Liberty Might Back DSL, AOL

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New York -- As Liberty Media Group chairman John Malone
looks around for investments, some might not necessarily be in cable's best
interests.

Flexing his financial independence with control of the
AT&T Corp. subsidiary, Malone told investors at a conference here last week that his
interests in interactivity and high-speed data might lead to deals with America Online
Inc. or digital-subscriber-line carriers.

"Right now, [America Online is] on the outs with the
AT&T guys, but we'd love to do something with them," Malone said. "I
wouldn't be surprised if we could work out something in Internet TV with them."

DSL -- a way to send data at high speeds over phone lines
-- is inferior to cable, but it could also be worth a look-see, the former
Tele-Communications Inc. chairman and CEO said.

"I'm a big believer that everybody wants
high-speed Internet," Malone added. "Any business that gets you there in an
effective way is worth looking at."

Any opportunity to gauge where Malone is thinking about
directing some of Liberty's $29 billion in investment capital is intriguing.

But the headline news from last week's session -- the
first since AT&T bought TCI and Liberty -- was the announcement that Viacom
Inc.'s MTV Networks would buy several assets from Liberty-controlled TCI Music,
including interactive-music-video network The Box Music Network and Web sites SonicNet,
Addicted to Noise and Streamland.

Liberty -- which recently transferred a batch of
Internet-related assets into TCI Music -- would get a 10 percent stake in MTVN's
online-music ventures, including what MTVN officials said would be a new unit spun off
into a separate, publicly traded vehicle at a later date.

"First and foremost, this is a deal about the
Internet," MTVN president and chief operating officer Mark Rosenthal said last week.
"This deal expands our attractive position as the No. 1 music-content provider."

The two companies also agreed to combine wits to launch an
interactive commerce-oriented music channel for advanced digital set-top boxes, which
should be available to cable operators by the end of the year.

The deal consolidates MTVN's music-video power base by
adding The Box, which claims around 24 million subscribers. But it was unclear how The Box
fits into MTVN's interactive-music plans.

"The Box remains The Box for now," Rosenthal
said. "We've admired their core competencies of pay-per-view and localism that
we haven't had at MTV."

The Box has been around since 1985, when it was known as
Video Jukebox Network. TCI Music bought the network in December 1997.

TCI Music started paying launch fees to expand the
network's subscriber base, altering its previous strategy of paying operators a cut
of the fees subscribers paid to order videos.

That raised the network's subscriber count from about
6 million a year ago, but it also added to operating losses. In the first quarter of 1999,
The Box's revenue rose 18 percent, to $6.3 million, but its pretax loss rose by 50
percent, to $3.9 million, according to a recent securities filing.

The deal also marks somewhat of a reunion between Liberty
Digital president and CEO Lee Masters, a former MTV: Music Television executive, and MTVN
chairman Tom Freston.

"We believe this enterprise will be the dominant
player in the Internet-music space," Masters said. "With the deployment of
broadband, the Internet represents an even greater opportunity for the music
industry."

Rosenthal said MTVN would maintain the SonicNet brand,
which carries a great deal of credibility among cyber-music aficionados. In 1998, Yahoo!
Internet Life
magazine tapped SonicNet as the best overall music site, and it was
awarded the "Webby" as "Music Site of the Year" earlier this year.

Masters said he hoped to "build significant value for
our shareholders" by handing The Box and the Web sites over to MTVN.

He does not plan on being a passive minority investor,
though. "Lee will have an important voice at the table," Rosenthal said.

The deal leaves digital-audio service Digital Music Express
with Liberty Digital, which has the ability to program one 6-megahertz channel on AT&T
Broadband & Internet Services cable systems, and which owns stakes in interactive
ventures iVillage Inc. and Priceline.com Inc.

Also last week, TCI Music CEO Thomas McPartland resigned as
of June 1. McPartland, whose future plans were unclear, had run TCI Music since January
1998, after it bought his former venture, Paradigm Music Entertainment Co.

Before leaving, McPartland registered in April to sell
20,000 shares of his TCI Music common stock, valued at the time at about $1 million.

"I am extremely proud of the value we have been able
to create for TCI Music's shareholders," McPartland said in a prepared
statement.

Meanwhile, Malone, conceding that DSL had problems --
"It's spotty" -- sounded ready to hedge AT&T Broadband's
substantial bet on cable-modem services through its acquisition of TCI's former
control stake in At Home Corp., parent of @Home Network.

"It's going to be a dogfight," Malone said.
"The phone companies will find it easier to get into long-distance, and [cable
operators] will muscle out their base from local [telephony]. It may not be pretty."

Although he has a reputation of not being afraid of a good
fight, Malone revealed that he decided to avoid a different conflict by selling
Liberty's 50 percent stake in Fox/Liberty Networks to News Corp. for $1.4 billion in
stock.

Malone said he opted to avoid a "real shin-kicking
battle" between News' Fox Sports Net and The Walt Disney Co.'s ESPN sports
network.

"You're not dealing with normal capital forces
[in the sports arena]," Malone said. "You have unstable team owners, unstable
athletes and two large corporations trying to gain control. We didn't want to be in
that kind of dogfight. That's the kind of thing [News chairman] Rupert [Murdoch]
relishes."

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