I would like to share with you important information about the future of Dominion’s satellite business. At the end of the first quarter 2008, the operating life of Dominion and the Dominion Video Satellite, Inc. DBS satellite service will come to an end, and Dominion will no longer be able to provide programming to your home by way of satellite. As you may recall, the lifetime subscription agreement states that your subscription was for “the operating lifetime of the Dominion Sky Angel domestic U.S. DBS service or for the lifetime of the subscriber and his or her spouse.” Consequently, on March 31, 2008, the operating lifetime of Dominion Video Satellite, Inc.’s DBS service and your subscription will end. Ending the satellite business was a very difficult decision for Dominion, and while we would have prayed for a different result, we were without any alternative. As I will outline below, a combination of factors led to the demise of the DBS service.
Since you were all subscribers to Dominion on or before April 14, 2006, you
know that on that day Dominion experienced a sudden loss of programming due to
a technical failure of the Echostar III satellite
that we have shared with Echostar Communications
Corporation’s DISH Network since 1998. We were successful in working with Echostar to get seven of our 10 channels back on the air
fairly quickly, hut were unsuccessful in getting the other three channels
reinstated. It became apparent that the Echostar III
satellite had considerable problems and that it was unlikely to reach its
originally
planned lifetime. With great concern, we had meetings with Echostar
for more than a year in an effort to get back the three channels and to
negotiate a new agreement for the lease of transponder space on a new
to-be-built satellite. Because our assigned frequencies were at the 61.5 degree
orbital spot and the only other DBS provider with assigned frequencies at that
spot is DISH, DISH was our only alternative for a new lease. Despite our best
efforts, we were unable to negotiate a new agreement.
Even prior to the programming loss, we had been working with a satellite construction company on the design of a new satellite of our own and hired a Manhattan financial advisor, specializing in the satellite business, to help us develop a business plan to finance it. Additionally, we hired a well established marketing firm to help us identify our audience and to develop a new marketing plan. Perhaps the key finding in all of this was that the marketplace had been radically changed by the competition for new subscribers between the satellite and cable industries. The introduction of the concept of free equipment was never anticipated by the industry and no business plan we could come up with allowed a niche player like Dominion to continue to subsidize the equipment as we had in the past. Any new agreement with Echostar would have meant the end of the equipment subsidy we had negotiated in the original Agreement and that our customers would have to pay between $350 and $400 for the equipment and installation. Furthermore, in order to maintain adequate cash flows to sustain the operation and provide for needed satellite financing, the monthly cost of our service would have had to increase substantially. The results of our market research, which included the hiring of the foremost statistical advisor in the satellite industry to conduct quantitative research and the conducting of a number of focus meetings with our subscribers around the country indicated that with a substantial increase in our monthly fee there would not be enough support to maintain a satellite operation. Additionally, our FCC license was up for review in 2009, and without the ability to finance a satellite of our own or a new satellite contract with Echostar, it was not likely to be renewed.
With much prayer, we sought God’s guidance.
In the midst of extensive internal analysis and debate about the future of our Christian television platform, God constantly seemed to be guiding us to a new level of faith and understanding. I want to assure you that our mission to build and operate a global communications system to deliver the Gospel of Jesus Christ around the world never changed, and our constant desire was to find a way that subscribers would be able to have the opportunity to receive quality service and family-friendly, Christ-centered programming. With God’s help, and your support and understanding, we believe we have found a way to preserve the vision my father Robert Johnson, Sr., had more than twenty-five years ago for a high-quality Christian-owned multi-channel television service featuring a wide variety of Christ-centered and family-friendly TV and radio channels.
Over the past couple of months, you have been receiving monthly newsletters with information about a new service that utilizes cutting-edge technology to deliver programming to your television by way of a broadband Internet protocol, commonly known as IPTV This month, we are launching this new service from a new company, Sky Angel U.S., LLC. The new company, Sky Angel U.S., LLC, will be offering, for delivery to your television at a very reasonable cost, a new and much-improved Christian and family-friendly programming package through a high-speed Internet connection and small set-top box. It does not require an outside dish or antenna, nor professionally installed equipment or even a computer This new technology will enable Sky Angel U.S. to make significant enhancements to service we weren’t able to achieve on Dominion’s satellite operating platform, including many more channels and special features such as Video On Demand. Additionally it will allow Sky Angel U.S. to expand services here in the United States and around the world more easily quickly and cost effectively.
Internet Protocol Television (IPTV) is not the same as what is commonly known as Web streaming. IPTV provides a real, high-quality viewing experience on your TV. The technology is widely used in both Europe and Asia and is experiencing growing popularity in the United States. We have spent many months testing the IPTV technology and we are very impressed with the quality of picture and ease of set up.
Market forces brought Dominion to a place where it became increasingly evident that a niche player such as Dominion could not compete and survive as a direct broadcast satellite provider on a playing field alongside much larger, publicly traded satellite operators. These other providers have had a competitive edge in the satellite business by carrying a broader range of channels, most of which Dominion would not carry due to our belief that they are not a fit with our values and are inappropriate for our Christian and family-centered programming service. By providing a product that appeals to a diverse market of subscribers, these other providers possess a strategic and financial advantage that has enabled them to provide generous incentives for satellite equipment and installation that we can not match, and their sustained subscriber growth allows them to support the vast network of satellites necessary to deliver their programming. We believe IPTV provides Sky Angel U.S., LLC the ability to respond to this challenge to our previous business and an opportunity to offer a quality, low-cost alternative.
While one door is being closed, we believe the Lord has opened another with IPTV.
In addition to a multitude of value-added services and conveniences, such as
the ability to easily and quickly set up your own equipment to retrieve many
programs that have already aired and to access a large library of Video On Demand programming, IPTV can provide you with the ability
to maximize your viewing experience. IPTV’s convergence of Internet and television will
enable a level of interactivity that is not possible over satellite television.
I
encourage you to read this month’s Sky Angel newsletter that is enclosed with
this letter to learn about our new company and the three IPTV subscription
packages we are offering at a very reasonable cost the exciting expanded lineup
of faith and family channels that you can receive, and a special limited-time
free equipment offer we are making available to you. I also invite you to visit
our new IPTV Web site at www.skyangel.com to learn even more about our new
company and service. We promise to do all that we can to make this opportunity
to experience this new service as easy as possible for you.
We understand that there will be some who will not have access to the necessary Internet connection to embrace this new service. We hope you will understand that we had no other alternative that would permit the future ability of Dominion to provide DBS service. My dad could not have foreseen the market forces at work today that have made continued DBS service a non- alternative, but I know he would have chosen to embrace this new technology in an effort to be faithful to the vision God gave him for a platform to enable the Gospel to reach the corners of the Earth. My sincere thanks for your past support, and I pray that you will understand and support our new efforts with your thoughts and prayers
Sincerely
in Christ,
Rob
Johnson
CEO