MEXICO, U.S. REACH DTV PACT; L.A. STATIONS TO START DIGITAL BROADCASTS.

Byline: Dave McNary Daily News Staff Writer

Hollywood's digital revolution took a major step forward Friday as U.S. and Mexican authorities agreed to allow five Los Angeles TV stations to begin airing theater-quality broadcasts later this year.

The pact, signed by the Federal Communications Commission and Mexico's Secretariat of Communications and Transportation, clears the way for KABC (Channel 7), KNBC (Channel 4) and KTLA (Channel 5) to begin broadcasting digital signals in November along with 21 other stations in top 10 markets around the country.

The agreement by the Los Angeles stations was in the form of a memorandum of understanding. It includes channel allotments, procedures for notifying each government of plans to start DTV service and the provision that the DTV signals not interfere with Mexican broadcasts.

KCBS (Channel 2) and KTTV (Channel 11) are required by the FCC to start offering a digital feed by next May along with 14 other stations in major U.S. markets.

Digital TV's crystal-clear picture and sound will be available to those willing to splurge at least $5,000 on digital TV set. DTVs, as they are already called, have been popping up at trade shows and should begin coming into high-end retailers in September.

``In my view, 20 years from now, we'll all be watching digital TV,'' said Thomas Adams, president of Adams Media Research. ``I think we'll look back at analog as pretty quaint.''

Pete Camacho, home theater manager at Dave's Video, The Laser Place in Studio City, said many potential buyers are not being spooked by sticker shock, even though initial models may run as high as $20,000.

``Everyone who comes in here is interested in DTV,'' he said.

Mitsubishi, Pioneer, Phillips and Panasonic have indicated they will have DTV models in showrooms this fall.

``The difference in quality is so stunning,'' said Mark Elson, general manager at Dave's. ``It's like a window into a different reality.''

Initially, much of DTV simply will be the station's analog feed converted to a digital format, but there will be some direct digital transmission of major programs.

``I don't think `Friends' will drive the move to DTV, but wide-screen National Football League games will,'' Adams said.

Additionally, those with DTV sets - which will feature rectangular screens like those in movie theaters - will be able to use them for other digital programming such as satellite TV broadcasting and Hollywood's latest format, the burgeoning VideoDisc">digital videodisc.

``DTV sets are really good news for Hollywood, because movies are really the only format that's going to be widely available,'' Adams said.

The transition to a DTV nation will be complex. The federal government's timetable calls for the nation's 1,600 TV stations to begin airing digital signals on a new channel and stop using analog channels by 2006.

In 2002, the federal government is planning to auction off the airwaves used by analog channels for uses such as paging and Internet access. However, broadcasters don't have to give up the analog licenses in 2006 if fewer than 85 percent of households in a market have access to digital TV.

Further complicating the picture is the contention by cable TV companies that they don't have room for digital signals. That means DTV owners will need an antenna to get the DTV signal.

Over the short term, broadcasters will have to decide whether to install new towers to send DTV signals or add the equipment to existing towers. As time goes on, they will also have to decide whether to use their airwaves for a single signal of the highest quality possible, split it into several channels or use part of it for data services, e-mail and other services.

``We've set up the timetable, but we've made a conscious decision to let the market make all the decisions,'' said FCC spokesman David Fiske.

Friday's agreement ``represents a major step forward in the cooperative efforts of Mexico and the U.S. to bring the benefits of DTV to consumers quickly and clear the way for the imminent roll-out of DTV in the top 10 U.S. markets,'' FCC Chairman William Kennard said.

The pact was similar to recent agreements with Canada to allow 17 stations in New York City, Boston, Detroit and Chicago to begin airing digital signals that won't interfere with Canadian TV.

KABC is owned by The Walt Disney Co.; General Electric Co. owns KNBC; Tribune Co. is the owner of KTLA; News Corp. owns KTTV; and CBS Inc. owns KCBS.