The history of satellite TV service providers in the United States goes back farther than you might think. Most people are familiar with popular current providers such as the Dish Network and DirecTV, but very few know how satellite TV has developed and evolved since its earliest beginnings in the 1970s.



The Beginnings of Satellite TV

Thirty years ago there was no such thing as satellite TV service providers, but that was about to change. Several private companies banded together in the early 1970s to launch a series of geosynchronous satellites (geosynchronous means an orbit that keeps the satellite directly above one area of the earth at all times) to transmit signals from an originating source to multiple receiving locations.

In 1976, HBO became the first programmer to deliver satellite programming to cable companies; many other programmers like Turner Broadcasting System (TBS) and the Christian Broadcasting Network (later called The Family Channel) followed suit, and the satellite television industry was poised for tremendous growth.

Big Dishes, Free Programming

As more and more programmers used satellites to deliver their programming to cable companies across the country, a Stanford University professor developed a way to receive those signals in his own home. His receiver dish, later known as a C-band dish for the frequency that it received, was quite large and quite effective. He was able to pick up signals from just about any programmer he wanted because the signals were sent out “in the clear”, or without any encryption.

At one point, the professor sent HBO a check for $100 to pay for the programming he had been receiving and enjoying so much, but much to his surprise, they sent the check back to him. They informed him that they dealt only with cable companies, not individuals. And thus, a television revolution was born.

The professor published a “how to” guide for building a home satellite dish and founded a company to produce the parts for dishes. Initially these systems were quite expensive (up to $10,000 or more) but as the technology improved, the costs dropped dramatically (to $3,000 or less).

Why would anyone want to spend that much money for a C-band home satellite receiver? After all, the dish itself was quite large and unsightly, and required a good deal of space for installation.

The answer lies in several factors. First, because the programming was free, the homeowner only had to make a one-time investment in hardware. There were no additional monthly fees. Second, the signals were extremely crisp and clear because they came directly from the programmer, rather than second- or third-hand from another provider or cable TV system. And third, there were literally hundreds of channels available, a selection that cable companies could not even come close to offering.

C-band dishes were especially popular in rural areas where there was no cable service provider and over the air broadcast signals were weak or even totally absent. As a result, the satellite TV industry surged in popularity and grew quickly.

No More Free Lunch

Of course, all good things come to an end, and it did not take long for satellite TV service providers to realize that there was tremendous value to their programming that was essentially being given away for free to C-band dish owners. They began to lobby Congress for the right to scramble, or encrypt, their signals so that they could no longer be received by dish owners who did not pay for a decoding device. Dish owners hated this idea, naturally, but they simply did not have the organization or influence of large programming companies. Congress passed the Cable Act of 1984, which allowed programmers to encrypt their satellite signals.

Suddenly the satellite programmers were full-fledged satellite TV service providers, with a new (but still small) revenue stream from C-band dish owners. In those days, though, encryption technology was not as sophisticated as it is today, and many dish owners found ways around the encryption or bought bootleg decoders. Theft of service remained a major problem up until the early 1990's, when digital encryption technology went into widespread use.

Competition Heats Up

As the industry grew, individual programmers realized they could not survive if they all were their own individual satellite TV service providers, so they looked to new companies who were willing to take on that role. The biggest boon to the industry, though, came in the form a technology leap that allowed receiver dishes to shrink significantly in size, to the point where they were small enough to be installed on the roof or outside wall of most homes.

A huge new market was born for direct broadcast satellite (DBS) systems. Many companies jumped into this business, most notably a consortium of four cable TV companies as well as a non-cable associated company. Their services were known, respectively, as Primestar and DIRECTV.

More and more satellite TV service providers entered the market, presenting consumers with a confusing array of services at a wide range of prices. Meanwhile, the pressure to improve the technology and deliver more advanced services meant that providers were pushed to spend more and more money to stay competitive. Inevitably, some could not keep up with the financial demands and only the strongest survived.

Industry Consolidation and Changes in Ownership

A flurry of industry consolidation, changes in ownership, and restructuring led to the emergence of two major satellite TV service providers – DirecTV and Dish Network. Their size and financial strength allowed them to invest in new technologies and rapidly expand their service offerings. Today, DirecTV and Dish Network offer consumers a huge assortment of options, including pay-per-view programming, on-demand programming, music services, satellite radio, high speed internet, and more.

About DirecTV and the Dish Network

The Dish Network and DirecTV are the two major satellite TV service providers in the market today, and for good reason. They each offer a range of services at reasonable prices, and have quite a large customer base.

In the early days of DBS, a major obstacle for the providers was the equipment costs the customers had to absorb in order to get their homes set up with a dish and a receiver. Further complicating the issue, if the customer had more than one TV in their home then they had to purchase a separate receiver for each TV where they wanted to have DBS service. The cost was prohibitive for many potential customers, so DirecTV and the Dish Network looked for ways to lower the start up costs and make it easier for people to switch from cable TV to satellite TV.

The winning strategy, as it turns out, was collaborating with equipment manufacturers and offering free satellite TV systems to customers who would agree to service contracts of up to two years. Over that length of time, the Dish Network and DirecTV were able to recover enough revenue to at least break even on the discounted equipment costs, and often gained substantial additional revenue as customers purchased pay-per-view programming and other extra services.