Communications Satellite Corp. and United Satellite Communications Inc., rivals in a multimillion-dollar race to launch direct satellite-to-home television broadcasting service, have held preliminary talks about a merger, industry sources said today.
Sources close to both companies said the meetings, which began several months ago, involve top officials of Comsat's Satellite Television Corp., and United Satellite, the new company started by General Instrument Corp., Prudential Insurance Company of America and other investors.
Representatives of both companies refused comment. An industry source close to the two companies said representatives of STC had initiated the talks.
At stake is entry into the uncertain market for pay TV service delivered directly from space to small roof-top antennas. The two companies want to serve primarily urban and rural communities that do not have cable television service.
The technological and regulatory fight for first entry into the direct broadcast satellite (DBS) market picked up steam after United Satellite announced in February that it had obtained financing from Prudential to challenge STC's DBS plans quickly.
Comsat's STC unit has conducted a long regulatory fight to win approval for the first DBS service. Until United jumped into the business, STC had expected to begin so-called "high power" DBS service around 1986. STC originally planned to launch three satellites as part of a more than $600 million project.
But Comsat was forced to change its plans after United said it was preparing to introduce a new, less costly "low power" DBS service as soon as this fall. Comsat switched gears and two months ago announced that it would offer DBS service to the northeastern United States as soon as next year, utilizing a less powerful satellite operated by Satellite Business Systems.
Another player is a joint venture between Inter-American Satellite Television and newpaper publisher Rupert Murdoch's News America company. It plans to start its satellite pay TV service by the end of the year.