HITS Moves Ahead on Sky Cable Plans

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Headend in the Sky is moving ahead with plans to launch a
direct-to-home satellite service, dubbed "Sky Cable," in late August or
September, officials said last week.

HITS, a unit of AT&T Corp.'s National Digital
Television Center, is still getting signed charter-affiliation agreements back from MSOs
and systems that are interested in rolling out Sky Cable, according to Rich Fickle, senior
vice president of HITS.

The original deadline for those agreements was May 15, but
it was pushed back to June 15 due to paperwork delays.

At this point, operator response to Sky Cable has been
strong enough for Fickle to predict that HITS would have the commitments necessary to
launch it.

HITS would only go forward with Sky Cable if MSOs and
systems committed 300,000 subscribers to it during the next two years, Fickle said.

"We're optimistic that we'll get the
commitments," he said, adding that HITS is now making plans and targeting a
late-summer launch for Sky Cable.

Sky Cable is a satellite-overlay service that would permit
small systems with 3,000 or fewer subscribers to offer 100 to 150 channels without
investing in costly plant or headend upgrades.

Homes at those cable systems would continue to get their
analog-cable service. But the system would install medium-power dishes from General
Instrument Corp. at subscriber homes to receive digital programming from HITS satellite
transponders.

As a result, Sky Cable subscribers would get program
packages that include their old analog lineups overlaid with HITS digital programming,
including pay-per-view, premium multiplexes, digital music and an interactive on-screen
program guide.

The GI dish, as well as a GI hybrid set-top/satellite
receiver, would cost operators about $350. Under the expected plan, operators would pay
HITS transport fees for the digitized programming, with GI likely to handle signal
authorization.

Sky Cable still poses some challenges to small cable
systems. Their billing systems need to be compatible with HITS, and this entails an
investment, sources said.

In addition, programmers must agree to have their cable
channels delivered via the Sky Cable packages, and all of them haven't signed off yet.

More than 1.5 million subscribers -- mainly those of
AT&T Broadband & Internet Services, formerly Tele-Communications Inc. -- currently
receive HITS digital programming delivered directly by satellite to headend.

But that HITS platform is still too costly to make
financial sense for very small systems. That's where Sky Cable, which is essentially
"HITS to the home," comes in.

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