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Malone’s Net plan

TCI topper bullish on pricey online TV technology

ANAHEIM — John Malone, CEO of Tele-Communications Inc., the second-largest cable operator in the U.S., said he’s looking for outside investors to come up with the billions of dollars it will cost to equip cable homes with digital boxes that will allow viewers to start surfing the Internet through their TV sets.

“If we could get mass deployment of these boxes in three to four years, we’d hit Madison Avenue like a bombshell,” Malone said, speaking informally at a luncheon Q&A with Spencer Kaitz, president and general counsel of the California Cable TV Assn., during the Western Cable Show here.

Malone’s TCI has just begun distributing a relatively low-cost digital-programming service — the first of its kind — to cable operators under the umbrella name HITS (Headend in the Sky), which a few cable systems have begun transmitting to their subscribers.

But the prospect of new, more elaborate digital boxes caused Malone to refer to HITS as “a model-T Ford.” Malone said the main function of HITS is to provide more channels of pay-per-view movies and of multiplexes of HBO, Showtime, Encore’s Starz! and the other pay TV networks.

Although giving more programming choices to subscribers is a plus, Malone has become convinced that the new digital boxes will turn every TV viewer into a rabid consumer of merchandise like, to use his examples, books through Amazon.com, CDs through the Columbia Record Club, sell-through videos from Blockbuster and even hot pizzas from the local Domino’s — all done with the greatest of ease, through pointing and clicking the remote control.

Asked by reporters after the luncheon where the financing would come from to make these advanced digital boxes (at a cost of at least $300 apiece) available to the 67 million or so cable homes throughout the U.S., Malone said, “A communications company could put up one third, a computer company could put up another one third,” with the final third coming from the revenues generated by the pay TV channels and the pay-per-view movies.

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