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USDTV Shutting Down Operations

After losing a financial backer who helped it after bankruptcy, low-cost wireless digital-TV service USDTV is ceasing operations and shutting down.

The closure of USDTV, which was four years old, will affect about 7,200 subscribers in Salt Lake City; Dallas/Fort Worth, Texas; Albuquerque, N.M.; and Las Vegas.

Salt Lake City-based USDTV blamed its demise on the withdrawal of financing from its major investor, NexGen Telecom, which experienced a setback in another business.

In November, NexGen paid a reported $1 million to buy the assets of USDTV, which had filed for Chapter 7 bankruptcy protection in July. NexGen financially backed the company that purchased USDTV, USDigital.

“We owe a great debt of gratitude to NexGen for their efforts,” said USDigital CEO Steve Lindsley, who described NexGen Telecom’s core business as energy-related.

“[But] they suffered a significant setback in one of their non-USDTV-related businesses, to the point where they had to notify us and our management team that they could no longer fund the company or the operation.”

Lindsley has been seeking bridge financing until he could secure a larger cash infusion from investors.

“Ultimately, we ran out of runway,” he said. “We ran out of the ability to raise the bridge funding and, so, therefore, we made the decision to shut down the service, as extremely difficult as that is.”

USDTV’s business strategy plan was to offer consumers a no-frills, low-cost alternative to cable, at $19.95 per month, using the digital spectrum of local TV-station partners and its own HDTV set-tops.

Averaging 30 channels per market, the USDTV service included all of the local and national broadcast channels from networks like ABC, CBS, Fox and NBC, along with many leading cable networks such as Fox News Channel, ESPN, ESPN2, Discovery Channel, TLC, Disney Channel, Toon Disney, Lifetime Television, Lifetime Movie Network, Home & Garden Television, Food Network and Starz.

USDTV tried to rally the broadcast industry around its service, and in 2005, it got a $26 million investment from Fox Television Group, Hearst-Argyle Television, McGraw-Hill Broadcasting, and Morgan Murphy Stations. But the full industry didn’t hop on board.

“I’m very saddened by the fact that at the end of the day, the broadcast industry didn’t really grab hold of this opportunity and take it to its full promise, because this was an idea whose time really had come,” Lindsley said. “The industry, in my opinion, has got to be willing together to take meaningful and significant risks in order to see its future be successful for the long haul.”

USDTV succeeded in moving forward with several industry firsts -- launching the service, doing deals to secure content, having Wal-Mart Stores market the service and convincing broadcasters to invest and participate by providing their spectrum -- according to Lindsley.

The company made arrangements with a third-party installation company to convert the USDTV cable set-top boxes so they can continue receiving free over-the-air local digital and HDTV channels without the USDTV cable service.

“At the heart of these set-top boxes is a free-to-air receiver, so it would be a shame to lose those receivers,” Lindsley said.

USDTV is also attempting to make arrangements with other TV-service providers, such as EchoStar Communications’ Dish Network and Comcast, to give its customers a special offer if they choose to switch to those services, Lindsley added.