Cable gets big competitor in little satellite dish

September 04, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

Vincent Mazza has a new "toy." He was the first on his block to get one. It's small, but he really, really likes it. Now his neighbors are getting them too.

And that's grim news for the beleaguered cable television industry.

The gizmo in the driveway of Mr. Mazza's Davidsonville home is a direct broadcast satellite (DBS) receiver -- the hottest new consumer electronics product to reach the marketplace since the VCR. With it, a viewer can bring in cable TV programs without paying a dime to the local cable TV monopoly.

"It's going to blow cable away because they're not the only kid on the block any more," said Walter Frazier, president of Stansbury Decker Systems Specialists, a Linthicum satellite dealer that has more than 1,200 customers on a waiting list to buy the dishes when they go on sale in Maryland late this month or in early October.

Mr. Frazier is hardly a neutral observer, but even cable partisans admit that times are tough.

While the cable industry sweats under the burdens of price regulation and a public image even politicians don't envy, all facets of the satellite TV business are booming at its expense.

And if the aerial assault wasn't enough, the telephone industry has launched a ground offensive with its plans to offer video services over its phone lines.

Satellite TV is nothing new, but until this year bringing in a signal has required a bulky C-band dish measuring at least 7 1/2 feet across. Such dishes have become commonplace in the rural areas and atop the taverns of America, but their spread in metropolitan residential areas has been limited by their cost and conspicuousness.

Mr. Mazza's dish measures a mere 18 inches across, about the size of a pizza pan. Unlike traditional satellite dishes, it is "very unobtrusive," the retired chemical engineer said. In fact, it's not all that much bigger than a cable television node.

So far, there are only a handful of 18-inch DBS dishes in Maryland. Mr. Mazza ordered his from a dealer in Roanoke, Va., because he didn't want to wait until the devices go on sale here.

If Maryland consumers follow the pattern of other markets where DBS has rolled out, Mr. Mazza might have sidestepped a stampede.

From Albuquerque to Roanoke, consumer electronics retailers are reporting a buying frenzy worthy of the Mighty Morphin Power Rangers action figures.

Con Maloney, owner of Cowboy Maloney's Electric City in Jackson, Miss., witnessed the birth of the phenomenon because his market was among the first to receive DBS dishes back in June.

"This thing started out on opening day with 200 people outside of our store and it's been burning bright ever since," he said.

Mr. Maloney said he had been surprised to find that consumers were buying more of the $899 dishes, which support two television sets, than the $699 models, which support one. While those prices aren't cheap, they compare favorably with those of 7 1/2 -foot C-band dishes, which start at about $2,500.

Cable customers switch

Most ominously for the cable industry, Mr. Maloney and other retailers say they've had stronger-than-expected sales among customers who are currently cable subscribers.

"We're expecting that over the next three to five years, 60 percent of our customers will come from cabled areas," said Stan Hubbard, chief operating officer of Hubbard Broadcasting Co., managing partner in a venture called USSB, one of the two DBS programming providers.

If Mr. Hubbard's projections of 10 million to 15 million DBS customers by the end of the decade come true, that works out to a loss of 6 million to 9 million current or potential cable customers over the next 5 1/2 years.

Those numbers represent 10 percent to 15 percent of the cable business' current subscriber base of about 60 million -- a fact that has not escaped cable industry officials.

"It's definitely of competitive concern to us," said Stephen R. Effros, president of the Cable Telecommunications Association.

But Mr. Effros dismissed predictions that DBS would cut heavily into the cable industry's franchise. He complained that it had been marketed in a deceptive manner, that it had no potential for interactivity, that there were hidden costs and that the system was highly susceptible to "rain fade" -- a loss or degradation of reception during stormy weather.

"It's entirely a buyer-beware market," he said.

But Mr. Effros would have a hard time convincing Mr. Mazza, who said the programming, pictures and sound are all superior to cable. When his neighbors -- who also happen to be his sons -- saw the laser-disc quality video and heard the CD-quality sound, they ordered their own DBS systems, Mr. Mazza said.

The number of dishes sold is merely a leading indicator of DBS' acceptance. Ultimately, it will live or die by programming. And there it has great strengths -- plus one glaring weakness.

No local broadcast

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