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Dishing it out
By LOUIS HAU, Times Staff Writer
The 54-year-old Detroit native says he dropped Time Warner Cable in favor of DirecTV so he could follow his beloved Motor City sports teams, the Lions, the Red Wings and the Tigers. Until now, he had to go to a local sports bar to catch their games. "The cost of sitting in that sports bar for four to five hours will pay the satellite bill," Tobias says. A decade ago, satellite TV wasn't all that appealing for average consumers. The dishes were huge and unsightly, you needed a good set of rabbit ears or a rooftop antenna to pull in local channels, and the monthly service fees were sky-high. Now most dishes are just 18 inches across, local broadcast channels are available by satellite in many major TV markets (including the Tampa Bay area) and service fees have fallen to the cost of cable, if not lower. "When they just came out, the customers were more the high-end audio-video guys," says Ken Dreksler, senior manager at the RadioShack at Northeast Shopping Center in St. Petersburg, which sells both DirecTV and Dish Network satellite services. "Now you get a more mainstream crowd. The prices have trickled down to the point where it's actually an alternative to cable." Cable remains king. Companies such as Time Warner Cable, the bay area's leading provider, continue to dominate the pay-TV market. (And in parts of Pinellas County, Time Warner faces direct competition from Verizon's much smaller Americast cable system.) But satellite providers have been making an impressive grab for market share. Satellite subscribers are now 22.5 percent of the combined nationwide market for cable and satellite, up from 16.3 percent at the end of 1999, according to Kagan World Media, a market research firm in Carmel, Calif. Kagan's numbers include satellite subscribers who also subscribe to cable to get local channels. In Florida, the growth has been similarly impressive. According to figures compiled by SkyReport, a publisher of research about the satellite industry, the Sunshine State had 6.47-million cable and satellite subscribers in July, and 23 percent were satellite subscribers. That's up sharply from 13 percent in July 1999. After years of snatching up customers in rural areas where cable isn't readily available, satellite providers are now focusing more of their energies on urban and suburban areas where they have to go head to head with the cable giants. In the latest installment of its nationwide TV ad campaign, DirecTV is running a cheeky commercial that features a cable company employee nervously asking the guy installing a satellite dish at his home to park his van out back. "These companies are gaining cable's best customers, the kind who buy HBO and Showtime," says SkyReport editor Michael Hopkins. "They're not just taking away cable customers but cable customers who are spending a lot of money." Clearly feeling the competition, Time Warner is running commercials that emphasize its video-on-demand features as something satellite can't offer. The narrowing gap in pricing between cable and satellite services in recent years has stemmed not just from a drop in satellite services but from a continued rise in cable rates. According to the Federal Communications Commission, the average monthly rate for cable programming services and equipment increased 7.5 percent in the 12-month period ended July 2001, the most recent period for which statistics are available, far outstripping the 2.7 percent rise in the consumer price index during the same period. But there are signs that cable providers are beginning to respond to the satellite price challenge. Charter Communications, the nation's fourth-largest cable operator, recently said it will freeze its cable rates in the St. Louis area until February 2004. Closer to home, sales representatives for Time Warner Cable have been spotted locally going door to door to homes that have satellite dishes, tempting residents with special cut-rate cable deals well below Time Warner's regular rates. But price isn't the only area of competition. In a survey released in September by J.D. Power and Associates, DirecTV and Dish Network had the highest residential customer satisfaction rates among all pay-TV providers, based on cost of service, billing, program offerings, equipment and service capabilities, customer service and reception quality. "While the study shows the average expenditure for both (cable and satellite) is now nearly equal, more consumers are electing to switch services to satellite TV providers," said J.D. Power senior director of telecommunications Steve Kirkeby. * * * The ambitions of DirecTV and Dish Network, the two leading satellite providers, have grown along with their subscriber numbers. General Motors Corp.'s Hughes Electronics unit, which owns DirecTV, and EchoStar Communications Corp., which owns Dish, announced at the end of last year that they planned to merge. They argued that a combined company would be good for consumers because it would eliminate duplicative programming and open up more satellite capacity for improved picture and sound quality. But the FCC last month rejected Hughes' and EchoStar's merger application, arguing that it would be anticompetitive. The two sides have until later this month to submit an amended application that addresses the FCC's concerns. In an interesting twist, consumer advocacy groups, which normally oppose big media mergers, support the DirecTV-Dish merger. Gene Kimmelman, Consumers Union's senior director for public policy and advocacy, said in a statement on the FCC ruling, "Cable companies have a monopolistic grip on the vast majority of communities in America," and the merger would help make satellite TV providers more competitive. That Kimmelman attended the same high school in Oak Ridge, Tenn., as EchoStar chairman and chief executive Charlie Ergen has been a source of grumbling in the cable industry about the consumer advocate's motives. But Consumers Union dismisses such talk as baseless. * * * Even if a revamped version of the satellite merger eventually wins approval, cable operators have trump cards to play. They can typically offer high-speed Internet services at much lower cost than satellite companies. And the cable companies eventually may offer telephone service as well. "The technology is there, and there may be a market for that in the future -- video, data and voice over one line," says Jason LaMountain, a senior communications consultant for Taylor Research & Consulting Group in Brownfield, Maine. Furthermore, market watchers say, the rapid growth of satellite in recent years is likely to slow because satellite providers have already picked the easily reached "low-hanging fruit" of rural residents and disgruntled cable customers. "That doesn't necessarily mean they're not still signing them up, but clearly it's not as easy as it had been before," SkyReport's Hopkins says. There's also the community-based presence cable companies have, which satellite providers do not. Time Warner Cable, for instance, operates exclusive round-the-clock local news channels in eight major TV markets, including the Tampa Bay area's Bay News Nine. Time Warner Tampa Bay also provides free cable connections to all local schools in the company's service areas and sponsors a literacy mentoring program. "We're literally living, breathing, supporting the local community," says Time Warner Tampa Bay spokeswoman Linda Chambers. But for Mike Tobias, it all came down to programming and price. Tobias, who works at St. Petersburg's Stone Soup Cafe, just made the signup deadline for DirecTV's exclusive NFL Sunday Ticket package, which broadcasts multiple pro football games every Sunday for $179 a season. Plus, DirecTV threw in four free months of one of its premium programming packages. Still, Tobias says his allegiance to satellite isn't set in stone, noting that DirecTV's exclusive rights to NFL Sunday Ticket won't last forever. "I think it will really make it a competitive situation," he says. "When everybody has it, I may switch back to cable if they gave me the best deal." - Louis Hau can be reached at hau@sptimes.com or (813) 226-3404. Cable vs. satellite: Comparing the optionsCable and satellite systems offer an array of options at different prices. And Time Warner, the Tampa Bay area's dominant cable provider, offers rates that vary by county and sometimes by neighborhood. To illustrate the choices, here's a comparison of satellite and cable TV service for a home with a single television set in unincorporated Hillsborough County. * * * Basic Package. Includes local broadcast channels plus basic cable channels such as CNN, ESPN, Discovery, A&E and Nickelodeon, but not premium movie channels such as HBO and Showtime.
Premium movie channels (Discounts apply when more than one premium package selected)
Premium sports programming
Premium foreign-language programming
-- Notes: All prices are rounded to nearest dollar and do not include taxes. Different rates may apply for customers who don't have a credit card or bank debit card. Periodic special offers may offer better rates. - Sources: Satellite and cable providers.
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