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argue that cable will be a bottleneck without extending must-carry to digital signals, causing
many stations to disappear.
Cable commits to telephony. By year's end, 200,000 lines of cable telephone service are offered
via newly rebuilt, broadband HFC plants. Companies taking the plunge in at least one market
are Cablevision Systems Corp., Comcast Corporation, Cox Communications Inc., Jones
Communications Inc., MediaOne Group Inc., Rifkin & Associates, Tele-Communications, Inc.,
and Time Warner, Inc.
Cable modems are a hot commodity and consumer demand is high. In one day, CompUSA sells
its entire inventory of General Instrument modems used in Daniels Cablevision's San Diego
system. MediaOne Express subscribers in Massachusetts and New Hampshire buy cable
modems for $250 in Circuit City retail stores, as MediaOne is the first MSO to launch a retail
initiative with a national retailer. @Home announces an alliance with chain retailer, CompUSA,
to sell @Home branded pre-installation kits. Lack of modem certification delays widespread
retail sales of cable modems. Between 400,000 and 500,000 pre-DOCSIS standard cable
modems are installed by the end of 1998; approximately two percent of the homes passed.
EchoStar Communications ends a $5 billion breach-of-contract lawsuit by signing a new deal to
buy the satellite TV assets of News Corp. and MCI WorldCom Inc. for $1.25 billion of stock. (37
percent of EchoStar) The deal is announced following the dissolution of the PrimeStar/News
Corp. alliance that was created in June 1997, just after the first EchoStar/ASkyB alliance
dissolved. The second deal gives EchoStar chairman, Charlie Ergen, more control over the
company with 40 percent of the equity and 87 percent of the voting interest. EchoStar will
control over 50 of the 96 full-CONUS DBS frequencies available, as well as two high-power
satellites ready to launch and a new satellite uplink center in Gilbert, Arizona. It plans to launch
local broadcast network channels to half the country and provide high-definition television and
data services through a single, small dish.
DBS providers reportedly pass the 10 million-subscriber mark at the end of October and
mergers change the competitive landscape. DIRECTV strengthens its position as the largest
provider, when its parent company, Hughes Electronics Corp., buys USSB's two million
customers for $1.3 billion. Using a free dish offer, EchoStar grows by nearly two million
customers and promises to be stronger with the additional transponders from the News
Corp./MCI deal. The ailing PrimeStar has over 2.3 million customers and even C-Band has
100,000 more subscribers than in June 1994 when DBS debuted, though it dropped under two
million subscribers for the first time.
Digital Cable exceeds expectations, growing to at least 1.5 million households by year-end. The
average system offers an optional tier with 57 video channels and 24 audio channels. The
leader, TCI's Headend in the Sky, with over 1.2 million customers in TCI and non-TCI systems,
increases to 130 video channels and 43 audio services which it provides to 60 MSOs in 700
systems. Jones Intercable launches its first digital cable service, Impact TV in Pima County,
Arizona.