EchoStar Pitches Telco TV Package

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EchoStar Pitches Telco TV Package
NOVEMBER 13, 2008
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ANAHEIM, Calif. -- TelcoTV -- Well, folks, it looks like satellite TV figurehead Charlie Ergen, chairman and CEO of Dish Network Corp. , has his hungry eyes on a slice of the IPTV systems market too.

EchoStar Technologies LLC, the set-top and technology unit that split off from Dish Network early this year, is branching further into the telco world with a strategy centered on an all-MPEG-4 video satellite-fed distribution system and an integrated "turn-key" play that bundles in EchoStar's own IPTV set-tops, middleware, and conditional access (CA) system. (See EchoStar Ready to Split.)

EchoStar is pitching the concept to Tier 2 and Tier 3 telcos, though it could also be suitable for cable operators that migrate to IPTV platforms.

The video transport part of the package, introduced in 2007 under the VIP-TV banner, will compete head on with Avail Media Inc. and SES Americom 's IP Prime service. (See EchoStar Unveils ViP-TV.)

VIP-TV's present "proposed" programming transport channel lineup comprises 300 video and music channels. More than 40 are in high definition. Here's what VIP-TV GM Dan Daines told LRTV about it in July:

EchoStar is combining that offering with a more extensive IPTV platform that uses the NagraStar conditional access system (from the Dish-Nagravision SA joint venture), and EchoStar's own middleware and interactive program guide. EchoStar is also in discussions regarding the integration of conditional access systems from other IPTV players, including Latens Systems Ltd. , Verimatrix Inc. , and Widevine Technologies Inc. , according to EchoStar VP of sales and marketing Michael Hawkey.

EchoStar has also developed two IPTV set-tops: an HD-DVR box that can tune to two televisions or provide picture-in-picture in one TV; and a lower-end high-definition box, though this can be converted into a DVR by linking it to an external storage device with USB 2.0 connections.

Although the VIP-TV transport service is ready to roll now, the other turn-key elements should start to enter lab trials early next year, Hawkey says.

But how does EchoStar expect to stand out in a crowded field? Hawkey thinks telcos will give EchoStar more than a look because it's basing everything on an integrated system that's been "tried and tested" to millions of customers: That's a reference to the technology base used by Dish Network.

Beyond that, EchoStar is also looking to add more advanced features, including multi-room DVR functionality and some place-shifting applications from its Sling Media Inc. division.

If all that strategy sounds familiar, it should. EchoStar is also trying to win business in the cable industry with set-tops that use the tru2way platform. The company has acknowledged that winning cable's trust will be a significant challenge, but remains confident MSOs will give EchoStar a shot if the tech firm can offer competitive pricing and advanced product feature sets. (See EchoStar Blazing Way to Tru2way .)

— Jeff Baumgartner, Site Editor, Cable Digital News

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Subscriber Values: Q2 2008

Business customers remain more valuable than residential, as competition in residential service decreases.

by Alex Goldman  ISP-Planet Managing Editor [August 25, 2008]

Subscriber numbers are from ISP-Planet's list of Top U.S. ISPs and from company reports (and are as of June 30, 2008). Market capitalization data is as of market close, August 12, 2008, as reported on Yahoo Finance.

Our ISP rankings now contain only one pure, public ISP. United Online no longer considers itself an ISP. Time Warner is downplaying the importance of AOL.

ISP Subscriber Value:  $297
Stock Symbol	ISP	Value per subscriber	Market Cap (millions)	Number of subscribers
[ELNK]	EarthLink	$297	$979	3,299,000

EarthLink, unfortunately, shows a higher subscriber value because its market cap is steady as subscriber numbers fall.

CLECs
Our CLEC listings require close examination. We are comparing a wide variety of companies, and we welcome your comments

CLEC Subscriber Value:  $2,008
Stock Symbol	CLEC	Value per subscriber	Market Cap (millions)	Number of subscribers
[PAET]	PAETEC	$5,396	$851	162,940
[ALSK]	The ACS Group	$1,322	$526	397,846
[GNCMA]	General Communications	$811	$433	534,384
[SURW]	SureWest	$502	$107	213,141

Notes on CLECs
Fairport, N.Y.-based PAETEC reported serving 162,940 T-1 lines. Since it also delivers VoIP and also delivers high margin T-1 lines, its average revenue per customer (ARPU) is higher than many other CLECs on this list, justifying the price difference. The company reported over 47,000 business customers.

Anchorage, Alaska-based General Communications (CGI) competes as a CLEC with the ACS Group (below), which operates more like an ILEC. Nevertheless, GCI has found markets it can own in cellular and cable, as well as interesting niche markets in schools and rural health. Its consumer segment appears to be stronger than the business segment. The company reported the following subscribers:

Segment	Cable	Cable Broadband	Long Distance	Access Lines	Wireless
Consumer	130,700	91,000	89,800	78,100	77,000
Resell				2,000
Business	not disclosed	9,000	10,400	45,400	7,100
Other	+ 51 schools (representing 171) + 39 Rural Health clinics = 90
Total	= 540,190 subscribers

3

Anchorage, Alaska-based Alaska Communications Systems Group(The ACS Group). It served 180,541 access lines. It had 148,679 cellular customers (361 resale), 65,011 long distance customers, and 55,873 internet customers (47,939 DSL plus 7,934 dialup). The company is more like a rural ILEC than a CLEC, but its reported subscribers are declining in most segments.

Anchorage, Alaska-based SureWest is a small town ILEC that operates as a CLEC outside its home area. The company's success demonstrates the power of the ILEC advantage. It operates VoIP, cellular, and broadband (mostly DSL). It reported 105,600 broadband subscribers of which 100,200 subscribed to broadband internet, 56,600 to VoIP, and 57,100 to video. Since its VoIP business was only launched in March, 2008, the take rate is extremely impressive.

ISP sale
Q4 2007 saw one publicly announced purchase of an ISP that we know of. Multichannel news reports that SureWest acquired Everest Broadband for $173 million. The deal closed on Dec. 6, 2007. It covered 37,500 customers and was therefore worth $4,613 per customer. Key to the deal's high valuation were 1,600 commercial customers.

Nevertheless, the article notes:

The price also represents a healthy cash flow multiple–at 9.1 times Everest’s estimated third quarter 2007 annualized cash flow, compared to past overbuilder deals that have been valued at about 8.5 times cash flow.

Since the deal, SureWest's stock has fallen—perhaps one more case of a company being punished by Wall Street for reinvesting cash in its business while others are rewarded for letting equipment expire. The company sold its directories service in Q1 2007. In the past, this would have been a sign of distress, as directories were a profitable monopoly, but nowadays directories are just another monopoly that has been broken open by the internet.

Notes
Covad was acqired [.pdf] by private equity. It no longer reports numbers and has been removed from the list.

We have been hearing about many Wi-Fi rollups but most are secretive. Our one recent story (so far) on this subject is about Two Wi-Fi Rollups in Texas.

—End

 

Related articles:
	[Jan. 7, 2008]	Consolidation in the Commuications Mid-Market
	[Dec. 21, 2007]	Banking on WISP Acquisitions
	[Nov. 27, 2006]	ISPCON: The Banker's Optimism

Online resources:
	DSL Subscriber Numbers
	History of Subscriber Values
	ISP Rankings Worldwide
	ISP-Planet's Investor section
	Top U.S. ISPs by Subscriber [source]