Last Years HDTV Fireworks Fizzed Out

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For better or worse, it's all quiet on the HDTV front.

Questions about high-definition-television policy and
technology generated much of the heat at last year's National Show in Atlanta. But one
year later, there's little rhetoric to stir up controversy, and not much more concrete
activity.

The relatively slow pace of HDTV-distribution agreements
for the handful of cable channels and broadcast-TV networks with any HDTV programming to
speak of appears to be less an infrastructure and technology issue than one of basic
economics.

While the major MSOs make steady progress with system
upgrades for digital-broadcast and interactive-video capabilities, there's little economic
incentive to accelerate the rollout of HDTV.

With the number of homes with digital-TV receivers capable
of displaying HDTV signals estimated in the low thousands, cable-industry executives
privately said there's no reason to lead the market.

Those industry executives willing to speak for the record
appeared only marginally more enthusiastic about the near-term prospects for HDTV,
although at least a few system operators will allocate bandwidth this fall for most, if
not all, available HDTV programming.

Moreover, without a pricing model in place for HDTV
programming, those cable operators that are transmitting HDTV programming have yet to
charge for it. "At some point, we're going to reach critical mass, and we'll have to
deal with that," one senior executive with a leading MSO said, "but not
yet."

AT&T Broadband & Internet Services, with the most
digital-video subscribers of any MSO, would appear to be a likely candidate to add HDTV
programming. But senior vice president of advanced technology Laurie Schwartz-Priddy said,
"We don't have an agreement to carry any of the HDTV product."

AT&T Broadband has had "some very productive
discussions" with the broadcast-TV and cable networks, and it hopes to have at least
some carriage agreements "on a [broadcast] network basis…by the summer,"
Schwartz-Priddy added.

An executive with another major MSO said, "We're
talking with all of the broadcasters." He conceded that his company feels little
pressure to conclude an agreement, based in large part on the slow pace of
consumer-equipment sales and the limited transmissions of HDTV programming, apart from
NTSC (National Television Systems Committee) signals upconverted by broadcasters to 720p
(progressive) or 1080i (interlaced) mode.

"We've talked to a couple of people at NBC,"
Cablevision Systems Corp. senior vice president for engineering and technology Wilt
Hildenbrand said, "[but] we're not pushing them [for an agreement], and they're not
pushing us."

Of the major broadcast networks, only CBS has been able to
get any significant carriage agreements, notably with Time Warner Cable in New York and
Los Angeles and with Cablevision in the New York metropolitan area.

But this could change with the fall-1999 network season,
particularly with the addition of some high-profile programming in HDTV.

ABC's decision to broadcast Monday Night Football in
HDTV starting this fall -- funded in large part by broadcast and consumer-electronics
equipment manufacturer Panasonic Consumer Electronics -- will increase pressure on cable
operators to reach carriage agreements in those markets where the HDTV feed is available.

"We plan on carrying that, of course,"
Hildenbrand said. "Anyone that comes up with unique HDTV programming, we will
carry."

Apart from the peripatetic tango between cable MSOs and the
major broadcast-TV networks, even major cable networks with HDTV feeds or plans to provide
them are finding few takers.

To date, only two cable operators -- Time Warner in New
York and Tampa, Fla., and Cablevision in the metropolitan New York area -- have signed
distribution agreements for Home Box Office's HDTV feed, an HBO spokesman said.

In part, that's because of the lag effect between system
upgrades to 750-megahertz capacity and adding the capability to pass through HDTV signals.
"It's still a small number of systems," Time Warner chief technical officer
James Chiddix said of his MSO's upgrades to HDTV capability.

HDTV programming, to an extent, remains hostage to a series
of unresolved issues. Those include a long-term solution to the disconnect between cable's
choice of QAM (quadrature amplitude modulation) for digital-video signals, versus
broadcast TV's use of VSB (vestigial sideband); copy protection; and regulations governing
how -- if at all -- cable operators will be required to carry both digital and analog
off-air TV signals.

Cable enthusiasm for HDTV is likely to rise measurably once
system operators can transmit cable and off-air programming in QAM, rather than VSB, to
take advantage of QAM's bandwidth efficiency.

This will happen once consumer-electronics manufacturers
begin adding dual QAM/VSB demodulation chips to their next-generation digital-TV receivers
and set-top boxes -- or once HDTV-capable set-top boxes become a viable solution.

Time Warner in New York is one of only a few system
operators to carry a broadcast-TV HDTV signal in VSB, although Chiddix noted that this
solution will last "as briefly as possible. It's a terrible idea: 8 VSB wastes
spectrum."

Once cable moves to 256 QAM, operators will be looking down
a 40-megabit-per-second pipeline per 6-MHz channel -- enough to carry three 720p HDTV
programs, a 480p standard-definition program and perhaps 1 mbps or so of data.

With most system operators allocating 150 MHz to 200 MHz of
spectrum out of 750 MHz in upgraded systems for digital-video programming -- including
pay-per-view, HDTV and multiplexed-premium channels -- bandwidth could become an issue in
the short term if operators had to deal with a deluge of HDTV programming.

But it's hard to find anyone who believes this will happen.

"You could build a model where everyone is running out
of space," Hildenbrand noted. "But that's not likely to happen. This is a game
of timing."

Virtually all of the major MSOs are well into their system
upgrades, with operators such as AT&T Broadband, MediaOne Group Inc., Time Warner and
Cablevision at or above 50 percent conversion to 750 MHz.

Time Warner, Chiddix said, will have completed 85 percent
of its upgrade by the end of this year.

Those plant upgrades -- combined with planned upgrades to
256 QAM modulation from 64 QAM -- should give operators enough capacity to carry their
current packages of NTSC analog, standard-definition digital and HDTV programming, they
said.

"We're working the 256 issue very hard, both on the
satellite and the plant," Schwartz-Priddy said. Although AT&T Broadband -- as was
the case under its former Tele-Communications Inc. management -- prefers that broadcasters
use 720p instead of 1080i for HDTV programming, the MSO will pass through 1080i "if
that's what they give us."

Similarly, Schwartz-Priddy would like to see broadcasters
sign carriage agreements that allow AT&T Broadband to remodulate off-air signals to
QAM. "[But] it's got to be a mutually agreeable situation," she said.

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