SKEPTICS ASIDE, SOME CABLE OPS START PUSH TOWARD HDTV ROLLOUT

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Widespread doubts about high-definition television in and
out of cable mask a growing recognition in some quarters that MSOs will be best served by
taking a leading role in bringing the new format to the public.

While even its staunchest proponents in cable recognize
that the onset of HDTV is fraught with difficult issues and potential dangers, they
believe that market opportunities, as well as competitive pressures, will drive them to
launch services in some places as early as the end of this year.

Among the MSOs leaning in this direction are Time Warner
Cable, Cox Communications Inc. and Cablevision Systems Corp.

'In our discussions with [cable] programmers, our
position has been that we might support an HDTV signal or two on our cable systems,'
said Alex Best, chief technical officer at Cox.

'We haven't made any commitments yet, but there
are good reasons to be moving in this direction,' Best added.

Competition, specifically from a direct-broadcast satellite
provider, is a key reason, Best said. Indeed, last week, DirecTv Inc. announced that it
would broadcast pay-per-view movies and events in HDTV this year.

Cox also wants to put pressure on broadcasters to do
likewise, rather than using their digital spectrum to deliver multiple channels in
standard-definition format.

And there is the obvious market pressure that will arise as
broadcasters make their moves into HDTV, starting as early as November in the top 10
markets.

'We have to move in tandem with the
broadcasters,' said Michael Luftman, vice president for public affairs at Time Warner
Cable. 'I can't say that it will be on day one in these early markets, but it
will be soon after.'

Beyond these defensive reasons, there is the strong
possibility that movies available in HDTV format from DVD (digital versatile disk) will
help to push penetration of HDTV sets. That should create a niche of high-end customers
who would be strong candidates for movies and sports delivered over HDTV feeds from cable
programmers.

Last week, Thomson Consumer Electronics Inc. said HDTV sets
could initially cost as much as $7,000. But, as Best noted, it's in the interests of
the manufacturers to aggressively price the sets once they're in the market, which
could lead to rapid price declines by next year.

Many cable programmers are anxious to tap into this market,
noted David Fritch, senior manager of marketing strategies for digital network systems at
NextLevel Systems Inc.

'When HBO [Home Box Office] made the announcement that
it intends to deliver HDTV signals, it shifted the whole argument from being a broadcaster
issue to being a cable issue,' Fritch said. 'There are a lot of programmers
stepping up to supply feeds.'

CABLEVISION'S PLANS

The combination of early adopters, DVD and cable HDTV feeds
makes for a potentially rich opportunity, in Cablevision's opinion.

'There are high-end users out there with pretty high
levels of pent-up demand for what HDTV can deliver,' said Wilt Hildenbrand, vice
president of engineering and technology at Cablevision.

While not downplaying all of the issues that stand in the
way of 'doing it right,' Cablevision believes that it has nothing to lose and
everything to gain through an aggressive HDTV posture.

'By the last quarter of this year, we plan to have
some type of services running on a closed-circuit basis, and we may even carry them out
into our cable systems,' Hildenbrand said.

By closed-circuit, Hildenbrand means that the company
intends to use its venues at Radio City Music Hall and Madison Square Garden to provide
on-site HDTV displays and as sources for signals to be delivered over the company's
fiber routes to its cable stores and other sales centers.

'The problem is that if everybody waits for somebody
to move first, nobody moves first,' he said.

Cablevision, with the closed-circuit and cable-delivery
strategies using its own programming sources, can make the first move, Hildenbrand said.

'HDTV doesn't have to go out over the air, and it
can be made available on an elective basis, so why not leverage the capacity that
we've built into our systems to take advantage of whatever opportunity is out
there?' Hildenbrand said.

Of course, as Best noted, not all cable systems are
equipped to deliver the 750 megahertz of capacity that Cox and Cablevision have built into
some of their systems.

'We have a lot of 550-MHz systems that are completely
filled with analog channels, which means that we'd have to take something off to
deliver HDTV,' Best said.

In fact, that painful reality provides DBS with an
opportunity to win the first round in the competition for HDTV early adopters, Best noted.

'But after 10 rounds, there will be a knockout, and
cable will be the one left standing,' he added.

This is the case because as HDTV moves into the mainstream
several years from now, cable will have the capacity, with network upgrades, to convert a
large share of its venue to the format, while maintaining a high channel count. In
contrast, Best said, DBS, with 32 transponders and the ability to deliver only one or two
HDTV signals per transponder, will see its channel capacity sapped dramatically over time.

GNARLY ISSUES

Just how much capacity HDTV will consume on cable systems
is one of the many gnarly technical issues that the industry faces as it deals with
manufacturers and broadcasters on several fronts. The capacity issue is tied to which of
the 17 Federal Communications Commission-endorsed formats cable operators choose to send
over their pipes: As many as four HDTV feeds might be possible per 6-MHz channel using the
lowest-end formats, versus only one feed at the highest end.

'We don't want to get involved in delivering a
bandwidth hog that expropriates our capacity if there's no perception of significant
value on the part of the consumer,' said Jerry Bennington, senior vice president of
Cable Television Laboratories Inc. 'But in the absence of real products and the
ability to test the differences, it's hard to make choices.'

Last summer, at the annual CableLabs meeting, executives
viewed three formats over two monitors supplied by Matsushita Electronics Corp. -- one a
$5,000-level set, the other a $50,000 prototype.

'You could definitely see a difference on the $50,000
display, but there wasn't a big difference between the low- and high-end formats on
the other monitor,' Best said, echoing opinions offered by other executives at the
viewing.

SECURITY ISSUES

Another major hurdle involves the need for copy protection
in the handoff of the HDTV signal from the set-top to the digital TV set, which is also a
major issue in the offering of HDTV over DVD systems.

Hollywood, concerned that the high-quality replication
possibilities of digital could lead to theft of 'in-the-clear' signals, wants
encrypted signals to stay encrypted all the way into the TV set, which means that
everybody must agree to a baseline security system for HDTV movies, however they are
delivered.

Cable interests participating in negotiations with the
consumer-electronics manufacturers reported that significant progress has been made on
this issue, with prospects good that there will be a solution announced in the near
future.

'There have been two leading proposals in these
discussions, and now, one is winning out,' said Bill Wall, chief scientist for
digital technology at Scientific-Atlanta Inc.

There is already agreement on the physical-layer
communications bus that will serve as the interface in connecting digital devices of all
descriptions at the TV set, Wall noted.

But for all of the progress and the imminence of HDTV, the
cable industry as a whole has not yet warmed to the concept the way that it has to other
new service opportunities, Bennington noted.

'MSOs are pursuing the technical and business issues
with a sense that they want to be in a position to support their customers to whatever
extent there is demand for HDTV, and to let the customers decide whether it's a
business,' Bennington said.

'We need to get the baseline technical issues
resolved, but there's not nearly the momentum in this area that there is in MCNS
[Multimedia Cable Network System, the cable-modem standard] and OpenCable [the advanced
set-top initiative],' he said.

Where cable's dealings with broadcasters are
concerned, the CableLabs HDTV task force, under the leadership of Cox CEO James Robbins,
has not yet followed up on its first round of meetings with broadcasters prior to the
Western Show, Bennington said. But the group was encouraged by the responses at the first
round of meetings, and it intends to 'regroup' on the subject shortly, he added.

Cable has a lot to offer to broadcasters, Bennington added,
given their interest in a premium payback on digital TV to complement whatever thin
ad-revenue streams they can find.

'We don't want to be regulated or blindly pushed
into a fixed solution in this process,' he said. 'We want to be adaptive.'

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