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Though satellite transmissions are being used for everything from clearing checks to providing televised conferences of company executives in distant cities, the industry's hottest prospective market is for direct broadcast by satellite. D.B.S., as it is called, will enable entertainment-programming companies to beam television shows and movies via satellite directly to homes equipped with rooftop "dish" antennas, thereby cutting out cable companies altogether. Prices for the devices currently begin at around $2,000, but a number of companies are at work on family-size units that will retail for less than half that amount.
One Comsat subsidiary, Satellite Television Corp., has already invested an estimated $500 million in developing a direct broadcast system, and earlier this year was granted a license by the Federal Communications Commission to put it into operation, probably in 1986. Last week the commission granted D.B.S. approvals to a number of other eager firms, including CBS Inc., Graphic Scanning Corp., RCA, Western Union and Video Satellite Systems Inc.
Any outfit capable of beating its competitors into such a wide-open market would obviously gain an advantage, and one firm, General Instrument Corp. (fiscal 1982 sales: $957 million), is trying hard to be first. The company has entered into a partnership with United Satellite Television, an upstart venture headed by Francesco Galesi, a New York City businessman with ambitious plans to launch a D.B.S. operation in the northeastern U.S. next July. The group's objective is to rent dishes manufactured by General Instrument for $35 a month, which will also provide customers five channels of news and entertainment programming.
Companies offering satellite services must compete for so-called transponder access rights from the satellite companies themselves. Aboard each of the 19 commercial satellites currently in U.S. domestic service are anywhere from ten to 24 of the communications devices, each acting as a kind of sophisticated relay station that captures messages beamed up from, say, New York or Atlanta, then bounces them back to to such destinations as Los Angeles and perhaps Honolulu.
Fighting over transponder access rights has long since reached virtual Star Wars proportions in the industry, and the surging demand for the devices has already spawned middlemen brokers eager to cash in on the profit potential of trading the rights. Some firms have actually gone into business in order to lock up transponders before they are launched, a practice encouraged by FCC rules requiring satellite owners to offer transponders to customers at a fixed price on a first-come, first-served basis.
In an effort to keep more of the market value of the transponders to itself, RCA Corp., a major satellite producer, last November auctioned off transponder leases at Sotheby Parke Bernet in New York. The seven transponders that were put on the block, launched aboard Satcom IV two months later, brought from $10.7 million to $14.4 million in the bidding, and would have immediately netted RCA $90 million had not the FCC later ruled the auction invalid on the grounds that it undermined the intent of the tariff regulations. (RCA was, however, eventually allowed to offer each of the leases at the average price paid at the auction.)