Dish Network And DirecTV: Satellite Dishes Could Be Banned

Includes: DISH, SIRI, T
by: Little Apple

Back in the early 1990's I owned a house with the most beautiful back yard and view of the lake. And then my next door neighbor moved in and put up a satellite dish in his backyard which was at least nine feet in diameter and at least 12 feet high. It was within a few feet of my fence and cast the most horrible shadow over my new swimming pool. Twenty years later, thanks to technology, we now have (what seem tiny in comparison) little versions. But these are now becoming a problem according to an article in the Wall Street Journal:

Along some streets in East Boston, satellite dishes protrude from nearly every house, with some multifamily structures decked with as many as eight. Other cities are reporting a similar outbreak. "We have blocks that look like NASA or Area 51," said William Carter, a chief staffer for the Philadelphia City Council.

Not only are the current dishes an eyesore, but a lot of owners move and leave their dish behind. Evidently this is not regulated by anyone. Because of these problems some cities are considering a ban on the dish. Boston was the first large metro area to ban them, and other cities may be following their lead:

Boston may be one of the first cities in the nation to ban satellite dishes. The problem is that many think they look awful. "A satellite dish is a dish-shaped type of parabolic antenna designed to receive microwaves from communications satellites, which transmit data transmissions or broadcasts, such as satellite television."

Judging from comments on the internet, this issue seems to be evenly divided between people who are anti-dish and prefer cable and those who are pro-dish. As a matter of fact, both sides of this issue are becoming very vocal this week. All of these stories may really affect companies like Dish Network (NASDAQ:DISH) and DirecTV (NYSE:DTV). On April 25th, the Satellite Broadcasting and Communications Association (SBCA) issued a formal statement to a Massachusetts television station. Here is an excerpt from that release:

Federal law, however, prohibits such regulation. FCC regulations that have become known as the "OTARD rules (for "over the air reception device") prohibit cities from restricting dish placement. They essentially prohibit restrictions that increase costs, delay installation, or preclude signal reception-unless the restrictions are both justified by real safety or historic preservation concerns and applied evenhandedly to all devices, not just satellite dishes. The recent city ordinances plainly cannot meet this standard. So the satellite industry has filed appropriate legal proceedings at the FCC.

Chart forDish Network Corp.

This FCC law seems to be pretty clear cut. But we have to remember that it is an old law (1990's) and may need to be updated based on these new problems. So far this news has not affected either of the two big "satellite dish" stocks in a negative way. As a matter of fact, in the last five days both stocks have gone up. Considering the millions of satellite TV subscribers in this country, I think there would be a revolt if the dishes were to be banned. However, I know it is possible because they are not allowed where I live now.

Dish also has a lot of other things going for it. The company is petitioning the FCC to start its own cell phone network right now. And AT&T (NYSE:T) has been courting the company as a possible takeover target. The only negative thing about this is the amount of time the FCC takes approving its application. Some analysts feel that the time delay would encourage AT&T to make a move.

One thing that has come up in some of the discussions about the dish situation (on different web sites) is the fact that there are other types of satellite antennas. For instance, the antenna used on automobiles for Sirius XM (NASDAQ:SIRI) Backseat TV is not a dish antenna. I realize that it only receives three channels, but can't this technology be used to redesign the "ugly dish" shape? The new satellite radio antennas keep getting smaller and smaller. And considering how much the dish has changed over the years, someone should be able to shrink it smaller. This picture shows the two Sirius XM Backseat TV satellite antennas (top right) for a car:

SIRIUS SCV1 Backseat TV™ System

If you own either DirecTV or Dish, I would not be worried just yet. And as I said, Dish has a lot of other great things going for it. So far this problem is only in a couple cities, and the Satellite Broadcasting and Communications Association has filed a petition with the FCC. The outcome will probably take months. If by then the ruling is bad for the dish, those companies will have had time to develop an alternative antenna. But this may eventually affect you in the future both as an investor and a consumer.

Disclosure: I am long SIRI.