News

FCC Pushes DBS Powers Out of Auction

12/12/2004 7:00 PM Eastern

Washington— The Federal Communications Commission has decided to restrict bidding eligibility on satellite licenses to companies without nationwide satellite reach.

That pushes aside two powerhouse direct-broadcast satellite operators, EchoStar Communications Corp. and DirecTV Inc., and virtually ensures a one-sided auction in favor of Cablevision Systems Corp.’s Rainbow DBS.

The restrictions apply to the last two remaining unassigned DBS channels with nationwide reach in the 12-GHz band, valuable because they have the unobstructed ability to send signals to homes from the East Coast to far-western portions of Alaska and Hawaii. Other recently auctioned channels are located too far west to serve the entire eastern region.

“Given these circumstances, the two channels … could be quite important to increasing the number of options or choices available to subscribers of DBS or MVPD [multichannel video-programming distribution] services,” the FCC said in its Dec. 3 order.

The agency said it believes there is a benefit to excluding EchoStar and DirecTV, citing increased competition, development of new services and technological innovation. Consumers stand to benefit in markets where DBS operators and cable systems compete and where they do not.

EchoStar and DirecTV, the only two DBS operators that serve all 50 states, have such extensive market power that the FCC believes allowing either or both to bid on the two channels would mean a greater likelihood the motivated companies could move to “foreclose rivals.”

EchoStar last June reported more than 10 million subscribers; DirecTV reported more than 13 million. Competitors include Rainbow DBS, which can operate on 11 DBS channels, and Dominion, which leases six of its eight FCC-authorized broadcast-satellite channels to EchoStar.

In filing comments with the FCC, EchoStar called the eligibility restrictions “unnecessary and probably unlawful,” arguing that satellite operators can still be effective by strategically using small numbers of frequencies with potential to serve sizeable markets. EchoStar also questioned the reasoning behind even holding an auction, because the restrictions would allow Rainbow DBS to be the sole qualifying applicant and to possibly win the bid at below-market value.

States News Service

November