DISH Network has to be happy today, as their Echostar XI satellite was launched successfully late last night and is on its way to becoming fully operational.

Echostar XI was sent up to provide the much needed capacity DISH Network needs to continue their HD expansion. After falling behind Direct TV significantly in the high definition marketplace, DISH Network is making a strong comeback, announcing the addition of quite a few new HD channels in early August which should put their channel count at about 100.

Yesterdays launch of Echostar XI was contracted to Sea Launch, an independent launch and delivery company that earlier this year delivered a new satellite into orbit for Direct TV. The DirecTV 11 satellite is expected to become operational by September, and should allow DirecTV to expand their HD channel capacity up to 150. Whether there actually will be 150 HD channels is another matter.

Sea Launch reported that contact with the satellite was made about 70 minutes into the mission from Perth, Australia indicating that things are on track with Echostar 11. It generally takes several month of testing after the satellite reaches its orbiting position before the satellite actually begins transmitting programming back to DISH Network subscribers.

The mission is critical for DISH Network after the failure of the AMC-14 satellite earlier this year. That satellite made it out of the atmosphere, but then had a secondary burn failure, and the satellite did not reach its intended orbit position. While DISH Network did not own that satellite, it was planning on leasing the entire capacity. SES Americom was the owner, and filed a claim with insurers on the loss.

In a SEC filing today, DISH Network verified the successful launch of Echostar 11. In the same filing, DISH Network said their Echostar 2 satellite had a substantial failure yesterday and was considering that satellite to be a total loss. Echostar 2 was launch all the way back in September in 1996, and was primarily being used as a backup satellite.

One Wall Street analyst is predicting a slowdown in DirecTV’s momentum.

Craig Moffett, analyst for Sanford C. Bernstein downgraded DIRECTV to a “market perform.”  Previously, the firm had DIRECTV rated as “outperform.” The downgrade sent DTV shares down 70 cents, nearly 3%, closing at $25.55 a share in heavy volume. At the same time, Moffett said he prefers DISH Network shares. DISH closed up 42 cents, up about 1.5%.

So why the downgrade, and why now? Wall Street recommendations are generally about as reliable as a broken clock, and I believe that is the case here. Moffett says DIRECTV will suffer in the second quarter for three reasons. Let’s review those reasons, and why I believe they are incorrect. As the year progresses, we will check back on Moffett’s analysis and my analysis. Using the respective share prices of DIRECTV and DISH Network as the year progresses will help us gauge the predictions of an amateur blogger vs. a Wall Street analyst.

Moffett’s first point is that DirecTV’s performance lately has been due to their HD leadership, and that will not be as much of a factor in the months ahead. Moffett’s reasoning behind this is that traditionally 70% of HDTV’s are sold during football season, September to December, and service providers follow the same pattern.

This year is different, as Americans are about to be flooded with tax rebate checks. Direct deposits of rebates will hit starting May 1^st, and paper check rebates will continue through mid-July. HDTV’s will be flying off the shelves, as the rebate amount for most couples will be $1,200. Right in the neighborhood of the amount needed to purchase that new Hi-Def television.

According to Moffett, the second factor that will hurt Direct TV is the housing crisis. He predicts a strong impact on gross subscriber additions, as fewer people are moving into new home. Here I see the point, but dispute that it will hurt DirecTV significantly, as it has DISH Network. DirecTV has a more affluent base, and tighter credit restrictions. They have reduced churn to extremely low levels, and their generally higher income subscriber base is just not as susceptible to “bad housing market” issues.

Finally, Moffett’s third factor in downgrading DirecTV is the fact that the former Bell South territory once known as Bell South has stopped selling Direct TV, and is now selling DISH Network, the AT&T satellite TV partner. While no doubt true, this has been known for some time. With the stock market being a forward-looking mechanism, DIRECTV and DISH Network’s share prices have reflected this news for months. While the actual numbers from this area will of course tilt toward DISH Network, DIRECTV still has several advantages.

I see two main advantages for DIRECTV appreciating in price more than DISH Network by year-end.

First, the HD advantage. DIRECTV has executed their HD expansion plan in a nearly flawless manner over the last 9 months. They have more HD channels, and more of the HD channels that people actually want. With the successful launch of DIRECTV 11, and the failure of DISH Network’s satellite AMC-14, the HD race may become a runaway by the end of the year. DIRECTV should actually have excess capacity later this year, and may be waiting for operators to provide them with additional HD content. On the other hand, DISH is stretched as it is, counting on two satellites that haven’t even left Earth.

Second, the Liberty Media factor. John Malone’s company acquired 41% of DIRECTV earlier this year. While Liberty was initially coy about how much more of DIRECTV they would acquire, about a month later they upped their stake to 48%.

Clearly, Malone wants to play in the sandbox with the big boys. Liberty has an interest, and more importantly the means to fully take over DirecTV if it so wishes.

DISH Network made their first public comment since the AMC-14 satellite launch was deemed a complete failure. While the comments generally rehash the same company line from DISH Network, they do raise a question or two.

The filing notes that DISH was planning on leasing the entire capacity of the satellite to expand its HD offerings. While DISH Network admits that the failure of the satellite could impact its “longer term” plans to expand HD offerings, they state nothing will be affected this year.

Why no impact on this year’s plans? That is where DISH Network continues to spin on what it can offer the customer in HD. Because the company has two additional satellites set to launch in the next few months, they continue to say that they are on track as far as adding additional content. While technically true, how much more content, and how much sooner could it have been added had AMC-14 been successful?

Of course, the public won’t find out the answers to those questions. DISH Network is of course doing the “political” thing, reassuring current and potential customers that the HD is coming, just be patient.

DISH Network has publicly stated the goal of reaching 100 local HD networks and 100 National HD channels by the end of 2008. The local HD train has left the station, and DISH has been adding 3-4 local markets a week over the last month. Currently, DISH now reaches 46 local markets.

DISH currently broadcasts 70+ national HD channels. While that technically may be true, many of the HD channels offered by DISH do not have any sort of following. The satellite TV broadcaster carries all of the VOOM HD channels, 15 in all which are not seen anywhere else except for Cablevision customers.

Subtract also 9 HD Pay-Per-View (PPV) channels and the majority of regional sports channels, which are generally of interest only in certain areas, and the actual number of HD channels that a customer really wants to see drops into the 30-40 range.

But 30 or 40 “good” HD channels won’t make for a good press release. Expect to see DISH Network, and all other pay television providers for that matter continue to say they have “the most HD.”

Nearly a month after the AMC-14 was launched, SES Americom has declared the satellite to be a total loss. The supplier of satellite services was to have leased the satellite to DISH Network. The launch initially went off as planned, but a failure during the second burn of the fourth stage left the satellite short of its proper orbit.

Engineers from SES Americom and Lockheed Martin, the builder of the satellite have been exploring options on moving the satellite to its proper geostationary orbit. While there was some hope of moving to the satellite to its proper orbit, it is either impossible or hung up in a patent dispute with Boeing. Either way, SES has decided to scrap the satellite and settle for the $150 million dollar insurance payment.

The loss confirms the original bad news for DISH Network. The satellite television provider has been locking horns with DIRECTV and various cable operators in a battle to deliver HD content to the consumer.

So how will the news affect DISH Network? While a satellite failure is always bad news, this one could not have come as a worse time for DISH Network. After initially leading the high-definition bandwagon, DISH has fallen behind DIRECTV in both national HD and in local HD channel coverage.

Earlier this year, DISH forecast 100 national HD channels and 100 local HD markets by the end of 2008. While they expect to launch two additional satellites later this year, they will be hard pressed to reach their stated goal. Additionally, competitive forces will continue to press the DISH subscriber base as consumers look to sign up with providers offering more HD.