Scramble Is On for Home Dish Owners : HBO, Cinemax Start Full-Time Signal Protection

Home satellite dish salesman Robert Dudley thinks that Home Box Office’s move to scramble its television signals, which began Wednesday, likely will come back to haunt the pay television giant.

“HBO now enjoys the reputation as the nation’s most widely known movie channel, and if they don’t deal fairly with the millions of people who have watched (HBO programming) through their satellite dishes, they’ll never get those people to buy their services again,” said Dudley.

Based on conversations with irate satellite owners, Dudley added, HBO has gotten off to a shaky start. “I’ve talked to many people who have called (HBO’s advertised telephone number) and never gotten through.”

Dudley and other San Diego satellite dish salesmen are also irritated that HBO has decided to slap a $19.95 programming charge on satellite owners who wish to continue receiving the programs.

“HBO sells the programming at between $3 to $5 per month to cable companies and they’re turning around and demanding this incredible profit margin,” Dudley complained. “Why do they have to charge the homeowner in Rancho Santa Fe $20, when he’s already absorbed the transmission cost?”

Although prices for the dishes have fallen to less than $1,000 for a bare-bones system, many recent dish buyers have been outraged to learn they will no longer fill their screens with free HBO movies, Dudley said.

Some consumers who recently paid as much as $4,000 for home satellite antennas have discovered that they must still pay hundreds of dollars more for a decoder and the programming charges to fully enjoy their investments.

The uproar was sparked when cable programmers decided to stop the “pirating” of programming that cable subscribers have had to pay for.

HBO and Cinemax--the two largest pay-cable movie and entertainment channels--Wednesday began full-time scrambling of their signals that bounce off orbiting communications satellites, making it impossible for home satellite dish owners to view the programs without a special converter device.

Representatives of the $2 billion home-satellite industry have welcomed the announcement and predicted that it would help boost sales by erasing the confusion that has hovered over the industry for the last several years as programmers such as HBO, Cinemax, Nickelodeon and the Disney Channel wrestled with the problem of how to handle the interception of programming by satellite dish owners.

Dudley argued that Wednesday’s scrambling really marked the beginning of a new era for satellite television.

“As satellite television matures, more services will come available as it becomes cost effective for programmers to deal directly with end users,” Dudley said. “We’ll see things like real time market quotes, banking information and other things which have been put on hold until the technology catches up. Well, the technology is now here.”

Sales of the four-to-10-foot diameter satellite ground dishes have mushroomed in recent years from just over 6,000 units in 1980 to about 500,000 last year. The growth has been spurred by lower prices, which have fallen from about $6,000 for a complete unit in 1980 to less than $2,000 for a more sophisticated unit today.

But the sharp growth curve of the industry could begin to lose some steam in the months ahead. In addition to HBO and Cinemax, most of the other pay television channels, plus at least two of the major networks, have indicated that they plan to start scrambling their satellite transmissions by the end of the year.

“What the industry expects is that by this fall, 20 or so of the most desired channels will be scrambled,” said Don Burke, vice president of sales for satellite antenna maker Channel Master of Smithfield, N.C. “But some cable companies have taken a real negative attitude. They’ve been running announcements telling dish owners that in a few years (the only thing) they’ll be using their dishes for is as a bird bath.”

Consequently, consumers with satellite dishes are already searching for for alternatives to buying $400 decoders and paying HBO and/or Cinemax up to $19.95 in monthly subscriber fees.

More than 21 different cable services will use a digital scrambling technology developed by San Diego-based M/A-COM Linkabit.

“We’ve got enough confidence in our system that we are making 200,000 decoders,” said Linkabit Vice President Mark Medress.

Although HBO has set up a marketing operation to handle inquiries from satellite dish owners who want to receive HBO programs, the company is very sensitive about including its cable operators partners in on future program sales to dish owners.

“Our intention is not to have the sky go blank on these people (satellite dish owners), we just want to treat them like everybody else,” said HBO spokeswoman Janice Bender.

To that end, a number of cable operators, including Telecommunications Inc. in Denver, say they will soon begin offering packaged transmissions of HBO, Cinemax and other pay services to satellite dish owners at prices competitive with regular cable subscribers.

In addition, Burke of Channel Master said his company has arranged with M/A-COM to sell the decoder to purchasers of satellite dishes.

“As more an more people scramble there will be more competition among programmers and prices will drop,” predicted Burke. “Prices will become more competitive with cable rates but (satellite dish owners) will still have the advantage of being able to receive many more channels or programming that the cable subscriber.”

Johnson reported from San Diego and Shiver reported from Los Angeles.