DirecTv Outlines Ethnic Services

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DirecTv Inc. announced a series of deals last week that
will allow the company to deliver ethnic channels to U.S. homes as early as May.

PanAmSat Corp. will lease to DirecTv four Ku-band
transponders at its Galaxy III-R satellite at the 95 degrees west longitude spectrum, a
few degrees away from DirecTv's own satellites, which are parked at 101 degrees west.

Ethnic American Broadcasting Co. will deliver the first six
foreign-language channels for the new service. The initial channel lineup includes Russian
service WMNB-TV, Network Asia, Ukrainian Broadcasting Network, Ciao TV: The Italian
Superchannel, The Egyptian Satellite Channel and Nile TV, an Arabic-language service.

Apart from Spanish programming, foreign-language channels
are not typically represented on local cable systems because the target audience is
generally not large enough in any given market, with the exception of certain major
cities.

Lourdes Saralegui, executive vice president of PanAmSat,
said the new channel capacity at 95 degrees west is 'a pretty good solution for
expanding DirecTv's offering and for serving a market that we have found is very
underserved.'

DirecTv is betting that new subscribers to its ethnic
services will also become customers for the company's full-service American fare at
101 degrees.

'You're seriously underestimating the ethnic
marketplace if you don't offer mainstream programming, too,' said Larry Chapman,
executive vice president of DirecTv.

Barbara Sullivan, president of B.G. Marketing Inc., agreed.
Sullivan saw such a demand from ethnic subscribers when she worked for EchoStar
Communications Corp., which already offers foreign-language services.

'Ethnic programming brings in new subscribers for the
full package,' Sullivan said, 'because they're typically two-generation
households.' The older generation might want Croatian services, for example, while
the younger ones want to watch 'everything else.' And in ethnic-American
families, Sullivan said, the younger generation doesn't necessarily move away from
home the way mainstream Americans do.

Subscribers to DirecTv's new services at 95 degrees
will also be able to access all of the channels from 101 degrees with a new,
21-inch-by-35-inch elliptical antenna, which is larger than the 18-inch dish used by
current DirecTv subscribers. The new dish is capable of seeing both orbital positions. The
larger dish is also necessary for ethnic-channel subscribers who don't choose the
mainstream services, because the satellite at 95 degrees west does not deliver a true
high-power direct-broadcast satellite signal.

Hughes Network Systems, a sister company to DirecTv --
Hughes Electronics Corp. is the parent of both companies -- will supply the receiving
hardware for the new ethnic services at 95 degrees. The new system requires a modified
Digital Satellite System IRD (integrated receiver decoder) with a tuner designed to pick
up FSS (Fixed Satellite System) as well as DBS frequencies.

EABC and DirecTv have had an agreement in principle since
last summer to give EABC's ethnic programming digital carriage, said EABC president
David Moro. The two companies already work together; EABC is one of DirecTv's charter
MDU (multiple-dwelling unit) operators.

Moro said EABC will launch at least 20 ethnic channels for
DirecTv, 'and possibly a good many more.'

EABC has a history of marketing foreign-language services.
Its Russian service, for example, is available on several local cable systems and on a
number of private and wireless cable systems, Moro said.

Sullivan said it's important to have the programmers,
rather than DirecTv, market their foreign-language services. When she said potential
subscribers need to be approached by somebody who speaks their language, she was speaking
literally.

Chapman said he expects EABC to target potential
subscribers directly, rather than through retail.

'There may be some specialty retailers who serve these
special markets,' he said, 'but we're taking a cautious approach because we
don't want to create any confusion.'

Chapman said the services at 95 degrees don't require
a massive penetration of subscribers to be successful, because the real estate there is
not as costly as it is at 101.

EchoStar is also expected to move much of its
foreign-language programming away from its full-CONUS (continental United States)
satellites at 119 to its recently launched EchoStar III, and perhaps to EchoStar IV, which
has a launch window this spring. The company is also expected to add more ethnic channels
there this year.

While EchoStar III and IV are high-power DBS birds, they
are not located closely enough to 119 to allow a single dish. Subscribers would require a
second -- and conceivably a third -- 18-inch dish to watch all of the programming
available through EchoStar.

Analysts said EchoStar's two-dish proposition and
DirecTv's larger dish have the potential to slow demand for the ethnic channels.

According to Steve Blum, president of California-based DBS
consultancy Tellus Venture Associates, 'a 35-inch dish is a big deal. That's not
trivial. Once you get up to 36 inches, you need a serious antenna mount.' From an
installation standpoint, he said, it's easier to install two smaller dishes.

But Blum added that the ethnic market will be driven less
by technology and more by the programming.

'The attraction of the programming itself will be
enough to drive penetration,' he said.

PanAmSat's Galaxy III-R satellite currently sends
DirecTv's Galaxy Latin America service to Latin America and the Caribbean. That
programming will migrate to the recently launched Galaxy VIII-i satellite, which is
collocated at 95 degrees west.

In addition to more ethnic programming, DirecTv may lease
extra channel capacity at 95 west for other niche offerings, such as high-definition
television and business services.

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