News

EchoStar Starts Local Feeds

1/11/1998 7:00 PM Eastern

Las Vegas -- Direct-broadcast satellite company EchoStar
Communications Corp. demonstrated its local-channels capability at the Consumer
Electronics Show here last week, with live feeds from its first six local markets.

The company has uplinked ABC, CBS, NBC and Fox affiliates
from New York; Boston; Washington, D.C.; Chicago; Atlanta; and Dallas to its new EchoStar
3 satellite, and it has started selling the second dish needed to receive those local
channels direct to consumers. The product will soon be available to dealers who want to
market it themselves.

Starting in mid-January, local-channel packages will be
available for $4.99 per month to Dish Network subscribers within those designated markets
who cannot receive acceptable broadcast signals.

EchoStar chairman Charlie Ergen said he believes that the
company's plan to make digitally encoded local channels available to as many as 50
percent of all U.S. homes will help to drive distribution of its product into top national
consumer-electronics chains such as Circuit City and Best Buy.

And it won't hurt that EchoStar has a second
name-brand manufacturer, Philips Consumer Electronics Inc., in its corner. The companies
announced at the CES that Philips will distribute three Dish Network hardware models to
its current retail network starting this spring. Initial models will be manufactured by
EchoStar. By the end of the year, Philips will build its own Dish Network systems, which
should help to alleviate some of EchoStar's product-shortage problems in time for
next holiday's selling season.

A deal with JVC helped Dish Network to gain distribution in
Sears Roebuck & Co. stores last fall.

Customers who buy a second dish for the local channels will
find that local is not all of the programming available on EchoStar III. Already, the new
bird broadcasts religious programming that has migrated from EchoStar I and II, as well as
some business and foreign-language channels. EchoStar has set aside spectrum for
educational channels to meet the DBS public-service requirements, once they're
established.

And starting in March, EchoStar will offer new data
services through a special personal computer card to be marketed jointly by EchoStar and
Adaptec. A TV set-top box for interactive services is expected to be announced later in
the year.

This summer, Dish Network will begin broadcasting Bloomberg
Interactive Television to PCs with the satellite receiver card. With the service,
subscribers can receive data in video and text forms at the same time. Features include
customizable video-news clips, headlines, weather and financial information.

Mark Jackson, senior vice president of satellite services
for EchoStar, said other interactive services will be announced over the next few months.
Each data service will be sold a la carte. EchoStar has not yet decided whether to bundle
the data services into packages, Jackson said.

Even with all of the other programming deals in the works,
local channels are clearly the cornerstone of EchoStar's competitive strategy, at
least for 1998.

Ergen said that in the past three years, 40 million people
went into stores looking to buy DBS, but they decided against it when they found that they
couldn't receive local signals.

Meanwhile, EchoStar is seeking clearance from copyright
officials for its local-markets plan.

Current law allows satellite carriers to offer network
signals to dish owners who are considered 'unserved households,' which means
that they can't get a local-network signal with an antenna and that they haven't
subscribed to cable within 90 days.

Typically, unserved households are dish owners who live in
rural areas, who can't get cable, or who receive a poor-quality off-air network
signal.

Specifically, EchoStar on Dec. 23 asked the U.S. Copyright
Office to reinterpret the Satellite Home Viewer Act's definition of an 'unserved
household' so that local markets would be open to DBS retransmission of local-network
signals. Under EchoStar's proposal, an 'unserved household' would become
one that is eligible to take a DBS carrier's local service, even if the household
could get the same signals via antenna.

Before subscribing to EchoStar's local-TV-signal
service, the household would still have to discontinue its cable subscription for 90 days,
said EchoStar counsel Pantelis Michalopoulos.

At least initially, EchoStar does not plan to market
local-channel packages to homes within white areas that can receive a good off-air signal.

U.S. Satellite Broadcasting's president and CEO,
Stanley E. Hubbard, said that would not leave a large percentage of U.S. homes eligible
for the service. Hubbard and Ergen disagreed over what percentage of U.S. households would
fall outside of white areas. Ergen estimated that it would be 'more than 4
percent,' although he couldn't say how much more.

But even 4 percent of television households translates into
4 million homes -- not a small market to a company the size of EchoStar, which just
surpassed the 1 million-subscriber mark.

'Time will tell if this was a good business for
us,' said Ergen. 'We're not afraid to fail. We're not afraid to try
new things.'

While Ergen's DBS competitors have criticized the
local-channel plan as expensive and impractical, it is winning support from others.

The move could also help cable operators: Lawmakers could
be less inclined to freeze rates if cable faced stronger competition.

In a statement last week, Rep. Billy Tauzin (R-La.)
heralded EchoStar's plan as 'good news for consumers and for those of us who are
committed to unleashing competitive forces in the marketplace. The answer to rising cable
rates is increased competition, not increased regulation.'

'We realized years ago that the only way to be a true
alternative to cable was to deliver local channels,' Ergen said.

According to Tauzin, EchoStar should not be restricted by
must-carry rules -- at least not yet. 'Simply put,' his statement read,
'the company does not have the bandwidth nor the technological capability to
accomplish that goal at this time.'

EchoStar will soon receive widespread support from
broadcasters, Ergen predicted. But he expects others to continue to criticize the plan.

'We could have handed out $1,000 bills on the show
floor and people would have found something to criticize,' he said.

Ted Hearn contributed to this story.

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