An old Chinese adage advises, "A wise man changes his mind often, a fool, never." Late last year, when both GM Hughes' (NYSE: GMH; www.hughes.com) El Segundo, CA-based DirecTV (www.directv.com) and Germantown, MD-based Hughes Network System (HNS) (www.hns.com) announced they had entered into a new agreement with Digital Subscriber Line (DSL) provider, Telocity (www.telocity.com), most in the telecommunications industry did not appreciate the real significance of the announcement. And when GMH's PanAmSat reported February 6, 2001, that it has teamed with DSL-provider BellSouth to enable carriage of Internet services via PanAmSat's Net-36 satellite broadcast unit, most industry reports gave it no more than a few lines. Yet more important to this publication and audience, most in the Multiple Dwelling Unit (MDU) industry watched these two GMH pronouncements slip by almost unnoticed, and certainly few, if any, recognized how important a part of GMH's business model this old Chinese adage had become.

Yet there is more here than just the idea of a Direct Broadcast Satellite (DBS) company venturing out into the competitive environs of wires and telephone companies. Also worth noting is the idea that a huge military-like bureaucratic institution like GMH could be aggressive and trend-setting enough to achieve the bigger goal of providing signals to subscribers in whatever form it takes to attract and keep those customers. In fact, this is likely the first deal of its kind involving forays by a DBS provider into telephone company-like delivery of DBS-like content.

For MDU owners, managers and customers, there is now the prospect of a large and rich company that once tried quite hard to access some 50-60 million U.S. MDU inhabitants, now trying again. This time, however, using DSL, the longer term results suggest a much more vigorous assault and much greater success.

It may be safe to say that most in the DBS industry believe that business models have never quite appropriately favored a DBS system operator engaging mass deployments of satellite services to MDUs (also known as apartments, condominiums, dormitories, rest homes and other single buildings offering large numbers of occupants a place to live and work). The simple reason typically came down to two problems: 1) too many hands demanding a piece of the revenue pie, and 2) not enough revenues to make the infrastructure and other costs worthwhile.

Can a DirecTV (or an EchoStar?) investment in a DSL broadband provider like Telocity change all that? The short answer is "likely."

By moving into a new form of signal delivery, a company like DirecTV can now more readily access millions and millions of new broadband subscribers, without angering the millions of owners and managers and co-inhabitants who don't want to be forced to view deck-mounted satellite dishes. This is especially important these days, because the average size of dishes is expected to rise by several inches, when new DBS services require several satellites in order to deliver the full complement of broadband signals from various satellite locations.

Additionally, accessing DirecTV and/or EchoStar broadband content via DSL landlines may eliminate occasional signal reception worries involving rain fade and/or problems with inadequate look angles from the satellite to the respective dish/antenna. Moreover, with the support of deep-pocketed backers like GMH and BellSouth, purveyors of DSL to MDUs should find marketing more effective, especially if today's DBS-only providers are able to continue to deliver exclusive content, such as NCAA championship playoffs basketball, NFL Sunday Ticket football, and first-run movies.

Another possible advantage to those in the MDU universe may be an enhancement of bundled services, such as broadband and subscription TV, and possibly telephone access. Nonetheless, it is important to note that even the most robust roll-out of these Telocity-like services to a large percentage of MDUs nationwide is probably at least several or more years away.

A few more points here: First, expect many more "out of their space" agreements like this, where one signal provider like DirecTV ventures into another realm, in order to deliver its content to more potential subscribers. In that vein, we are here predicting, for the first time, that EchoStar will engage such a DSL-type relationship later in the year 2001. In fact, especially with failures such as the recent demise of the Verizon purchase of Northpoint, the deals for additional purchases of similar companies by similar buyers become more and more attractive. Second, once the satellite industry deploys two-way Ka-Band services into various spotbeamed regions nationwide, the bar to deliver quality broadband services to all subscribers nationwide-be they MDU or business or single family dwellings-will be that much higher, meaning today's DBS providers may well revisit the MDU game with the deployment of next generation Ka-Band satellite services. Third, remember that by utilizing existing phone lines that have been upgraded to include DSL capabilities, the Telocitys of the world may be able to penetrate MDUs (especially), much more cheaply than today's DBS providers can using satellites. And finally, it is possible that the enhanced competition may speed the timeframe by which existing exclusive and perpetual cable agreements become a thing of the past.

GMH once said it was once a satellite company and that it would remain just a satellite company. In the end, however, by practicing its Chinese quite a bit, GMH has become much more than just a satellite company. In fact, GMH has become a leader. For MDU owners, managers, and occupants, that vision will allow them, much more quickly and with better quantity and quality, to become much more than just viewers and owners of video-only services.