If there is an industry conference somewhere and it deals with technology, Yankee Group media analyst Adi Kishore is there. He recently penned two reports for Yankee: One says DBS will reach 29.3 million households by the end of 2008; the other, that 59.2 million homes will have an HDTV monitor by then. Last week, he pulled himself away from the CTAM conference to discuss the reports with B&C.
You're predicting that the DBS market will grow to 29.3 million by 2008. Do you think that's a conservative estimate, given that, as of 2003, it had 21.6 million subscribers?
It's realistic. If you're a satellite company, you're faced with a significant challenge when you look at some of the applications cable's two-way plant can offer. In the longer term, satellite may be able to overcome that. So barring some sort of major technological improvement, this is the trend we anticipate.
Why do you see the DBS growth rate slowing?
It's a combination of a couple of things. VOD is a factor, and part of it is market maturity. There was a segment of the population that either couldn't get cable or hated it. They were sitting and waiting for an alternative. So satellite snapped them up, and that helped DBS grow in the early stages.
Also, the game has changed. Moving forward, it's not a video market but a bundled-services market. Satellite's ability to offer voice and data by themselves is a constraint. They're looking at having more robust data products. But right now, they're at a disadvantage.
Digital video recorders, VOD and HDTV are key for cable growth. But can they offer all those services? And can satellite respond?
Dish and DirecTV today don't have capacity to offer local HD, and they can barely handle local SD channels. So taking those channels and multiplying by four or five to get the HD bandwidth required becomes staggering. For cable, the hybrid fiber–co-ax plant is flexible, and they can fix bandwidth. Cable has an upgrade path that is evolutionary. But satellite needs to start looking at things like unutilized spectrum, MPEG-4 compression or a common spectrum-sharing delivery method. It's trickier for them.
Is HDTV the big weapon in the DBS/cable battle?
It's one of a couple, along with VOD and the service bundle. But satellite has a huge advantage with customer satisfaction. They also have a retail advantage. If they can make their relationships with regional bell operating companies work in offering bundled services, they can negate to a great extent the bundling advantage. None of this is unresolvable for DBS.