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Cablevision’s DBS Service Will Be HD-Heavy

Cablevision Systems Corp.’s much criticized start-up direct-broadcast
satellite service is aiming squarely at high-def junkies, loading up on HDTV
services, creating a slate of new, narrow-interest HD networks of its own and
possibly selling its dish through Sears, Roebuck & Co. stores.

Expected to be unveiled Oct. 1, the DBS service is designed as a direct
replacement for cable, DirecTV Inc. or EchoStar Communications Corp.’s Dish

The service aims at the high end of the TV market -- viewers who have
invested in high-definition TV sets, currently around 2 million homes but
growing quickly as TV prices drop to $1,000-$2,000. Cablevision’s Rainbow 1 DBS
service wants rights to every HD channel available, from Home Box Office to
start-up HDNet.

DirecTV currently carries four HD channels, while EchoStar offers five. HDTV
is such a bandwidth hog that the satellite companies will have a hard time
fitting many more into their lineups. But right now, there aren’t many more HD
channels available to carry.

The Rainbow DBS venture is the pet project of Cablevision chairman Charles
Dolan, who has enthusiastically spent months working out details. "I haven’t
seen Chuck engaged like this in years," one cable executive said.

The company projects 30,000 subscribers by year-end, 150,000 by the end of
2004, 500,000 in 2005 and 1 million in 2006. By comparison, DirecTV, the biggest
DBS service, has 10 million subscribers.

The venture’s working name is "Rainbow 1 DBS," and executives have also used
and trademarked the name "Rainbow Sat." But in June, a Cablevision unit
trademarked the brand "Voom" for satellite services and equipment, and two weeks
ago, the MSO grabbed the Internet domain

Whatever it’s called, Cablevision is having a difficult time locking up deals
with programmers.

As a top-10 multichannel distributor serving 3 million metro New York
customers, Dolan is an important customer to cable networks. But some are
exploiting his pressing need for networks for the DBS venture to squeeze better
carriage terms out of Dolan’s cable systems.

That may present a problem, since Cablevision has promised investors that it
will spin the DBS venture off as an independent company by December.

Cablevision declined to discuss its DBS plans, saying it expects to unveil
them within the next few weeks.

Dolan has been secretive, keeping many of his own executives in the dark
about programming and marketing details, but he has a timetable: Cablevision’s
DBS license from the Federal Communications Commission mandates that it light up
some sort of service by year-end.

At least initially, there will be no local broadcast signals available on the
Rainbow 1 service, so subscribers would have to rely on cable or over-the-air
reception to get local stations. But Cablevision’s satellite receiver will come
with a separate antenna.

The base package would cost subscribers $49.95 per month. They would get one
slate of 21 HD channels, the 'Rainbow exclusive' services. They would also get
another slate of conventional, standard-definition cable services like A&E
Network, MTV: Music Television or Lifetime Television.

Subscribers would then get to choose one of six premium packages. One is
dubbed "HD Marquee," envisioned as a lineup of core HD channels, such as HDNet,
Discovery HD Theater, ESPN HD and Bravo HD.

A second tier would be sports, a blend of high-definition services, like NBA
TV’s HD service, and smaller services, like ESPNews and Fox Sports Net

The remaining four packages would be movie channels: for example, all of
HBO’s various feeds, including its HD service, or a similar lineup from Showtime
Networks Inc., Starz Encore Group LLC or Cinemax.

Details of equipment deals -- such as retail pricing, subsidies and
commissions to retailers -- could not be learned. However, one industry
executive pointed out that the location of the Rainbow 1 satellite means the
signal will be weak on the West Coast, requiring subscribers to acquire much
bigger dishes.