UIH Plans Headend in Sky for Europe

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London -- The European division of global cable operator
United International Holdings Inc. is about to unveil an extensive strategy to launch a
digital-programming-distribution project in Europe styled after Tele-Communications
Inc.'s Headend in the Sky venture in the United States.

Mark Schneider, president and CEO of UIH's United
Pan-Europe Communication (UPC), based here, confirmed that UPC is finalizing plans to
launch a "digital center to distribute programming and Internet product to digital
set-tops," with the service to be uplinked from the Amsterdam area. Schneider said
final negotiations with equipment vendors and programmers are under way, which will likely
result in a formal announcement of the project shortly.

"We did an RFP [request for proposals] in January, and
we're pretty much done with the process of selecting the equipment vendors and the
location, and even the boxes that we want to use," Schneider said. "We're
focusing on finishing that process by July. As long as our orders are in by July, we
figure that we can launch within a year."

Tony White, vice president and managing director of General
Instrument (Europe) Ltd. in Reading, England, which is one of the companies in the
running, called the UPC effort "a project of extreme importance" to the European
industry.

"In terms of the uplink facility, it's one of the
bigger projects that we've bid on recently," he said. "In terms of the
other end -- the set-tops -- it is a very, very significant award. It's up there with
the big ones for us."

As with HITS, the UPC project is designed to enable local
cable operators to add digital tiers while they work on upgrading their systems, and to
offer new channels much-needed distribution. UPC's systems reach 3.1 million homes in
13 European countries.

However, one European cable expert -- Marcel de Sutter,
secretary general of the Association of Private Cable Operators, a trade group based in
Brussels, Belgium -- doubted that the HITS formula could be successfully adapted to
Europe. He cited high European satellite-transponder costs and a greater need for locally
targeted programming as two significant hurdles that the UPC venture will face.

"I don't feel that it can succeed," de
Sutter said.

Schneider countered, "We know that people are going to
want to be on this platform because we can deliver a lot of subs to them. We have signed
some programming deals, and we're negotiating a lot of programming."

He said it's likely that an announcement from UPC
involving a programming partner will come first -- probably one with a leading player in
Scandinavia that will lend its programming to the UPC venture across three or four
countries.

"You'll see some announcements from us within the
next two to three weeks, maybe a month on the outside, on some different ventures -- not
so much technology as content partners and expertise partners," Schneider said.

Regarding equipment vendors, he declined to say which
companies were still in the running.

"There's a very hot-and-heavy set of negotiations
going on right now in price and who we use, so we're still a little ways from
finalizing it," he said.

"Our understanding is that some recommendations will
go before the UIH board on vendors -- probably a short list -- within the next few
weeks," White said. "The board will approve it, then final contract negotiations
will take place."

As envisioned, the UPC project will include existing
channels -- both local and pan-European networks -- as well as many new channels,
particularly in the pay-per-view realm.

"I'm thinking that there will be around eight
channels per language-group area, either done in joint ventures or by ourselves,"
Schneider said. "There will be any number of channels from other providers, like a
Turner [Broadcasting System Inc.], or you name it -- all of the other guys that are
producing channels that we want to have on the digital platform."

"Programming, obviously, is key, as always,"
White said. "You're only going to sell any kind of addressable package with the
right programming. I know that they're working very hard on that aspect."

Schneider said he envisioned an offering "somewhere in
the 30-channel neighborhood. Then, for the NVOD [near-video-on-demand] business, 50 to
70" channels.

While existing and new European networks will see the UPC
project as another way to gain additional carriage, European TV observers speculated that
UPC may also have some difficulty clearing the rights for its NVOD channels. Schneider
maintained that talks are on track, and he stressed that UPC's regional activity in
PPV for its cable systems across Europe has paved the way for the new set of PPV-rights
talks.

"We've been licensing pay-per-view [rights] in
Austria, Belgium, Norway, Israel and Holland, so we feel very confident that studios are
going to be happy to have us just expand that relationship, as long as we respect their
release dates in the different markets," he said. "We've been able to get
pay-per-view rights in most of our major markets, so far. It's a matter of using file
servers to target the dates when the releases are allowed."

Once the technology and programming deals fall into place,
Schneider said, the European digital project will begin to gear up later this year.

"The digital part of it, the channels, will be ready
by the end of this year or the first part of next year," he said. "The full
digital launch will hopefully be next June." But he added that if things move as
quickly as hoped, the full project could launch "more like in the first quarter of
next year."

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