What If Cablevision Launched a Satellite And Everybody Asked Why?

Cablevision got its new DBS bird launched into orbit. Now if observers only knew why. Last week's successful launch of the high-powered satellite didn't loosen the tongues of Cablevision executives, who have been rather silent on the business plan.

Rainbow 1, a 5-ton satellite built by Lockheed Martin, lifted off from Cape Canaveral, Fla., Thursday night. Thunderclouds loomed, "but the clouds just cleared, and we were ready to go," said Cablevision Executive Vice President of Technology Wilt Hildenbrand.

"This is a lot more fun than putting wires up on telephone poles," Cablevision Chairman Chuck Dolan said shortly after the launch.

Dolan and other company executives say they plan to launch a DBS service by October but won't say exactly what programming they plan to deliver or how they plan to price and market it to compete with DirecTV and EchoStar.

They indicate that the service will deliver a mix of standard- and high-definition signals, but high-def probably won't be available for two years. Cablevision has hinted that it might try a mix of retail and wholesale, using its relatively high capacity to deliver HDTV signals that DBS and some cable systems may not have the bandwidth to deliver on their own.

The venture is widely criticized on Wall Street because few investors see how Cablevision could thrive as a third DBS player when the overall multichannel video market seems to be topping out around 85% of all U.S. homes. Given that it costs the relatively mature DirecTV and EchoStar $600 to add a subscriber, some analysts estimate that rolling out a consumer DBS business could run $2 billion. And Cablevision has no backup satellite. "We would have preferred [Cablevision] to shut down the business or sell it pre-launch," said Richard Greenfield, an analyst with Fulcrum Capital.

Cablevision has said it will spin the DBS venture off to its shareholders along with $450 million in funding from the company. That will ostensibly limit the downside for Cablevision shareholders.

Rainbow 1 is hovering at the equator. Going north to the United States, that longitude runs 300 miles east of the coast of Maine. But the signals won't quite cover the entire continental United States, leaving at least the Pacific Northwest beyond reach.

Cablevision talks about the satellite's ultimately having capacity for 468 standard-definition video channels. Further, "spot beams" can direct different programming to 22 circular regions, 252 channels per region. But that high capacity presumes that the satellite will transmit in the MPEG-4 compression scheme, a standard that has not yet been finalized for video delivery. That means that decoder chips aren't available and won't be at mass-market prices any time soon.