John Merli /
08.09.2006 12:00 AM
USDTV: Low Cost, Little Interest
Bankrupt 'wireless cable' service fails to build customer base

SALT LAKE CITY

"It's simple, instantaneous, and doesn't require any technical knowledge on your part. Isn't that nice?"

Nice, yet apparently not nice enough. USDTV filed for Chapter 7 bankruptcy protection July 6, after a two-year effort to provide low-cost DTV on analog sets to the last of the "antenna people" and other hold-out consumers who might settle for less TV for less money.

According to Wilmington, Del. attorney John Carroll of Cozen O'Connor, who represents the court trustee, two parties were in seperate discussions in mid-July to assume the assets and debts of USDTV. A creditors meeting was scheduled for Aug. 3, according to court documents.

After a soft launch in early 2004 in its home base of Salt Lake City, USDTV obtained the capital necessary to expand into Las Vegas, Albuquerque and Dallas-Ft. Worth with about 30 channels. Its monthly fee was $20, plus about $65 in startup expenses.

At its peak, the company employed 135 people. At the time of the bankruptcy filing, USDTV had about 16,000 subscribers, the majority of them in Dallas and Salt Lake City. Service continued in the weeks following the bankruptcy filing.

A POSITIVE NEGATIVE

Lindsley's company was attempting to create a positive from a negative: counting on a mostly maverick base of disgruntled consumers-who, for various reasons, would not (or could not) pay for traditional cable or satellite-to welcome USDTV's compromise service as a way to get fewer channels at lower monthly fees.

According to Lindsley, his company simply didn't have enough time and adequate long-range backing to achieve its goals successfully.

"We had a very positive sign of consumer demand of this product in a short time," he said. "We only went into the Dallas market last September and were on a [course] to sign up 20,000 homes within a year."

Lindsley, who had a comparable enterprise prior to USDTV that experienced a similar fate, said what the early sign-up numbers showed was "consumers were interested in 'value offerings,' and that includes price, but they were not interested in paying for channels they never watched."

He likened his firm's services to a kind of a la carte approach, yet apart from an add-on premium channel or two like Starz!, USDTV subscribers got a set package of channels, including only one news cable network, Fox News Channel.

"We haven't had the time to build a fully integrated Web, to get into big-box stores. We're just getting started at this point," he said.

Ultimately, he added, broadcasters were unwilling to competer with cable.

"The key is to get in the game, and until broadcasters are willing to get into the game, we have to go with third parties."

Lindsley said his firm at least provided a start for local broadcasters to start signing on subscribers like cable does. But some industry analysts like Bruce Leichtman contend that Lindsley's firm was doomed from the start because it was offering a service that very few people wanted to buy.

"USDTV failed because it had a very poor consumer proposition," said Leichtman, president of Leichtman Research Group, a media research firm in Durham, N.H.

"Going for 'less for less' is not something that consumers truly want, and that proposition was the basis for any lack of success that it could have ever possibly had. This of course was same proposition that wireless cable tried a while back and it just does not work," Leichtman said.

Josh Bernoff, principal analyst for Forrester Research, said USDTV "definitely had the opportunity to pick off those who wanted to pay less for a cable service. And there are plenty of them." But he said there are big reasons for its demise.

"First, people who want to pay less for cable have a great alternative already-satellite. Echostar, in particular, has the lowest cost digital offering available. Competing for these folks means major marketing costs, which USDTV didn't have the stomach for."

For his part, Lindsley said that despite conventional wisdom that most antenna people were primarily low income, he said about 70 percent of his customer base owned their own homes and had a median household income of $65,000-plus.

But Bernoff said that income is not necessarily the issue.

"HDTV is growing in popularity and more than 40 percent of HD set owners today have below-average incomes," he said.

Ironically, he said this is another problem for an operation based on digital broadcast, such as USDTV. "It means stations need to set aside more bandwidth for HDTV, and add in multicasting, which [consumers] are also interested in-and that means there's less bandwidth for USDTV."

It also may mean the Wal-Mart customers USDTV were targeting aren't willing to settle for just a few channels, Bernoff said.

Finally, another fundamental problem facing USDTV was one broadcasters have faced for more than half a century: terrestrial interference.

The outcome of the bankruptcy is expected to be finalized some time in September.


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