CES: EchoStar Makes Price Pitch

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While DirecTV used CES to proclaim that it will be ready to deliver over 100 channels of HDTV this year, satellite competitor EchoStar, which already offers 30 hi-def channels, announced aggressive new pricing strategies in an attempt to gain market share.

EchoStar unveiled a bundled package for new subscribers called the DishDVR Advantage Package that gives customers 200 channels of programming, including local channels, and a dual-tuner DVR standard definition receiver for $49.99 per month.

The offer, which is available Feb. 1, also includes an 18-month protection plan with technical support, free equipment replacement and free installation when a customer moves. According to EchoStar president and COO Carl Vogel, that package represents a 7% savings over buying these items individually.

"We think we represent the best price/value economics in the industry," said Vogel at a press conference Monday.

EchoStar is also going to give its flagship ViP622 high-definition DVR away for free (in conjunction with program package commitments, of course) as part of its "Digital Home Advantage Program." The ViP622 boxes use MPEG-4 compression to receive EchoStar's HD broadcast and include an ATSC tuner to give viewers the option of receiving local DTV broadcasts over the air.

They currently offer over 300 gigabytes of storage and will include 500 gigabytes of storage later this year, allowing EchoStar to preload the boxes with more premium movies and allowing customers to record more HD content.

Mark Jackson, president of EchoStar Technologies, notes that the EchoStar DVR will pump programming to two sets simultaneously and requires less wiring for HD installation than competitor DirecTV. He also says that the ViP622 has a USB slot to allow customers to attach external storage devices.

Another feature is that ViP622s come with a "HomePlug" Ethernet adapter that can hook to a PC network and plug into a standard electrical outlet. With the PVR plugged into another standard electrical outlet in another room, a home's existing electrical wiring can serve as the network connection between a broadband connection and the PVR.

EchoStar Chairman and CEO Charlie Ergen was also on hand to take questions, though in a posture consistent with his absence from EchoStar's Q3 earnings call, he claimed to no longer be that familiar with EchoStar's day-to-day operations.

"I just came here to see what we're doing too," the ever-gregarious Ergen joked. "I don't do much with EchoStar on a day-to-day basis anymore; this is probably the last time I'll talk to the press all year."

Ergen then proceeded to adroitly answer questions and offer opinions on every aspect of EchoStar's business, including the company's refusal to pay higher fees to carry Time Warner's Court TV network---"Our customers are ecstatic their basic rate is not going up this year"---and its ongoing patent legislation with DVR-maker TiVo---"We believe the TiVo litigation is behind us, and we came out on the right side of that."

Ergen also threw cold water on speculation that EchoStar would once again attempt to merge with DirecTV now that Liberty is taking control of the company from News Corp., saying that instead he was looking to take advantage of DirecTV being distracted by dealing with the regulatory issues that come with closing the deal.

"I think we merged with them two or three times before, and it always set us back a little bit, because we had to go to Washington instead of running the business," Ergen said. "I'm happy they have to go to Washington now."

Addressing John Malone's suggestion in Broadcasting & Cable that DirecTV and EchoStar could potentially partner by sharing satellite resources or developing a common platform to deliver local high-definition signals, Ergen said some cooperation on technical resources could happen in the future, such as sharing transmission backhauls or co-investing in backup satellites. Moreover, he said that Liberty's takeover of DirecTV was a shot in the arm for the DBS industry in general, which has faced criticism from Wall Street that it can't compete with cable's bundle of video, voice and data services.

"Obviously, Dr. Malone is getting back into the business, and that says a lot about getting into the satellite business," said Ergen. "He's giving up a real good asset in News Corp. stock, and that says a lot about the
prospects of this business."

With such theoretically bullish prospects for DBS ahead, some analysts at CES were surprised at the level of price-cutting that EchoStar is undertaking. Steve Mather, Steve Mather, VP of equity research with
investment bank Sanders Morris Harris, figures that Ergen has looked at the competitive landscape and sees cable pushing the bundle and DirecTV touting tons of HD channels. Price thus becomes the "open white space" where EchoStar can play.

"He's being very aggressive, but price is the biggest weapon in his arsenal, and he's going to get subs," says Mather. "It's a big land-grab."

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