News

SATELLITE BILL MAY BE DOA

11/14/1999 7:00 PM Eastern

Washington -- A bill to reform the Satellite Home Viewer
Act was on the road to the White House last week when it hit an axle-cracking pothole dug
by Sen. Phil Gramm (R-Texas).

Gramm, catching nearly everyone off guard, announced that
he would block the bill as long as the $1.25 billion loan-guarantee program to promote
rural access to local TV signals remained in the legislation (H.R. 1554, S. 247).

"I can guarantee you that there will be no bill in
this millennium if it has this provision in it," said Gramm, a fiscal conservative
and chairman of the Senate Banking Committee.

Gramm's effort was cheered on by small cable
operators, which complained that the loan program was designed to subsidize
direct-broadcast satellite against cable operators that serve rural markets.

"This is clearly a money grab by the satellite
industry. This is a handout to big business," said Matt Polka, president of the
American Cable Association, which includes 280 cable operators serving 2.3 million
subscribers.

Complicating matters further was a late-hour attempt by
America Online Inc. to remove a provision that would ban online-service providers from
utilizing cable's copyright license to retransmit local broadcast signals.

AOL was upset that the provision would slam the door on its
ability to provide television service. House Commerce Committee chairman Thomas Bliley
(R-Va.) wants to remove the provision if Gramm's opposition provides the opportunity.

The cable and broadcast industries -- joining the Motion
Picture Association of America and virtually every major sports league -- sent a letter
Nov. 11 to all House and Senate members protesting AOL's campaign. Marybeth Peters,
the U.S. register of copyrights, also opposed AOL's effort in a letter to Congress
last Thursday.

The industry group said the license was never intended for
the global distribution of broadcast content over the Internet, stressing that automatic
Internet distribution would expose copyright owners to massive piracy and local TV
stations to an invasion of imported signals offering competing sports games and movies.

With Congress expected to recess for the year this week,
Gramm used that deadline to force Senate leaders to take his threat seriously that the
satellite bill would die unless his demands were met.

There's another deadline, too. On Dec. 31, DBS
companies lose the right to transmit distant network signals and superstations -- a cutoff
no one on Capitol Hill wants to see occur.

Sen. Conrad Burns (R-Mont.) -- the sponsor of the rural
provision, who vowed to overcome Gramm's objections -- quickly backed down after
obtaining a commitment from Gramm to hold hearings on the issue next year in the Banking
Committee.

Gramm's determination even forced Senate Judiciary
Committee chairman Orrin Hatch (R-Utah) to back down, despite Hatch's overt support
for the Burns provision.

But a Burns aide said late last week that the Burns-Gramm
deal was off because congressional leaders could not agree to advance the bill without the
rural TV provision.

Gramm's attack on the bill came one day after the
House passed it 411-8, capping a three-year effort to give DBS carriers the legal
authority to provide dish owners with their local TV signals.

House passage occurred after broadcasters and DirecTV Inc.
reached a compromise on a few key issues over the previous weekend. EchoStar
Communications Corp. -- the No. 2 DBS provider, with 3.1 million subscribers -- said it
was excluded from the bargaining table and blasted the deal.

Under the compromise, DBS carriers can begin offering local
TV signals immediately, but that authority will terminate in six months for signals not
covered by retransmission-consent deals. The six-month grace period is a one-time event:
After its expiration, DBS carriers must obtain retransmission consent prior to providing
any local signals.

Because the retransmission-consent provisions failed to
include language strictly prohibiting broadcasters from charging DBS carriers more than
what they charge cable operators, EchoStar blasted the exclusion as
"anti-competitive."

EchoStar, a company source said, considered the six-month
grace period effectively useless because it would not want to anger customers by dropping
local signals in six months if retransmission-consent talks stalled.

The compromise would also allow DBS subscribers who
can't get off-air TV signals to import two packages of the four major networks, even
if dish owners opt to buy local TV signals.

A provision requiring DBS carriers to provide free antennas
to dish owners who lost distant network signals under a court injunction was deleted.

While EchoStar bemoaned the outcome, supporters of the
legislation said the measure contained many benefits for DBS.

Must-carry was put off until Jan. 1, 2002; copyright fees
for superstations and distant network signals were cut 30 percent and 45 percent,
respectively; and former cable subscribers no longer have to wait 90 days before buying
distant network signals from DBS.

Also, thousands of dish owners who lost distant network
service prior to Oct. 31, 1999, would have service restored.

"The net result is a fair and equitable balance
between two industries," said Jim May, executive vice president of government
relations at the National Association of Broadcasters. "I don't think either one
of us comes away as slam-dunk winners, nor do I think either of us comes away as slum-dunk
losers."

Broadcasters wanted immediate must-carry, and they wanted
distant network signals terminated in markets served by local signals, but they got
neither. "That was our original position, and it became clear to us that this was
something the conference was not going to agree to," May said.

There was a lot of uncertainty late last week about how to
push the bill over the goal line.

Two options were under active consideration. One was to
return the bill to the 18-member House-Senate conference committee with instructions to
delete the $1.25 billion rural TV program. The second was for the Senate to introduce a
bill minus the rural provision, pass it, then send it to the House for a final vote before
seeking President Clinton's signature.

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