PARIS -- DirecTV Group's announcement of a billion-dollar, three-satellite contract with Boeing Satellite Systems for large satellites to be launched for high-definition television (HDTV) threw a lifeline to a struggling commercial satellite builder and transformed the North American broadband-access picture.

The agreement, announced Sept. 9, by El Segundo, Calif.-based DirecTV, also removes months-long doubt about the future of the company's $1.5 billion Spaceway broadband satellite project. News Corp. of Sydney, Australia, obtained Spaceway when it purchased DirecTV parent company Hughes Electronics Corp. earlier this year.

 

Two of the three Spaceway Ka-band satellites, also under construction at Boeing, will be substantially reconfigured to add to DirecTV's orbital capacity to deliver local and national HDTV programming to the entire United States.

 

Spaceway-1 will be launched in early 2005 aboard a Sea Launch vehicle. Spaceway-2 will be launched in April aboard an Ariane 5 rocket. Both satellites will provide two-way broadband data services and high-definition television to subscribers equipped with rooftop dishes that will be a bit larger than those used for today's standard-definition, Ku-band direct-broadcast TV.

DirecTV officials had long expressed doubts about whether Spaceway's original business plan -- providing high-speed Internet to businesses and consumers -- made sense. Boeing engineers ultimately persuaded DirecTV that the satellites' on-board processors and phased-array antennas could be adapted to beam television or broadband data links.

 

Spaceway-3, part of the original Spaceway system, has not been modified for HDTV, Boeing spokeswoman Marta E. Newhart said Sept. 10. DirecTV spokesman Bob Marsocci said Sept. 10 that the satellite will remain a ground spare.

 

Beyond Spaceway, DirecTV ordered three large 702-model Ka-band satellites from Boeing, all with a dual HDTV/broadband capacity. DirecTV 10 and DirecTV 11 will be delivered in 2006 and 2007, respectively. The third will be a ground spare. Newhart said the contract for these spacecraft includes an option for a fourth satellite.

 

"For less than $1 billion we are going to create a national infrastructure that enables us to bring next-generation television into every American household," DirecTV Chief Executive Officer Chase Carey told a Morgan Stanley investors conference Sept. 9. "We found we could fill a video capability while maintaining [with Spaceway] the broadband capabilities. These satellites do maintain both."

 

Marsocci said Carey's billion-dollar reference was based on an estimated price tag of $300 million each for the construction, launch and insurance of the DirecTV 10 and DirecTV 11 satellites, plus construction of the ground spare. The figure does not include the cost to DirecTV of purchasing a large number of Ka-band rooftop antennas and other gear that customers will need before their screens are capable of operating in HDTV format. Marsocci said DirecTV had not yet selected a manufacturer for its customer equipment.

 

DirecTV's announcement helps confirm the arrival of Ka-band as a commercial option for satellites. Up to now, the band has been little-used, making it ideal for high-bandwidth applications that would be more difficult to manage in the crowded Ku-band frequencies.

 

Carey said the decision to use Ka-band should quiet industry concern that DirecTV did not have enough satellite spectrum to offer local HDTV channels. DirecTV 10 and 11 each will be able to beam HDTV programming to 500 local markets from the company's primary orbital slot at 101 degrees west longitude.

"The question of [orbital] capacity should be answered by what we announced with these satellites," Carey said. "As opposed to others who compete with us, who have spectrum strewn across the sky, we've focused on accumulating a tremendous amount of Ka- and Ku-band spectrum at a point that enables us to bring all of this down to a single dish in the home."

 

For Boeing Satellite Systems, the DirecTV order could not have come at a better time. The satellite manufacturing operation has lost money in the past two years and likely will lose money again in 2004, according to Boeing financial forecasts. But Boeing Co. Chairman Harry Stonecipher has said he would give the satellite division time to sort out its technology-related problems, which have resulted in programs with little or no profitability. Stonecipher said that he expected these problems to be resolved in 2005.

 

David Ryan, president of Boeing Satellite Systems, has said the company would not compete in today's commercial market for classic telecommunications satellites because it cannot make money there. Instead, Ryan has said, Boeing will focus on those less-numerous deals that leverage the company's expertise in on-board processing, phased-array antennas and other advanced technologies.

 

Many industry officials had written off Boeing to the sidelines of an industry that it used to dominate as Hughes Space and Communications, which Boeing bought in 2000. Rumors that Stonecipher would sell or close the operation were so rampant that Stonecipher conceded he had considered that option, but rejected it.

 

The DirecTV deal's three satellites have vaulted Boeing to the lead position in 2004 in the commercial market. Only 10 commercial telecommunications satellites have been ordered this year, including the DirecTV contract.

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