Does this sound fair?

[Wally20]

So I've taken upon myself to talk with our D* contractor at my condo about upgrading our system to a MFH2 system since my HOA board is lazy and won't do it themselves. Here's a little background: we have 2 buildings with a total of around 100 units. However, there are only 13 units that are currently using D*with the rest using Comcast. As far as I can tell they would only need to install a new dish and some swm8 splitters on floors where there are customers as all the necessary cabling is already in place.

After talking with the contractor they've offered to upgrade to an MFH2 system for $1000 and a 7 year contract or for free in return for a 10 year contract. They would also charge a $5 a month fee to all D* subscribers. Does this seem fair? The HOA board president seems reluctant to sign such a lengthy contract but they're also too cheap to pony up the cash for something that only 10% of the residents are using. Obviously I haven't negotiated a contract for something like this and I have no idea if what they're offering is fair. It sounds alright to me considering the equipment cost would probably be a couple grand. What do you guys think?

[DirecTv Chicago]

No it does not sound fair. But I would assume their is not much competition in your area so they can request basically whatever they want. A 7 to 10 year contract is a little extreme while they are charging you at the same time.

It would cost you roughly $2,000 - $2,500.00 I would imagine to build out what you are looking for to start with. So the $1000.00 cost is not unreasonable but thats because they are receiving a long term contract to recoup their costs.

Personally I would throw a clause in the contract that states when the association reaches 25 customers you will receive a portion of the intial fee back and if they reach 50 customers you would receive a portion of the fee back, etc. Or just add a revenue share all together.

They are basing their model off of 13 units over 7-10 years. When in reality, with MFH2 you should be able to add a much larger percentage of users with the new HD channels compared to Comcast.

[Wally20]

Thanks for the response. I had asked about reducing the costs/length of contract if we (HOA board) got out the word and got some more people signed up but they kind of side stepped the question and that's when they offered to do it for free in return for a 10 year contract. They also claim their costs were $3200 per building which seems suspiciously high. I'm assuming they're going to be installing extra swm8's for the anticipated increase in subscribers and figuring that into their costs.

I think a lot of people are going to sign up with d* once the upgrade happens. Right now we only have 1 line running into each unit from the electrical closet on each floor so currently we can only get one HD box hooked up at a time. They claim they could do 2 SD boxes but I don't know how that would be possible. Anyway, when you only have the option of getting 1 HD box with a single tuner in your entire unit with D* or going with comcast and getting multiple boxes it's no wonder why D* is only getting 10% of the units in our complex.

So, I'm thinking of asking for a 7 year contract with no fees and hopefully they go with that. That's probably still pretty generous on our part but at this point I just want to get the upgrade done. I signed up last July and going 9 months with a HR20 box with a single tuner has really sucked not to mention the fact that I still can't get any of the new HD channels.

[DirecTv Chicago]

I forgot to factor in the additional building instead of assuming it was just one large building. So factoring in double dishes, additional cable, maybe an extra chassie, it could be closer to the $3,000 - $3,500.

You'll learn quickly that an ROE in this case is more important then the upfront cash. They realize also that they can make their money back regardless and then some.

Assuming their is some competition in your area and other system operators you should be able to find someone willing to do a 5 year contract. 7 years is a long time which is why your HOA would be hesitant in signing it.

[Wally20]

Out of curiosity, how much would they make for each subscriber they sign up?

[DirecTv Chicago]

It depends on how they are setup, meaning if they are a system operator or go through a MSO. Generally they receive a one time payment for new retail customers and a percentage of the monthly programming charges. Those prices can vary.

Even at the high end they won't make anywhere near amount people believe they make. The profit margin with DirecTV is very minimal compared to the overall cost of intial system setup and maitenance.

Since you are in a retail account as opposed to a bulk account there is a larger margin of commission possiblilty for the system operator, but no gurantee on the amount of customers he will sign up.