USDTV, one of several new companies trying to pioneer new DTV content deliver services, has filed for Chapter 7 protection under US Bankruptcy laws. The novel a la carte cable program delivery service targeted select "family friendly" cable channels and delivered them by piggy-backing its DTV signals on local TV broadcaster antennas.

Steve Sechrist
Senior Analyst and Editor
of Projection Monthly

The filing comes just 10 months after the company secured a $26M investment from major broadcasters Fox Television, McGraw-Hill Broadcasting, Hearst-Argyle TV and LIN TV, a group that controls 71 television stations, mostly in big and midsized broadcast markets. USDTV believed this support would convince other independents to sign up in a nationwide roll-out, but this apparently did not come to pass.

USDTV CEO Steve Lindsley realized from his time as president of Salt Lake based KSL-TV, that local stations were facing a spectrum windfall in the FCC mandated move from analog to digital broadcasting. As stations completed their expensive digital build-out with enough bandwidth to deliver its main programming in HD quality digital, there was enough space left over for three additional channels. The USDTV business plan made use of this excess broadcast spectrum capacity, paying the local broadcasters for access to their unique frequencies and using these to deliver special packaged cable channels in local markets, at a fraction of what cable providers charged. Customers received up to 35 cable channels for $19.95/ month vs. the standard cable package offered by Comcast for example, selling at a duopoly priced $46.60. The service offered only SD quality programming - not HD.

So what happened? The Board of Directors for USDTV isn’t telling. Lindsley is embargoed from commenting on why the company chose Chapter 7 (liquidation) over the more common restructuring bankruptcy option covered under Chapter 11. The company said they have $10M in assets and owe $15M to creditors-is this reason to shut the doors?

Broadcast&Cable speculates the company could not manage the expensive nationwide roll-out, said the company was loosing $100 with every STB sold and commented on the monthly subscriber churn which they reported at 4%. The pub also took a shot at subscribers describing them as "low-end customers" stating "many don’t pay their bills." But some are not buying this.

For example, in 2004, the company received an investment from Chinese STB maker HiSense that provided hardware support for up 500K digital STB units, enough to cover 29 major US markets. The digital STB is currently available in most Wal-Mart stores nationwide as the units also serve as standard DTV receivers for local digital broadcasts where USDTV signals are not available.

Our take: USDTV offered consumers an excellent alternative to the cable/satellite duopoly pricing model which forces unwanted programming on customers and ceaselessly increases prices. The sad truth may be it was the broadcasters themselves unwilling to go head-to-head against the cable TV juggernaut that played the spoiler in this deal.

Whatever the outcome of the USDTV assets, Lindsley is hopeful the company will continue to operate in some form. He’s been down this road once before with WOW Digital TV, the precursor to USDTV. Let’s hope the third time is the charm. –SS