Digital satellite systems vs. cable.

About 15 years ago, big satellite dishes started sprouting in backyards across America. That market didn't take off because of costs and the cable television industry's lock on programming. Now, those big, old satellite dishes are being supplanted by 18-inch digital satellite systems (DSS), and the cable industry may be facing some troubled times.

Jim Rulmyr of Mercer Management Consulting, Inc., believes the time is right for DSS to challenge cable TV competitively. He points out that the Cable Act of 1992, which forced all cable networks to provide their programming to cable television's competitors on equal terms, lifted previous barriers and truly opened the marketplace to competition. The initial push into the market that occurred in the 1980s didn't win consumer support because it was cost-prohibitive - dish owners had to pay for the cable channels. "After spending $2,000 to $3,000 for the big dish, the monthly programming subscriptions were almost the same as if they remained with cable."

With cable's monopoly on programming removed, several companies - the Direct TV division of GM Hughes Electronics, RCA, and the United States Satellite Broadcasting division of Hubbard Broadcasting - have entered the marketplace, providing consumers with more channels for slightly less in monthly fees than cable.

"DSS technology is working internationally," Rulmyr notes. "There are more than 2,500,000 subscriptions in the United Kingdom for the dishes, which is several times the penetration of cable TV. If the UK's experience is any indication, satellite TV can beat cable TV when compared head to head. U.S. cable TV companies will need to develop effective customer retention strategies."

Two factors that are fueling DSS's quick surge of success are the reasonable price of equipment and the quality of the audio and digital picture. Services are priced about 10-20% below a comparable cable package. At present, DSS -...