• by Wayne Friedman , Staff Writer, August 14, 2006

What's with the rough turbulence of the satellite TV business?

Both EchoStar Communications and DirecTV posted lower than expected new subscribers gains in their respective recent reporting periods. DirecTV pulled in 195,000  and EchoStar grabbed 125,000, both down from 225,000.

The satellite business picture isn't all bad, however. EchoStar sales exceeded analyst revenue estimates, and both DirecTV and Echostar's respective average monthly revenue per subscriber numbers continues to grow. Additionally, there is less churn rate among satellite customers for both services. That means those customers aren't seeking alternatives--yet.

Almost a decade or more ago, the satellite TV business was heralded as the true competitor to the big monopoly called cable, but video consumers haven't pulled any plugs on cable as yet. It must be that TV users like those big all-encompassing media packages--the so-called "triple play," with video, Internet, and phone (wireless)--offered by media companies.

Satellite companies can't compete with cable and other companies in this way--though they do offer satellite-delivered Internet service.  They also don't offer video on demand, a tool that seems to be the cable industry's real trump card at the moment.

And now there are many new modes of video distribution, including traditional phone companies like Verizon and AT&T, who are getting into the act.

The real story is that satellite companies have forced traditional cable companies to work harder--adding digital services, while trying to keep monthly prices at bay.

What's left for satellite? Apparently, contraction. The specter of slower satellite distribution growth could be in the cards; for the second time in four years, talk of a merger between EchoStar and DirecTV has surfaced.

Of course, it's not over with other video competitors. Cable operators will continue to contend with a host of alternative programming delivery systems--IPTV, local digital signals, and, of course, broadband.

Cable doesn't have a monopoly on video distribution these days--but it has seemingly weathered a big air attack from sky-high competitors with the most potential.