News

PrimeStar Signs Contract for Set-Tops

2/22/1998 7:00 PM Eastern

PrimeStar Partners L.P. said General Instrument Corp. will
manufacturer $180 million worth of new integrated receiver-decoders.

The announcement signals the direct-broadcast satellite
company's intent to move ahead with its high-power business.

PrimeStar spokeswoman Kimberly Maki said GI has agreed to
deliver a minimum of 500,000 high-power units. But she admitted that the volume is
contingent upon certain factors affecting PrimeStar's move to a high-power DBS
business, including government approval of two DBS-license transfers.

GI has a long-standing relationship with PrimeStar as
supplier of the set-top for its medium-power satellite service. GI has already begun
production on the first high-power model, which will initially serve as the set-top for
both PrimeStar's retail and wholesale high-power services.

Hardware pricing has not yet been announced, although Maki
said costs on the boxes for both the retail and wholesale service would be 'very
competitive.'

The deal 'represents a great opportunity for both
companies to derive new business,' said Doug Means, vice president of consumer
networks for GI.

PrimeStar's medium-power growth has lagged since
mid-1997, when it announced that it would move to a high-power DBS service. Last month,
the company signed up only 16,000 new subscribers.

Means said DBS is 'without question' an important
business for GI. He added that with PrimeStar's move to high-power, GI will be
expanding into new distribution outlets. Meanwhile, GI continues to produce medium-power
boxes for PrimeStar.

PrimeStar also plans to name a second supplier for the
high-power IRDs -- most likely a name-brand consumer-electronics company that will help
PrimeStar to penetrate national retail distribution. Today, RadioShack is PrimeStar's
only national retail account.

Means would not say whether GI plans to be the
original-equipment manufacturer of the IRDs for the second equipment supplier. In any
case, GI would get a licensing fee for the hardware from any new manufacturers.

PrimeStar's new high-power IRDs include GI's
proprietary DigiCipher II conditional-access technology, as well as MPEG-2 video
compression and Dolby Digital surround sound.

The new box also marks PrimeStar's first interactive
programming guide, considered crucial to the success of a DBS product offering so many
channels.

According to a statement, the technology will support new
interactive and data services as they are developed. Maki would not specify whether
PrimeStar has plans to offer Internet access or high-definition television over its
high-power service.

To help PrimeStar sell the new IRD to the wholesale
multichannel-video-provider market, GI has built in an analog tuner. The tuner allows
seamless integration of analog channels for cable and wireless cable companies that want
to offer a PrimeStar digital tier along with their own basic-analog services.

Maki said the analog tuner also has applications for
PrimeStar's retail customers who want to keep a lifeline cable subscription to
receive local-broadcast signals.

In comments to the Federal Communications Commission
earlier this month, EchoStar argued that PrimeStar should not be allowed to control the
last remaining full-CONUS (continental United States) DBS slot because it has not
announced plans to offer local signals over satellite. EchoStar said offering DBS
programming as a supplement to cable is not a proper use of scarce DBS spectrum because it
doesn't give consumers a true competitive choice to cable.

PrimeStar has a pending deal with News Corp. for the
high-powered slots at 110 degrees west longitude. Last year, EchoStar signed its own deal
with News Corp. that would have allowed the two companies to deliver local and
multichannel video programming from both 119 degrees west and 110 to a single 18-inch
dish. But the deal fell through, and the two companies will go to court over the matter
later this year.

EchoStar is still expressing interest in the spectrum at
110, and it has asked the FCC to deny a license transfer of the spectrum to PrimeStar.

In its own filings earlier this month, the Wireless Cable
Association International asked the FCC to impose program-access and
retransmission-consent conditions if it approves the transaction between News and
PrimeStar. The comments stated that wireless cable operators across the country have been
denied access to News programming such as Fox News Channel and FX.

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