Forecast Sees Double-Digit Cable Growth

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New York -- Domestic spending on basic, premium,
pay-per-view and advertising services from multichannel-video providers should keep
growing at double-digit rates, as gains in basic services offset slower growth in the
other three revenue categories.

That was one conclusion drawn by Veronis, Suhler &
Associates in its latest communications-industry forecast.

The investment bank believes that total spending on
subscription-video services will grow at a compound annual rate of 11.6 percent between
1997 and 2002, rising from $38.5 billion in 1997 to $66.4 billion in 2002.

That growth rate is slightly higher than the 11.1 percent
compound rate racked up in the 1992-through-1997 period.

Cable should add subscribers at a 1.7 percent compound
annual growth rate over the five-year period, which is less than one-half of what it
achieved from 1992 through 1997, but "an increase, nevertheless," in the face of
competition, according to the report.

Veronis, Suhler figures that direct-broadcast
satellite's subscriber count will grow to 8 million in 2002, which seems low,
considering that The Carmel Group now counts 7.7 million subscribers combined for EchoStar
Communications Corp.'s Dish Network, DirecTv Inc. and PrimeStar Inc.

The report figures that competition from digital-cable
services, saturation of unwired territories and rising programming costs will cut into
DBS' growth.

Interestingly, Veronis, Suhler believes that regional
telephone companies' multichannel-video businesses will have amassed 2.5 million
subscribers by 2002, which is more than the report estimates for wireless cable (2
million) or C-band satellite (1.8 million) services.

Phone companies feel no compelling, competitive reason for
pushing into video now, but that could change as cable continues to plow into local
telephony, according to the report.

The report estimates that household spending on basic-cable
services will rise at a 10.6 percent annual rate over the 1997-through-2002 forecast
period -- up from 8.3 percent from 1992 through 1997 -- ending with $33.2 billion in 2002.

The average monthly bill for basic service would rise to
$39.50 from $26 under that scenario, assuming that the government doesn't take action
to curtail high-single-digit annual rate increases.

Basic bills figure to rise more than spending on premium
channels or PPV. Total spending on premium channels will rise at a 4.8 percent annual
clip, down from 5.5 percent from 1992 through 1997.

Spending on premium services rose 13.5 percent in 1997 --
the first double-digit increase since 1985 -- with about 75 percent of the growth in
subscriptions coming from DBS. The report assumes that as the basic-channel universe
expands with greater channel capacity, premium services will have a tougher time
attracting subscribers.

PPV spending -- a $2.3 billion business in 2002, versus
$8.5 billion for premium channels -- figures to grow at a compound annual rate of 10.7
percent, according to the report. That's down from 28.7 percent from 1992 through
1997. In 1997 alone, the increase was about 35 percent. Without Mike Tyson fighting,
though, per-household spending on PPV events will decline drastically this year.

Overall, by 2002, the report thinks that cable's share
of the PPV business will be about $1.5 billion, up from $824 million in 1997.

Subscription-video advertising, a $7.9 billion business in
1997, has risen at an 18.7 percent compound annual rate over the last five years, the
report estimates. That growth rate will dip to a still-strong 15.9 percent, and the total
business should grow to about $16.5 billion in 2002.

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