Satellite Snafu Will Delay Dish Network’s HD Expansion

In another competitive setback, Dish Network’s high-definition launches, particularly some local HD debuts, will be delayed by a snafu in a satellite launch, the company said Monday.

The postponement stems from last Friday’s problematic launch of AMC-14, which Dish Network planned to lease in order to expand its local HDTV and international offerings.

“The launch anomaly will result in a delay of our rollout of some high-definition channels, including some local network channels,” Dish Network said in an 8-K filing Monday with the Securities and Exchange Commission.

Sanford C. Bernstein analyst Craig Moffett issued a report Monday on the problem with AMC-14 entitled “Dish Network High-Definition Plans…Lost in Space.” He called the “anomaly” with AMC-14 “a major blow” to Dish Network’s planned HDTV expansion -- from 70 national HDTV channels to 100 by the end of the year, as well as having local HD in 100 markets – especially in terms of competing with DirecTV.

“The mishap extends the window of advantage for DirecTV, which has made HDTV the cornerstone of its marketing,” Moffett wrote. “Cable operators similarly benefit, although less so, if only because the mishap defers what otherwise would have been an advantage for Dish Network in its HD offering.  By the time contingency plans have been executed, Dish will likely be playing catch-up.” 

Last Friday a Proton launch vehicle carrying the SES Americom satellite “experienced an anomaly which left the satellite in a lower orbit than planned,” Dish Network said in its filing.

AMC-14 appears to be functional, and SES and Lockheed Martin are exploring ways to bring the bird into its correct orbital position, according to Dish Network.

“If those efforts are successful, station keeping fuel would be required to correct the orbit, so the service life of the satellite would be substantially reduced,” Dish Network told the SEC.

Back in February during a fourth-quarter conference call, Dish Network CEO Charlie Ergen conceded that delays in satellite launches last year had hurt the direct-broadcast satellite provider competitively, hamstringing its effort to offer local HDTV in more markets.

With AMC-14, Dish Network would be able to roll out local HDTV in 10 markets a month through the end of the year, Ergen told analysts last month.

In his report Monday, Moffett wrote, “Having the most high definition has become a major source of competitive advantage for DirecTV, which has used its HD superiority in an appeal to high-end subscribers. DirecTV has recently been gaining share from Dish. Meanwhile, Dish has struggled with a lower-end positioning, and has suffered consequently higher churn. Dish Network had made it clear that HD featured prominently in their own future plans, and that they did not plan to cede ‘video superiority’ to anyone. Given the long lead times involved in contracting for, building, and launching a satellite, however, it could take years for Dish Network to fully recover.”

Dish Network also has a satellite launch, EchoStar XI, set for the summer, and one set for later this year, Ciel 2.

“Both were expected to augment local HD offerings,” Moffett wrote. “Whether those satellites can be re-purposed is unclear, as the engineering of national and local [spot beam] services is quite different. And even if they are, Dish's plans to expand their local HD coverage - the other critical element of any comprehensive HD strategy - would suffer.”