Faced with a shrinking subscriber base and the prohibitively high cost of upgrading its plant for new services, a small cable operator in rural Colorado said last week that it would shut down its two cable systems as early as this month after converting its nearly 1,000 customers to direct-broadcast satellite.
Ouray Cablevision, which operates in Ouray and Ridgeway, Colo., will replace its 22-channel analog-cable service with free Dish Network systems from EchoStar Communications Corp.
Ouray president Ken Schumann, also a longtime satellite-television dealer, will receive unspecified programming and hardware commissions from EchoStar for each cable customer he converts to Dish.
When local customers began placing orders for their dishes, Schumann said, many of them wanted to know what the catch was.
Unlike its other free-hardware offers, EchoStar is not requiring ongoing programming commitments from Ouray customers, although Schumann said he is suggesting through pitch letters that they try Dish for at least six months.
For customers who take the recommended package-40 basic-cable channels, plus four local Denver stations-the monthly bill would go down by $5 per month, from $29.95 to $24.98.
"We've begun to lose more and more subscribers to satellite TV," Schumann said last week. "We realized that as a small operator, we can't compete like the bigger operators can."
Due to economy-of-scale issues, he added, the systems couldn't offer upgraded services like pay-per-view or high-speed Internet access. "It's cost-prohibitive to put in digital," Schumann said.
American Cable Association president Matt Polka said he thought the Ouray Cablevision shutdown would be an isolated incident among small cable operators.
"Many of these companies have been in the family for years, and it's something they'd like to continue," Polka said. "Our guys are trying their hardest to find private money to fund their digital upgrades. While it's a difficult challenge, our members are holding on."
Polka noted that Schumann was not a member of the ACA, which represents small cable operators nationwide.
Some small cable operators have already chosen to deploy direct-to-home satellite dishes at their customers' homes, either from Dish, DBS rival DirecTV Inc., or services like Hits2Home or WSNet. But in the earlier deals, satellite was used as an overlay to supplement cable, not to replace it.
Schumann said he first put the systems up for sale four or five years ago, and two prospective buyers pulled out of their deals at the last minute.
Schumann's history with satellite goes back further than his cable business. He started installing C-band dishes in the late 1970s, and claims to be among EchoStar chairman Charlie Ergen's first satellite dealers when Ergen founded his C-band equipment business 20 years ago.
Schumann started his current cable operations in 1983, after a stint of helping to build cable plant along the TransAtlantic Pipeline in Alaska in the early 1980s.
Schumann will continue to sell satellite dishes to new residents following the conversion process. In the meantime, he said, he's made a deal with EchoStar to try to convert every household within his markets to Dish, including noncable customers such as C-band-dish owners.
EchoStar spokeswoman Judianne Atencio said the deal plays into Ergen's goal to put a dish on every house. "We'll start small town by small town," she said. "We'll move across the United States, leaving cable companies in our wake."
