<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 March 31, 1999

                                       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
        incorporation or organization)               Identification No.)

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

                                 (651) 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.

                     Class                            Outstanding at May 3, 1999
                     -----                            --------------------------
       Class A Common Stock, $.0001 par value:                31,507,250
       Common Stock, $.0001 par value:                        58,327,025

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

      UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARIES
            REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999

                                      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                           11

PART II.       OTHER INFORMATION

     Item 1.   Legal Proceedings                                              19

     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 Ended March 31
                                                              1999                       1998
                                                            ---------                  ---------
<S>                                                         <C>                        <C>
REVENUES                                                    $164,161                   $136,839
COST OF SALES                                                 96,696                     84,656
                                                            ---------                  ---------
GROSS MARGIN                                                  67,465                     52,183

OPERATING EXPENSES:
  Selling and marketing                                       33,559                     27,230
  Manufacturer Incentive                                      11,115                     11,310
  General and administrative                                  19,817                     13,437
  Commissions to retailers                                     2,978                      3,256
  Engineering and operations                                   4,784                      3,311
  Depreciation and amortization                                5,013                      3,772
                                                            ---------                  ---------
   Net operating loss                                         (9,801)                   (10,133)

OTHER INCOME:
  Interest income                                                740                        996
  Other                                                            1                          8
                                                            ---------                  ---------

    Net loss                                                $ (9,060)                  $ (9,129)
                                                            ---------                  ---------
                                                            ---------                  ---------
    Net loss per share - basic and diluted                  $  (0.10)                  $  (0.10)
                                                            ---------                  ---------
                                                            ---------                  ---------
</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>
                                                                   March 31, 1999              December 31, 1998
                                                                   --------------              -----------------
                                                                     (Unaudited)
<S>                                                                <C>                         <C>
CURRENT ASSETS:
  Cash and cash equivalents                                            $ 67,884                     $ 66,297
  Trade accounts receivable, net                                         57,828                       47,843
  Prepaid expenses and other                                              7,238                        8,856
                                                                       ---------                    ---------
    Total current assets                                                132,950                      122,996
                                                                       ---------                    ---------

PROPERTY AND EQUIPMENT:
  Land                                                                      351                          351
  Buildings and improvements                                              5,106                        5,106
  Equipment                                                             151,092                      150,249
                                                                       ---------                    ---------
                                                                        156,549                      155,706
  Less - Accumulated depreciation                                      (101,561)                     (96,548)
                                                                       ---------                    ---------
    Total property and equipment, net                                    54,988                       59,158
                                                                       ---------                    ---------

OTHER ASSETS:
  Long-term investments, consisting
   of U.S. Treasury securities                                               --                        4,501
  Other                                                                   3,244                        3,456
                                                                       ---------                    ---------
    Total other assets                                                    3,244                        7,957
                                                                       ---------                    ---------

                                                                       $191,182                     $190,111
                                                                       ---------                    ---------
</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>
                                                                   March 31, 1999              December 31, 1998
                                                                   --------------              -----------------
                                                                     (Unaudited)
<S>                                                                <C>                         <C>
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                                $ 74,900                     $ 65,743
  Deferred revenue                                                       64,368                       52,956
  Manufacturer Incentive obligation                                      27,659                       25,579
  Contract cancellation payable                                              --                       13,200
                                                                       ---------                    ---------
    Total current liabilities                                           166,927                      157,478
                                                                       ---------                    ---------

LONG TERM LIABILITIES:
  Due to HBI                                                             10,000                       10,000
  Manufacturer Incentive obligation                                      77,653                       77,103
                                                                       ---------                    ---------
    Total long term liabilities                                          87,653                       87,103
                                                                       ---------                    ---------

COMMITMENTS AND CONTINGENCIES (Note 3)

SHAREHOLDERS' EQUITY (DEFICIT)

  Preferred Stock, $0.01 Par Value, 50 million shares
   authorized; none issued or outstanding                                    --                           --
  Class A Common Stock -
    Participating, voting, $.0001 Par Value, 500 million shares 
    authorized, 30,451,450 shares issued and outstanding 
    at March 31, 1999 and 29,390,450 at December 31, 1998                     2                            2
  Common Stock -
    Participating, voting, $.0001 Par Value, 100 million shares 
    authorized, 59,382,825 shares issued and outstanding 
    at March 31, 1999 and 60,422,825 at December 31, 1998                     7                            7

  Additional paid-in capital                                            375,032                      374,896
  Accumulated deficit                                                  (438,439)                    (429,380)
  Accumulated other comprehensive income                                     --                            5
                                                                       ---------                    ---------
    Total shareholders' equity (deficit)                                (63,398)                     (54,470)
                                                                       ---------                    ---------
                                                                       $191,182                     $190,111
                                                                       ---------                    ---------
                                                                       ---------                    ---------
</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 Three Months Ended March 31
                                                               1999                       1998
                                                             --------                   --------
<S>                                                          <C>                        <C>
OPERATING ACTIVITIES:
  Net loss                                                   $(9,060)                   $(9,129)
  Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities -
    Depreciation and amortization                              5,013                      3,772
    Change in operating items:
      Receivables and other current assets                    (8,367)                     7,392
      Accounts payable and accrued expenses                   (4,043)                     1,302
      Deferred revenue                                        11,412                      6,184
      Manufacturer Incentive                                   2,630                      7,342
      Other                                                      206                       (107)
                                                             --------                   --------
        Net cash provided by (used in)
        operating activities                                  (2,209)                    16,756
                                                             --------                   --------
INVESTING ACTIVITIES:
  Purchase of and deposits on equipment                         (842)                    (1,665)
  Proceeds from sale of long-term available-for-sale
   investment                                                  4,501                         --
                                                             --------                   --------
        Net cash provided by (used in) 
        investing activities                                   3,659                     (1,665)
                                                             --------                   --------
FINANCING ACTIVITIES:
  Proceeds from stock issuance                                   137                         --
                                                             --------                   --------
        Net cash provided by financing activities                137                         --
                                                             --------                   --------
        Increase in cash and
         cash equivalents                                      1,587                     15,091
                                                             --------                   --------

CASH AND CASH EQUIVALENTS, beginning
 of period                                                    66,297                     68,646
                                                             --------                   --------
CASH AND CASH EQUIVALENTS, end of period                     $67,884                    $83,737
                                                             --------                   --------
                                                             --------                   --------

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 a digital satellite system ("DIRECTV/USSB System"). 
The Company's programming is available to customers who have a DIRECTV/USSB 
System, 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 March 31, 1999 and December 31, 1998, and had approximately 74.5% of the 
total voting power at March 31, 1999.

The Company has entered into an Agreement and Plan of Merger dated as of 
December 11, 1998 (the "Merger Agreement") with General Motors Corporation, a 
Delaware corporation ("GM"), and its subsidiary Hughes Electronics 
Corporation, a Delaware corporation ("Hughes"), pursuant to which, if certain 
conditions are satisfied, the Company will be merged with and into Hughes 
(the "Merger"). The Merger, which is subject to shareholder approval and to 
the satisfaction of other conditions contained in the Merger Agreement, is 
expected to take place in May 1999. If the Merger is completed, each share of 
USSB stock will be converted, subject to certain limitations, into either (i) 
a fraction of a share of Class H Common Stock of GM equal to the exchange 
ratio provided in the Merger Agreement or (ii) cash equal to that exchange 
ratio multiplied by the 20-day volume-weighted average price of the GM Class 
H Common Stock (the "Merger Consideration"). The Merger Consideration is 
dependent upon the GM Class H Common Stock price and will not exceed $18.00 
per share.

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, 1998 
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 


                                       7
<PAGE>

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.

The FCC 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. On June 24, 
1998, the Company voluntarily returned to the FCC its authorization for eight 
transponders at 148DEG. west longitude. The return of the authorization at 
148DEG. west longitude had no effect on the status of the Company's Permit 
for the 110DEG. orbital location.

The Permit requires the Company to comply with specified construction and 
launch schedules. 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. Under the Merger Agreement, the Company and 
Hughes have agreed to cooperate and use their reasonable best efforts to 
maintain the Permit at the 110DEG. orbital location. In connection therewith, 
the Company and Hughes have jointly filed an application for modification of 
authorization to move the DBS-1 satellite, which presently operates at the 
101DEG. orbital location, to the 110DEG. orbital location to satisfy the 
FCC's due diligence requirements. On April 1, 1999, the FCC staff issued an 
order approving the transfer of control of the FCC authorization for 
construction at the 110DEG. orbital location to DIRECTV, conditioned upon 
DIRECTV initiating service on the three transponders authorized at the 
110DEG. orbital location by December 31, 1999.

Under the Merger Agreement, on December 17, 1998, Hughes, DIRECTV 
Enterprises, Inc., a wholly-owned subsidiary of Hughes, and the Company also 
filed applications with the FCC requesting consent to the transfer of control 
of all of the FCC authorizations held by USSB II, Inc. to Hughes. The FCC 
staff's April 1, 1999 order also approved the transfer of control of the
FCC license for five transponders at the 101DEG. orbital location and related 
earth station licenses to DIRECTV.

The order of the FCC staff issued on April 1, 1999 became final on May 12, 
1999.

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"). As required by the Merger Agreement, the Company has canceled the 
110DEG. Contract and has allowed the 148DEG. Contract to expire in accordance 
with its terms. Both actions were effective December 31, 1998.


                                      8
<PAGE>

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 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, a subsidiary of Hughes Electronics 
Corporation. As previously 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. In 
connection with the execution of the Merger Agreement, DIRECTV and the 
Company entered into a Channel Services Provision Agreement which provides 
that, subject to the terms of that Agreement, DIRECTV will provide to USSB, 
on a full time basis, channel capacity and related services on two other 
satellites owned by Hughes at the 101DEG. orbital location sufficient to 
transmit and deliver a limited number of premium movie services to USSB 
subscribers. At the same time, the Company and Hughes also entered into a 
Replacement Payload Option Agreement which clarifies USSB's right to 
transponder capacity on a replacement satellite , in the event the Merger 
Agreement is terminated due to the failure of the transponders on DBS-1. The 
Replacement Payload Option Agreement provides that USSB may elect to purchase 
five transponders at a fixed price on DIRECTV 1-R, a satellite under 
construction by Hughes.

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.

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 parties have agreed in principle to 
settle this litigation and, pursuant to such agreement, the Company expects 
to contribute an amount which it does not presently anticipate to be material 
to the financial position of the Company.

In September 1998, WIC Premium Television, Ltd., an Edmonton, Alberta, Canada 
corporation, ("WIC") initiated legal proceedings in both the Federal Court of 
Canada Trial Division and the Alberta Courts against numerous retailers, 
programming providers, and programming distributors, including the Company. 
The Company is challenging the jurisdiction of both courts, and management 
has not reached a judgment regarding whether WIC may be entitled to damages 
or any remedies from the Company.

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.

                                      9
<PAGE>

MANUFACTURER INCENTIVE PROGRAM

On August 26, 1996, the Company, together with DIRECTV, Inc., entered into 
financial incentive arrangements with certain manufacturers of DIRECTV/USSB 
System equipment to assist these manufacturers in lowering the price of 
DIRECTV/USSB System. 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 DIRECTV/USSB System households are 
authorized to receive programming. The expense and liability for such future 
commitments are established and recorded upon activation of the related 
DIRECTV/USSB System. In the quarter ended March 31, 1999, the Company charged 
to expense $11.1 million, representing the full amount of those future 
obligations for the Manufacturer Incentive program incurred during the 
quarter. Cash paid in the quarter ended March 31, 1999 totaled $6.2 million, 
and future payment obligations (all of which have been previously charged to 
expense) totaled $105.3 million at March 31, 1999.

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 DIRECTV/USSB System unit sales increase, the cash flow 
related to these arrangements will increase accordingly.

NOTE 4.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

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 either as 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 
March 31, 1999. 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>

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

         The Company believes that forward-looking statements contained 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 "forward-looking statements" within 
the meaning of and are made pursuant to the safe harbor provisions contained 
in the Private Securities Litigation Reform Act of 1995. Investors are 
cautioned that all forward-looking statements involve risks and uncertainty. 
There are certain important factors that could cause results to differ 
materially from those anticipated by the statements made in this Report. 
Several of these factors are discussed under the heading "Risk Factors" below.

AGREEMENT AND PLAN OF MERGER

         As previously reported, the Company has entered into an Agreement 
and Plan of Merger dated as of December 11, 1998 (the "Merger Agreement") 
with General Motors Corporation, a Delaware corporation ("GM"), and its 
subsidiary, Hughes Electronics Corporation, a Delaware corporation 
("Hughes"), pursuant to which, if certain conditions are satisfied, the 
Company will be merged with and into Hughes (the "Merger"). The Merger, which 
is subject to shareholder approval and to the satisfaction of other 
conditions contained in the Merger Agreement, is expected to take place in 
May 1999. If the Merger is completed, each share of USSB stock will be 
converted, subject to certain limitations, into either (i) a fraction of a 
share of Class H Common Stock of GM equal to the exchange ratio provided in 
the Merger Agreement or (ii) cash equal to that exchange ratio multiplied by 
the 20-day volume-weighted average price of the GM Class H Common Stock (the 
"Merger Consideration"). The Merger Consideration is dependent upon the GM 
Class H common stock price and will not exceed $18.00 per share.

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 a digital satellite system ("DIRECTV/USSB System"). 
The Company's programming is available to customers who have a DIRECTV/USSB 
System, which consists of an 18-inch satellite dish, a receiver/decoder and a 
remote control. At March 31, 1999, approximately 4.62 million households were 
authorized to receive programming services using the DIRECTV/USSB System, up 
from 4.32 million at December 31, 1998. All of the Company's gross revenues 
and identifiable 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. Although the Company achieved positive 
adjusted cash flow (defined as earnings before interest, taxes, depreciation 
and amortization and the non-cash component of the Manufacturer Incentive 
program) for the quarter ended March 31, 1999, management expects that losses 
will continue into 1999.

         To simplify the DIRECTV/USSB System 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.


                                      11
<PAGE>

SUMMARY OF SUBSCRIBER AND REVENUE DATA

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

         The number of USSB paying subscribers grew to approximately 
2,192,000 at March 31, 1999 from approximately 2,028,000 at December 31, 
1998. Approximately 207,000 additional households were receiving a free 
promotional month of USSB programming as of March 31, 1999.

         In addition to tracking the absolute number of subscribers, 
management assesses the Company's penetration of its potential DIRECTV/USSB 
System market by comparing the number of USSB paying subscribers to the total 
number of households that have received the free promotional month of USSB 
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 DIRECTV/USSB System households includes households 
receiving the free promotional month that have not yet made their 
subscription decision.

         The following summary table 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 DIRECTV/USSB households is also shown.

SUBSCRIBER BASE:
(In thousands)

<TABLE>
<CAPTION>
                                               TOTAL USSB
                                                 PAYING                      PERCENT OF
                                               SUBSCRIBERS                      USSB
FOR THE           USSB             USSB            AND           USSB        CONVERTIBLE
QUARTER          PAYING         PROMOTIONAL    PROMOTIONAL    CONVERTIBLE    HOUSEHOLDS     ESTIMATED
 ENDED       SUBSCRIBERS(a)   ACTIVATIONS(b)   ACTIVATIONS   HOUSEHOLDS(c)    SERVED(d)    HOUSEHOLDS(e)
-------      --------------   --------------   -----------   -------------   -----------   -------------
<S>          <C>              <C>              <C>           <C>             <C>           <C>

March 31,
  1998           1,799             106            1,905           3,128          58%          3,467
June 30,
  1998           1,842             111            1,953           3,312          56%          3,667
Sept. 30,
  1998           1,929             150            2,079           3,522          55%          3,945
Dec. 31,
  1998           2,028             202            2,230           3,778          54%          4,324
March 31,
  1999           2,192             207            2,399           4,210          52%          4,620
</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 DIRECTV/USSB System 
     deactivations. See note (e).

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


                                      12
<PAGE>

(e)  Total estimated number of households with active DIRECTV/USSB System 
     units which are authorized to receive either USSB or DIRECTV programming 
     as of the end of the period. Estimate based on cumulative DIRECTV/USSB 
     System activations, less: (i) cumulative DIRECTV/USSB System 
     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 DIRECTV/USSB System households as accurately as possible.


         As of March 31, 1999, the Company achieved a penetration of 
convertible households of approximately 52%. Management believes that the 
reduction in the penetration percentage compared to the previous quarter is 
due primarily to the announcement of the Merger, which created some consumer 
and retail confusion about the on-going need to subscribe to USSB services.

         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 that include special rates for limited periods, which 
typically result in lower average per subscriber revenues for such 
promotional periods.


REVENUES:

(In thousands, except per subscriber data)

<TABLE>
<CAPTION>
                                                          FOR THE QUARTER ENDED
                                                          ---------------------
                                        MARCH 31     DEC. 31    SEPT. 30    JUNE 30    MARCH 31
                                          1999        1998        1998        1998       1998
                                          ----       ----         ----        ----       ----
<S>                                     <C>         <C>         <C>         <C>        <C>

Average monthly subscription 
  revenue per paying subscriber (a)      $23.35      $23.58      $23.53      $23.60     $24.22

Total revenues (b)                      $164,161    $144,685    $136,567    $132,710   $136,839
</TABLE>

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

RESULTS OF OPERATIONS

REVENUE OVERVIEW.  The Company's total revenues increased to $164.2 million 
for the quarter ended March 31, 1999, compared to $136.8 million for the 
comparable prior year period. The revenue increase was primarily attributable 
to a larger subscriber base and several large pay-per-view events.

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 the period 
was primarily attributable to the increase in the number of paying 
subscribers to approximately 2,192,000 at March 31, 1999, from approximately 
1,799,000 at March 31, 1998, partially offset by generally reduced 
subscription prices which were implemented March 10, 1998.

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.

COST OF SALES AND GROSS MARGIN.  Cost of sales consists of payments to 
programmers, which are based on the number of paying subscribers. Programming 
costs also include the purchase of rights to broadcast event programming on a 
pay-per-view basis. The cost of programming 

                                      13
<PAGE>

increased to $96.7 million for the quarter ended March 31, 1999, compared to 
$84.7 million for the comparable prior year period. The increase in cost of 
programming was primarily the result of an increased number of subscribers 
from the comparable prior year period. The Company's gross margin percentage 
increased to 41.1% for the quarter ended March 31, 1999, compared to 38.1% 
for the comparable prior year period. The increase reflects the fact that the 
Company's current programming offerings of premium channels carry higher 
margins than the basic channels previously carried, as well as the 
achievement of certain volume-based discounts in programming costs. 
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 $77.3 
million for the quarter ended March 31, 1999, compared to $62.3 million for 
the comparable prior year period. 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. The current quarter's operating expenses include 
$5.7 million of expenses associated with the pending Merger.

         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 
DIRECTV/USSB System participants. Selling and marketing expenses increased to 
$33.6 million for the quarter ended March 31, 1999, compared to $27.2 million 
for the comparable period in 1998. This increase was primarily attributable 
to increased customer service expenditures associated with the growth of the 
Company's subscriber base, which totaled approximately $2.2 million, plus an 
increase in advertising and promotional expenditures of approximately $4.2 
million related to a joint promotion with DIRECTV.

         MANUFACTURER INCENTIVE PROGRAM.  Manufacturer Incentive program 
expense relates to financial incentive arrangements with certain 
manufacturers of DIRECTV/USSB System equipment. These arrangements have had 
the effect of contributing to certain DIRECTV/USSB System manufacturers 
lowering the price of systems. Such arrangements commit the Company to pay 
the manufacturers over a five-year period from the date new DIRECTV/USSB 
System households are authorized to receive programming. The entire expense 
and liability for such future commitments are established and recorded upon 
activation of the related DIRECTV/USSB System. Manufacturer Incentive program 
expenses totaled $11.1 million for the quarter ended March 31, 1999, compared 
to $11.3 million for the comparable period in 1998. The Company expects the 
total expenses under the Manufacturer Incentive program will 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 various 
administrative services provided by HBI. General and administrative expenses 
increased to $19.8 million for the quarter ended March 31, 1999, compared to 
$13.4 million for the comparable period in 1998. The increase was primarily 
attributable to increased costs of approximately $2.7 million related to the 
pending Merger, and increased billing and remittance processing costs, and 
costs for certain other services under the Company's arrangements with its 
third-party subscriber management services provider of approximately $1.4 
million.

         COMMISSIONS TO RETAILERS.  Commissions to retailers consist of 
amounts paid by the Company to eligible DIRECTV/USSB System retailers whose 
customers become paying subscribers, and are intended to encourage retailers 
to promote the sale of DIRECTV/USSB Systems and subscriptions to USSB 
programming. These expenses generally run for three years at 


                                      14

<PAGE>

decreasing rates for each subscriber year. Commissions to retailers were $3.0 
million for the quarter ended March 31, 1999, compared to $3.3 million in the 
comparable period in 1998.

         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 (which fees increase as subscriber levels increase) 
and satellite telemetry, tracking and control expenses. Engineering and 
operations expenses were $4.8 million for the quarter ended March 31, 1999, 
compared to $3.3 million for the comparable period ended 1998. The increase 
from the prior year is a result of an increase in subscribers and costs 
associated with operating new technologies.

         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 was 
$5.0 million for the quarter ended March 31, 1999, compared to $3.8 million 
for the comparable period in 1998.


NET LOSS.  The Company recorded a net loss for the quarter ended March 31, 
1999 of $9.1 million, the same as the comparable prior year period.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

     LIQUIDITY AND CAPITAL RESOURCES.  Cash and cash equivalents increased to 
$67.9 million at March 31, 1999 from $66.3 million at December 31, 1998. The 
increase in cash at March 31, 1999 primarily reflects the net operating 
results of the Company.

     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. Management believes that the Company's current cash position and 
cash generated from operations is adequate to meet anticipated operating 
expenses.

     As a result of the pending Merger, the Company has terminated its 
contracts requiring material capital expenditures, and had no material 
commitments for capital expenditures as of March 31, 1999. The Company does 
not expect to incur significant future capital expenditures. In connection 
with the Merger Agreement, the Company and Hughes have entered into a 
Replacement Payload Option Agreement which clarifies USSB's right to 
transponder capacity on a replacement satellite if the Merger Agreement is 
terminated due to the failure of the transponders on DBS-1. The Replacement 
Payload Option Agreement provides that USSB may elect to purchase five 
transponders at a fixed price of $90.0 million on DIRECTV 1-R, a satellite 
under construction by Hughes. In the event the Merger is not consummated 
because of the failure of DBS-1, the Company would require external financing 
for such satellite capacity. The Company believes that such financing would 
be available.

     WORKING CAPITAL.  Working capital at March 31, 1999 was a negative $34.0 
million compared to a negative $34.5 million at December 31, 1998. Management 
expects that working capital will remain negative through 1999 as the current 
portion of the Manufacturer Incentive program obligation increases.

     LITIGATION.  Personalized Media Communications, L.L.C. ("PMC") has 
commenced two legal proceedings against Hughes Network Systems, Thomson 
Consumer Electronics and other DIRECTV/USSB System manufacturers, DIRECTV, 
Inc., and the Company.

                                      15
<PAGE>

     IPPV Enterprises, a Georgia partnership, has commenced a legal 
proceeding against Thomson Consumer Electronics, Hughes Network Systems, 
other DIRECTV/USSB System manufacturers, DIRECTV, Inc., and the Company.

     WIC Premium Television, Ltd., an Edmonton, Alberta, Canada corporation, 
("WIC") initiated two separate legal proceedings in the Federal Court of 
Canada Trial Division and in the Judicial District of Edmonton against 
numerous retailers, programming providers, and programming distributors, 
including 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. Part II, Item 1, "Legal Proceedings" contains additional 
information on these matters.

     CAPITAL EXPENDITURES.  Capital expenditures for the quarter ended March 
31, 1999 totaled $842,000, consisting primarily of purchased computer 
hardware and software.

     NET OPERATING LOSS CARRYFORWARD.  At March 31, 1999, the Company's net 
operating loss carryforward was $350.4 million for federal tax purposes. Such 
carryforwards expire in the years 2000 through 2014.

YEAR 2000

     The Company has analyzed Year 2000 compliance issues related to its 
computer systems and technologies associated with delivering programming. 
Based on its current assessment, management believes that Year 2000 
compliance will not pose significant operational issues. The Company is 
executing an implementation plan whereby all systems critical to managing the 
business will be made Year 2000 compliant. The implementation plan includes 
assessing and evaluating compliance and criticality of the various computer 
systems, executing resolution strategies, and testing and certification of 
the resolution efforts. Most of the Company's internal computer systems and 
applications and programming technologies were developed during the past 
several years and are substantially Year 2000 compliant. In addition, the 
Company is working with its other key vendors and suppliers, including its 
programming providers and current customer service and billing vendor, to 
assure that the vendors' systems will be Year 2000 compliant. The Company has 
been informed in writing by its current customer service and billing vendor 
that such vendor expects to be substantially Year 2000 compliant by July 
1999, and the Company believes that all its key vendors will be Year 2000 
Compliant, and has received written assurance from such vendors.

     If the pending Merger closes, Hughes, as the surviving corporation, will 
acquire all of the assets and vendor contracts of the Company.

     If the Merger does not close, the Company and DIRECTV have agreed that 
DIRECTV will provide USSB with billing and subscriber management services 
commencing July 1, 1999. The Company has been informed in writing by DIRECTV 
that DIRECTV expects its billing and customer management system to be 
substantially Year 2000 compliant by June 1999.

     In the event the Merger is not completed, and DIRECTV is not Year 2000 
compliant, the Company would continue to use its current customer service and 
billing vendor to provide customer service and billing services at an 
increased cost. The Company believes the worst case scenario would occur if 
both its current billing and customer service provider and DIRECTV failed to 
become Year 2000 compliant. Under these circumstances, the Company's 
operations and its ability to provide customer service and billing would be 
materially adversely affected.


                                      16

<PAGE>

     The Company has begun to incur expenses related to the analysis and 
implementation of Year 2000 resolution. The cost of all Year 2000 renovation 
has been expensed in accordance with the Company's financial policies. The 
Company's current and expected costs relating to Year 2000 issues are not 
material to its results of operations.

SEASONALITY

     Sales of DIRECTV/USSB System units are 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 levels of prepaid subscriptions in 
any given quarter.

RISK FACTORS

     The Company is preparing to close the Merger at the earliest practicable 
time. To prepare for the Merger, the Company has taken certain actions and 
refrained from taking other actions which could have an adverse effect on the 
Company if the Merger does not close. As required by the Merger Agreement, 
the Company has terminated the contract it had entered into with Convergys 
Information Management Systems for billing and customer management services 
and will be dependent upon DIRECTV for such services after June 1999. As also 
required by the Merger Agreement, the Company has terminated its contract 
with Lockheed Martin for satellite construction at the 110DEG. orbital 
location. The Company has paid termination charges in connection with these 
terminations, thereby reducing the Company's available cash resources. The 
Company has modified or curtailed certain of its marketing programs in 
preparation for the Merger. The Company believes that the Merger has also 
created some consumer and retail confusion about the on-going need to 
subscribe to USSB services. The Company could also be competitively 
disadvantaged if the Merger is not completed.

     So long as the Company continues to operate on a stand-alone basis, or 
if the Merger is not completed, there are certain important factors that 
could cause actual 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 DIRECTV/USSB System and USSB's 
programming, the effects of changes in USSB's and DIRECTV's programming 
offerings, 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, thereby 
increasing the competition 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. In connection with the 
execution of the Merger Agreement, DIRECTV and the Company entered into a 
Channel Services Provision Agreement which provides that, subject to the 
terms of that Agreement, DIRECTV will provide to USSB, on a full time basis, 
channel capacity and related services on two other satellites owned by Hughes 
at the 101DEG. orbital location sufficient to transmit and deliver a limited 
number of premium movie services to USSB subscribers. Not all of the channels 
currently carried by the Company could be carried under this arrangement.


                                      17

<PAGE>

     The Company is also subject to the effects of, and costs associated 
with, litigation involving the technology and the intellectual property 
associated with the DIRECTV/USSB System. DIRECTV has initiated the use of the 
mark "DIRECTV System" to identify the DIRECTV/USSB System in lieu of the 
formerly-used "DSS" mark. If the Merger is not completed, such use could 
adversely affect the Company.

     The Company is also dependent on third-party programmers, and on 
vendors, including those providing customer service and billing services. If 
the Merger is not completed, DIRECTV has agreed in the Merger Agreement to 
provide billing and customer management systems to the Company commencing on 
the later of July 1, 1999 or upon termination of the Merger Agreement. The 
Company has terminated its contract for subscriber management services with 
Convergys Information Management Group Inc. as required by the Merger 
Agreement, and the Company will be dependent upon DIRECTV to provide such 
services if the Merger is not completed. The Company is also dependent upon 
the continued effectiveness of the security and signal encryption features of 
the DIRECTV/USSB System.

     Such factors as increases in costs, including programming costs, in 
excess of those anticipated by the Company; sufficient availability of 
DIRECTV/USSB Systems at retail; potential adverse governmental regulations 
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 I, "Business Competition" of the Company's Report on Form 
10-K for the year ended December 31, 1998, for a further discussion of 
certain of these risks.


                                      18
<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 DIRECTV/USSB System 
developers, manufacturers and programmers, including, among others, Hughes 
Network Systems, Thomson Consumer Electronics and other DIRECTV/USSB System 
manufacturers, DIRECTV, Inc., and the Company.

     In the ITC action, PMC alleges that Hughes Network Systems, Thomson 
Consumer Electronics and other DIRECTV/USSB System 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 DIRECTV/USSB System 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 
DIRECTV/USSB System 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 
Court of Appeals for the Federal Circuit issued an opinion on November 24, 
1998 (i) reversing the finding of the ITC that the claims in suit were 
invalid for indefiniteness, (ii) vacating the finding of the ITC that claim 7 
was infringed and remanding that issue to the ITC for further consideration, 
(iii) affirming the ruling of the ITC that claim 6 was not infringed, and 
(iv) declining to review the holding of the ITC that claim 44 was likewise 
not infringed. In accordance with that opinion, the case has been remanded to 
the ITC for further proceedings. On March 26, 1999, PMC filed a Motion to 
Terminate the Investigation stating that PMC preferred to pursue its rights 
in the district court action described herein. That Motion is pending and 
undecided.

     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 


                                      19

<PAGE>

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 district court action pending the resolution of 
the ITC investigation, the district court entered an order to that effect.

     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 DIRECTV/USSB System 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 DIRECTV/USSB 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. The
parties have agreed in principle to settle this litigation and, pursuant to such
agreement, the Company expects to contribute an amount which it does not
presently anticipate to be material to the financial position of the Company.

     WIC PREMIUM TELEVISION LTD. V. GENERAL INSTRUMENT CORPORATION, NEXT 
     LEVEL SYSTEMS, INC., NEXT LEVEL SYSTEMS OF DELAWARE, INC., ET AL., 
     SHOWTIME NETWORKS, INC., ET AL., RETAIL SALES AND MARKETING, INC., 
     HOME BOX OFFICE, INC., WARNER COMMUNICATIONS, INC., JOHN DOE, 
     ECHOSTAR COMMUNICATIONS CORPORATION, DISH LTD., ECHOSPHERE 
     CORPORATION, UNITED STATES SATELLITE BROADCASTING COMPANY, INC., 
     CORMAN PARK SATELLITE LTD., WARREN SUPPLY COMPANY, PROGRAMMERS 
     CLEARING HOUSE, INC., RALPH WARREN, RONALD WARREN, RALPH WARREN AND 
     RONALD WARREN CARRYING ON BUSINESS AS "PROGRAMMERS CLEARING HOUSE," 
     AND AS "WARREN ACTIVATIONS," AND AS "WARREN RADIO & TELEVISION," 
     AND AS "ENTERTAINMENT DIRECT," WARREN SUPPLY COMPANY CARRYING ON 
     BUSINESS AS "BUILDERS EXPRESS," 4-12 ELECTRONICS CORPORATION, 
     FREEDOM SATELLITE CORPORATION, CHRISTOPHER NELSON PERSONALLY AND 
     CARRYING ON BUSINESS AS "SKYLIGHT HOME SATELLITE THEATER," 
     CHRISTIAN NELSON, SHELDON NELSON AND VIACOM ENTERPRISES CANADA 
     LIMITED, ET AL., in the Federal Court of Canada Trial Division, 
     Court File No. T-1538-98 and in Judicial District of Edmonton, 
     Court File No. 970316746-1998.

     In September 1998, WIC Premium Television Ltd. of Edmonton, Alberta, 
Canada ("WIC") served on USSB, among others, a statement of claim issued by 
the Federal Court of Canada. WIC alleges that USSB breached Canadian law by 
participating in the broadcast and illegal reception of its services by 
customers located in Canada. WIC seeks injunctive relief prohibiting such 
action by USSB.

     In October 1998, WIC commenced a similar action against USSB in 
Alberta's Court of Queen's Bench. WIC alleges that USSB breached Canadian law 
by participating in the broadcast 

                                      20

<PAGE>

and illegal reception of its services by customers located in Canada. This 
action seeks injunctive relief and damages.

     The Company has not yet defended either complaint and is challenging the 
personal jurisdiction of the Canadian Courts over the Company. While it is 
not possible to estimate the probable outcome of these proceedings at this 
time, the Company intends to vigorously defend the actions.


                                       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 March 31, 1999 which have changed 
since the most recently filed Report.

<TABLE>
<CAPTION>
                Use of Proceeds                             Direct or Indirect Payments to Others
                ---------------                             -------------------------------------
<S>                                                         <C>
Working Capital                                                          $33,756,866

Purchase and Installation of Machinery and Equipment                      33,548,696
Temporary Investments

     Short Term Treasuries                                                42,922,213
</TABLE>


                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     a.   Exhibits

          27.1   Financial Data Schedule


                                      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: May 13, 1999             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
                                    Senior Vice President and 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 March 31, 1999

<TABLE>
<CAPTION>
     Exhibit No.               Exhibit Description
     -----------               -------------------
     <S>                       <C>
     27.1                      Financial Data Schedule
</TABLE>


                                      24