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EchoStar Launches Price Hike

The avowed lower-cost satellite TV operation rolls out a bigger increase than its cable rivals.



is playing catch-up on prices.

Starting Feb. 1, the operator of the Dish Network satellite service will raise prices on major programming packages by as much as 8%. The changes appear to outpace recent annual increases rolled out by major cable operators.

EchoStar, which has long labored to position itself as the cheaper alternative to cable TV, says the new prices reflect rising programming costs. The boost illustrates how EchoStar and fellow satellite operator



continue to fight with cable operators for subscribers -- without using price cuts as a weapon.

"Investors have been fretting over the prospect of a price war in the multichannel industry for the last 12 to 18 months," says Sanford Bernstein analyst Craig Moffett. "And they keep being surprised by the fact that it isn't materializing."

All Over the Map

The Dish Network price increases fall unevenly across EchoStar's customers and programming packages, making the exact impact of the increase somewhat hard to pin down.

The monthly fee for what Moffett calls EchoStar's most heavily promoted introductory tier -- America's Top 60 package, accompanied by a side order of local channels where available -- is rising $2, or 6.7%, to $31.99. Other "America's Top" package monthly fees are rising, too; for example, the price of the America's Top 180 package with local channels is rising $3, or 6%, to $52.99. Packages without local channels, says Moffett, will rise as much as 8%.

But other programming packages have no price increases, notes EchoStar spokesman Steve Caulk, including EchoStar's Latino packages and virtually all international programming packages.

EchoStar calculates the average price increase at 4.3%, based in part on the $56.11 in average monthly revenue per subscriber that the company reported for the third quarter of 2004. The company also says the number is weighted to reflect customers' payment for services that aren't being affected by rate increases.

But Moffett, who assigns a headline range of 6% to 8% to EchoStar's price increases, argues they are significantly larger than recent percentage price increases announced by major cable operators. EchoStar's increases apply to its entire video bundles -- including channels that would be on digital tiers for cable operators -- while headline price increases for cable operators tend to cover basic video tiers, Moffett says.

Thus, says Moffett, his 6% to 8% number for EchoStar compares with what he calls a 4.5% recent increase at



, the nation's largest operator of cable systems.



, he points out, recently announced a 2.9% increase for basic programming, and increased prices for digital less than that.

Comcast reported monthly average video revenue per customer of $50 in the third quarter. Cablevision, by's

calculation, had over $64 in average monthly video revenue per customer in the same quarter.

Pot and Tea Kettle

Moffett says he sees irony in EchoStar's price increases, given that the company often rails publicly against cable programming rate increases. For example, in November, EchoStar issed a press release advising journalists to call the company for help in reporting stories about local cable rate increases. "Every year, cable companies raise their rates as they approach the holidays, delivering a lump of coal to their customers," read the release. "DISH Network can help you balance your story."

The chief factor behind this year's increases, says EchoStar, is a 7% increase in programming costs. Also contributing, says the company, is passage of legislation in 2004 requiring EchoStar to rejigger its lineup of local programming in certain markets.

The price increase "is not an example of rampant corporate greed," says Moffett. Operating expenses, particularly programming expenses, are still rising, he says, and customer acquisition costs for satellite operators have grown dramatically in the last 12 months. "These operators are rational businessmen who expect to make an acceptable return," says Moffett.

Moffett has a market-perform rating on EchoStar, and a price target of $35. EchoStar's stock fell 2 cents Wednesday to trade at $32.28.