HITS: Small Ops Coming Onboard

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More than 1 million homes are customers of
Tele-Communications Inc.'s National Digital Television Center, according to a status
report from the NDTC. These include both TCI and non-TCI affiliates.

One of the bigger challenges for TCI's Headend in the
Sky service has been attracting the interest of small cable operators, which may need
additional digital-programming tiers to combat satellite competitors, but which may not
want them badly enough to pay TCI a per-subscriber fee.

The NDTC said that's changing now, especially since
TCI kicked in a volume-purchase plan that significantly reduces the price of digital
set-tops -- one of the more weighty cost items on any digital-video implementation.

Before TCI's volume-purchase order of 15 million
set-tops from General Instrument Corp., small operators were forced to pay in the
neighborhood of $460 per box; with the TCI "friends-and-family" order, that
per-box price drops to $330, said Rich Fickle, senior vice president of HITS.

The per-box price will drop again in the first quarter of
next year, because of increased silicon integration, said David Robinson, vice president
and general manager of GI's digital-video group.

And it looks as though the programming-lineup tweaks are
nearing an end. HITS altered its lineup at the end of July, and it will tinker with it
again in late October to replace Viewer's Choice with "three additional
transponders worth of programming," Fickle said. That will likely include new,
cable-branded channels like Lifetime Movie Network and "several networks out there
that have announced new channels," he added.

Among these, according to HITS affiliates, are Toon Disney,
AMC's American Pop, DIY, Style, Biography, International Channel and Noggin.

Fickle said HITS now supports 43 non-TCI affiliates, up
from about 10 a year ago. "Then, there are about 15 others that are in the final
contractual stages," he added.

He declined to name the new affiliates, aside from those
operators that already agreed to be publicly identified, like FrontierVision Partners L.P.
and Buford Cable Television.

Also sweetening the HITS offering: The conditional-access
and control piece was sold off to GI earlier this year, in an attempt to assuage concerns
that TCI had too much control over other MSOs' content. Plus, HITS recently dropped
its transport fees "by close to half," from an original cost of 3.5 cents per
subscriber, per month, Fickle said.

Small operators contacted last week said they're
warming up to HITS.

David Kinley, president of Sun Country Cable, said he will
start beta-testing the HITS service in one of his larger systems early next year.

"We're taking a good, hard look at this.
We're going to do this beta-test, and we hope to launch it next year," Kinley
said.

Also kicking the tires a bit more aggressively is Jones
Intercable Inc., which is poised to fire up the HITS service in its Pima County, Ariz.,
system next year, and which is considering HITS for Augusta, Ga., and other systems, said
Bonnie Cleaver, senior director of new business and digital deployment for the MSO.

Cleaver said Jones is still considering other alternatives,
such as TVN Entertainment Corp., but "the decision time frame for Augusta is getting
close, since we want to launch digital video there in the first quarter of next
year."

Cleaver and other small MSOs said they're still
"terribly interested" in the availability of "grooming" devices, so
that they can cherry-pick a custom lineup of the digital channels coming from the HITS
satellite transponders.

New technology could allow affiliates to take individual
services from each of the pods, rather than accepting entire pods.

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