Satellite

Faces on the Front Line

1/23/2005 7:00 PM Eastern

The rules are stringent. The demands are high. The competition from big box consumer electronics stores grows every year. Yet the loyalty of thousands of Dish Network retailers to EchoStar Communications Corp. remains strong.

While DirecTV Inc. has made a concerted effort to get its direct-satellite packages into as many big CE chains as possible, EchoStar continues to rely heavily on its extensive network of dealers across the country. Dish still has national retailers, including RadioShack Corp. and Sears, Roebuck and Co. stores, and SBC Communications Inc. is selling more Dish systems every day. But a significant number of new customers still come from the company’s complex matrix of independent dealers across the country.

And Dish clearly understands the importance of its retailers, no matter their size. “We rely heavily upon them to be our eyes and ears in the local communities, in identifying customers’ needs and market opportunities,” notes Amir Ahmed, EchoStar vice president of sales.

“We support various types of retailer distribution, and we have benefited from our associations with both local retailers and large retail chains. The local retailer typically provides installation and service, whereas the large retail chains present a prominent point of sales contact. Each retailer holds value within our company, and the ongoing success of Dish Network is dependent to a significant degree upon our retailers’ continued success.”

Yet despite all the good will, Echostar has frustrated some dealers in recent years with restrictive contracts and what some describe as onerous charge-back rates. Ryan Alford, editor of Media Business News’ SkyRetailer newsletter, says it’s becoming more difficult for independent dealers to make money selling both Dish and DirecTV systems and satisfy the sales quotas.

“We used to sell both Dish and DirecTV, but we couldn’t reach our quota selling both, so we settled on EchoStar,” says Marcio Prevado, owner of Castle Rock, Colo.-based World Satellite.

Alford contends that some former dealers believe Dish wants to usurp the dealer network so it can do more business in-house and keep better control over their customers and products. Todd Humphrey, president of DBS Install Inc., says EchoStar has become less interested in helping local dealers sell systems and is more interested in selling them directly to customers. That’s one reason why his company installs and services Dish systems, but doesn’t sell them.

Alford concurs. “Some dealers have complained that they can’t get their customers signed on because of credit issues,” he says. “But then when the customer calls EchoStar directly, they get signed right on.”

Humphrey and other retailers may be disgruntled with some of EchoStar’s rules, but the DBS company isn’t having any trouble finding people to sell the service. Alford estimates about 12,000 independent dealers sell Dish systems around the country. Great Falls, Va.-based VMC Satellite claims to be the nation’s largest Dish dealer. CEO Rick Rahim says he has 130,000 agents selling the service for him around the country.

“I’m not totally thrilled with all the terms we have to adhere to as a Dish Network dealer. But this is a great business to be in and a great company to work with,” says Rahim. “I can disagree with those guys, but they still listen to me. And we can still disagree and respect one another.” According to Rahim, his company represents about 5% of Dish Network’s business, which gives him some clout with the EchoStar executives. Still, he believes the company listens to all its dealers.

EchoStar hosts a gathering for all its dealers each May and the event is an opportunity for dealers and executives to mingle. Some 2,200 dealers attended the 2004 Team Summit held last May in Dallas, its seventh such gathering. For Dish dealers, the mini conference has taken the place of the Satellite Broadcasting & Communications Associations’ annual show. Last year, it featured product displays from 120 vendors. EchoStar also sponsored training sessions and gave dealers face-to-face access to company executives.

“EchoStar has been extremely good to us,” says Linda Prevado, co-owner of World Satellite. “They have made an effort to visit us a lot and have been open to ideas and suggestions. It’s good to know they’re listening.”

The Prevados believe EchoStar has worked hard to support its dealer network while at the same time taking advantage of the exposure the big box stores give the company.

“DirecTV is 80% big box,” Prevado says. “Dish is just the opposite. They have worked hard to come up with a good mix of both big box and independent dealers.”

Dealers must be willing to give back a certain percentage of the money they receive if a customer defects or is turned off due to credit issues. Yet EchoStar is generous in other areas, Prevado says. For instance, the company will pony up to 50% of the marketing costs a dealer undertakes to sell Dish products, Prevado says.

EchoStar is also helpful in other ways, dealers say. The company was on hand to help Intermountain First Aid & Safety/Radio Shack when it switched out the bulk of cable customers in Center, Colo., last summer. The city-owned cable system that served about 600 customers shut down operations when it couldn’t afford to upgrade the system. The town government cut a deal with Intermountain and EchoStar to switch the town’s cable customers to Dish. The company sent eight installers to help, says Tessa Vargas, Intermountain’s manager.

But she admits there were some bumps in the road. “There were several instances when people would call the 800 number about the switch, and the customer service reps wouldn’t let them do it even though it had all been cleared by EchoStar,” she says. “That was a headache. And then there were several instances where people had to wait or couldn’t sign up because they couldn’t pass the stringent credit requirements. But everything was eventually worked out, and it’s been great.”

If Vargas has any complaint about being a Dish dealer it’s the amount and complexity of paperwork that needs to be filled out every year. “One year we signed a piece of paper incorrectly, and it took six months before we could sell Dish systems. The paperwork required is incredible. Every year you have to renew your contract and it’s very tedious.”

September