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A more serious challenge to cable may come from direct-broadcast satellites (DBS). A consortium of telecommunications companies that includes GM Hughes Electronics, RCA/Thomson and Hubbard Broadcasting has just completed a nationwide roll-out of its Digital Satellite System, which offers 150 channels to customers who buy and install a home dish only 18 in. in diameter. Though the hardware is still relatively expensive -- between $700 and $900, down from $2,000 to $3,000 for older big dishes -- the monthly cost of various channel packages is comparable to cable's. The chief competitor to DSS is Primestar, a four-year-old venture co-owned by General Electric and six cable operators (among them Time Warner). It requires a larger dish (36 in. in diameter) to bring in fewer channels (up to 77), but costs less up front (a $150 installation charge) since customers are allowed to lease rather than buy the dishes. Primestar, which has just completed going digital, is planning to launch a second satellite next year, which it promises will boost its capacity to 200-plus channels by mid-1996. A third company, EchoStar Communications, intends to launch its own satellite next year and promises a service that will eventually provide up to 250 channels.
DBS's most obvious market is the 10 million to 12 million homes, largely in rural areas, that are not reached by cable. (About 3.6 million of these currently have one of the older-generation big dishes.) But why would an urban cable customer be induced to switch to a dish? The home-satellite companies are trumpeting their higher-quality picture and CD-quality sound, as well as a larger array of channels. Primestar, for example, offers a package of 14 regional sports networks that provide college football games on Saturday, and DirecTV will soon offer pro fans a full complement of 10 to 12 n.f.l. games on Sunday (cost: $49.95 for five weekends). DSS also offers 50 pay-per-view movie channels, with a selection of films repeated continuously at half-hour intervals so viewers can see them at virtually any time they wish.
DBS still has serious drawbacks compared with cable. Despite the space-age technology, satellite dishes cannot deliver one very homely piece of the media pie: local stations. To get them, satellite customers must either switch back to an ordinary antenna or maintain their basic cable service. Despite a better-quality picture, moreover, DBS depends on a clear line of sight to the southern sky (where DBS satellites are floating 22,000 miles above the earth) and can be disrupted by storms. And bugs still remain in the digital picture quality: very fast action, such as football plays, can sometimes break up. Perhaps more seriously for the future, DBS is incapable of providing full interactivity, as cable eventually will. All of which, cable executives argue, means DBS will be a fringe nuisance, not a major threat. "Their first 1 million customers will be easy," says Robert Thomson, senior vice president of Tele-Communications Inc., the nation's largest cable operator. "But then the rubber will meet the road."