The Little Dish That Could...?

For years, the joke in the cable TV industry has been that DBS, the acronym for direct broadcast satellite, stands for Don't Be Stupid. But cable companies may not be laughing long.

By early May, DirecTV Inc., a unit of defense contractor Hughes Aircraft Co., will power up a satellite already carefully positioned in space. The bird will immediately start sending channels of crystal clear digital-television signals directly to small household-receiver dishes in Jackson, Miss., Albuquerque, N.M., and other test cities. If all goes well, a second satellite will be added, and the service will expand to 150 channels nationwide by yearend.

The DBS roll-out marks the culmination of a decade-long, $1 billion quest by Hughes. Its target market: the 10 million rural households that don't have access to cable systems. To receive programming now, those viewers have to install huge receiver dishes--at $3,000 to $4,000 a pop--to pull in satellite TV.

Hughes's new system requires only an 18-inch dish that initially will sell for $700--and will drop in price, analysts figure, as sales pick up. The dishes will be sold through high-volume retail outlets such as Circuit City and Sears.

LOCAL DRAWBACK. The rub for cable companies: Hughes and partner Hubbard Communications figure 60% of their cutomers will be lured away from cable. DirecTV will offer CD-quality sound and higher-resolution pictures--at least to those with newer TVs. It will have most of the usual cable fare--plus up to 50 pay-per-view movies, including many hits, for $1.95 to $3.95. And sports fans will have their pick of college and pro events. Salomon Bros. figures the service will pass its 3 million subscriber break-even point by 1997.

Cable companies are skeptical. "I'm not having sleepless nights," says Marc B. Nathanson, chief executive of Los Angeles-based Falcon Cable Systems Co. DirecTV's $29.95 monthly fee for its full service no more than matches cable fees, and having to buy a receiver dish may deter potential customers. Another drawback: Though the service will offer some network TV, most viewers won't be able to receive any local stations unless they keep cable service or install a separate antenna.

DirecTV also has to move fast. Cable companies are backing Primestar, a rival service that already offers 10 channels of programming by satellite to 70,000 subscribers. Primestar plans to offer 77 channels by midyear as it switches to digital broadcasting. To be sure, only subscribers with those huge receiver dishes will be able to get the service. But the message is clear: DBS isn't such a stupid idea any more.

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