News

Rainbow DBS Rules Waves

7/18/2004 8:00 PM Eastern

Cablevision Systems Corp.’s Rainbow DBS subsidiary came out the winner last week in an FCC auction for additional satellite spectrum licenses, a move that should increase the reach of its Voom high-definition direct-broadcast satellite service.

Rainbow DBS, which is set to be split off from Cablevision in the fall, acquired two new DBS slots July 14 for about $6.4 million, or $3.2 million each, a bargain price according to a report by Merrill Lynch & Co. media analyst Jessica Reif Cohen.

At about $100,000 per channel, Reif Cohen called the purchase “a remarkable bargain,” given the price is “a mere fraction of the $24 million per frequency set in the January 1996 Federal Communications Commission auction for a full-CONUS [continental United States] license.”

She called the $6.4 million a modest increment to Rainbow DBS’s $482 million full-year 2004 capital-expenditure budget, although the development of the spectrum will likely add to the long-term operational costs of the venture.

EchoStar Communications Corp. was the winning bidder for a third license at 157 degrees west longitude with about 29 channels, for $5.8 million, according to the FCC.

The Rainbow DBS slots, located at 175 degrees west longitude and 166 degrees west longitude, each have about 32 channels. While the slots are not full-CONUS, they should give Rainbow DBS more capacity.

But the new slots do have their downside. According to Reif Cohen, Rainbow DBS currently has 11 channels at 61.5 degrees west longitude — another non-CONUS slot — which will not reach areas in the northwest, such as Seattle and Portland, Ore. The new licenses will have similarly poor coverage.

September