Trade Show Hits DBS in Transition

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With cable seemingly on a roll, a divided direct-broadcast
satellite industry gathers this week for the SBCA '99 National Satellite Convention &
Exposition.

A shifting competitive landscape featuring just two major
DBS players, as well as their legislative feuding and new interactive services, figure to
be hot topics when some 5,000 industry members assemble at the Las Vegas Convention Center
for the Satellite Broadcasting & Communications Association's annual convention.

Industry backers deplore the infighting between EchoStar
Communications Corp. and DirecTV Inc. over local-into-local legislation and former
PrimeStar Inc. subscribers.

"With PrimeStar out of the picture, you'd think the
remaining players could present a unified front," Alpert & Associates president
Mickey Alpert said. "It's a tragedy because the name of the game is taking
subscribers away from cable."

At issue is EchoStar's opposition to legislation drafted by
DirecTV and the National Association of Broadcasters that scraps anti-discrimination
provisions, preventing broadcasters from extracting exorbitant retransmission-consent fees
from DBS providers.

At the same time, it preserves must-carry requirements that
would eat up EchoStar's greater channel capacity.

"[DirecTV] sold us down the river," one EchoStar
executive said.

The DirecTV-NAB draft has been presented to a House-Senate
conference committee charged with crafting a unified measure that both chambers could
adopt. Lawmakers hope that a new law will give DirecTV and EchoStar the ingredients to
compete head-to-head with cable operators.

DirecTV president Eddy Hartenstein will get his chance to
defend the agreement when he delivers Monday's opening keynote address.

EchoStar chairman Charles Ergen will likely respond Tuesday
morning during a keynote question-and-answer session. Ultimately, EchoStar may have to
swallow hard and accept the changes, Alpert said. "I think EchoStar would rather have
something than nothing," he added.

Jimmy Schaeffler, a DBS analyst with The Carmel Group,
expects EchoStar's and DirecTV's recent forays into interactive services -- and not their
internecine battles -- to dominate the convention.

EchoStar has a deal with Microsoft Corp.'s WebTV Networks
unit to fold the television-Internet service into its Dish Network satellite-TV receiver,
while America Online Inc. has a $1.5 billion deal to launch its interactive "AOL
TV" service via new DirecTV set-top boxes.

For DBS retailers, SBCA '99 will revolve around where
"they will fit in" with these new services, Schaeffler said.

"The question is going to be the level of subsidies
[on equipment] and who's going to be getting them," he added. "It's either going
to be given away or highly subsidized. But will retailers get a piece of that subsidy?
That hasn't been nailed down yet."

The future of the SBCA itself will come under the
microscope, as the trade group struggles to redefine its place in an industry dominated by
just two players.

Noting that the SBCA was not involved in DirecTV's talks
with the NAB, some wondered if the organization can still exert the same clout that it did
when there were nine separate DBS providers in the market.

Steve Blum, president of Tellus Venture Associates, a
Marina, Calif.-based consultancy, said the SBCA must move beyond the "delicate
balancing act" resulting from having "only two players left in the
industry."

"Three years from now, the SBCA won't play the same
role that it plays today," Blum said, "but it doesn't play the same role today
that it played three years ago. It's a changing marketplace. As you have new services and
products, you're going to need somebody out there acting as the voice of the specialty
retailer." MCN

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