TELSAT® COMMUNICATIONS LTD

Direct Broadcast Satellite

A New Generation of Television In America

Version 34. Feb 7, 1999.

Richard R. Peterson, President

1480 Lark Avenue

Maplewood, MN 55109

NOTICE: This document is Copyright (C) 1999, Richard R. Peterson. All rights reserved. Permission is granted to duplicate this document if and only if the following three conditions are met: 1. This document cannot be modified in any way. 2. This document cannot be sold nor included as a part of any publication sold. 3. This notice must be included. Any other use requires the written consent of the author.

DISCLAIMER: The author makes no guarantee as to the accuracy of any information provided in this document and is not responsible for any consequences of its use.

NOTICE: At the time this document was written, several mergers and acquisitions in the DBS world had been announced, but were pending government approval. Most expect these mergers to be approved and this document is written assuming so.

A multi-channel alternative to cable television known as Direct Broadcast Satellite (DBS) is now available in the continental U.S. DBS provides cable-like television programming directly from satellites on small (18 inch to 3-foot diameter) satellite dishes. Millions of households now subscribe to DBS services resulting in what appears to be some noticeable competition for the Cable TV industry.

DBS' appeal is primarily channel capacity. With DBS, several standard analog television signals are digitally compressed onto a single satellite transponder thereby allowing up to 200 or more channels receivable with a dish pointed at a fixed position in the sky.

The DBS industry is dominated by two aggressively competing companies: DIRECTV® and Echostar® with their services called DIRECTV and DISH Network respectively. These two services are very comparable in content and price. Although they still have far fewer subscribers than the Cable TV industry, DBS services are rapidly adding subscribers and the industry is showing some very strong growth.

There are currently four all-digital DBS services in the U.S. today called DIRECTV, DISH Network, SkyAngel, and Unity Motion. Two other companies, Primestar and the United States Broadcasting Company are about to phase out their services as the result of mergers and acquisitions.

DIRECTV is a 200+ channel service using 18 inch dishes. DIRECTV is considered the premier DBS service in the U.S. today acquiring over four and a half million subscribers since starting in 1994. They are considered the Goliath of the DBS industry and have by far the largest number of subscribers. Their DBS service has grown into a multi-billion dollar business and strong growth continues.

The DISH Network is a 200+ channel service offered by EchoStar Communications, Inc which also uses 18 inch dishes. DISH started in spring of 1996 so their market share is less than DIRECTV, but their service is growing at a rate comparable to DIRECTV and they are proving to be formidable competitors with over two million customers.

Dominion has partnered with EchoStar to deliver a 6 to 10 channel Christian religious service called SkyAngel which broadcast from one of the EchoStar satellites and using EchoStar's decoders. SkyAngel is a very small niche service and is not considered a major player in the DBS world so it will not be discussed here.

Unity Motion is a brand new service starting in early 1999. They offer an exclusively High Definition Television (HDTV) service using 36" dishes and their own special DBS/HDTV decoders. They currently offer 3 HDTV channels and say they expect up to 12 by the end of 1999. It is too early to tell how successful they will be, but many people are watching them closely.

Primestar, one of the first DBS companies to come on-line, is continuing to operate their 150 channel service to their current 2 million subscribers, but they are in the process of phasing out so they are no longer adding new subscribers. They have been bought out by DIRECTV and over the coming 2 to 3 years will be converting their subscribers from Primestar's service to the DIRECTV service. Primestar's satellite signal is expected to be turned off when the transition is complete, so Primestar will not be discussed here.

The United States Satellite Broadcasting Company is also continuing to operate their service but also will be transferring all assets and subscribers to DIRECTV. USSB was one of the original DBS services and was very successful. They had partnered with DIRECTV putting together a popular complimentary service featuring premium cable channels using DIRECTV's satellites and reception systems. USSB will be merged into DIRECTV by mid 1999 so they will be considered part of DIRECTV and no longer a separate company. At that time it is expected that the name USSB will no longer be used, so only DIRECTV will be discussed here.

To receive the signals, viewers need a reception system made up of a satellite dish, a digital decoder (usually in the form of a set top box), and a remote control designed for their system. Each of the DBS services transmits a digital bitstream which contains compressed audio, compressed video, authorization information, program guide information, and other information which is unique to their service. The decoders decode the digital bitstream converting it into video and audio which can be displayed by conventional NTSC TV sets or in some cases HDTV sets.

There are three possible decoder types from which potential subscribers can choose today, namely DIRECTV, DISH, or Unity Motion. These three are all different and not interchangeable. In order to change to another service subscribers must either sell or otherwise exchange their decoders for one designed for the new service.

A single decoder can decode a single channel which can then be routed to several TV sets and VCRs throughout a household. A separate decoder is needed for each TV or VCR that subscribers want to be able to view a different channel on simultaneously. Therefore to watch two different satellite channels simultaneously or to tape one channel while watching another a household must have two decoders.

DBS is now a viable alternative to cable TV for one important reason: recent advances in real-time digital video compression technology allow a very large number of channels to be carried on the same frequency range where only a few could in the past. Each of the DBS services uses a real-time lossy compression system which allows an average of about six or eight channels to be broadcast from a single satellite transponder where only one channel was possible before. This results in the DBS services' ability to broadcast up to 200 channels from a single orbital location in the sky. Without digital compression only 32 channels would be allowed making the DBS services much less desirable. The actual number of channels broadcast by each service varies considerably.

Several things affect the number of channels including the number of broadcast frequencies (transponders) licensed by each provider, the number of channels packed into each transponder frequency, the number and power of the satellites in place at each location, whether or not they broadcast in high definition, and other factors. We will look at some of them.

The FCC has allocated eight orbital positions at the equator for U.S.-owned High Power DBS services. At each of these slots the FCC permits a maximum of 32 broadcast frequencies (transponders). Not all the orbital positions can cover the entire continental US so these assignments were made in a way that gives the services the ability to offer an equal number of channels to everyone regardless of where they live. The positions which do cover the entire continental U.S. have always been the most desirable slots and they have been the premier asset coveted in the recent mergers and acquisitions.

The full-conus slots (those that can reach the entire continental US) are 101 degrees, 110 degrees, and 119 degrees. DIRECTV has a license for 32 transponders at 101 degrees, three at 110, and eleven at 119. EchoStar has 27 at 110 degrees, 21 at 119, and several others that are east coast or west coast only. They both now say they have the capability of between 300-400 total channels, although they currently only have satellites in place for about 200.

It is also possible for companies who are not licensed DBS broadcasters to offer DBS-type services from conventional satellites. To the consumer these services look identical to licensed DBS services, except that they generally require a somewhat larger dish (although still much smaller than conventional dishes) and they also require professional installation. Unity Motion uses a conventional satellite and a larger dish for their HDTV service.

The number of channels which can be compressed onto each transponder depends on a lot of things such as desired image quality, degree of allowable visible artifacts, frame rate of the source material, amount of movement in the source material, and the amount of error correction overhead. The DBS companies compress several analog signals and combine the resulting picture and sound bitstreams with program guide data, conditional access data, and other digital overhead information necessary to reconstruct the original signals.

Programming containing frames with many fast-moving small objects such as a basketball game can be compressed perhaps 3 or 4 to a transponder before significant digital artifacts appear. Programming containing mostly large still images can be compressed at a higher rate, perhaps 5 or 6 to 1 transponder. Movies are filmed at 24 frames per second rather than 30 for video so they contain less source material. In addition, film is not interlaced and is in general fairly constant from frame to frame. As a result, film can be compressed more, perhaps 7 or 8 to 1 transponder for acceptable quality. Compression technology continues to improve so these may be conservative estimates.

The amount of actual picture and sound data sent across a transponder depends in part on the amount of error correction overhead in the signal. The overhead does several things including helping to restore data which may have been lost during transmission. More powerful satellites or multiple satellite transponders configured to broadcast in the same frequency, can reduce the error correction overhead, allowing more program data to be carried. DIRECTV has launched multiple satellites into their licensed orbital locations to increase the power on each transponder frequency and therefore maximize the number of channels.

Error correction overhead is a relatively small part of the signal, though, so this is a pretty expensive means of getting a small increase in channel capacity. It would be much more cost effective for DIRECTV to launch the satellite into another orbital location for which they own the license and offer considerably more services at the same price. They simply didn't have any more licenses until very recently when they bought Primestar and USSB's assets. They are now expected to either move one or more satellites from their primary location to a newly acquired slot or launch new satellites into the new slots to expand their service.

DIRECTV and EchoStar are just beginning to broadcast from more than one orbital location. This complicates things a bit since all dishes sold thus far and most in the future will only be able to receive signals from a single orbital location. Existing customers will need to upgrade to take advantage of the new services. Nevertheless both DIRECTV and EchoStar will increase their use of multi-location broadcasts to expand their channel capacity in the future.

Only about two HDTV channels can be put on a single transponder as compared to eight or so regular channels. The DBS companies will need to carefully consider the degree to which they offer additional High Definition channels since each one will significantly impact the total number of channels on their services. There is more about HDTV below.

You need special multi-location reception systems which are now becoming available and are expected to be very significant in the coming months as both DIRECTV and EchoStar expand their multi-location services. Once installed, viewers will not easily be able to tell when they are switching between the various satellites and orbital positions.

EchoStar currently sells a two-dish system which includes a signal combiner on the roof to allow the signals received by the two dishes to be combined and run into the house through a single cable. Most expect the two dish system to be replaced with a single multi-location dish in the future.

It appears subscribers who already own decoders don't need to replace them to receive additional services from multi-locations; only the dish needs to be replaced. New decoders will be required for DIRECTV and EchoStar's new HDTV services planned for later in 1999.

No, not really. Digital TV is different. It helps to understand what is happening in the television world today to understand what the differences are.

Today's terrestrial broadcasts and most cable systems use an analog system called NTSC. With NTSC, the number of horizontal scan lines is fixed at about 480, but the number of vertical lines that can be distinguished across the screen varies depending on the source. For example, VHS can produce about 240 lines, good terrestrial broadcasts about 330 lines, Super VHS about 400 lines, and DVD perhaps 600+ lines. Chrominance (color) resolution is considerably lower.

The DIRECTV and EchoStar systems were designed to use standard (NTSC) programming and display the results on conventional television sets. The programming received at their uplink centers is primarily high quality NTSC and they say they broadcast at about about 400 lines of resolution today (note that is VERTICAL lines, or the resolution in the horizontal direction.)

DIRECTV and EchoStar digitize the analog signal, transmit it, and the decoders at the viewer's homes convert the digital signal into a standard NTSC signal for display. Because it is a digital broadcast, the signal displayed could be nearly indistinguishable from the source, but because the digital compression used is lossy in nature, that is often not the case. Nevertheless, the picture is noise-free and ghost-free and is usually considered much higher quality than can be received terrestrially. DIRECTV and EchoStar use a digitally transmitted ANALOG signal broadcast at a higher resolution than normal NTSC terrestrial broadcasts, but with lossy compression that can reduce the picture quality.

Today's analog broadcasts are transitioning to digital. Television stations are beginning to convert to a recently developed digital system called the ATSC system which is expected to replace the NTSC system. They have been given an additional block of spectrum in which they are required to begin simultaneously broadcasting their programming both in their current analog form and in the new digital form. This transition to all digital broadcasting is scheduled to be completed in 2006 at which time the analog broadcasts are supposed to stop. Therefore, by 2006, all terrestrial broadcasts in the US are supposed to be digital.

A very complex digital decoding capability is required to receive the ATSC digital broadcasts, so they will not be receivable with today's television sets unless an additional external ATSC set-top box is added. (This is analogous to what is required to receive DBS programming.) That means either many TVs (and VCRs, camcorders, etc) will need to be replaced or many ATSC decoders will need to be purchased before then.

The ATSC system includes resolutions that vary from 480 to 1080 lines of resolution in both progressive and interlaced formats. (Unlike NTSC, ATSC is usually measured by the number of horizontal lines which equates to the resolution in the vertical direction.) Broadcasters can pick what format they want to broadcast in, but the decoders are able to receive and decode all possible formats. Resolutions under 720 are considered Standard Definition, and others are considered High Definition. Most ATSC formats were designed for display on a 16x9 ratio screen as opposed to today's 4x3 ratio. 1080 Interlaced (called 1080I) seems to be the standard HDTV format planned, but some 720 Progressive (720P) is also planned. Most agree 1080P would be the most desirable format, but with today's technology it can't quite fit into a 6 MHz spectrum band.

To start with, the DBS companies now can offer High Definition programming, since HDTV source material is coming available and High Definition TV sets are starting to appear to display the signals. In fact, DBS is the only means today for most in the US to have access to a High Definition broadcast signal.

Unity Motion's entire business plan is based on HDTV. They are already broadcasting at 1080I on 3 channels with more planned. Early reviews indicate exceptional picture and sound quality. It remains to be seen how well they will do in the future. DIRECTV has announced plans for two High Definition Television(HDTV) PPV channels in early to mid-1999. Both EchoStar and DIRECTV have also said they plan to carry both the east and west coast feeds of High Definition HBO when it starts in March or April of 1999. More HDTV programming announcements are expected in the coming months.

It is not clear, however whether or not DIRECTV or EchoStar's HDTV broadcasts will be as good as a terrestrial HDTV broadcast. This is because terrestrial broadcasts will have a fixed 6 MHz spectrum band allowing over 19 Mbits/second of data to be sent. Tests have concluded this is ample space for a 1080I signal to be transmitted with the resulting picture indistinguishable from the original. The DBS systems put multiple channels on the same transponder and allow the bitrate of each individual channel to dynamically change as the needs vary due to their content. If multiple channels happen to have bursts where they need more data simultaneously, image degradation can occur, although usually that is for short durations of time. Terrestial broadcasters may also simulcast, but most will likely use a single 1080I signal for HDTV at least occasionally.

It remains to be seen exactly how DIRECTV and ECHOSTAR implement HDTV. Of course, it also remains to be seen how broadcasters use their spectrum as well.

Unity Motion is entirely an HDTV service so all of their decoders can receive and display all ATSC formats including HDTV. Their equipment is available today. The other services will require new enhanced decoders to receive HDTV which are not yet available. The new decoders will be able to receive both the analog signals from the satellites, and the HDTV signals as well. Further, most decoders announced to date (including Unity Motion) can receive and decode terrestrial digital broadcasts as well. This is quite important; a single satellite decoder can also function as a digital TV receiver which can be hooked up to either an HDTV set (for best picture and proper aspect ratio) or a standard conventional set if desired.

Those contemplating a purchase of an HDTV decoder (either built-into a set or a separate set-top box) should strongly consider waiting and getting one that can also receive either DIRECTV or EchoStar's programming. Most decoders today are priced in the $1500-$2500 range, but RCA has raised eyebrows with the announcement of a $650 DIRECTV decoder with full ATSC reception capability. A digitally broadcast terrestrial signal has an outstanding picture even when displayed on a conventional NTSC set, so this is expected to be quite popular for high-end video buffs.

A new dish will likely be required for reception of HDTV, since HDTV services will likely not be broadcast from DIRECTV or EchoStar's primary satellite location.

That is a good question. It may have a very large effect, primarily because the bitrate terrestrial broadcasters will likely use for their ATSC broadcasts will be considerably higher than the bitrate required for the same digitally compressed NTSC programming. This means that at a minimum it will impact EchoStar's carriage of local channels causing a need for much greater bandwith to broadcast network affiliates with the same level of quality they can receive over the air. It may actually make it easier for DIRECTV to create decoders which seamlessly merge local channels in with their satellite delivered channels. Time will tell. It will also be interesting to watch what happens with the digital delivery of the cable programming offered on the DBS services and what affect that has on bandwidth requirements.

The picture and sound quality on both DIRECTV and EchoStar seems to be open to debate. There are occasional digital artifacts resulting from the heavy compression used. There is a significant trade-off each service provider needs to make regarding quality versus the number of channels available on their systems.

Many DBS subscribers report that the video and audio quality are excellent and the systems work extremely well. Others report noticeable digital artifacts on at least some channels. The quality seems to vary significantly across channels in part because the compression process can severely degrade low-quality source material.

At times the video and audio quality on both DIRECTV and EchoStar is superb. Unity Motion's quality is stunning, since they are HDTV-only. Digital TV works.

Local channels are the Achilles Heel of DBS. Since DBS is a national broadcast, local information becomes difficult. DIRECTV and EchoStar have vastly different solutions to the problem.

EchoStar has decided in order for DBS to be true and complete competition for cable TV, local channels must be broadcast from the satellite. They have invested a huge amount for satellites and DBS frequencies to allow them to rebroadcast ABC, CBS, NBC, and FOX local network affiliates from several major cities across the U.S. These signals are receivable only by viewers within each affiliate's local coverage area. EchoStar continues adding cities and expects to have local signals for the majority of households available by the end of 1999. They currently charge $5 per month extra for the local channels.

DIRECTV says they have no plans to broadcast local network affiliates and instead says a local antenna is the best option for DBS subscribers to receive the major networks. The Consumer Electronic Manufacturing Association (CEMA) has put together color-coded maps that allow dealers to determine what type of antenna is required for all viewers in their area.

Unity Motion is a national service only and has no plans for local broadcasts.

A package of uplinked network affiliates for the major networks has been available for sale to those rural customers who are outside the range of terrestrial broadcasts. The law states that viewers who can receive the networks using a roof-top antenna are not eligible to receive the out-of-market package over the satellite. This is really only applicable to a small fraction of the DBS customers.

US lawmakers and the FCC are both working on this whole network affiliate issue and the final results will likely be drastically different than they are today, so for more information, contact your DBS provider.

The DBS satellites operate from 22,300 miles above the equator at various positions across the U.S. Dishes are pointed toward the south with the angle above the horizon dependent on the distance north of the equator. Those in the northern part of the U.S. (such as Minnesota) see the satellites about 25-35 degrees above the horizon. Those in the southern part see them higher in the sky.

The primary DIRECTV satellites are at the 101 degree West orbital location which is above a North/South line running through western Nebraska. Viewers in the central portion of the U.S. (such as Texas or the Dakotas) see the satellite about straight to the south. On the East coast it is slightly west of south and on the West coast it is slightly east of south. Additional satellites are expected to be added at 119 degrees and 110 degrees.

The primary EchoStar satellites are at the 119 degree orbital position which is above a north/south line running through western Nevada. Those on the west coast will see the satellite about straight to the south. All others will see it to the southwest. They now own even more transponder frequency licenses at 110 degrees so subscribers will likely want the capability to receive from that location as well.

EchoStar also uses 61.5 and 148 degrees for the eastern and western half of the U.S. respectively which are used for some niche services including Sky Angel .

Unity Motion broadcasts from TelStar 4 at 89 degrees which is above a North/South line running through central Wisconsin.

The DIRECTV and DISH hardware were both designed to allow self-installation with kits available for both systems for about $70. The dishes can be installed anywhere there is a direct line of sight to the satellite with no trees or buildings in the way. The dishes typically have a built-in audible signal meter or blinking LED to indicate signal strength to help position them during installation. Professional installations typically retail for $200 or so, but free or reduced-price installation is often available as part of a promotion.

Unity Motion equipment must be professionally installed.

Sometimes, but not always. The DBS dishes connect to the decoders with coaxial cable. The dish electronics have either one or two coaxial connections depending on the model so at most two decoders can be connected to one dish. It is important to purchase a package which can allow more than one decoder to connect to a dish if viewers ever want to hook up more than one decoder in a household.

Channel Master and perhaps other companies sell a MultiSwitch which takes both coaxial outputs from a dual output dish and allows up to four decoders to be connected to it. Note that the base units from most manufacturers can only be connected to one decoder, so the Deluxe unit is necessary in this configuration.

On most systems, the DBS decoders accept a credit-card sized processor board called a SmartCard which plugs in and allows the decoder to receive authorized programming. The authorization stream is sent on each transponder along with the video and audio information. The SmartCard can be easily replaced by the owner if necessary to help curb piracy.

Pirate DIRECTV SmartCards have been developed and are being sold now, mostly in Canada. It appears EchoStar's security has also been broken, although they seem to have much less piracy. DIRECTV has issued several Electronic Counter Measures (ECMs) which have temporarily shut down the pirate cards and they plan to also distribute smart-card replacements in the near future which are expected to make the existing pirate cards (temporarily at least) unusable. They have pushed for several indictments of pirate card manufacturers and have helped to successfully prosecute some. They say they will vigorously fight against piracy to protect their programmers, but piracy still seems to continue.

Because the DBS signals are sent as digital packets, the systems can send video, audio, and computer data in any combination to the decoders. Each DBS transponder has a large amount of bandwidth, some of which the DBS companies may choose to use for data services such as Internet or interactive TV services. It is important to consider, though, that DBS is a one-way broadcast so any return data necessary must be sent over a telephone line.

Both DIRECTV and EchoStar have made numerous announcements of plans for data services in the past with most of them being delayed and repeatedly changed. They have recently again made several announcements, but subscribers should consider these past failures when contemplating the new services. Most new services are expected to be available by the middle of 1999.

EchoStar has recently announced an agreement with WebTV to co-produce a DISH decoder capable of receiving Internet TV services through satellite. The intent is to make it easier for TV viewers to surf the web or send email from their TVs. They also have agreements with OpenTV for interactive services.

DIRECTV has recently announced an agreement with TIVO, Inc. to create a DBS decoder with built-in "Personal TV" features. This allows subscribers to set up the decoder to watch the program guide for certain favorite types of channels. Favorites can be saved internally in the decoder for later viewing.

DIRECTV has also announced an agreement with Wink Communications to allow the reception of special interactive television features such as electronic shopping. This capability will require specially designed decoders and will be offered as a free enhancement to DIRECTV subscribed channels.

Network affiliates provided on the DBS services cannot be received by the majority of U.S. households. For those who can receive them, it is usually not their local affiliate.

Because of the broadcast frequencies used by the DBS providers, outages can occur as a result of severe thunderstorms in all DBS systems. The satellites are focused to send more power to rainier areas to help minimize this problem, but it does exist.

There are occasional visible digital artifacts which some viewers find objectionable. Some claim this is very distracting while others hardly notice it. It appears to be quite subjective. Nevertheless digital artifacts are a part of the DBS services.

Some cable TV customers with cable-ready VCRs and TVs are used to being able to watch one channel and record another or set their VCR to record two different cable channels while they are out. The DBS systems, like any system which requires a decoder, can only decode one channel at a time so a separate decoder must be purchased for each TV or VCR which are to be used at the same time. Also, some models don't have a program timer to use with a VCR's timer to record programs on more than one channel at a time.

Many on the west coast are disappointed that programs appear very early since the services use east coast feeds for most of their programming.

Industry experts say they expect to see over 10 million DBS subscribers by the year 2000. That is still a small fraction of the cable subscribers which number over 60 million but substantial enough for them to take notice.

DIRECTV currently has the widest variety of channels and are probably the best for subscribers who want the most possible choice and can afford a number of services. NFL football and other sports enthusiasts will also want DIRECTV as well as those who like a lot of Premium services and Pay Per View movies and events.

Unity Motion is probably the choice for those who want a totally High Definition experience.

Each of the service providers are in debt and are continuing to operate at a loss. When choosing a DBS service provider, viewers should note whether or not it has enough cash to continue to operate so they are not left holding unusable hardware if a service were to cease operation. It appears that both DIRECTV and Dish will be operating for a long time. It is too early to tell how well Sky Angel will do, but even if it fails the DISH hardware will continue to be usable to receive EchoStar programming. If Unity Motion fails its hardware will still be usable as a terrestrial Digital Television decoder.

No, it looks like the two major players DIRECTV and EchoStar will pretty much dominate the DBS industry for the foreseeable future with the two niche services SkyAngel and Unity Motion minor players.

This document is available on the World Wide Web from John Hodgson's DBS Home Page at www.dbsdish.com and at several other sites.