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03.22.2004
Originally featured on BroadcastEngineering.com
Over-the-air pay TV service unveils national plans

A new type of multichannel pay television service — using the transmitters of local digital broadcast stations — has announced plans to go nationwide. U.S. Digital Television, or USDTV, based in Salt Lake City, now delivers 26 channels to viewers for $19.95 a month.

So far, USDTV has about 1000 subscribers who can receive all the digital broadcast signals in their local market plus Fox News Channel, ESPN, ESPN2, Disney Channel, Toon Disney, Lifetime, Lifetime Movie Network, Discovery Channel, HGTV and the Food Network. As a premium service, USDTV is also offering movie channel Starz! to subscribers willing to pay extra.

Armed with $8.5 million in private equity funding, the new service has been available for three months in Salt Lake City and was launched last week in Albuquerque, N.M., with plans to add Las Vegas in May or June. The company said it hopes to serve 30 markets by year’s end and to have five million subscribers in four years.

The service works by aggregating both standard- and high-definition feeds from stations and networks at a single digital transmission tower, which then uses bandwidth—bought or leased from the stations — to distribute the signals to standard UHF/VHF antennas. To decode the feed, a viewer must buy a $99.95 set-top box, which has the capability to handle HD signals and 5.1 Dolby Digital surround sound. The set-top box also works as an HD tuner, even without the service.

As part of its national launch, USDTV said it was partnering with retail company Wal-Mart to sell its set-top boxes for $98.76 each. The company also has an agreement with Warren Buffet’s consumer electronics chain, RC Willey, whose stores are located west of the Mississippi River.

In addition to the $8.5 million, USDTV said it secured another round of financing to help pay for its national expansion, including a $60 million commitment from Chinese plasma and liquid-crystal display television manufacturer Hisense to produce 400,000 set-top boxes and jointly develop plasma and LCD televisions with USDTV technology built into the units.

USDTV officials said they have a two-part marketing approach for the service. First is to target “cable-nevers,” or customers who refuse to subscribe to cable or satellite services but might have an interest in some cable programming if it were offered at cheaper price. The other target is consumers who are fed up with rising rates at their cable provider.

USDTV noted that the abundance of unused spectrum at local broadcast stations is currently helping keep its costs down.

Though cheaper, the $19.95 package doesn’t approach the channel quantity of standard-tier cable service, which averages about $40 through Comcast in Salt Lake City, the Associated Press reported.

USDTV’s business model depends on local broadcasters, who get a share of its monthly subscription fees. They could also share additional revenue generated by an expanded on-demand service that USDTV says it plans to offer by the end of 2004 and that would store programming on a TiVo-like receiver with a built-in hard drive.

Individual stations get a percentage of revenues based on the amount of bandwidth provided by the station, multiplied by the number of subscribers.

For more information, visit: www.usdtv.com.

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