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Cable, DBS Fan Must-Carry Flames

10/10/1999 8:00 PM Eastern

Washington -- Lawmakers trying to finalize satellitelegislation got hit from both sides last week on the issue of mandatory carriage of localTV signals by direct-broadcast satellite carriers.

The cable industry urged Congress not to back away fromplans to require DBS carriers to carry all local TV stations, while the satellite playerswere pulling in the opposite direction.

National Cable Television Association president RobertSachs said in an Oct. 1 letter to Senate Judiciary Committee chairman Orrin Hatch(R-Utah), "It would cause great concern to our industry" if the must-carryprovisions were watered down.

Sachs said the cable industry has lived with must-carry for30 years. To let DBS provide less than a full complement of signals, he added, "wouldcreate a serious competitive imbalance among multichannel-video distributors."

Three days later, Hatch heard from the DBS side in a letterfrom EchoStar Communications Corp. and the National Rural Telecommunications Cooperative,which resells DirecTV Inc. service.

In the letter, EchoStar chairman Charlie Ergen and NRTCpresident Bob Phillips said must-carry rules should be relaxed because the legislation asit exists would codify a "digital divide" that would deny rural markets theability to receive local TV signals via satellite.

"'Must-carry' requirements must bere-examined," Ergen and Phillips said.

Not to be outdone, DirecTV penned its own letter to Hatch,which was largely a response to the NCTA's analysis of the must-carry issue.

DirecTV president Eddy Hartenstein said the NCTA'sreason for pressing for enactment of full must-carry was to confine DBS local-signalservice to a limited number of markets.

"[The] NCTA has an interest in seeing local-into-localservice offered in as few markets as possible because cable operators know that a fullycompetitive DBS service is a real threat to their monopoly status," Hartenstein said.

Two weeks ago, Hatch became chairman of the 18-memberHouse-Senate panel that is trying to write a single bill that would allow DBS carriers toprovide local TV signals throughout the entire local market for the first time.

Hatch wants to conclude the negotiations as quickly aspossible, revamping the Satellite Home Viewer Act.

The cable industry agreed to support the legislation (H.R.1554 and S. 247), provided that DBS carriers were required to carry all signals in amarket.

Congress responded by mandating full must-carry, but notuntil Jan. 1, 2002 -- a phase-in designed to accommodate DBS' channel-capacitylimitations.

But now, EchoStar and the NRTC are making a last-minutepush to change the compromise.

They want the 2002 date postponed indefinitely, claimingthat they can't serve rural markets if they chew up channel capacity by offeringevery TV signal in the large markets. On prior occasions, Ergen has called for nomust-carry until a DBS provider has 15 percent market share.

"DBS holds the greatest promise of any extanttechnology to deliver to all of America the full range of telecommunications technology,but there is a very real threat of an urban/rural divide if viewing choices remain limitedand costly," Ergen and Phillips said.

In his letter, Sachs said the cable industry was firm about"inclusion of a date-certain, full must-carry requirement" because DBS shouldnot enjoy too many regulatory advantages over cable.

For example, he noted, a DBS carrier is obligated to carryall local signals only to the extent that it elects to offer any local signals at all.Cable operators, meanwhile, can't sell subscribers Home Box Office or Cable NewsNetwork unless they buy the broadcast basic tier first.

"The conferees should reject any attempt to furtherextend the must-carry effective date or reduce the scope of the satellite must-carryprovision to something less than 'full' must-carry, or to effectively do so bydelegating such authority to the FCC [Federal Communications Commission]," Sachssaid.

Hatch ordered congressional staff to begin work on a finaldraft. One cable-industry lawyer said it was unlikely that a final bill would remove theJan. 1, 2002, date. "I don't believe there is major interest in substantialrevision to must-carry," the lawyer said.

Robert Kaimowitz, a DBS analyst for ING Barings Furman SelzLLC, said he didn't view must-carry in a negative light. Instead, he felt that itwould force DBS to add enough capacity to carry every local TV signal and furtherchallenge the dominance of the cable industry.

"I think must-carry will wind up being positive forthe satellite industry. It's going to force the DBS companies to launch spot-beamsatellites," Kaimowitz said.

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