USDTV Shutting Down

USDTV is shutting down.
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USDTV is shutting down. A letter to subscribers on signed by the USDTV management team said, "We are deeply saddened to inform you that we are ceasing operations and closing down the USDTV service. We are doing this after nearly four years of pioneering efforts to bring you a low-cost family friendly alternative to cable TV."

It is a credit to USDTV that even as the company was shutting down; they looked for ways to take care of their subscribers. The Web site said USDTV has made arrangements with a third-party installation company to convert existing USDTV set-top boxes so they can continue to receive free, off-air local digital and HDTV channels without the USDTV cable service. This will provide former subscribers to the multiple channels many PBS stations are providing, weather information such as NBC's Weather Plus, the Qubo children's programming channel on ION stations, a wide variety of religious programming on the Trinity stations' multicast channels and other digital-only channels provided by networks and local TV stations.

USDTV was at the cutting edge of DTV technology, implementing conditional access for ATSC over-the-air broadcasts and demonstrating MPEG-4 over ATSC using an add-on box to their existing tuner at NAB last year. Technology such as A-VSB and the recently announced mobile TV technology from Harris could provide a new way for broadcasters to obtain subscription revenue from their DTV bandwidth.

Off-air subscription TV is not a new idea--On-TV did very well with it in several markets until viewers started switching to cable TV to receive more premium channels. USDTV provided multiple channels, but I suspect that even though it came with a higher price, cable TV provided enough additional channels to justify the extra cost and USDTV wasn't able to gain enough subscribers fast enough to stay in business.

Will the new mobile ATSC technology be the solution? Is advertiser supported free off-air TV the only business model that works for broadcast TV? I think it's safe to say cable TV and, more recently, DBS are the reason off-air subscription TV efforts like On-TV and USDTV couldn't survive. However, in the mobile/portable TV marketplace, cable TV isn't a player. Satellite operators like DirecTV demonstrated the recording of programs and transferring them to personal media players at the last two Consumer Electronics Shows, but can they compete with multiple channel options on a broadcast mobile TV platform? I doubt it. The major competition will be from Qualcomm's MediaFLO and Crown-Castle's DVB-H services. Unlike broadcasters, who will likely want to continue to use most of their bandwidth to offer high-quality HDTV programs off-air, these companies can use their entire bandwidth to offer a wide selection of programming.

My opinion is that there may be a market for off-air broadcast subscription TV, but to be successful it will have to include more than one station in a market (to provide multiple channels) and will have to provide a mixture of free and subscription content. The free content will provide an incentive for consumers to buy the handheld or portable receivers and the subscription content will provide the revenue stream needed to supplement what will probably be limited incremental advertising income from the mobile service. Eventually, the receivers could be sold at a discount with the purchase of a subscription contract, matching the DBS and cell phone business models.

For additional information on the USDTV shutdown and the business reasons behind it, see Money woes turn off USDTV in the Deseret Morning News, which includes an interview with Steve Lindsley, the founder and CEO of USDTV.