WINGING TOWARD DIGITALCable industry pushes digital at the Western show

In a move that dovetailed with this year's Western Cable show focus, Time Warner named Scientific-Atlanta the primary digital set-top box contractor for its Pegasus digital cable program.

The multiple systems operator will buy 550,000 of Scientific-Atlanta's Explorer digital set-top boxes, as well as 200,000 terminals from Pioneer and 250,000 from Toshiba. The price tag for Time Warner is about $450 million.

Time Warner will also tap PowerTV for its operating system and Eagle multimedia hardware technology, which will be incorporated into all the boxes. The MSO may offer General Instrument's DCT-1000 digital box in markets where it wants to launch digital services before officially rolling out its Pegasus program.

The announcement set the tone for the entire show, as the cable industry finally acknowledged the extent of the threat posed by direct broadcast satellite (DBS) services.

"Digital TV is the most urgent thing we can do," said John Malone, president and chief executive officer of Tele-Communications Inc. "It creates a good defensive posture against satellite services. It creates new growth business in the terrestrial cable video entertainment business and it offers a unique opportunity for Americans [without personal computers] to go into interactive services such as the Internet, e-mail and impulse shopping.

While Malone made a similar speech extolling the benefits of digital cable at the Western show four years ago, digital manufacturers this year proved they're ready to meet the challenge. While larger vendors such as Scientific-Atlanta, Pioneer, Toshiba and Zenith-which delivered its first digital set-top box to Americast last week-may have been in the spotlight, smaller digital cable manufacturers were feeling vindicated that the technology is finally having its day in the sun.

"Digital has been driven by the business model, not by the technology itself," said Alan Watson, vice president of business development for News Digital Systems, an end-to-end supplier of digital broadcasting equipment.

"They've got to respond to DBS," Watson said. "The obvious way is to put in more channels and more capacity with digital cable.