AT&T Deal Boosts Health Net


In the first major coup in the battle of the health
networks, News Corp.'s entrée has landed a major carriage deal and comittment from
AT&T Broadband & Internet Services.

AT&T Broadband's long-term affiliation agreement,
announced last Friday, not only covers the newly relaunched The Health Network, but also
includes a renewal and extensions of its deals for Fox Sports Net's regional sports
networks. The long-term agreements reportedly cover 10 years.

Under the deal, The Health Network will get carriage in
"a majority" of AT&T's 10 million cable homes -- two-thirds of them, over

The MSO -- which will have an estimated 16 million
subscribers after the MediaOne Group Inc. merger and other deals close -- will carry The
Health Network through a combination of analog and digital carriage.

Discovery officials downplayed the impact of The Health
Network's new agreement, saying they have an existing affiliation deal for Discovery
Health with AT&T Broadband that covers analog and digital carriage.

The AT&T Broadband launches represent a nice boost for
The Health Network as it bitterly competes for distribution with Discovery Communications
Inc.'s new Discovery Health Channel.

The agreement is the first major carriage deal to be
announced by either of the rival health services. Discovery Health launched Aug 2.

"The Health Network helps to broaden an important
programming category," AT&T Broadband executive vice president of programming
Madison Bond said in a prepared statement. "The Health Network's innovative
programming lineup and the promise of future applications involving the health genre
factored into our decisions."

The AT&T Broadband contract is also particularly tasty
for The Health Network due to DCI's ownership ties. AT&T Corp. subsidiary Liberty
Media Group owns 49 percent of DCI, yet AT&T Broadband made a major commitment to roll
out The Health Network first, rather than Discovery Health.

Sources said Liberty chairman (and AT&T director) John
Malone was not happy to hear that AT&T Broadband had closed the affiliation deal with
News Corp. for The Health Network.

But AT&T Broadband was eager to sign the deal, which is
described "favorable" in that it is long-term, in order to lock up its
regional-sports-network contracts with Fox Sports Net over a long period with predictable
rates, sources said.

The Health Network is coming to cable operators with a low
rate card -- 5 cents per month, per subscriber -- as well as upfront cash launch fees
ranging from $3 to $4.50 per subscriber, according to sources.

"Nowadays, getting any substantial subscriber
agreement is a huge triumph," said Lindsay Gardner, executive vice president of
affiliate sales and distribution for the Fox Channels Group, which manages The Health
Network for Fox Entertainment Group and AHN Partners LP.

"But AT&T and Time Warner [Cable] set the tone for
our industry," he added. "All other MSOs are influenced by the programming
decisions they make. We will be aggressively merchandising AT&T's public endorsement
to other operators."

But Bill Goodwyn, senior vice president of affiliate sales
and marketing for Discovery Networks U.S., said his company has an agreement -- basically
a hunting license -- with AT&T Broadband for Discovery Health. However, while that
deal has incentives for AT&T Broadband to launch Discovery Health, the MSO hasn't made
any firm subscriber-rollout commitments. AT&T is now carrying Discovery Health in
about 1 million homes, an MSO spokeswoman said.

"At the end of the day, we're happy with the AT&T
deal we have," Goodwyn said. "This [Health Network] deal doesn't impact us at

The Health Network was formed this year following the
merger of Fit TV and America's Health Network, and was relaunched in July, inheriting 17.5
million subscribers from both services.

Officials from DCI's Discovery Health Media Inc., the
umbrella company that includes Discovery Health,

has previously projected that its analog cable-health
network will be in 10 million to 15 million homes by the end of the year. DCI is investing
$350 million in Discovery Health Media.

DCI is acquiring Glenn Jones' Knowledge TV, and the company
is talking with operators to find out how they feel about the 20 million-subscriber
network being converted to Discovery Health. If operators agree to the switch, Knowledge
TV's 20 million homes would give DCI a nice distribution base for Discovery Health.

Discovery Health officials have privately expressed concern
about the leverage that News Corp. has as it tries to get distribution for The Health
Network, according to several sources.

Unlike DCI, News Corp has bargaining chips it can dangle in
front of cable operators, such as renewals for its regional-sports channels -- as was the
case with the AT&T Broadband deal -- and retransmission consent for Fox TV stations.

In order to get carriage for Discovery Health, DCI has
offered MSOs a variety of incentives and options, including equity in the health network,
10 years of free carriage and cash launch fees.

A year ago, DCI launched a digital health network that is
now being carried on AT&T Broadband's digital platform, Headend in the Sky. In August,
DCI rolled out the new analog version of Discovery Health, which it is plumping up with
new original programming.

The Health Network inherited Fit TV's slot on HITS
transponder 7. However, Discovery Health does

not have a particularly good transponder position on HITS.
It is on pod 11, which is not one of the more popular transponders cable operators pull
down when they subscribe to the HITS service.

HITS is reportedly considering grouping News Corp. networks
together on one transponder -- either 5 or 7 -- which would include The Health Network.
That would be a favorable transponder position.

MSO Cox Communications Inc. owns a sizable stake in DCI,
and it is expected to become a Discovery Health affiliate.