News

Hill Moves on DBS Must-Carry

3/14/1999 7:00 PM Eastern

Washington -- Congress took another step last week on bills
that would ultimately slap direct-broadcast satellite carriers with full must-carry
obligations in markets where they provide local signals in less than three years.

The DBS must-carry provision -- clearly the most important
regulatory-parity issue facing the cable industry -- and its constitutionality have been
drowned out by other provisions dealing with the fate of 2.2 million home-dish owners, who
would have lost their distant-network signals if a compromise had not been worked out late
last week.

In five congressional hearings this year on DBS copyright
and competition legislation, the legality of DBS must-carry has barely been mentioned.

"There really hasn't been much discussion on
that. There really hasn't, surprisingly so," a House aide said.

Some congressional sources and Washington lawyers said the
lack of discussion probably means that House and Senate lawmakers must think that if cable
must-carry is constitutional, then so is DBS must-carry.

According to several sources, DBS must-carry would have a
difficult time surviving a First Amendment challenge that would most likely be led by
EchoStar Communications Corp., the only DBS company that is committed to using its
spectrum to provide customers with their local TV signals.

"We believe that there will be serious constitutional
issues, but we'll cross that bridge if and when we come to it," said Karen
Watson, EchoStar's chief Washington lobbyist.

If the courts do strike down DBS must-carry, the cable
industry would be competing against a company in EchoStar that would have much greater
control over its spectrum and much greater freedom to package its programming services.

Unlike cable operators, EchoStar would probably not have to
force its subscribers to buy local TV signals first, and it might not even have to make
them available to all subscribers.

Washington officials and lawyers who are veterans of the
cable must-carry wars said last week that DBS must-carry would be tough for a court to
accept, mainly because broadcasters won their battle against cable in the Supreme Court by
a narrow 5-4 vote.

John Nakahata, former chief of staff to Federal
Communications Commission chairman William Kennard, said a defense of must-carry in the
DBS context could not be based on the survival of "free" over-the-air
broadcasting, as it was in the cable must-carry context.

"I think that it would be extremely challenging,"
Nakahata said. "It seems to me that when you're talking about somebody with 5
percent to 10 percent market share, instead of somebody with 60 percent market share,
that's a different story."

A broadcasting source agreed with Nakahata, saying that the
Supreme Court upheld cable must-carry after determining that broadcasting was essential to
American society and that cable had bottleneck control over the distribution of local TV
signals.

"It's a harder case to make [for DBS] than for
cable because there is not the bottleneck-control issue," the broadcasting source
said.

However, a cable-industry attorney said the DBS must-carry
provision differs from cable in a critical way: Although cable operators are required to
carry local TV signals, EchoStar is covered by must-carry rules only if it elects to offer
local signals in a market.

"In 'carry one, then carry all,' there is an
element of volunteerism that is not in the cable must-carry rules," the cable lawyer
said, speaking not for attribution.

Last week, the Senate Commerce Committee passed a bill
sponsored by Sen. John McCain (R-Ariz.) that would require EchoStar to carry all TV
signals in a served market by Jan. 1, 2002. The McCain bill would specifically apply cable
must-carry rules to DBS, presumably including a local-TV-signal buy-through requirement.

Under House legislation (H.R. 1027) passed last week by the
House Courts and Intellectual Property Subcommittee, the same deadline would apply, but
the language used is quite general, and it makes no reference, as McCain's bill does,
to the cable must-carry provisions contained in the 1992 Cable Act.

The House bill, sponsored by Rep. Howard Coble (R-N.C.),
needs to be merged with legislation that has not yet been produced by the House Commerce
Committee.

Last Thursday, Commerce Committee chairman Rep. Tom Bliley
(R-Va.) and Telecommunications Subcommittee chairman Rep. Billy Tauzin (R-La.) had a
meeting with Judiciary Committee chairman Rep. Henry Hyde (R-Ill.) and Coble, chairman of
the Courts and Intellectual Property Subcommittee, to strategize on fashioning a single
bill.

A House aide said it appears that the Commerce and
Judiciary panels will approve legislation by March 26, and that the staffs of both panels
will use the one-week recess to combine the bills to take to the House floor.

"They committed to producing a comprehensive
satellite-reform bill that protects American consumers," Tauzin spokesman Ken Johnson
said.

McCain's bill will likely be joined on the Senate
floor with companion legislation (S. 274) sponsored by Senate Judiciary Committee chairman
Orrin Hatch (R-Utah). A McCain aide said it was unlikely that the two bills would reach
the Senate floor before the March 26 Easter recess.

September