<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION

                           Washington, DC  20549

                               ----------------

                                  FORM 10-Q

(Mark One)
     /X/      QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended June 30, 1998

                                       OR

     / /      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the transition period from ___ to ___
                            Commission file number 0-27492

                  UNITED STATES SATELLITE BROADCASTING COMPANY, INC.
                (Exact name of registrant as specified in its charter)

                 MINNESOTA                             41-1407863
      (State or other jurisdiction of       (IRS Employer Identification No.)
     incorporation or organization)

                    3415 UNIVERSITY AVENUE, ST. PAUL, MN  55114
                (Address of principal executive offices) (zip code)

                                   (612) 645-4500
                (Registrant's telephone number, including area code)

                                        N/A
Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                                    YES    X   NO
                                                         ------    ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
             Class                              Outstanding at August 5, 1998
             ------                             -----------------------------
     <S>                                        <C>
     Class A Common Stock, $.0001 par value:              23,874,450
     Common Stock, $.0001 par value:                      65,936,325

</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


<PAGE>

               UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND
                                     SUBSIDIARIES
               REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998


                                        INDEX


<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                       <C>
PART I.    FINANCIAL INFORMATION

     Item 1.   Financial Statements

               Consolidated Statements of Operations                       3

               Consolidated Balance Sheets                                 4

               Consolidated Statements of Cash Flows                       6

               Notes to Consolidated Interim Financial Statements          7

     Item 2.   Management's Discussion and Analysis                       12

PART II.       OTHER INFORMATION

     Item 1.   Legal Proceedings                                          20

     Item 2.   Use of Proceeds                                            22

     Item 6.   Exhibits and Reports on Form 8-K                           22
</TABLE>


                                          2
<PAGE>

                           PART I.  FINANCIAL INFORMATION

                           ITEM 1.  FINANCIAL STATEMENTS

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                     UNAUDITED




<TABLE>
<CAPTION>


                                                 For the Three Months               For the Six Months
                                                     Ended June 30                      Ended June 30
                                               -----------------------            -----------------------
                                                  1998           1997                1998           1997
                                               --------       --------            --------       --------
<S>                                            <C>            <C>                 <C>            <C>
REVENUES                                       $132,710       $114,236            $269,549       $213,467
COST OF SALES                                    78,742         73,223             163,398        138,153
                                               --------       --------            --------       --------
GROSS MARGIN                                     53,968         41,013             106,151         75,314

OPERATING EXPENSES:
  Selling and marketing                          27,413         18,334              54,643         41,764
  Manufacturer Incentive                          9,260         12,812              20,570         23,967
  General and administrative                     14,191         11,695              27,628         22,940
  Commissions to retailers                        3,822          3,858               7,078          7,655
  Engineering and operations                      3,140           (216)              6,451          3,499
  Depreciation and amortization                   3,643          5,137               7,415          9,720
                                               --------       --------            --------       --------
     Net operating loss                          (7,501)       (10,607)            (17,634)       (34,231)

OTHER (INCOME) EXPENSE:
  Interest income                                (1,043)        (1,373)             (2,039)        (2,542)
  Other                                           1,432             49               1,424             44
                                               --------       --------            --------       --------
     Net loss                                   $(7,890)       $(9,283)           $(17,019)      $(31,733)
                                               --------       --------            --------       --------
                                               --------       --------            --------       --------
     Net loss per share - basic and diluted      $(0.09)        $(0.10)             $(0.19)        $(0.35)
                                               --------       --------            --------       --------
                                               --------       --------            --------       --------

</TABLE>



The accompanying notes are an integral part of these consolidated financial 
statements.


                                          3
<PAGE>

         UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                        ASSETS
<TABLE>
<CAPTION>


                                                                    June 30,       Dec. 31,
                                                                      1998           1997
                                                                  ---------      ---------
                                                                  (unaudited)
<S>                                                               <C>            <C>
CURRENT ASSETS:
     Cash and cash equivalents                                    $  79,569      $  68,646
     Trade accounts receivable, net                                  36,528         44,992
     Prepaid expenses and other current assets                       10,458         11,832
                                                                  ---------      ---------
       Total current assets                                         126,555        125,470
                                                                  ---------      ---------

PROPERTY AND EQUIPMENT:
     Land                                                               351            351
     Buildings and improvements                                       5,106          5,075
     Equipment                                                      141,662        138,264
                                                                  ---------      ---------
                                                                    147,119        143,690
     Less - Accumulated depreciation                                (86,649)       (79,235)
                                                                  ---------      ---------
       Total property and equipment, net                             60,470         64,455
                                                                  ---------      ---------

OTHER ASSETS:
     Satellite deposits                                               7,300          8,380
     Long-term investments, consisting of U.S. Treasury
       securities and other                                           4,372          3,970
     Other                                                            3,732          4,035
                                                                  ---------      ---------
       Total other assets                                            15,404         16,385
                                                                  ---------      ---------
                                                                 $  202,429     $  206,310
                                                                  ---------      ---------
                                                                  ---------      ---------

</TABLE>


The accompanying notes are an integral part of these consolidated financial 
statements.


                                          4
<PAGE>


        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS (CONTINUED)
                  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                   LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)



<TABLE>
<CAPTION>


                                                                    June 30,      Dec. 31,
                                                                      1998          1997
                                                                  ----------    ----------
                                                                  (unaudited)
<S>                                                               <C>           <C>
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                           $  62,715      $  60,599
  Deferred revenue                                                   55,576         56,156
  Manufacturer Incentive obligation                                  21,066         17,023
                                                                  ----------    ----------
       Total current liabilities                                    139,357        133,778
                                                                  ----------    ----------
LONG TERM LIABILITIES
  Due to HBI                                                         10,000         10,000
  Manufacturer Incentive obligation                                  67,999         60,433
                                                                  ----------    ----------
       Total long term liabilities                                   77,999         70,433
                                                                  ----------    ----------

COMMITMENTS AND CONTINGENCIES (Note 3)

SHAREHOLDERS' EQUITY
  Preferred Stock, $.01 par value, 50 million shares
  authorized; none issued or outstanding                                  -              -
  Class A Common Stock -
       Participating, voting, $.0001 par value, 500 million
       shares authorized, 23,874,450 shares issued and
       outstanding at June 30, 1998 and 16,172,601 at
       December  31, 1997                                                 2              2
  Common Stock -
       Participating, voting, $.0001 par value, 100 million
       shares authorized, 65,936,325 shares issued and
       outstanding at June 30, 1998 and 73,638,174 at
       December 31, 1997                                                  7              7
  Additional paid-in capital                                        374,877        374,877
  Accumulated deficit                                              (389,796)      (372,777)
  Accumulated other comprehensive income (deficit)                      (17)           (10)
                                                                  ----------    ----------
       Total shareholders' equity (deficit)                         (14,927)         2,099
                                                                  ----------    ----------
                                                                 $  202,429     $  206,310
                                                                  ----------    ----------
                                                                  ----------    ----------

</TABLE>


The accompanying notes are an integral part of these consolidated financial 
statements.


                                          5
<PAGE>

         UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)

                                      UNAUDITED

<TABLE>
<CAPTION>


                                                                               For the Six
                                                                               Months Ended
                                                                                June 30
                                                                     --------------------------------
                                                                          1998                1997
                                                                      ----------          ----------
<S>                                                                   <C>                 <C>
OPERATING ACTIVITIES:
  Net Loss                                                            $  (17,019)         $  (31,733)
  Adjustments to reconcile net loss to net cash provided by
  operating activities -
     Depreciation and amortization                                         7,415               9,720
     Write-off of satellite deposits                                       1,430                 -
     Media credits utilized                                                    -                 (87)
     Change in operating items:
       Receivables and other current assets                                9,838                 136
       Accounts payable and accrued expenses                               2,116               9,350
       Deferred revenue                                                     (580)              5,120
       Manufacturer Incentive                                             11,609              22,144
       Other                                                                 293                (105)
                                                                      ----------          ----------
         Net cash provided by operating activities                        15,102              14,545
                                                                      ----------          ----------
INVESTING ACTIVITIES:
  Purchase of and deposits on equipment                                   (3,779)            (10,554)
  Proceeds from sale of long-term available-for-sale investment                -               3,000
  Purchase of investments                                                   (400)                -
                                                                      ----------          ----------
         Net cash used in investing activities                            (4,179)             (7,554)
                                                                      ----------          ----------
FINANCING ACTIVITIES:
  Repayments to affiliated companies, net                                      -                (145)
                                                                      ----------          ----------
         Net cash used in financing activities                                 -                (145)
                                                                      ----------          ----------
         Increase in cash and cash equivalents                            10,923               6,846

CASH AND CASH EQUIVALENTS, beginning of period                            68,646              86,518
                                                                      ----------          ----------
CASH AND CASH EQUIVALENTS, end of period                              $   79,569          $   93,364
                                                                      ----------          ----------
                                                                      ----------          ----------

SUPPLEMENTARY CASH FLOW INFORMATION:
  Cash paid during the period for -
     Interest                                                         $      -            $      -
     Income taxes                                                            -                   -
                                                                      ----------          ----------
                                                                      ----------          ----------

</TABLE>


The accompanying notes are an integral part of these consolidated financial 
statements.


                                          6
<PAGE>

         UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS


NOTE 1.   ORGANIZATION:

United States Satellite Broadcasting Company, Inc. and Subsidiaries ("USSB" or
the "Company") provide subscription television programming via a high-power
direct broadcast satellite ("DBS") to households throughout the continental
United States.  The Company broadcasts a high quality digital television signal
using the Digital Satellite System ("DSS-Registered Trademark-").  The Company's
programming is available to customers who have a DSS unit, which consists of an
18-inch satellite dish, a receiver/decoder and a remote control.  All of the
Company's gross revenues and identifiable assets relate to the Company's
activities in this industry.

Hubbard Broadcasting, Inc. ("HBI") beneficially owned 51.8% of the Company as of
June 30, 1998 and December 31, 1997, and had approximately 68.1% of the combined
voting power with respect to all matters submitted for the vote of all
shareholders at June 30, 1998.

NOTE 2.   BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been prepared
in accordance with Generally Accepted Accounting Principles for interim
financial statements and, therefore, do not include all information and
disclosures required by Generally Accepted Accounting Principles for complete
financial statements.  In the opinion of management, such statements reflect all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations, and cash
flows for the periods presented.  The results of operations for interim periods
presented are not necessarily indicative of the results which may be expected
for the entire fiscal year.  These statements should be read in conjunction with
the December 31, 1997 consolidated financial statements, the notes thereto, and
the Company's Report on Form 10-K.

NOTE 3.   COMMITMENTS AND CONTINGENCIES:

REGULATORY MATTERS

USSB II, Inc. (a wholly owned subsidiary of the Company) holds a license from
the Federal Communications Commission (the "FCC") to broadcast from five
transponders at 101DEG. west longitude (the "License").  The Company must
continue to maintain the License to operate its business.  The License expires
in June 2004 and is renewable at ten-year intervals.  Although the Company
expects to obtain such renewals in the ordinary course, there can be no
assurance that such renewals will be granted.

The construction and launch of broadcasting satellites and the operation of
satellite broadcasting systems are subject to substantial regulation by the FCC.
Under the License, the Company is subject to FCC review primarily for the
following: (i) standards regarding individual satellites (e.g., meeting minimum
financial, legal and technical standards); (ii) avoiding interference with other
satellites; and (iii) complying with rules the FCC has established specifically
for high-power DBS satellite licenses. In addition, uplink facilities are
separately licensed by the FCC.  The Company's National Broadcast Center and the
Auxiliary Broadcast Center have each received its FCC license. FCC rules are
subject to change in response to industry developments, new technology and
political considerations.


                                          7
<PAGE>

The FCC also granted the Company a Construction Permit and Launch Authority (the
"Permit"), held by USSB II, for satellites with three transponders at 110DEG. 
west longitude and eight transponders at 148DEG. west longitude.  The Permit
required the Company to comply with specified construction and launch schedules.
On June 24, 1998, the Company voluntarily returned to the FCC its authorization
for eight transponders at 148DEG. west longitude.  This action has no effect on
the status of the Company's Permit for the 110DEG. orbital location.  The FCC
has the authority to revoke the Permit for the 110DEG. orbital location if the
Company fails to comply with the FCC schedule for construction and launch.  In
connection with the original Permit, the Company entered into satellite
construction contracts with Lockheed Martin Astro Space Corp. ("Lockheed
Martin") for the construction of the two satellites (see below).  The Company
anticipates that it will terminate its 148DEG. Contract (as defined below) as a
result of returning its FCC authorization for eight transponders at 148DEG. 
west longitude.

While the Company has generally been successful to date with respect to
compliance with regulatory matters, there can be no assurance that the Company
will succeed in obtaining and maintaining all requisite regulatory approvals for
its operations.

LOCKHEED MARTIN ASTRO SPACE AGREEMENT

The Company originally entered into contracts with Lockheed Martin for the
construction of direct broadcast satellites at the 110DEG. orbital location
(the "110DEG. Contract") and at the 148DEG. orbital location (the "148DEG. 
Contract").

Under the 110DEG. Contract, as amended effective May 1, 1998, the Company is
required to pay $76.2 million for satellite construction, of which $7.3 million
has been paid through June 30, 1998. The contract also provides for payments for
ongoing operations services and in-orbit performance incentive payments during
the life of the satellite.  In addition, substantial costs would be incurred to
launch and insure the satellite.

While the 110DEG. Contract is cancelable in whole or in part at the option of
the Company, such cancellation would require forfeiture of any deposits and
progress payments made, plus additional penalties.  If satellite construction
proceeds as scheduled under the 110DEG. Contract, aggregate amounts due are as
follows:  $5.9 million through December 31, 1998 and $63.0 million in the year
ended December 31, 1999.

As a result of returning its FCC authorization at 148DEG. west longitude on
June 24, 1998, the Company recorded a non-cash charge of $1.4 million for the
quarter ended June 30, 1998, reflecting the write-off of deposits which it had
previously made.  The Company anticipates that it will terminate its 148DEG. 
Contract as a result of returning its FCC authorization for eight transponders
at 148DEG. west longitude.

ADVERTISING AND PROMOTIONS

The Company has entered into commitments to purchase or participate in joint
purchases of broadcast, print and other media for advertising and promotional
purposes.  At June 30, 1998, such commitments totaled $13.7 million due through
December 31, 1998, all of which are noncancelable.

INSURANCE

The Company maintains business interruption and in-orbit insurance coverages at
levels management considers necessary to address the normal risks of operating
via communications


                                          8
<PAGE>

satellite, including damage, destruction or failure of the satellite or its
transponders.  Additionally, the Company maintains general liability and
directors' and officers' insurance coverages.

SATELLITE

All of the Company's programming is carried on a single satellite, DBS-1, which
the Company co-owns with DIRECTV, Inc., a subsidiary of Hughes Electronics
Corporation.  As reported, a spacecraft control processor ("SCP") aboard the
DBS-1 satellite failed on July 4, 1998, and control of DBS-1 was automatically
switched to the spare SCP without interruption of service.  No agreement has
been reached with DIRECTV as to how USSB's services would be integrated into a
reduced offering of DSS signals if DBS-1 were to fail.  The Company will
continue to work with DIRECTV on a plan to maximize the consumer proposition of
the DSS system in such event.  In addition, there can be no assurance that, if a
replacement for DBS-1 were to be needed in the future, such a replacement would
be available when required or, if available, that it would be on terms
acceptable to the Company.

LITIGATION

In November 1996, Personalized Media Communications, L.L.C. ("PMC") initiated
legal proceedings against the Company and others before the United States
International Trade Commission ("ITC"), and in the United States District Court
for the Northern District of California.  The Company does not believe that PMC
is entitled to damages or any remedies from the Company, and management intends
to vigorously defend both actions.  See Part II, Item 1 of this Report on Form
10-Q for a description of this matter.

In June 1997, IPPV Enterprises, a Georgia partnership ("IPPV") initiated a legal
proceeding against the Company and others in the United States District Court
for the District of Delaware. The Company does not believe that IPPV is entitled
to damages or any remedies from the Company, and management intends to
vigorously defend the action.  See Part II, Item 1 of this Report on Form 10-Q
for a description of this matter.

The Company is also exposed to other litigation encountered in the normal course
of business.  In the opinion of management, the resolution of these other
litigation matters of which the Company is aware will not have a material
adverse effect on the Company's financial position, results of operations or
cash flows.

MANUFACTURER INCENTIVE PROGRAM

On August 26, 1996, the Company, together with DIRECTV, Inc. (the Company's DSS
partner), announced that it had entered into financial incentive arrangements
with certain manufacturers of DSS equipment to assist these manufacturers in
lowering the price of DSS units.  Such arrangements, which run for up to four
years depending on manufacturer, commit the Company to pay the manufacturers
over a five-year period from the date new DSS households are authorized to
receive programming.  The expense and liability for such future commitments are
established and recorded upon activation of the related DSS unit.  In the
quarter and six months ended June 30, 1998, the Company charged to expense $9.3
million and $20.6 million, respectively, representing the full amount of those
future obligations for the Manufacturer Incentive program for the sale of DSS
units to new households.  Cash paid in the quarter and six months ended June 30,
1998 totaled $5.0 million and $9.0 million, respectively, and future payment
obligations (all of which have been previously charged to expense) totaled $89.1
million at June 30, 1998.

While the amounts to be incurred in the future by the Company under these
arrangements cannot be precisely estimated, the Company expects that as the
level of retail DSS unit sales increase, the expense and cash flow related to
these arrangements will increase accordingly.


                                          9
<PAGE>

THIRD PARTY VENDOR

The Company's agreement with its third party customer service and billing
provider was modified during the second quarter to provide financial incentives
aimed at improving customer retention, expanding existing capabilities, and
enhancing the overall performance for each party. The Company has begun to incur
increased costs as a result of this modification.

NOTE 4.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings and loss per Share" (SFAS No. 128) effective December 31, 1997.  As a
result, all prior periods presented have been restated to conform to the
provisions of SFAS No. 128, which requires the presentation of basic and diluted
earnings and loss per share.  Basic loss per share is computed by dividing net
loss by the weighted average number of common shares outstanding during each
year.  Diluted loss per share is computed under the treasury stock method and is
calculated to include the dilutive effect of outstanding stock options.  A
reconciliation of these amounts is as follows (in thousands, except per share
data):

<TABLE>
<CAPTION>


                                                       For The Quarter            For the Six Months Ended
                                                       ---------------            ------------------------
                                                         Ended June 30                    June 30,
                                                         -------------                    --------
                                                        1998        1997             1998           1997
                                                      -------     -------         --------       ---------
<S>                                                  <C>         <C>              <C>            <C>
Net loss                                             $(7,890)    $(9,283)         $(17,019)      $(31,733)
Weighted average number of common shares
     outstanding - basic                              89,811      89,811            89,811         89,811
Dilutive effect of option plans                           --          --                --             --
                                                      -------     -------         --------       ---------
Common and common equivalent shares outstanding
     - diluted                                        89,811      89,811            89,811         89,811
                                                      -------     -------         --------       ---------
Net loss per share - basic and diluted                 $(.09)      $(.10)            $(.19)         $(.35)
                                                      -------     -------         --------       ---------
                                                      -------     -------         --------       ---------

</TABLE>


In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133).  SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative financial instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value.  SFAS No. 133 requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met.  Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. The Company will be
required to adopt SFAS No. 133 no later than January 1, 2000.

The Company has not entered into any derivative financial instruments as of June
30, 1998.  As a result, adoption of SFAS No. 133 would currently have no impact
on the Company.  In the future, if the Company were to enter into derivative
financial instruments which are covered by SFAS No. 133, volatility in earnings
and other comprehensive income could be increased.


                                          10
<PAGE>

NOTE 5.   CHANGE IN FISCAL YEAR:

On September 4, 1997, the Board of Directors of the Company voted to change the
Company's fiscal year end from June 30 to December 31, beginning with a six
month transition period which ended on December 31, 1997.  The accompanying
financial statements have been recast to conform to the new calendar year
presentation.


                                          11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                              AND RESULTS OF OPERATIONS

Forward-looking statements in this Report on Form 10-Q (statements which are
phrased in terms of anticipation, expectation, belief or the like or which refer
to future events, developments or conditions) are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty and that the Company faces a number of risks as it continues to
develop its commercial operations.  There are certain important factors that
could cause results to differ materially from those anticipated by the
statements made herein. Several of these factors are discussed under the
headings "Overview" and "Risk Factors" in this Item 2.

OVERVIEW

The Company provides subscription television programming via a high-power direct
broadcast satellite ("DBS") to households throughout the continental United
States. The Company broadcasts a high quality digital television signal using
the Digital Satellite System ("DSS"). The Company's programming is available to
customers who have a DSS unit, which consists of an 18-inch satellite dish, a
receiver/decoder and a remote control.  At June 30, 1998, approximately 3.78
million households were authorized to receive DSS service ("DSS households"), up
from 3.59 million at March 31, 1998.  All of the Company's gross revenues and
operating assets relate to the Company's activities in this industry.

The Company commenced commercial operations in June 1994 and has not generated
net earnings to date.  The Company achieved positive adjusted cash flow of
approximately $400,000 and $1.4 million (defined as earnings before interest,
taxes, depreciation, amortization and the non-cash component of the Manufacturer
Incentive program) for the quarter and six months ended June 30, 1998.
Management does not expect to achieve positive adjusted cash flow for the full
year 1998.  Management also expects that net losses will continue into 1999 as
the Company continues to incur substantial marketing expenses (including
Manufacturer Incentive program expenses) in order to build its subscriber base.
However, management anticipates that the Company will achieve positive adjusted
cash flow for the full year 1999 and will generate net income during the year
2000.  Reaching these expectations will depend, in part, on subscriber growth
and retention at levels greater than the Company experienced in the second
quarter.

As part of its ongoing strategy to focus on premium movie entertainment and 
to simplify the DSS offering at retail, the Company and DIRECTV integrated 
the basic channels carried by USSB into DIRECTV's programming line-up and the 
Company added two new commercial-free premium movie channels during the first 
quarter of 1998.  The ultimate impact of these developments depends on many 
factors, including consumer reaction to the Company's all-premium movie 
channel line-up. Management believes that the Company's customer base 
continued to adjust to the programming changes during the second quarter, and 
anticipates that the Company may continue to experience the effects of these 
programming changes at least through the third quarter.

SUMMARY OF SUBSCRIBER AND REVENUE DATA

Management currently measures the Company's performance by two key measures:
subscriber base and revenues.


                                          12
<PAGE>

The number of USSB paying subscribers grew to approximately 1,842,000 at June
30, 1998 from approximately 1,799,000 at March 31, 1998.  Approximately 111,000
additional households were receiving a free promotional month of USSB
programming as of June 30, 1998.

In addition to tracking the absolute number of subscribers, management assesses
the Company's penetration of its potential DSS market by comparing the number of
USSB paying subscribers to the total number of households that have received the
free promotional month of USSB's programming ("convertible households").  Since
the first month is free, the consumer's decision to purchase USSB programming is
generally made by the consumer only after the free promotional month has been
received.  As a result, the category of DSS households includes households
receiving the free promotional month that have not yet made their subscription
decision.

The summary immediately below shows, as of the end of each period, USSB paying
subscribers, USSB promotional activations, USSB convertible households and the
percentage of convertible households served by the Company.  The estimated
number of DSS households is also shown.

<TABLE>
<CAPTION>

SUBSCRIBER BASE:
(In thousands)


                                                        Total USSB
                                                          Paying                              Percent of
                                                        Subscribers                              USSB
For the           USSB                  USSB                and               USSB            Convertible         Estimated
Quarter          Paying             Promotional         Promotional        Convertible        Households            DSS
 Ended        Subscribers (a)      Activations (b)      Activations       Households (c)      Served (d)        Households (e)
--------      ---------------      ---------------      -----------       --------------      -----------       --------------
<S>           <C>                  <C>                  <C>               <C>                 <C>               <C>
June 30,
 1997            1,455                  75               1,530              2,289                64%        ||     2,651
Sept. 30,                                                                                                   ||
 1997            1,584                 113               1,697              2,462                64%        ||     2,887
Dec. 31,                                                                                                    ||
 1997            1,740                 215               1,955              2,757                63%        ||     3,318
March 31,                                                                                                   ||
 1998            1,799                 106               1,905              3,128                58%        ||     3,595
June 30,                                                                                                    ||
 1998            1,842                 111               1,953              3,312                56%        ||     3,784

</TABLE>


(a)  USSB paying subscribers as of the end of such period.

(b)  USSB household activations that were receiving a free promotional month of
     USSB programming as of the end of such period. These activations are not
     counted as USSB Convertible Households until they have completed the free
     promotional month.

(c)  Total number of USSB household activations since July 1994 that have
     completed a free promotional month of USSB programming.  The amounts shown
     reflect the elimination of certain DSS deactivations.  See note (e).

(d)  Total USSB Paying Subscribers as of the end of the period as a percent of
     USSB Convertible Households.

(e)  Total estimated number of households with active DSS units which are
     authorized to receive either USSB or DIRECTV programming as of the end of
     the period.  Estimate based on cumulative DSS activations, less (i)
     cumulative DSS deactivations, (ii) activations by dealers, manufacturing
     facilities, technical facilities and commercial locations known to the
     Company, and (iii) additional receivers in a single household, as of the
     end of such period.  The Company makes periodic reconciliations to estimate
     the number of DSS households as accurately as possible.

As of June 30, 1998, the Company achieved a penetration of convertible
households of approximately 56 percent.  The reduction in the penetration
percentage compared to previous quarters was impacted by the integration of the
basic channels described above, including the loss


                                          13
<PAGE>

of 72,000 USSB customers in the prior quarter who subscribed only to the basic
channels.  For the current quarter, the Company's subscriber base increased by
43,000 subscribers.

The Company's per subscriber and total revenues are shown below for the periods
indicated.  From time to time, the Company engages in certain promotional
activities, which include special rates for limited periods, which could result
in lower average per subscriber revenues for such periods.  In the quarter ended
June 30, 1998, per subscriber revenues were also affected by a full quarter's
impact of the reduction in subscription rates implemented by the Company on
March 10, 1998 for certain programming packages, as part of the basic channels
integration.  The Company expects that average per subscriber revenue will
continue to decline during 1998.

<TABLE>
<CAPTION>

REVENUES:
(In thousands, except per subscriber data)


                                                                    FOR THE QUARTER ENDED                              
                                           JUNE 30           MARCH 31             DEC. 31            SEPT. 30           JUNE 30
                                             1998              1998                 1997               1997              1997
                                          --------           --------             --------           --------           --------
<S>                                       <C>                <C>                  <C>                <C>                <C>
Average monthly subscription revenue
  per paying subscriber (a)                $23.60             $24.22               $24.66             $24.71             $24.86

Programming revenues (b)                  $132,710           $136,839             $128,769           $114,383           $114,236

</TABLE>

-------------------
(a)  Excludes pay-per-view event, commercial and TV GUIDE-TM- revenues.
(b)  Includes pay-per-view event, commercial and TV GUIDE revenues.

RESULTS OF OPERATIONS

REVENUE OVERVIEW.  The Company's total revenues increased to $132.7 million and
$269.5 million for the quarter and six months ended June 30, 1998, compared to
$114.2 million and $213.5 million for the comparable prior year periods.  The
revenue increase was primarily attributable to a larger subscriber base, offset
by generally reduced subscription prices which were implemented March 10, 1998
in conjunction with the integration of the basic channels.

REVENUES.  The Company derives its revenues principally from monthly fees from
subscribers for television programming.  Revenues are primarily a function of
the number of subscribers, the mix of programming packages selected by
subscribers and the rates charged.  The increase in revenues for both periods
were primarily attributable to the increase in the number of paying subscribers
to approximately 1,842,000 at June 30, 1998, from approximately 1,455,000 at
June 30, 1997, offset by the reduction in certain per subscriber rates, as
described above.

Pay-per-view revenues, which vary with the number and type of events provided on
a pay-per-view basis in any fiscal period, are included in the Company's total
revenue.  The revenues from such events are highly dependent on the type and
number of pay-per-view events offered, and are expected to vary accordingly.
Revenue for the quarter and six months ended June 30, 1997 included $8.3 million
attributable to the Holyfield vs. Tyson boxing event, which was held on June 28,
1997.  There were no similar events held in the comparable periods in 1998.

COST OF SALES AND GROSS MARGIN.  Cost of sales consists of payments to
programmers.  Programming costs also include the purchase of rights to broadcast
event programming on a pay-per-view basis.  The cost of programming increased to
$78.7 million for the quarter and $163.4 million for the six months ended June
30, 1998, compared to $73.2 million and $138.2 million for the comparable prior
year periods.  The increase in cost of programming was primarily the result of
an increased number of subscribers from the comparable prior year period.  The
cost of programming for the quarter and six months ended June 30, 1997 included
the cost of the Holyfield vs. Tyson event noted above.   The Company's gross
margin percentage increased to


                                          14
<PAGE>

40.7% for the quarter and 39.4% for the six months ended June 30, 1998, compared
to 35.9% and 35.3% for the comparable prior year periods.  The increase reflects
the fact that the Company's current programming offerings of premium channels
carry higher margins than the basic channels, as well as the achievement of
certain volume-based discounts in programming costs in 1998.  Generally, gross
margin percentage will vary based on the mix of programming packages taken by
subscribers, the pay-per-view events, and the extent to which volume-based
discounts from the Company's programming providers are realized.

OPERATING EXPENSE OVERVIEW.  Total operating expenses increased to $61.5 million
and $123.8 million for the quarter and six months ended June 30, 1998, compared
to $51.6 and $109.5 million for the comparable prior year periods.  The increase
was primarily attributable to the cost of providing the Company's services to a
growing subscriber base, including increased marketing, customer service and
general and administration expenses.

SELLING AND MARKETING.  Selling and marketing costs include promotional and
advertising costs, the costs of direct marketing and customer service and
amounts expended pursuant to joint marketing efforts with other DSS broadcasting
system participants. The Company's overall selling and marketing efforts also
include the Manufacturer Incentive program, which is discussed below. Excluding
Manufacturer Incentive program expenses, selling and marketing expenses were
$27.4 million and $54.6 million for the quarter and six months ended June 30,
1998, compared to $18.3 million and $41.8 million for the comparable prior year
periods.  Expenses associated with the Company's customer service, telemarketing
and direct mail marketing programs, which are directed at purchasers of DSS
units who activate with the Company, have increased as the number of such DSS
activations has increased.  In addition, the Company has incurred increased
costs under recently modified arrangements with its third-party customer service
provider.

MANUFACTURER INCENTIVE PROGRAM.  Manufacturer Incentive program expense relates
to financial incentive arrangements with certain manufacturers of DSS equipment.
These arrangements have had the effect of contributing to certain DSS
manufacturers lowering the price of DSS units.  Such arrangements commit the
Company to pay the manufacturers over a five-year period from the date new DSS
households are authorized to receive programming.  The expense and liability for
such future commitments are established and recorded upon activation of the
related DSS unit.  Manufacturer Incentive program expenses totaled $9.3 million
and $20.6 million for the quarter and six months ended June 30, 1998, compared
to $12.8 million and $24.0 million in the comparable prior year periods.  The
decrease in Manufacturer Incentive program expense for both periods primarily
results from lower rates with one manufacturer and a temporary reduction of
costs with another manufacturer in accordance with the arrangement with such
manufacturer.  The Company expects the total expense under the Manufacturer
Incentive program to continue to be a significant component of the Company's
operating expenses and cash flows.

GENERAL AND ADMINISTRATIVE.  General and administrative costs include in-orbit
and general insurance costs, billing and remittance processing, staff functions
such as finance and information services, and administrative services provided
by HBI.  General and administrative expenses increased to $14.2 million and
$27.6 million for the quarter and six months ended June 30, 1998, compared to
$11.7 million and $22.9 million for the comparable prior year periods.  The
increase was primarily attributable to increased billing and remittance
processing costs, resulting from the growth of the Company's subscriber base.
In addition, the Company has incurred increased costs for certain  billing
services under recently modified arrangements with its third-party billing
services provider.  Although total general and administrative costs have
increased between the periods, elements of general and administrative expense
have declined as a percent of revenues as certain of the expenses are fixed.

COMMISSIONS TO RETAILERS.  Commissions to retailers consist of amounts paid by
the Company to eligible DSS retailers whose customers become paying subscribers,
and are intended to encourage


                                          15
<PAGE>

retailers to promote the sale of DSS units and subscriptions to USSB
programming.  These expenses generally run for three years at decreasing rates
for each subscriber year.  As a result, commissions to retailers were $3.8
million and $7.1 million for the quarter and six months ended June 30, 1998,
compared to $3.9 million and $7.7 million for the comparable prior year periods.

ENGINEERING AND OPERATIONS.  Engineering and operations expenses include the
operation of the National Broadcast Center and the Auxiliary Broadcast Center,
fees charged in connection with the operation of the conditional access system
(determined by subscriber levels) and satellite telemetry, tracking and control
expenses.  Engineering and operations expenses were $3.1 million and $6.5
million for the quarter and six months ended June 30, 1998, compared to
($216,000) and $3.5 million for the comparable prior year periods.  The second
quarter 1997 amount included a $2.6 million positive adjustment to the
previously recorded expense of a security card changeout program, which was
completed at a cost less than previously estimated.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses relate
mainly to the Company's five-sixteenths ownership of DBS-1 and transmission
equipment located both at the Company's National Broadcast Center and its
Auxiliary Broadcast Center.  Depreciation and amortization were $3.6 million and
$7.4 million for the quarter and six months ended June 30, 1998, compared to
$5.1 million and $9.7 million for the comparable prior year periods.  Since the
Company depreciates DBS-1 on an accelerated basis, its depreciation expense will
decline over time.

NET LOSS.  The Company recorded a net loss of $7.9 million for the quarter and
$17.0 million for the six months ended June 30, 1998, compared to $9.3 million
and $31.7 million for the comparable prior year periods.  Included in the net
loss for the quarter and six months ended June 30, 1998 is a non-cash charge of
$1.4 million reflecting the write-off of satellite construction deposits which
it had previously made in connection with its 148DEG. orbital location.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES.  Cash and cash equivalents increased to $79.6
million at June 30, 1998 from $68.6 million at December 31, 1997.  The Company's
cash flow from operations is primarily impacted by the net loss, depreciation
and amortization, and the non-cash component of the Manufacturer Incentive
program.  In addition, cash and cash equivalents may fluctuate based upon
subscriber growth and the timing of annual subscription renewals.  The Company
utilizes this cash flow to further develop its business, including marketing
initiatives and capital expenditures.

The increase in cash at June 30, 1998 from December 31, 1997 primarily reflects
the operating results of the Company, including the increase in the non-cash
portion of the Manufacturer Incentive program, and the receipt of prepaid annual
subscription renewals.  Management believes that the Company's current cash
position and cash generated from operations is adequate to meet anticipated
operating expenses through 1998.  Management further believes that its cash
balances will not be less than $35-40 million during the next twelve months,
assuming that cash reserves are not utilized for any major capital expenditures.

The Company may require external financing for future major capital
expenditures, such as the construction of a new satellite, DBS-4, or a
replacement satellite for DBS-1, at the 101DEG. west longitude orbital
location.  The Company believes that such financing is available from a number
of sources and is evaluating options which would provide additional flexibility
in satisfying the Company's future financing needs, if any.

The Company continues to seek to develop a business plan to include the proper
set of strategic and financial partners for a separate business at the 110DEG. 
west longitude location.  The Company


                                          16
<PAGE>

expects that it will need to determine whether to proceed with any such
opportunity prior to the end of 1998 in order to satisfy the requirements of the
FCC.

WORKING CAPITAL.  Working capital at June 30, 1998 was a negative $12.8 million,
compared to a negative working capital of $8.3 million at December 31, 1997.
This change resulted primarily from the Company's net loss and the increase in
the current portion of the Manufacturer Incentive program obligation.
Management expects that working capital will remain negative through 1998 as the
Manufacturer Incentive program obligation increases with the growth of DSS
households.

LITIGATION.  Personalized Media Communications, L.L.C. ("PMC") has commenced two
legal proceedings against Hughes Network Systems, Thomson Consumer Electronics
and other DSS manufacturers, DIRECTV, Inc., and the Company.  The ultimate
outcome of these matters and the resulting effect on the liquidity and financial
position of the Company cannot be determined with certainty.

IPPV Enterprises, a Georgia partnership, has commenced a legal proceeding
against Thomson Consumer Electronics, Hughes Network Systems, other DSS
manufacturers, DIRECTV, Inc., and the Company.  The ultimate outcome of this
matter and the resulting effect on the liquidity and financial position of the
Company cannot be determined with certainty.

Part II, Item 1 of this Report on Form 10-Q contains additional information on
these matters.

CAPITAL EXPENDITURES.  Capital expenditures for the quarter and six months ended
June 30, 1998 totaled $2.1 million and $3.8 million, respectively, consisting
primarily of satellite deposits and purchased computer hardware and software.
The Company is required to make progress payments under its contract with
Lockheed Martin for satellite construction at the 110DEG. west longitude
orbital location.  If DBS-4 is built and put into operation at 101DEG. west
longitude, or if a replacement satellite for DBS-1 is required, the Company will
also incur additional capital expenditures.  Note 3 to the condensed
consolidated financial statements contains additional information on this
matter.

NET OPERATING LOSS CARRY FORWARD.  At June 30, 1998, the Company's net operating
loss carry forward was $313.8 million for federal tax purposes and $389.8
million for financial reporting purposes.  The difference in loss carry forward
primarily represents differing amounts of depreciation and Manufacturer
Incentive program expense reported by the Company for tax and financial
reporting purposes.  Such carryforwards expire in the years 2000 through 2013.

YEAR 2000

The Company has analyzed the Year 2000 compliance issues related to its computer
systems.  To be Year 2000 compliant, computer systems that have time sensitive
software must recognize a date using "00" as the year 2000 rather than the year
1900.  Certain systems have been determined to be Year 2000 compliant.  The
Company is executing an implementation plan whereby all systems critical to
managing the business will be made Year 2000 compliant, and is working with its
customer service and billing vendor to assure that the vendor's systems will be
Year 2000 compliant.  The Company does not expect the cost to be incurred
relating to Year 2000 issues to have a material effect on its results of
operations.


                                          17
<PAGE>

SEASONALITY

Sales of DSS units have been subject to seasonal sales patterns experienced by
the consumer electronics industry.  As the Company's subscriber base has
increased, it does not appear that seasonality has had a material effect on the
Company's revenues to date, although seasonality may affect the rate of
subscriber growth and the levels of prepaid subscriptions in any given quarter.

RISK FACTORS

There are certain important factors that could cause results to differ
materially from those anticipated by the statements made in this Report on Form
10-Q.  Such factors include the uncertain level of ultimate demand for the DSS
system and USSB's programming, the effects of changes in USSB's and DIRECTV's
programming offerings, including consumer reaction to USSB's revised channel
line-up, and USSB's continuing ability to offer competitive programming.

In addition, competitive issues, including changes by other DBS competitors to
their product offerings and pricing strategies, and the effect of digital cable
programming and digital broadcast television service, which may be used for
multichannel programming or high definition television (HDTV), and the entry of
new competitors into video programming, such as electric utilities and regional
operating telephone companies could adversely affect the Company.  The Company
anticipates that other DBS satellites will be launched at the 110DEG. west
longitude and other orbital locations, increasing the number of competitors in
the satellite broadcasting market.

All of the Company's programming is carried on a single satellite, DBS-1, which
the Company co-owns with DIRECTV, Inc., a subsidiary of Hughes Electronics
Corporation.  As reported, a spacecraft control processor ("SCP") aboard the
DBS-1 satellite failed on July 4, 1998, and control of DBS-1 was automatically
switched to the spare SCP without interruption of service.  If the spare SCP
were to fail, the Company could not provide programming services using DBS-1.
No agreement has been reached with DIRECTV as to how USSB's services would be
integrated into a reduced offering of DSS signals from other satellites at the
101DEG. orbital location if DBS-1 were to fail.  The Company has had
discussions with DIRECTV and will continue to work with DIRECTV on a plan to
maximize the consumer proposition of the DSS system in such event.  There can be
no assurance that such plan would carry every network or every channel of the
multichannel networks currently carried by the Company.  In addition, there can
be no assurance that, if a replacement for DBS-1 were to be needed in the
future, such a replacement would be available when required or, if available,
that it would be on terms acceptable to the Company.  The Company and DIRECTV
share many relationships, and a lack of continued cooperation between the two
companies may have an adverse impact.

The Company is also dependent on third-party programmers, and on vendors,
including those providing customer service and billing, and on the continued
effectiveness of the security and signal encryption features of the DSS system.
The Company is also subject to the effects of, and costs associated with,
litigation involving the technology and the intellectual property associated
with the DSS system.


                                          18
<PAGE>

Such factors as increases in costs, including programming costs, in excess of
those anticipated by the Company; sufficient availability of DSS units at
retail; potentially adverse governmental regulation and actions; and overall
economic conditions may also adversely affect the Company. The
Telecommunications Act of 1996 significantly deregulated the telecommunications
industry. The effect of such deregulation on the Company's business, results of
operations and financial condition cannot be predicted.   See Part I, Item 1,
"Business - Competition" of the Company's Report on Form 10-K for the Transition
Period ended December 31, 1997 for a further discussion of certain of these
risks.


                                          19
<PAGE>


                             PART II. OTHER INFORMATION

                             ITEM 1.  LEGAL PROCEEDINGS


The Company is exposed to litigation encountered in the normal course of
business.  In the opinion of management, the resolution of such litigation
matters of which the Company is aware will not have a material adverse effect on
the Company's financial position, results of operations or cash flows.  In
addition, the Company is a party to the following actions:



     IN THE MATTER OF CERTAIN DIGITAL SATELLITE SYSTEM (DSS) RECEIVERS AND
     COMPONENTS THEREOF, United States International Trade Commission,
     Investigation No. 337-TA-392; and PERSONALIZED MEDIA COMMUNICATIONS,
     L.L.C. V. THOMSON CONSUMER ELECTRONICS, ET AL., United States District
     Court, Northern District of California, Case No. C-96 20957.

In November 1996, Personalized Media Communications, L.L.C. ("PMC") initiated a
legal proceeding before the United States International Trade Commission ("ITC")
and a separate proceeding in the United States District Court for the Northern
District of California against digital satellite system developers,
manufacturers and programmers, including, among others, Hughes Network Systems,
Thomson Consumer Electronics and other DSS manufacturers, DIRECTV, Inc., and the
Company.

In the ITC action, PMC alleges that Hughes Network Systems, Thomson Consumer
Electronics and other DSS manufacturers have infringed, and that DIRECTV, Inc.
and the Company have contributed to and/or induced the infringement of, a patent
owned by PMC and requests the ITC to (i) bar the importing, marketing,
promoting, distributing, or sale of imported infringing DSS receivers in the
United States which are covered by PMC's patent and (ii) prohibit DIRECTV, Inc.
and the Company from broadcasting television programming to any imported
infringing DSS receiver.  A trial of the ITC proceeding before an administrative
law judge was conducted in July 1997, and an initial determination by the
administrative law judge was rendered in October 1997 ruling against PMC's
claims on all material issues.

On December 4, 1997, the ITC determined not to review the Administrative Law
Judge's determination.  On January 8, 1998, PMC filed a Petition to Review this
decision of the ITC in the Court of Appeals for the Federal Circuit.  The
Company was granted leave to intervene in this appeal and the appeal has been
set for oral argument on September 10, 1998.

In the second action, PMC filed a complaint in the United States District Court
for the Northern District of California alleging, among other things, that USSB
and DIRECTV directly infringe at least one claim of each of three patents.  PMC
also alleges that USSB and DIRECTV have contributed to and induced the
infringement of two of said patents by the other respondents.  PMC has alleged
that the Company's infringement of the said patents is willful. PMC has
requested an award of damages, that such damages be trebled, that the Company
and the other respondents be enjoined from further infringement of said patents,
and award of its attorneys' fees.

The Company denies that it has engaged in any acts of infringement, either
directly or indirectly as alleged in PMC's complaint.  Pursuant to a stipulated
motion to stay the action pending the resolution of the ITC investigation
described above, the district court entered an order to that effect.


                                          20
<PAGE>

     IPPV ENTERPRISES V. THOMSON CONSUMER ELECTRONICS, INC., HUGHES NETWORK
     SYSTEMS, SONY CORPORATION OF AMERICA, HITACHI HOME ELECTRONICS
     (AMERICA), INC., UNIDEN AMERICA CORPORATION, DIRECTV, INC., AND UNITED
     STATES SATELLITE BROADCASTING COMPANY, INC., UNITED STATES DISTRICT
     COURT, DISTRICT OF DELAWARE, CASE NO. 97-288.

In June 1997, IPPV Enterprises, a Georgia partnership ("IPPV"), initiated a
legal proceeding in the United States District Court for the District of
Delaware against digital satellite system developers, manufacturers, including,
among others, Hughes Network Systems, Thomson Consumer Electronics and other DSS
manufacturers, DIRECTV, Inc., and the Company.

IPPV alleges that the defendants, including DIRECTV, Inc. and the Company, have
infringed five IPPV patents relating to parental control, pay-per-view and other
features used in the DSS system.  IPPV has requested the court to award IPPV
damages, and to treble such damages. Four of the five IPPV patents in the suit
have expired and the fifth will expire in 2002.

The Company has denied all material allegations in the complaint.  While it is
not possible to estimate the probable outcome of this proceeding at this time,
management believes, based on advice of counsel, that it has valid defenses to
IPPV's claims.  The Company does not believe that IPPV is entitled to damages,
and management intends to vigorously defend the action.


                                          21
<PAGE>

                              ITEM 2.  USE OF PROCEEDS

Subsequent to the Company's initial public offering, effective January 31, 1996
(Registration No. 33-99906), and pursuant to the requirements of the Securities
Act of 1933, as amended and as then in effect, the Company filed an initial
report on Form SR with the Securities and Exchange Commission ("SEC") on May 10,
1996 and amendments thereto on November 12, 1996 and May 12, 1997.  Further
information was reported in the Company's periodic reports filed with the SEC,
commencing with its Report on Form 10-Q for the quarter ended September 30,
1997.

The following table sets forth the amount of direct or indirect payments to
others from such effective date through June 30, 1998 which have changed since
the most recently filed Report.

<TABLE>
<CAPTION>


            Use of Proceeds                              Direct or Indirect Payments to Others
            --------------                               -------------------------------------
<S>                                                      <C>
Working Capital                                                          $31,820,034

Purchase and Installation of Machinery and Equipment                      24,118,967
Temporary Investments
     Short Term Treasuries                                                54,288,774
     Cash                                                                          -

</TABLE>



                      ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     a.   Exhibits

          10.5      Amendment dated June 8, 1998 between ADS Alliance Data
                    Systems Inc. and United States Satellite Broadcasting
                    Company, Inc., to Processing Agreement dated March 5, 1993
                    between JCPenney Business Services Inc. and United States
                    Satellite Broadcasting Company, Inc.(*)

          10.34     Amendment No. 1 to the Administrative Services Agreement by
                    and between United States Satellite Broadcasting Company,
                    Inc. and Hubbard Broadcasting, Inc., effective July 1, 1998.

          27.1      Financial Data Schedule

          99.2      Additional Exhibit; Report on Form 8-K dated July 13, 1998

     b.   Report on Form 8-K

          The Company filed a Report on Form 8-K dated July 8, 1998 describing,
          under Item 5, Other Events, the announcement by DIRECTV, Inc. that a
          spacecraft control processor aboard the DBS-1 satellite manufactured
          by Hughes Communications Galaxy, Inc. failed on July 4, 1998.

------------------
(*) Portions of this document were redacted and filed separately with the
Securities and Exchange Commission pursuant to a request by the Company for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, in connection with the filing of this Report on Form 10-Q.


                                          22
<PAGE>

                                      SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




Dated: August 13, 1998             UNITED STATES SATELLITE
                                   BROADCASTING COMPANY, INC.


                                   By:  /s/ Stanley E. Hubbard
                                        --------------------------------------
                                        Stanley E. Hubbard
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)


                                   By:  /s/ Bernard J. Weiss
                                        --------------------------------------
                                        Bernard J. Weiss
                                        Chief Financial Officer
                                        (Principal Financial and Accounting
                                        Officer)




                                          23
<PAGE>

UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES

                  Index of Exhibits to Quarterly Report on Form 10-Q
                         For the Quarter Ended June 30, 1998

<TABLE>
<CAPTION>

     Exhibit No.    Exhibit Description
     -----------    -------------------
     <S>            <C>
     10.5           Amendment dated June 8, 1998 between ADS Alliance Data
                    Systems Inc. and United States Satellite Broadcasting
                    Company, Inc., to Processing Agreement dated March 5, 1993
                    between JCPenney Business Services Inc. and United States
                    Satellite Broadcasting Company, Inc. (*)

     10.34          Amendment No. 1 to the Administrative Services Agreement by
                    and between United States Satellite Broadcasting Company,
                    Inc. and Hubbard Broadcasting, Inc., effective July 1, 1998.

     27.1           Financial Data Schedule

     99.2           Report on Form 8-K

</TABLE>


----------------------------
(*) Portions of this document were redacted and filed separately with the
Securities and Exchange Commission pursuant to a request by the Company for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, in connection with the filing of this Report on Form 10-Q.



                                          24