Hughes to Devote More Satellites to Television

[Gregg Lengling]

Hughes Electronics Corp.,, owner of satellite broadcaster DirecTV, said it plans to reconfigure new satellites that had been intended for high-speed data transmission to provide additional bandwidth for advanced television services.
The shift in strategy, on the eve of the planned takeover of Hughes by News Corp. Ltd. at the end of the year, shows that DirecTV is focusing on offering next-generation television services like providing local television channels in high-definition format rather than on consumer Internet access.

The satellites to be reconfigured are part of Hughes' $1.5 billion Spaceway project and were intended to provide broadband data services for businesses and consumers.

But in comments made to the SkyForum satellite industry conference last week, and first reported in the Wall Street Journal, DirecTV chairman and CEO Eddy Hartenstein said Hughes is looking at ways to use part of the Spaceway satellites' capacity "to fill a big need for DirecTV."

A DirecTV spokesman declined to elaborate but said that the potential use of Spaceway capacity for DirecTV broadcasts was disclosed in an SEC filing at the beginning of the year.

The shift signals that Hughes may cede competition in the high-speed data market to its telecom and cable television competitors and focus its efforts on providing bandwidth for high-definition television.

Indeed, the Spaceway satellites, which will be among the most advanced when they go into service in the middle of next year, could replicate every existing channel in high-definition format and still have bandwidth left over for other services, said Lehman Brothers cable and satellite analyst Vijay Jayant.

The remaining bandwidth could then be used for a more limited broadband offering.

"It's tactically the right decision, given that the broadband business is not strategic (for DirecTV)," Jayant said.

Craig Moffett, cable and satellite analyst at Bernstein Research, says the shift gives DirecTV more options as it seeks bandwidth to provide a myriad of local channels in high-definition and is also a recognition that satellite broadband isn't yet competitive with terrestrial Internet offerings like DSL and cable modem service.

Satellite operators DirecTV and EchoStar Communications Corp. offer bundled broadband through existing partnerships with BellSouth Corp. and SBC Communications Inc., respectively.

[gparris]

The truth is that Directv is running scared as it realizes that you can either get locals OTA for HD if it is possible and practical-or with cable, like TWC, as with its HD local offerings.

This could stop DTV from expanding and competing on an even plane with cable.

HD network local stations will only be served by cable?
Directv hopes not.
It should be a complete solution, like cable is for SD and HD offerings, now.

Maybe there is a technology like "HD spot beam" with these advanced satellites. If not, DTV will be for the subs who either cannot get it or do not want cable.

At least the playing field will be level, again.