DirecTv Seeks Alliance with Bcasters

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DirecTv Inc. president Eddy Hartenstein
last week enlisted the direct support of local broadcasters to coax consumers to cut off
their cable.

At the National Association of Broadcasters Futures Summit
in Monterey, Calif., last Monday, Hartenstein proposed that broadcasters partner with the
direct-broadcast satellite company, as well as with digital set-top manufacturers and
local retailers, to jointly promote new digital-television services.

He said broadcasters would benefit from a plan to sell
off-air antennas and set-top boxes by taking control of local-channel delivery out of the
hands of cable and returning it directly to broadcasters.

That's a big issue in the digital-broadcast age,
because it's still unclear when, or even whether, most cable operators would pass
through every digital signal from any given local market. Must-carry rules have not yet
been determined for digital channels. And there's still the question of whether cable
operators will be required to pass on high-definition television signals with the same
picture quality that a broadcaster delivers.

Steve Effros, president of CATA (the Cable
Telecommunications Association), said he doesn't see DirecTv's proposal as a
threat to cable, adding that cable will deliver HDTV "if our customers want it."

As broadcasters examine a move to digital multichannel
services, they could also benefit from DirecTv's experience in electronic programming
guides, customer service, conditional access, billing and scheduling, Hartenstein said.

"We bring to the table an infrastructure background
and a relatively long number of years in nurturing manufacturer alliances and alliances
with consumer-electronics retailers," Hartenstein added.

Under DirecTv's scenario, the company would pinpoint a
single test market for a major promotional push of digital set-top boxes that could
receive both local digital and DirecTv programming. Hartenstein said he wants all local
broadcasters within that market to commit to going digital in time for the test next
spring. That way, the partners could study how quickly consumers adopt the new digital
technology.

"Unlike cable, DirecTv is not a gatekeeper,"
Hartenstein said. "Broadcasters participating in such tests would be directly
reconnected to their audiences with the off-air antenna."

Already, DirecTv appears to enjoy support from some
broadcasters. John Greene, vice president of special projects for Capitol Broadcasting Co.
Inc. in Raleigh, N.C., called the proposal "a good idea." Capitol, which
launched the first high-definition test channel, WRAL-HD, in Raleigh in July 1996, has
already expressed interest to DirecTv in having Raleigh chosen as the test market.

Raleigh is the 29th-largest television market in the
country. That would put it within close range of DirecTv's target of choosing a small
to midsized market for the test.

The size of the market is important, Hartenstein added,
because DirecTv wants to make sure that there are enough set-top boxes on hand to meet any
demand that the promotions create. The market shouldn't be so small that it is
statistically irrelevant, and it must be large enough to have a strong retail presence, he
said.

Greene said Raleigh is served by top national retailers
Best Buy and Circuit City, as well as by local audio/video specialists.

Raleigh's ABC and NBC stations are
network-owned-and-operated. Greene believes that this makes it easier for the stations to
make an early transition to digital. WRAL-HD itself is a CBS affiliate. And Capitol also
manages the local Fox station, so the company could influence that outlet's digital
timetable.

Greene said it's critical for broadcasters to start
marketing digital television because there's so much confusion surrounding it.

"We need to tie in with retailers and manufacturers to
get the word out," he added.

WRAL-HD already demonstrates its HDTV signal publicly about
three times per week.

Rob Hubbard, president of Hubbard Broadcasting Television
Group in Minneapolis, said that although "we'd be happy to participate" in
a market test, he doesn't believe that DirecTv would choose any of its stations.

"If the test were done in one of our markets, we run
the risk of having the whole process suspect," he said.

The Hubbard family, which owns Hubbard Broadcasting Inc.,
also has a controlling interest in U.S. Satellite Broadcasting, the DBS programmer that
shares the Digital Satellite System platform with DirecTv.

"It's important that they do this right the first
time," said Jimmy Schaeffler, chairman of The Carmel Group.

Thomson Consumer Electronics, which designed the original
DSS-hardware specifications for DirecTv, will supply digital set-top boxes for the test.
They would be the first DSS set-top boxes to integrate local channels with DBS signals,
although EchoStar Communications Corp. already does that on certain high-end models.

In addition to receiving digital terrestrial signals and
DSS feeds from DirecTv and USSB, the boxes will also receive today's NTSC (National
Television System Committee) feeds from cable or an off-air antenna, said Bill Mengel, DBS
product manager for Thomson. Digital-cable-modulation schemes won't be included in
the boxes initially because they are not yet operable on a nationwide basis.

The set-top boxes can't deliver a true HDTV-quality
picture to today's televisions, although they will convert an HDTV signal to
improved, standard-definition pictures on an NTSC screen. The set-top boxes will also
deliver true HDTV pictures to any display device capable of showing them, such as the
flat-screen plasma displays that are expected as early as this fall.

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