Satellite TV Provider Attempting Cable End-Run
By MICHAEL THURESSON
In the cutthroat battle for customers who live in apartments, the satellite TV industry has long been at a disadvantage to cable companies.
Cable operators have been able to line up exclusive contracts for whole buildings at a time; if residents wanted satellite bad enough, they had to string a dish onto the roof or a balcony.
Coppervision Inc., a Northridge-based start-up founded last September, is trying to change this. The trick: the building owner buys one satellite dish that goes on the roof and connects the entire building.
The system circumvents cable’s control of in-building wiring by using phone lines, giving the owner a share of subscription revenue that can be packaged with Internet service. There’s also a community video recorder that saves programming to a central computer in the building, allowing tenants to digitally record and play back shows.
Coppervision, which has yet to snare any landlords, is trying to break through by providing incentives for building owners to offer their tenants a choice. It gives building owners a share of each subscription a cut that starts at 9 percent selling DirecTV and EchoStar Communications Corp.’s Dish Network service.
Owners would have to shoulder installation costs of about $500 per apartment, but Coppervision claims that would be recouped in five years plus a 50 percent profit if one-quarter of tenants subscribe. “We’ll also give them a cut of the Internet and video recording service. Bundling services will be key,” said Gregg Fialcowitz, Coppervision’s chief executive.
But unseating incumbent cable providers, which currently control 95 percent of the apartment market, is an uphill battle.
“The biggest obstacle is the inertia of cable and persuading the landlord that the service is good enough to change the status quo,” said Jim Penhune, an analyst at Strategy Analytics, a communications research firm.
Hughes Electronics Corp.’s DirecTV unit has been trying without success to break the control of cable companies. DirecTV acquired DSL provider Telocity in 2001 to compete with cable modems, but decided to close its DSL service unit in December.
Regulations in place favor cable. By law, most apartment building owners in the U.S. must use one cable company for all cable service. The local government, meanwhile, gets a cut of the subscription revenue. Franchise agreements have been in place for more than 10 years; attempts to change providers have failed due to the cost of new equipment and wiring.
Coppervision’s system includes a rooftop dish, a computer that routes the satellite signal over phone lines, a TV set-top box and the video recorder.
“It keeps the unsightliness to a small roar and it’s self contained,” said Derek Fraychineaud, director of construction of L.A.-based Playa Capital Co., which is developing the Playa Vista community just north of Los Angeles International Airport.
Other property owners are unsure about whether they would recoup an investment. “It might be nice to offer this, but I’d never do 9 percent profit sharing. It would take too long to break even,” said Roger Strom, general partner at Yale Investment Co., which owns apartment buildings in Silicon Valley.