| The history of satellite TV service providers in | | | | programming companies. Congress passed the |
| the United States goes back farther than you | | | | Cable Act of 1984, which allowed programmers |
| might think. Most people are familiar with popular | | | | to encrypt their satellite signals. |
| current providers such as the Dish Network and | | | | Suddenly the satellite programmers were |
| DirecTV, but very few know how satellite TV | | | | full-fledged satellite TV service providers, with a |
| has developed and evolved since its earliest | | | | new (but still small) revenue stream from C-band |
| beginnings in the 1970s. | | | | dish owners. In those days, though, encryption |
| The Beginnings of Satellite TV | | | | technology was not as sophisticated as it is today, |
| Thirty years ago there was no such thing as | | | | and many dish owners found ways around the |
| satellite TV service providers, but that was about | | | | encryption or bought bootleg decoders. Theft of |
| to change. Several private companies banded | | | | service remained a major problem up until the |
| together in the early 1970s to launch a series of | | | | early 1990's, when digital encryption technology |
| geosynchronous satellites (geosynchronous means | | | | went into widespread use. |
| an orbit that keeps the satellite directly above one | | | | Competition Heats Up |
| area of the earth at all times) to transmit signals | | | | As the industry grew, individual programmers |
| from an originating source to multiple receiving | | | | realized they could not survive if they all were |
| locations. | | | | their own individual satellite TV service providers, |
| In 1976, HBO became the first programmer to | | | | so they looked to new companies who were |
| deliver satellite programming to cable companies; | | | | willing to take on that role. The biggest boon to |
| many other programmers like Turner | | | | the industry, though, came in the form a |
| Broadcasting System (TBS) and the Christian | | | | technology leap that allowed receiver dishes to |
| Broadcasting Network (later called The Family | | | | shrink significantly in size, to the point where they |
| Channel) followed suit, and the satellite television | | | | were small enough to be installed on the roof or |
| industry was poised for tremendous growth. | | | | outside wall of most homes. |
| Big Dishes, Free Programming | | | | A huge new market was born for direct |
| As more and more programmers used satellites | | | | broadcast satellite (DBS) systems. Many |
| to deliver their programming to cable companies | | | | companies jumped into this business, most |
| across the country, a Stanford University | | | | notably a consortium of four cable TV companies |
| professor developed a way to receive those | | | | as well as a non-cable associated company. Their |
| signals in his own home. His receiver dish, later | | | | services were known, respectively, as Primestar |
| known as a C-band dish for the frequency that it | | | | and DIRECTV. |
| received, was quite large and quite effective. He | | | | More and more satellite TV service providers |
| was able to pick up signals from just about any | | | | entered the market, presenting consumers with a |
| programmer he wanted because the signals were | | | | confusing array of services at a wide range of |
| sent out "in the clear", or without any encryption. | | | | prices. Meanwhile, the pressure to improve the |
| At one point, the professor sent HBO a check for | | | | technology and deliver more advanced services |
| $100 to pay for the programming he had been | | | | meant that providers were pushed to spend |
| receiving and enjoying so much, but much to his | | | | more and more money to stay competitive. |
| surprise, they sent the check back to him. They | | | | Inevitably, some could not keep up with the |
| informed him that they dealt only with cable | | | | financial demands and only the strongest survived. |
| companies, not individuals. And thus, a television | | | | Industry Consolidation and Changes in Ownership |
| revolution was born. | | | | A flurry of industry consolidation, changes in |
| The professor published a "how to" guide for | | | | ownership, and restructuring led to the |
| building a home satellite dish and founded a | | | | emergence of two major satellite TV service |
| company to produce the parts for dishes. Initially | | | | providers - DirecTV and Dish Network. Their size |
| these systems were quite expensive (up to | | | | and financial strength allowed them to invest in |
| $10,000 or more) but as the technology | | | | new technologies and rapidly expand their service |
| improved, the costs dropped dramatically (to | | | | offerings. Today, DirecTV and Dish Network offer |
| $3,000 or less). | | | | consumers a huge assortment of options, including |
| Why would anyone want to spend that much | | | | pay-per-view programming, on-demand |
| money for a C-band home satellite receiver? | | | | programming, music services, satellite radio, high |
| After all, the dish itself was quite large and | | | | speed internet, and more. |
| unsightly, and required a good deal of space for | | | | About DirecTV and the Dish Network |
| installation. | | | | The Dish Network and DirecTV are the two |
| The answer lies in several factors. First, because | | | | major satellite TV service providers in the market |
| the programming was free, the homeowner only | | | | today, and for good reason. They each offer a |
| had to make a one-time investment in hardware. | | | | range of services at reasonable prices, and have |
| There were no additional monthly fees. Second, | | | | quite a large customer base. |
| the signals were extremely crisp and clear | | | | In the early days of DBS, a major obstacle for |
| because they came directly from the | | | | the providers was the equipment costs the |
| programmer, rather than second- or third-hand | | | | customers had to absorb in order to get their |
| from another provider or cable TV system. And | | | | homes set up with a dish and a receiver. Further |
| third, there were literally hundreds of channels | | | | complicating the issue, if the customer had more |
| available, a selection that cable companies could | | | | than one TV in their home then they had to |
| not even come close to offering. | | | | purchase a separate receiver for each TV where |
| C-band dishes were especially popular in rural | | | | they wanted to have DBS service. The cost was |
| areas where there was no cable service provider | | | | prohibitive for many potential customers, so |
| and over the air broadcast signals were weak or | | | | DirecTV and the Dish Network looked for ways |
| even totally absent. As a result, the satellite TV | | | | to lower the start up costs and make it easier |
| industry surged in popularity and grew quickly. | | | | for people to switch from cable TV to satellite |
| No More Free Lunch | | | | TV. |
| Of course, all good things come to an end, and it | | | | The winning strategy, as it turns out, was |
| did not take long for satellite TV service providers | | | | collaborating with equipment manufacturers and |
| to realize that there was tremendous value to | | | | offering free satellite TV systems to customers |
| their programming that was essentially being given | | | | who would agree to service contracts of up to |
| away for free to C-band dish owners. They | | | | two years. Over that length of time, the Dish |
| began to lobby Congress for the right to | | | | Network and DirecTV were able to recover |
| scramble, or encrypt, their signals so that they | | | | enough revenue to at least break even on the |
| could no longer be received by dish owners who | | | | discounted equipment costs, and often gained |
| did not pay for a decoding device. Dish owners | | | | substantial additional revenue as customers |
| hated this idea, naturally, but they simply did not | | | | purchased pay-per-view programming and other |
| have the organization or influence of large | | | | extra services. |