Policy

Congress Passes DBS Legislation

11/22/2004 3:06 AM Eastern

Congress passed legislation Saturday that gives EchoStar Communications Corp. just 18 months to ensure that consumers need only one dish to receive all local TV stations in a market.

The phase-out of EchoStar’s two-dish policy was contained in a 1,000-page, $388 billion spending bill that funds Cabinet departments and dozens of federal agencies, including the Federal Communications Commission, for the current fiscal year.

Lawmakers, their aides and lobbyists reached agreement late last week, producing a compromise that, on balance, gave the edge to the National Association of Broadcasters.

But that didn’t mean EchoStar chairman and CEO Charlie Ergen came away empty-handed.

Congressional and industry sources said EchoStar secured permission to beam HDTV versions of ABC, CBS, NBC and Fox network programming to eligible subscribers around the country. But the number of households that would actually qualify for the service is much smaller than EchoStar had wanted.

Nevertheless, the Digital Television Coalition -- a group supported by EchoStar that claimed that 40 million households were in “digital white areas” not served by local TV stations -- claimed victory.

“This provision will provide relief to millions of television viewers -- particularly those in rural America -- who cannot receive their local ABC, NBC, CBS or Fox affiliate in digital,” the DTC said in a prepared statement.

Congress had to complete work this year on the Satellite Home Viewer Improvement Act because key provisions were due to expire Dec. 31. The new law is called the Satellite Home Viewer Extension Reauthorization Act.

“Passage of SHVERA will increase competition and consumer choice by both allowing satellite providers to continue to provide local and network broadcasts to viewers otherwise unable to receive local programming in their area, and to carry certain out-of-market signals in a comparable way to what cable operators are currently permitted to do,” House Energy and Commerce Committee chairman Joe Barton (R-Texas) said.

Text of the new legislation was not available Sunday.

There could be one snafu: According to published reports, House aides inserted a provision in the spending bill that would allow agents of the chairmen of the House and Senate Appropriations Committees to review private tax returns. The Senate quelled the uproar by dropping the tax provision and blocked sending the bill to the White House until the House did the same thing later this week.

The two-dish controversy erupted in January 2002, when federal law required EchoStar and DirecTV Inc. to carry every requesting local TV station in a market where they provided any local station.

The NAB branded the practice illegal and discriminatory, but the FCC, despite finding problems with EchoStar’s implementation of its two-dish service, did not ban it.

Losing at the FCC required the NAB to turn to Congress in search of statutory changes.

EchoStar offers local signals in about 150 markets, but customers in 38 of them need second dishes to view all of their local broadcasters.

EchoStar has said that complying with a two-dish ban within one year -- as House-passed legislation in July would have required -- would cost $100 million.

It’s not clear whether EchoStar will decide to discontinue local service in the two-dish markets or make the necessary modifications to comply with the new law.

A two-dish ban is something of a misnomer. The new law permits a two-dish requirement so long as all local stations are available on just one.

EchoStar and DirecTV may also offer all analog stations on one dish and all digital stations on another, sources said.

DirecTV does not require subscribers to obtain second dishes to view all local stations in a market.

“While we appreciate the bipartisan effort to pass legislation that considered the needs of diverse interests, EchoStar is disappointed that the bill inappropriately singles out EchoStar for unfair treatment with respect to channel positioning,” the company said in a prepared statement.

“The bill gives EchoStar only 18 months to eliminate its two-dish solution, while at the same time forcing us to wait up to three years to provide distant digital signals,” EchoStar added.

In other provisions, the new law extended for five years direct-broadcast satellite operators’ right to transmit ABC, NBC, CBS and Fox stations in New York and Los Angeles to subscribers around the country who can’t get same programming locally.

About 2 million DBS customers take distant-network-signal packages. DBS operators do not need retransmission consent to import network programming, but they do pay copyright royalties.

Similarly, the law extended for five years DBS operators’ right to sell superstations to any DBS subscriber, again without needing retransmission consent but with copyright-payment obligations.

Under the new law, the FCC has nine months to conduct a study on the impact of retransmission-consent, network-nonduplication, syndicated-exclusivity and sports-blackout rules on competition in the pay TV distribution market, with particular emphasis on rural cable systems, according to industry and congressional sources.

A congressional source said the National Cable & Telecommunications Association sought immediate statutory changes but had to settle for an FCC study.

For EchoStar, the digital-white-area provision was priority. Ergen has said local TV stations, especially in rural areas, had defaulted on their promise to blanket the country with HDTV content, slowing consumer purchase of HDTV sets and putting off indefinitely the time when broadcasters would surrender a big chunk of analog spectrum to the FCC.

“The forward-thinking digital-white-area provision will motivate local broadcasters to build their towers and broadcast at full power in order to serve their communities,” EchoStar said in a prepared statement.

“These changes will also help to accelerate the digital transition and ensure the return of the 700-megahertz spectrum to the government,” the company added.

Despite strong opposition from the NAB, Congress decided to allow DBS operators to offer network HDTV feeds to subscribers who currently qualify as unserved under analog-reception rules.

In a few years, the law permits DBS subscribers to prove eligibility for distant HDTV feeds if testing shows that they can’t get the HDTV programming locally, congressional and industry sources said.

There’s one big caveat with that provision: No testing is permitted if local digital-TV stations can’t provide a full-power signal due to factors outside of their control, such as interference coordination along the Canadian and Mexican borders and other regulatory issues, both local and national.

The law made sure local digital-TV stations are given priority over distant digital-network feeds. For example, DBS subscribers who sign up for local digital-TV signals would not qualify for distant HDTV signals.

And if DBS subscribers receive a distant HDTV package before DBS introduces local digital-TV service, they can keep the distant package, but only if they also buy the local digital package.

In an effort to address another NAB concern, Congress decided to impose time-zone restrictions on distant-HDTV-network subscribers.

A Senate source said a DBS subscriber on the West Coast who takes a distant HDTV network package is ineligible to purchase a similar package of digital-TV stations based in Eastern time zones.

That provision clamped down on time-shifting fans in California who purchase New York stations in order to watch ABC’s Nightline or CBS’ The Late Show with David Letterman at 8:30 p.m. instead of 11:30 p.m.