DirecTV is a company built on a dream of television programming delivered via satellite. In some important respects, DirecTV has clearly fulfilled that vision, providing more channels of high-definition programming than the land-based competition. On the other hand, technological innovation in the field of fiber optics has enabled cable companies to offer effectively comparable service without the enormous upfront costs associated with launching satellites. At the same time, aeronautic innovations have not keep pace and the price of launching additional satellites remain high.
While DirecTV is effectively protected from competition by other satellite operators by these high fixed costs, the company still faces substantial competition. This is unfortunate, because the satellite distribution model works best when it is used the most. Cable companies don't have this same increasing return on their working capital, but they have prevented satellite television from reaching the critical mass it needs to dominate distribution.
Ultimately, most consumers are probably much worse off with significantly higher cable bills than they would if satellite television had been adopted by more people sooner. But that doesn't mean that DirecTV is going to be a good investment now or in the future.
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