News

DBS Pact Expands GTE Video Ventures

4/12/1998 8:00 PM Eastern

GTE Corp. last week signed a multiyear agreement with
DirecTv Inc. to market and distribute the direct-broadcast satellite company's
digital-video service. It marks the third such agreement DirecTv has made with a telephone
company this year.

Late last year, DirecTv broke its ties with AT&T Corp.,
after the nation's largest telephone company generated a lukewarm response to its
efforts to market DirecTv. Last month, DirecTv signed with Bell Atlantic Corp. and SBC
Communications Inc. to offer its service in the regional Bell operating companies'
service territories. DirecTv also has a long-standing arrangement with Cincinnati Bell.

Unlike DirecTv's earlier pact with AT&T, no money
changed hands in the GTE deal. Rick Wilson, president of GTE Media Ventures, said GTE had
looked at every DBS company before making the deal with DirecTv. One reason it chose the
DSS platform is that DirecTv did not ask for any kind of equity arrangement.

GTE had also announced recently that it "will write
down investments in hybrid fiber-coax [HFC] technology associated with its video trial
markets because of advances in new technologies that will eliminate the need for duplicate
networks."

Wilson said GTE plans a move to VDSL (very high-speed
digital subscriber line), a wire that can integrate voice, data and video on twisted
copper. Wilson called VDSL "the platform of the future."

GTE will use a mix of solutions as they make sense in each
particular market, Wilson said, and added, "We're not banking on only one
technology."

John McKee, vice president of special markets for DirecTv,
said, "We've tried to incent GTE through a revenue-share agreement that
increases as their [DirecTv] subscribers increase."

McKee called GTE "an aggressive company" that
offers coast-to-coast distribution in 29 states, local service and a strong brand name.

As part of its one-stop-shopping telecommunications plan,
GTE will allow consumers to purchase or lease the Digital Satellite System hardware and
order DirecTv programming with one telephone call. GTE is in negotiations with U.S.
Satellite Broadcasting Inc. to market its programming, which is also delivered to DSS
dishes.

Wilson said the deal with DirecTv does not mean the company
is pulling back on its other video ventures, which include wireline and wireless-cable
service in California, Florida and Hawaii. But it does allow GTE to offer video as part of
its bundled telecomm offer in more markets sooner.

GTE will launch the co-branded DirecTv/GTE service in two
markets by midsummer, Wilson said. He declined to name those markets, saying only that
they would be large metropolitan areas where GTE offers phone service.

Initially, GTE will market DirecTv in areas where it does
not offer a competing video service. But over the next several years, GTE plans to offer
both DirecTv and GTE's own video services in some of the same markets.

The deal with DirecTv underscores GTE's move to offer
digital rather than analog video wherever possible. The company is upgrading its
wireless-cable product in Honolulu to a 150-channel digital service, which it plans to
relaunch within the next two months.

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