Pioneer Moves Vs. GI, S-A

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Tokyo -- Pioneer New Media Technologies is on a fast track
to provide a second type of digital-video-security system for U.S. and international cable
systems.

The vendor said MSOs need an alternative to the General
Instrument Corp./Scientific-Atlanta Inc. "stranglehold" on critical
signal-security methods.

The move partly reflects Pioneer's planned response to
MediaOne Group's request for digital-video-equipment proposals, issued Sept. 25,
executives said during a briefing at the manufacturer's headquarters here.

It also builds on Pioneer's late-summer announcement
that it will team up with Canal Plus, C-Cube Microsystems Inc. and DiviCom Inc. to create
an open, interoperable digital-video system, which includes conditional access and
encryption.

"We wanted to break our dependencies on S-A and
GI," said David Nicholas, executive vice president of sales and marketing for
Pioneer, adding, "As part of that, we did an assessment of the best potential
partners to break the dependencies -- people who complemented us, but who weren't
competitors."

What will come out of that is conditional-access and
headend-control gear based on Canal Plus' "MediaGuard" technology, and a
companion set-top made by Pioneer, said Tim Takahashi, president of Pioneer Digital
Technologies Inc.

MSOs familiar with Pioneer's plans -- via a shortlist
of private, one-on-one briefings conducted over the summer -- said they were pleased to
see a new entrant in the mix.

"I'm very encouraged with what Pioneer is
doing," said Steve Dukes, vice president of digital technology for MediaOne.

Dukes added that other vendors may also participate --
perhaps Panasonic Consumer Electronics -- since the project, by its very design, is aimed
at openness and interoperability.

One vendor that is not likely to be in the mix, for
MediaOne or any other MSOs seeking open set-tops made by large consumer-electronics
companies, is Sony Corp. At a briefing at its headquarters here, spokesman Daniel Lintz
declined to allow Sony's executives to discuss any cable-related products, U.S. or
international, because, "We don't have any products."

Lintz also refused to discuss Sony's arrangement to
take a 5 percent stake in GI -- which was announced 10 months ago -- because,
"It's still under negotiation."

Pioneer's plan, Nicholas said, is to move to
fast-track development of a set-top based on the arrangement.

"By next summer, we should be ready for field
tests," Nicholas said. "We felt that in order to have a shot at the market, we
had to be able to deploy a system before the end of next year, with volume shipments
before the end of 2000."

Although the group is sharply focused on the U.S. market,
the first deployments will likely be in Europe, he added.

Takahashi said the decision also stemmed from some
difficulties that Pioneer is experiencing as a licensee of S-A. Given that the two
companies are competitors, cooperation works fine on an engineering level, but not so well
at a business and strategic level, he added.

The new Pioneer box, as yet unnamed, will be "100
percent Pegasus-compatible," Takahashi said, referring to the set-tops that it is
making for Time Warner Cable as an S-A licensee.

In the United States, GI and S-A have a lock on the way
that digital signals are secured against theft or unauthorized use by cable subscribers,
due to a 1995 arrangement now referred to as "the harmony agreement."

In it, GI and S-A agreed to license critical encryption and
access elements to each other, and to a shortlist of other licensees, including Pioneer
and Toshiba Corp.

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