THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, October 30, 1996 TAG: 9610300472
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: THE NEW YORK TIMES
LENGTH: 55 lines
If Tele-Communications Inc. is still determined to be a full-fledged player in the high-powered satellite television business, it may no longer have a choice but to strike a deal with Rupert Murdoch and MCI.
The federal government Tuesday reaffirmed a decision that bars Tele-Communications from transmitting a direct-broadcast satellite (DBS) service to American homes from a Canadian-owned satellite.
The Federal Communications Commission originally rejected the request by TCI, the giant cable company, on July 15, on the grounds that Canada had not authorized U.S. companies to use the satellite. TCI and its partner, Telquest Ventures, appealed the ruling.
Now, with this final ruling, the FCC has closed the last obvious avenue for Tele-Communications to upgrade its medium-powered satellite service, Prime Star, without the help of Murdoch's News Corp. and MCI Communications Corp. These companies jointly control the only available U.S. orbital slot for a high-powered satellite service.
News Corp. and MCI plan to start a direct-broadcast satellite service - called American Sky Broadcasting, or A Sky B. But they must wait at least a year to take delivery of four high-powered satellites, which will transmit the service. TCI, on the other hand, already owns a satellite but lacks an orbital slot in which to put it.
``It just happens to be the only uncommitted DBS satellite on the earth,'' said Robert Thomson, TCI's senior vice president for policy planning, ``We suspect it will be a marketable asset.''
While TCI may now have fresh motivation for coming back to the table, several analysts said that the negotiations could receive a jolt of momentum from the other side as well.
That is because MCI is increasingly concerned about the cost of A Sky B, executives familiar with MCI's thinking said; analysts estimate those costs at between $1.5 billion and $2 billion. MCI chairman Bert Roberts indicated on Monday that the company would be willing to cut its equity stake in A Sky B to attract a new partner.
TCI Thomson said, was proceeding with a plan to start a nationwide high-powered DBS service by moving Prime Star from its current medium-powered satellite to a new orbital slot, which will enable the company to offer 30 to 40 more channels. But the new Prime Star would still not have as much channel capacity as the competing DirecTV and A Sky B services.
Thomson said TCI was experimenting with a new digital compression technology that, if successful, would allow it to match the 150 channels offered by DirecTV.
Few analysts question the ability of Tele-Communications to devise a creative solution. But Rick Westerman, an analyst at UBS Securities, noted that Prime Star faces daunting competition from the regular cable industry. Cable operators are installing digital set-top boxes, which will greatly expand the number of channels a terrestrial cable network can carry.
KEYWORDS: CABLE TELEVISION by CNB