EchoStar's Special Distribution Unit Takes Center Stage
By Jimmy Schaeffler, The Carmel Group

Recent announcements surrounding Direct Broadcast Satellite (DBS) powerhouse DirecTV, that it has downsized and integrated its MDU division into its sales division, have placed renewed emphasis on prospects for EchoStar to grow its Multiple Dwelling Unit (MDU), Multiple Tenant Unit (MTU), and other commercial unit businesses.

Working with local providers, such as Sonoma, CA-based Castle Cable, EchoStar has employed its new Quadrature Amplitude Modulation (QUAM) technology, a choice which in most instances has allowed it to utilize a building's existing wiring to deliver the DISH Network's digital signals. This, in essence, allows EchoStar and partners like Castle Cable to come closer to achieving a series of highly-sought after goals in the MDU and commercial spaces, i.e., 1) solid margins, 2) delivery of hundreds of digital signals, 3) smaller dish sizes, and 4) lower infrastructure costs. EchoStar has had its QUAM solution in place since late last year.

What's behind EchoStar's new focus on QUAM and companies like Castle Cable? EchoStar believes that the top cable multiple system operators (MSOs) -- such as AT&T, AOL Time Warner, Cox and Comcast - are beginning to look to spread their footprints into high-speed broadband digital services and bundled services (like telephony). As they do this, the days of strong private cable operators are coming to an end. Thus, EchoStar believes there's an opportunity in this MDU space, as does Castle Cable. Castle Cable saw the writing on the wall, i.e., that it needed to add that digital tier of 500 channels in order to compete against those cable MSOs.

EchoStar states it aligned with Castle Cable specifically because it offers one of the best names in the MDU business and it specifically aligns itself with the A+ properties in MDU marketplace. Notes an EchoStar spokesman, "We're always in the business of adding video subscribers, and if there are partners there that can help us do that better, we're looking at that...especially growing out from a regional to national scope." EchoStar also notes that it focuses particularly on two MDU markets, i.e., 1) Real Estate Investment Trusts (REITs), and 2) Property Management (especially involving multistate providers).

Yet competition remains, and will likely intensify when DirecTV re-establishes itself under a new owner and when some of the larger cable franchise holders get their feet on the ground again after some debilitating mergers and other recent transitions. Castle Cable's Principal, Mike Manfredi, notes that a lack of competition in most parts of the U.S. has also placed existing cable franchise holders in a position where they are less likely to be as aggressive as they might be otherwise. Also, what works for EchoStar today in the QUAM arena, may well work for others in the future.

For example, Saddle River, NJ-based Ikusi Telecommunications, has a new technology that proposes to allow a distribution of signals with a capacity of up to 2 Gigahertz, also using traditional coaxial wiring. Additionally, other regional providers that are particularly aggressive in their regional efforts to make digital services a strong part of their future include Atlanta, GA-based Apartment Media Works.

All together today, Castle Cable has about 50 apartment communities that it serves in Seattle, WA; Portland, OR; San Francisco, CA; Sacramento, CA; Los Angeles, CA; San Diego, CA; and Denver, CO. 340 channels are typically delivered to MDUs via EchoStar's full-CONUS slots, with another 20-25 channels delivered via EchoStar's partial-CONUS slot at 148° West Longitude. Castle Cable provides the QUAM-based system with it's own call center, care and billing services.

In addition to MDUs, EchoStar's special distribution unit is focusing hotels and motels as a class, as well as other buildings where people do not typically reside overnight, such as offices, restaurants, schools, and bars. Prisons are another set of locations where EchoStar wishes to draw business. Within hotels and motels, like competitors LodgeNet and OnCommand, EchoStar's solution offers bulk rates that provide guaranteed carriage for such key content providers as ESPN, CNN and TNT.

In this area, EchoStar's entire model today is spawned from its retailer model, however, other sales channels - such as its direct sales and those involving Real Estate Investment Trusts (REITs) - also offer the QUAM formula. Since the implementation of the QUAM solution, EchoStar's VP for Special Distribution, Chris Clark, reports his unit at EchoStar headquarters has been given a new emphasis of corporate time, money and effort. Key vendors that are allied with EchoStar include Spain's Televes (which supplies transcoders) and Alabama-based SCI (which offers set-top boxes under EchoStar's design). Headend equipment is typically supplied by other vendors that are not specially allied with EchoStar, such as retailers Blonder Tongue, Telewire, Spaun or Pico Macom.

Key contacts include Chris Altomari, EchoStar's MDU National Sales Manager, at (303) 723 2809; Ann Walker, Castle Cable's VP Business Affairs, at (707) 769 6000; Mor Allon, Ikusi's General Manager, at (201) 785 8801; and Bryan Rader, President, Apartment Media Works, at (678) 366 9900. EchoStar's Website may be accessed at www.dishnetwork.com; Castle Cable's is found at www.castlecable.com; Ikusi's is at www.ikusi.com; and Apartment Media Works' Website is located at www.aptmediaworks.com.

About the Author

Jimmy Schaeffler researches, analyzes and writes this regular report for Private & Wireless Broadband magazine. He is a subscription TV, broadband, and consumer electronics analyst at The Carmel Group (www.carmelgroup.com), a consultancy based in Carmel-by-the-Sea, CA that also publishes a monthly industry newsletter and analysis, titled DBS Investor. The company specializes in telecommunications, computers and the media. He can be reached at jimmy@carmelgroup.com or (831) 643 2222.