ATHENA READY TO ROLL Time Warner Preps Digital Service

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Time Warner Cable, satisfied that most technical wrinklesare smoothed out and that programming agreements are shaping up, is moving ahead tofinally launch and unveil plans for its digital-programming service, code-named"Athena."

Athena will mark Time Warner's entrée into digital-videoservices, and it will be offered to its subscribers through its "Pegasus"digital set-top boxes. Athena will essentially be Time Warner's souped-up equivalent ofTele-Communications Inc.'s Headend in the Sky and its Digital Cable tier.

Time Warner's digital-video package -- which will have along list of basic specialty channels, as well as enhanced pay-per-view and paymultiplexes -- is meant to be a formidable offensive weapon against direct-broadcastsatellite.

"This will compete extremely well with DBS," saidAndy Dale, president of The Outdoor Channel.

Time Warner, which could make an official announcementabout plans for Athena as early as this week, declined to comment last week. It'suncertain if the MSO will brand the service with its code name.

In Greek mythology, Athena -- the goddess of wisdom --tamed Pegasus. Time Warner's digital set-top strategy has long been named after thatmystical winged horse.

After some delays -- reportedly due to dissatisfaction withthe picture quality that Athena was attaining, and after some technical tweaking to adjustit -- sources said the initial digital-video launch could take place in December inAustin, Texas. That's where the MSO put its first Pegasus set-tops, made byScientific-Atlanta Inc., through their paces.

Time Warner is moving ahead slowly, making sure that all ofthe bugs are out in Austin, before doing a full-blown commercial rollout of thedigital-video package later next year. The next markets where Athena will launch willlikely be Tampa, Fla., and Columbus, Ohio, where Ameritech New Media competes against theMSO, one source said.

Time Warner, which will offer Athena to other MSOs, hasheld talks with both Comcast Corp. and MediaOne about taking co-ownership in the digitalservice, a source said. But dialogue broke off following an unexplained corporate tiffbetween Time Warner and MediaOne, the source added.

Comcast and MediaOne couldn't be reached for comment.

Athena will be very different from HITS in many respects.HITS was created as a business and would-be profit center for TCI, meant to not only serveits systems, but to aggressively court and sign up non-TCI systems.

In contrast, the co-ownership structure that Time Warnerdiscussed with MediaOne and Comcast would have been similar to a co-op, and it wasn'tmeant to generate profits, a source familiar with Athena said.

Rather, it was meant to create a bandwidth- andprice-efficient digital service, tailored to the larger systems, with upgraded plants andfairly robust analog-channel lineups, that those three MSOs all have, the source said.

MediaOne, which hasn't yet aligned its digital-videoacquisition or distribution plans, issued its own request for proposals related todigital-video equipment Sept. 25 (see related story, page 2).

One Comcast executive who requested anonymity said the MSOwas talking about finding a way to accelerate its launch of digital "and looking tofind any solution that allows us to do that quickly."

The executive, who said he wasn't aware of any talks withTime Warner, said Comcast may rely on a technology that it calls "multicorp,"which would allow the operator to serve multiple systems from one digital headend.

Aside from Comcast and MediaOne, MSOs outside of TimeWarner's boundaries have been buzzing about the Athena service during the last two weeks.

Senior executives at Cox Communications Inc. and CharterCommunications Inc. were all aware of, and interested in, the service. Operators have beeneager to have an alternative to HITS for digital programming.

"We've had some preliminary conversations, and I'dhave to say that yes, there's some interest there," said Chris Bowick, Cox's vicepresident of technology development.

Several programmers said the two Time Warner executives incharge of Athena -- Kevin Leddy, senior vice president of marketing,and Jim Braun,director of new-product development -- are still putting the final touches on its programlineup, and that it's been in flux.

"We're all waiting for a channel lineup," oneprogrammer said.

Added another network executive, "A lot of dates havebeen pushed around."

Several network officials said they've been told by TimeWarner that the Athena uplink will eventually include 48 basic digital-video channels,with 44 of them being "specialty networks." The other four will be adultservices and PPV channels such as Action Pay-Per-View, one source said.

Time Warner has been in talks with the "usualsuspects," in terms of programmers with digital services, sources said. That includesseveral of Discovery Communications Inc.'s digital services; Nickelodeon's upcoming kids'educational channel, Noggin; and American Movie Classics spinoff AMC's American Pop, amongmany others.

The MSO already has a carriage deal with The OutdoorChannel for that network to be carried digitally.

Not surprisingly, some channels owned by Time Warner'scorporate sibling, Turner Broadcasting System Inc., are also expected to end up on thedigital lineup, sources said.

On the front end, to deliver those 40 or so programmingservices to its systems, Time Warner will use Home Box Office's Hauppauge, N.Y., facilityas its digital-video uplink, probably using compression and encryption equipment made byS-A and branded "PowerVu."

Compression ratios will start at 10-to-1, ranging up to16-to-1 as S-A equipment enabling that becomes available, sources said.

In addition, Time Warner will not pursue "nationaladdressability," like TCI does, sources said.

For the rest of its digital-video package, several sourcessaid, Time Warner plans to take digital feeds of its PPV and premium multiplexes directlyfrom those programmers: services such as Viewer's Choice and HBO.

Time Warner plans to move all of its new-product tiers andpremium channels from current analog locations to the digital shelf as part of the plan,sources said, thereby minimizing the costs associated with set-top boxes containing bothdigital and analog descramblers. The boxes reportedly will only take and unscrambledigital signals.

Time Warner's decision to move NPTs to digital -- becauseits boxes can't unscramble analog -- has some programmers that are on those tiers upset atlosing their analog berths, one cable-network official said.

HITS and Athena will be very different in theirconfigurations because of the difference of TCI's plant versus Time Warner's. HITS wascreated to specifically serve the needs of TCI systems, many of which are in small marketsand haven't been rebuilt, having meager analog-channel offerings.

So the so-called HITS three-pack that TCI is rolling outcontains a number of networks, such as The History Channel and Home & GardenTelevision, that Time Warner and other MSOs already carry on analog in many systems.

"Time Warner's Athena works better for more robustsystems," one programmer said.

The three-transponder HITS three-pack also mixes in somepremium multiplexes and PPV on pods with specialty basic channels. Athena won't do that.

So while HITS was envisioned as a quick way to boost thechannel capacity of TCI systems, merely putting them at a par with other MSOs, Athena isseen as a tool to give Time Warner an extensive program lineup that will be verycomparable to -- and competitive with -- DBS, programmers said.

"This [Athena] is no three-pack," one programmersaid.

Added another, "Athena is a digital tier in a truesense."

Pioneer New Media Technologies and Toshiba Corp. are alsoplanning to build Pegasus boxes for Time Warner.

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