DirecTvs New Bird Could Fly Without USSB

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DirecTv Inc. will launch a fourth direct-broadcast
satellite to the 101 degrees west longitude orbital slot sometime in the middle of next
year, the company announced last week.

The service's DBS-1 bird, in orbit since late 1993,
suffered a failure on a control processor last month, leaving it without a backup
component.

"With respect to that one satellite, we're down
to a single thread, and we don't feel that this is the best way to fly," DirecTv
president Eddy Hartenstein said.

After a successful launch, DirecTv plans to shift the 11
transponders of channel capacity that it had on DBS-1 to the new, as-yet-unnamed
satellite, which has capacity for 16 transponders. Hartenstein said the move should give
DirecTv the ability to add 20 to 25 new channels.

DirecTv has an additional 16 transponders between its DBS-2
and DBS-3 satellites.

U.S. Satellite Broadcasting shares the Digital Satellite
System platform at 101, with five transponders at DBS-1. USSB had hoped that the launch of
a high-power DBS-4 satellite would give it additional channel capacity.

But last week, USSB president and CEO Stanley E. Hubbard
said he hasn't worked out with DirecTv what role USSB will have in launching the
fourth satellite or in sharing bandwidth on it.

"At this stage, it doesn't look good for
USSB," said Steve Blum, president of California-based DBS consultancy Tellus Venture
Associates, noting that DirecTv did not include USSB in its announcement last week.

"DirecTv is not launching DBS-4," Blum added.
"It's launching replacement capacity for DBS-1."

This means that DirecTv may not be obligated to give USSB
channel capacity on the new bird, and USSB's five transponders would then remain on
DBS-1.

Hubbard tried to put a positive spin on the news.

"The No. 1 commitment that DirecTv and USSB have
always made is that we'll have the best, most robust DBS system available," he
said.

Hartenstein said DirecTv will invest $200 million to put up
the new bird, including the cost of the satellite, launch, insurance and additional
equipment on the ground.

He said DirecTv should easily recover the incremental cost
of putting an extra satellite up through the revenues gained from adding extra services.

It's too soon to say which new channels DirecTv will
add with the launch of a new satellite.

"We'd like to add to our most broadly distributed
packages," Hartenstein said, adding that the company would "sit down in
earnest" with potential programmers soon.

Blum said that in order to generate enough new revenues to
pay for the cost of a new satellite, DirecTv would have to look seriously at new
subscription services.

"If I was DirecTv, I'd look to add HBO [Home Box
Office] or Showtime," Blum said.

USSB exclusively carries both HBO and Showtime multiplex
services on the DSS platform.

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