News

DBS Sees High-Tech Status in HDTV

6/21/1998 8:00 PM Eastern

Facing capacity issues, direct-broadcast satellite
companies are struggling to find the best ways to send high-definition television signals
to their customers. But unlike cable, DBS appears to be unified in its intent to move to
HDTV sooner, rather than later.

"The DBS industry has always been synonymous in the
consumer's mind with high-tech video," said Gary Traver, executive vice
president of broadcast operations for PrimeStar Inc., speaking at the DBS Summit in Denver
last week. "Every DBS provider, whether they like it or not, has to play a role in
high-definition."

HDTV poses a particular challenge for PrimeStar because the
status of much of its channel capacity is still up in the air. Currently a medium-power
service at 85 degrees west longitude, the company is seeking government approval for
access to high-power DBS spectrum at 110 and 119 degrees west.

PrimeStar president and chief operating officer Dan
O'Brien said the company might use the 119 spectrum for HDTV, as well as for other
incremental channels to its medium-power service, if the government does not grant
PrimeStar's request to merge with American Sky Broadcasting Inc., the DBS arm of News
Corp. and MCI Communications Corp.

If PrimeStar is blocked from using the 119 spectrum, as
well, the company would have to determine which current channels to drop from its
medium-power service in order to make room for HDTV.

It's only a matter of time before PrimeStar will be
forced to make a choice. While a DBS service could probably stay competitive with
consumers without going to HDTV for the next couple of years, O'Brien said,
consumer-electronics retailers might not be as patient.

"Everyone's buying the hype," O'Brien
said. "They want an HDTV feed. If EchoStar [Communications Corp.] and DirecTv [Inc.]
can offer a feed and we can't, it's a disadvantage."

More than DirecTv or EchoStar, PrimeStar has had a
difficult time making inroads into the consumer-electronics retail channel, for several
reasons.

PrimeStar's equipment is not yet backed by a strong
consumer brand name. The larger dish size doesn't always play well in larger markets.
And until its recent roll-up, the former partners' lack of one clear pricing and
marketing strategy hurt the company's chances of dealing with chains.

Meanwhile, EchoStar and DirecTv are already trying to shore
up retail support for their respective companies' moves to HDTV.

During a dealer meeting at corporate headquarters earlier
this month, EchoStar fired up its first HDTV feed. Senior vice president Mark Jackson said
the full-time dealer feed is up and in the clear right now for anyone with a dish, a
set-top and a high-definition display.

EchoStar's first HDTV feed is broadcast from the
EchoStar 3 satellite at 61.5 degrees west.

"We'll put it up at 148 degrees, too,"
Jackson added. Subscribers would need additional dishes to see both the HDTV signals and
the company's core Dish Network programming.

The content on EchoStar's HDTV dealer feed includes
film clips supplied by Home Box Office, which Jackson said will be a "leader" in
HDTV satellite content.

HBO will deliver its own HDTV feed next spring in the 1080i
(interlace) picture format, according to Matt Sappern, HBO's director of DBS-market
development.

It's not clear yet when HBO's HDTV feed will find
its way to the Digital Satellite System platform, which is shared by DirecTv and U.S.
Satellite Broadcasting. USSB officials have said that they will likely add the feed, but
they have not stated when or where.

DirecTv is putting its first HDTV programming up on the
Galaxy IIIR satellite at 95 degrees west, which will require subscribers to buy a larger
dish and new receiver to access the signals. Otherwise, DirecTv would have to pare its
other offerings, said Jim Williams, director of the HDTV program at DirecTv.

DirecTv president Eddy Hartenstein and USSB president and
CEO Stanley E. Hubbard said last week that they have had no discussions about the
possibility of USSB using spectrum on Galaxy IIIR to put up its own HDTV services,
although neither side had ruled it out.

DirecTv plans to launch its first two HDTV channels this
fall, with pay-per-view movie services. But Williams said last week that the company needs
to make at least one channel continuously available for dealer showrooms, "and that
doesn't lend itself to pay-per-view."

Digital projection televisions from both Thomson Consumer
Electronics and Hitachi Home Electronics Inc. will incorporate HDTV-capable DSS receivers
as early as this fall.

EchoStar does not intend to follow suit, at least not
initially.

"It's fairly risky to embed a DBS receiver in an
HDTV set," Jackson said.

He raised the questions of how consumers could record a
digital signal in a way that content providers would approve of and how to accommodate
local broadcasters' conditional-access systems.

Executives said the development of copy-protection
standards will impact how quickly HDTV will be introduced in the market.

DirecTv plans to help market a Thomson-made digital set-top
box next spring that would incorporate digital-broadcast and DirecTv's HDTV signals,
as well as analog signals. Williams said he expects to keep the retail price of the
set-top box under $1,000 to help drive the move to HDTV.

But not everyone at the DBS Summit believed that DBS
companies should rush headlong into HDTV. John Sie, chairman of Encore Media Group,
predicted that the new wide-screen format could actually confuse the public and slow sales
of new digital televisions.

March