DIRECTV 2008 Annual Report Download - page 23

THE DIRECTV GROUP, INC.
Competition
We face substantial competition in the MVPD industry and from emerging digital media
distribution providers. Our competition includes companies that offer video, audio, interactive
programming, telephony, data and other entertainment services, including cable television, other DTH
companies, telcos, wireless companies and companies that are developing new technologies. Many of
our competitors have access to substantially greater financial and marketing resources. We believe our
brand, the quality and variety of video, audio and interactive programming, quality of picture, access to
service, availability of HD and DVR services, customer service and price are the key elements for
attaining and retaining subscribers. According to the National Cable & Telecommunications
Association’s 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable.
Our over 17.6 million subscribers represent approximately 18% of MVPD subscribers at December 31,
2008.
•Cable Television. We encounter substantial competition in the MVPD industry from cable
television companies. Most cable television operators have a large, established customer base,
and many have significant investments in companies that provide programming content.
Approximately 97 million households subscribe to an MVPD service and approximately 66% of
MVPD subscribers receive their programming from a cable operator. In addition, most cable
providers have completed network upgrades that allow for enhanced service offerings such as
digital cable, HD channels, broadband Internet access and telephony services. Cable companies
bundle these services, offering discounts and providing one bill to the consumer.
•Telephone Companies. Several telcos have upgraded a significant portion of their infrastructure
by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber
lines provide the telcos with significantly greater capacity enabling them to offer new and
enhanced services, such as Internet access at much greater speeds and video. For example,
Verizon announced that at the end of 2008, it had the capability to serve 12 million homes with
fiber optic lines with the goal of having the capability to serve 18 million homes by the end of
2010. In addition, AT&T has begun deploying fiber optic lines to neighborhoods and expects to
have the capability to serve approximately 30 million of its customers by 2010. As of year end
2008, Verizon had approximately 2 million video subscribers and AT&T had approximately
1 million subscribers. Similar to the cable companies, the telcos expect to offer their customers
multiple services at a discount on one bill.
•Other Direct Broadcast Satellite and Direct-To-Home Satellite System Operators. We also compete
with Dish Network Corporation, which had nearly 14 million subscribers at the end of 2008,
representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite
operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-
licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the
United States.
•Small and Rural Telephone Companies. Other telephone companies are also finding ways to
deliver video programming services over their wireline facilities. For example, DISH Network
has agreements with Embarq, CenturyTel, Windstream, TDS, and Frontier to bundle their
individual DSL and telephony services with DISH Network’s video service.
•Video via the Internet. With the large increase in the number of consumers with broadband
service, a significant amount of video content has become available on the Internet for users to
download and view on their personal computers, televisions and other devices. For example, in
October 2008, Apple↧ announced that all four of the major networks are offering primetime
programs in high-definition on the online iTunes↧ Store and that over 200 million TV episodes
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