7 Apr 2011
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DTH Satellite TV: Timelines to the Future

While today's hot DTH marketplace makes for an exciting story, this is an industry with a history unknown to most. It is a story of an industry which was never supposed to exist. An industry born out of the genius of a Stanford University college professor and publicized by ham radio conversations. An industry that defied all odds to grow from the backyards of techies and early adapters to today's multi-billion dollar first-line competitor to the cable monopoly in America. And, it is the story of an industry comprised of thousands of entrepreneurs who kept the dream alive during long periods of traumatic political and marketplace upheaval.

Come with us now as we look at the people, the events, and the evolution of the technology.

1945 Arthur C. Clark's Dream

The entire satellite communications industry -- not just the DTH segment -- can trace its common heritage to one man. That man is the noted futurist and author Arthur C. Clark. Long before Clark was to take us to the farthest reaches of the universe in his legendary epic "2001: A Space Odyssey," he penned a paper entitled, "Extraterrestrial Relays." Published in October 1945 by "Wireless World Magazine," this article advanced a theory that world-wide communications could be accomplished by placing three space platforms into special orbits 22,300 miles above the equator. Clark explained that at this altitude, the platforms would orbit the earth at exactly the same speed as the earth turned -- thus they would appear to remain motionless in space when viewed from the ground.

Obviously, Clark's paper was far ahead of its time. The world had yet to see the widespread development of TV -- let alone the ability to place any object, much less a large communications platform, into orbit. The world would have to wait a dozen years before the first man-made object, Sputnik, found its way into orbit. This basketball-sized satellite carried a transmitter which delivered a non-stop Morris code-based political message touting the technological superiority of the Soviet Union. Spurred into action, America embarked on one of the largest technology development programs in history. The $20-plus billion space program saw the United States not only put men on the moon, but also lead to the development of Intelsat, an international consortium which deployed a network of geostationary communications satellites. In fact, the very first live global television broadcast - the realization of Clark's dream - came as Neil Armstrong stepped onto the moon in July of 1969.

By the mid-1970's, this same satellite technology was being widely utilized by private companies such as Western Union, AT&T, and RCA to support the rapidly growing telecommunications needs of the United States. In addition to telephony/data circuits and program links for television networks, the geostationary satellite was about to play a key role in the growth of the cable television industry -- at the time a nascent industry involved in the delivery of over-the-air TV signals to subscribers.

HBO Moves to Satellite, Taylor Howard Builds a Dish

In 1976, premium programmer HBO made history when it initiated satellite delivery of programming to cable headends with the heavyweight boxing battle dubbed, "The Thriller From Manila." The move by HBO was followed quickly by Ted Turner, who began uplinking his heretofore unknown Atlanta UHF-TV station, now known as WTBS. Turner branded it America's Station, and the superstation was born. 1977 saw Pat Robertson launch the first satellite-delivered basic cable service -- CBN Cable Network -- the predecessor of The Family Channel.

While all this was being done with cable operators in mind, Stanford University Professor Emeritus H. Taylor Howard was also busy in his garage. Howard, a lead scientist on several interplanetary NASA probes along with key communications systems on the Apollo Program, was soon to build the first consumer DTH system in America. In turn, Howard also became the first consumer to actually pay (or attempt to pay) HBO directly for its signal (the check was returned with a letter explaining that HBO only sold its signal to cable operators).

How did the world find out about Taylor Howard's invention? Well, as an amateur radio operator, he shared his knowledge with fellow "hams" around the world. This was backed up with a simple how-to manual on satellite TV published by Professor Howard. As the techies began to grasp the capabilities of satellite TV, a small group of entrepreneurs moved from hobbyist to businessperson. These pioneers -- many operating out of their garages -- gave birth to an industry which sold approximately 5,000 systems in 1980. Each of these systems, boasting an antenna 12 feet or more in diameter, fetched a whopping $10,000. The journey towards the DTH industry of today had begun.

1981 - 1985 Dish Fever Grows

The DTH industry grew quickly from its modest beginnings. As each new system was installed, the word of mouth advertising grew for the industry. Obviously the early DTH systems were very large, thus the simple act of having one installed drew the attention and interest of the neighborhood. Once non-dishowners experienced the diversity of satellite-delivered programming (new cable services were now launching at a rapid pace) coupled with the unsurpassed audio and video quality offered by a DTH system, the fever began to spread across the land.

For satellite TV to move beyond the techies and early adapters, into the mainstream consumer marketplace, three things had to happen: 1) the price had to be reduced; 2) the reliability and user friendliness of the hardware had to increase significantly and; 3) the legality of dish ownership by private citizens had to be clearly established. Driven by the entry of several larger manufacturers, the first two conditions were met rather easily. The price of a complete DTH system rapidly fell from the $10,000 level in 1980 to under $3,000 by the beginning of 1985. At the same time, the overall reliability of the hardware improved dramatically and the early systems which were really little more than experimental units transitioned into stylish state-of-the-art microprocessor-controlled video tuners comparable in size to a VCR. As for the legal status of the DTH industry, that issue was settled in 1984 when President Ronald Reagan signed the Cable Act in to law. This legislation clarified the right of American citizens to own a satellite dish, and it also contained provisions establishing the legal structure by which program providers could require those dishowners to pay for reception of their services.

The DTH industry will remember 1985 for its rollercoaster ride of highs and lows. From a shipment perspective, the chart clearly shows that satellite TV was hot -- some 735,000 systems were produced in the United States. Some months in the latter part of the year saw in excess of 80,000 units sold. An industry which began the year with less than a million consumers ended the year with over 1.7 million satisfied customers. Indeed, to the outside observer, the DTH industry appeared to be one of the hottest technology bets available. In fact, this success was setting the industry up for a dramatic tumble -- one which would take years to overcome.

With the cash registers ringing wildly in satellite dealerships across the country, the industry literally found itself out of control. Hundreds of new dealerships were opening every month -- with many of these new retailers having little, if any true understanding of the product and/or long term commitment to the business. The satellite dish had become the pet rock industry of the year.

All of this was happening in an environment where programming was free -- the consumer made a one-time hardware purchase and enjoyed well in excess of a hundred channels of high quality video, including every basic and premium cable service, at no charge. As 1985 wore on, the signs of change began to emerge. Several cable programming services announced plans to encrypt their satellite feeds under the authority granted to them by the 1984 Cable Act.

Clarity in hindsight tells us that the DTH industry should have prepared itself and its consumers for the sea change which was coming. However, for any number of reasons, most retailers either refused to believe that signal scrambling would ever occur -- or chose to ignore the train which was bearing down on those selling the promise of "free TV forever."

January 15, 1986 The DTH World Changes Forever

January 15, 1986 began like any other day in America. The lines were long at satellite dealerships, and sales were good. As the day wore on, suddenly the video on HBO was replaced by unrecognizable lines and the audio was gone. At that very moment, the hardware-based DTH industry transitioned into one which would be driven by the sale of software - programming.

The effect of scrambling one service out of many dozens -- albeit a high profile service such as HBO -- should have been a short-term manageable market development, especially in light of the fact that decoders (then manufactured by MA/COM, later to become part of GI) for the signal were available, and HBO stood ready to sell the service to any DTH consumer. This was not to be however, as the news of scrambling hit the national media with a message that, "....the skies have gone dark for dishowners." This highly inaccurate message was then reinforced by large scale negative advertising campaigns by cable operators which depicted satellite dishes as expensive and ugly contraptions which now at best would make for Olympic-sized birdbaths.

The first thing to happen was the wholesale defection of retailers who had entered the business in 1985 in search of the easy sale. This was followed by a bitter internal industry battle over scrambling which soon saw existing DTH system owners drawn into the fight to preserve the free airwaves. Worse yet, the industry allowed this battle to spread to new consumers as they entered dealer showrooms to consider the purchase of a dish. It even gave birth to three nightly satellite-delivered talk radio networks dedicated to discussing/debating the changing industry. The political fireworks generated by these shows demonstrated the fact that the industry was approaching a meltdown.

The impact on sales of new DTH systems was dramatic. From 735,000 systems in 1985, the industry plummeted to 225,000 units. An estimated 60 percent of all retailers in the industry on January 1, 1986 were gone as the year came to a close. Fire sales dominated the marketplace as hardware manufacturers and distributors either left the business or fought to generate sufficient cash flow to hang on. Clearly, the DTH industry was rapidly approaching a fork in the road on the way to survival or oblivion.

December 2, 1986 The First Signs of Unity

For the home satellite industry to survive, it was clear to many company executives that the political disagreements had to somehow give way to conscience building and industry unity on key long-range marketplace issues. This process began on December 2, 1986 in Anaheim, CA with the founding banquet for the Satellite Broadcasting and Communications Association (SBCA).

The SBCA was formed as a result of the merger of two trade organizations -- the Society of Private and Commercial Earth Stations -- (SPACE) and the Direct Broadcast Satellite Association (DBSA). SPACE had represented primarily the manufacturers, distributors, and retailers of DTH systems. DBSA was comprised of companies such as RCA Americom, AT&T, Hughes, Comsat, and USSB -- all of which were interested in high power DBS.

The new organization, which was led in its first year by Co-Chairman Taylor Howard of SPACE and Dr. John Clark of RCA Americom faced the immediate challenge of how to restore unity to a fractured industry. They quickly moved to create a Board of Directors which would offer equal representation to all segments of the DTH industry -- including the new players -- satellite programmers. For the first time, these programmers would have an opportunity to directly participate in the decision making of an industry they served -- something they were not afforded in the cable trade organizations of the day.

As the new satellite trade association took shape during the early part of 1987, the first sparks of optimism returned to the satellite business. Little did the SBCA leaders know that perhaps the industry's biggest challenge ever would surface in a matter of months.

1987 - 1993 Piracy Dominates DTH

Shipments of DTH hardware rebounded in 1987 from the depths of the 1986 slump. This upswing in sales was driven by the advent of integrated receiver/decoders which combined the decoder module with the receiver unit, and perhaps even more importantly, the arrival of program packages. The grouping of encrypted services (all of which had chosen to use the VideoCipher II (VC II) scrambling system) into attractively priced packages was a major step forward in the sale of programming to the consumer who previously was required to make several phone calls to purchase individual programming services.

Just as stability was returning to the industry, the VideoCipher II system came under heavy attack from hackers. Within months of the first rumors of a break in the system, the worst fears of the industry were realized as signal piracy exploded across the nation.

1994 Ready for DBS

The DTH industry had emerged from its second major crisis, and now, this industry which had begun so humbly, stood on the threshold of a new era, The Dawn of DBS. While 1994 marked the arrival of medium and high-power Ku-Band DBS service, it was also represented one of the best years ever for the C-Band industry.

With piracy effectively under control, and consumer interest in satellite TV growing as a result of initial marketing of DBS hardware, C-Band sales boomed. In August of 1994, some 85,000 systems were shipped, representing perhaps the best single month in the 14 year history of the industry. As 1994 drew to a close, over 600,000 new systems had been shipped, and nearly 2.2 million consumers were authorized for C-Band DTH service. While C-band activity has slowed, and the total authorized households had dropped, C-Band still represents almost 2 percent of all television households. And with the introduction of 4DTV, the prospects of the C-Band segment of the DTH industry may improve.

As the DTH industry celebrates the 20th anniversary of Taylor Howard's invention, it is clear that satellite TV is here to stay. The industry survived not only because it has a good product which offers unique programming at a good value -- but because many of those early pioneers simply wouldn't let the dream slip away. Those pioneers are now leading this industry into the digital information age of 21st century.

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