Bill Slams DirecTV But Helps EchoStar

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Washington -- DirecTV Inc. lost an important lobbying
skirmish with broadcasters last week, as two House committees unanimously approved bills
that would allow direct-broadcast satellite carriers to sell local-TV signals to home-dish
owners for the first time.

With cable-rate deregulation set to occur March 31, key
House lawmakers said they were eager to see the legislation become law as quickly as
possible, hoping that DBS carriers that provide local signals will check rising cable
rates.

"At its core, this legislation is about promoting
competition to cable," said Rep. Billy Tauzin (R-La.), chairman of the House
Telecommunications Subcommittee.

Over the next few weeks, staff from the House Commerce and
Judiciary committees will be charged with reconciling the two versions so that lawmakers
can take a unified product to the House floor. Similar bills that cleared Senate
committees are also awaiting a vote by the full Senate.

Under the House Judiciary bill, thousands of DirecTV
customers who rely on out-of-town feeds of Fox, ABC, NBC and CBS could lose access to the
networks.

The bill (H.R. 1027) would require DirecTV to immediately
terminate distant-network service in markets served by at least two local signals
delivered via satellite. The provision takes effect one year from the date of enactment.

"This provision has to be omitted from the bill,"
a DirecTV source said. "This is a provision that disenfranchises these
distant-network-signal subscribers and basically makes the equipment that they have
purchased useless for the purpose of network programming."

The provision was a setback for DirecTV -- which has about
2.5 million distant-network customers, about one-half of its overall base -- because the
DBS company has no plans to use its current DBS spectrum and hardware to provide local
signals.

EchoStar Communications Corp. offers a local-signal package
to a narrow group of households in 13 markets, following current law.

EchoStar's stock price hit record highs last week
following reports of the bills, closing at $67.13 per share last Thursday.

Although DirecTV officials have been quietly admitting
behind the scenes that they will revisit plans for local-signal delivery once favorable
legislation is passed, analysts believe that it would take some time for the company to
introduce such a service.

The National Association of Broadcasters, strongly backed
by The Walt Disney Co., insisted on the sunset provision partly in anger over the costly
court fight to stop DirecTV from illegally selling distant-network signals to dish
customers who should be getting the signals with off-air antennas.

However, Preston Padden, Disney's top Washington
lobbyist, said he sold the provision to Judiciary members as a tool for jump-starting DBS
provision of local signals.

"I think that they felt that this is a much better way
to incentivize people to do local-into-local," Padden said.

Rep. Howard Berman (D-Calif.), who co-sponsored the
distant-signal-sunset provision, said he is willing to give it a second look, suggesting
that basing the cutoff on just two signals might be unfair.

"It sounds sort of arbitrary. It's something that
we need to look at over the next few weeks," Berman said.

Both bills force DBS carriers that elect to provide any
local signals in a market to provide all signals starting Jan. 1, 2002 -- a phase-in that
the cable industry reluctantly acceded to.

In a lobbying victory for EchoStar, the Commerce bill (H.R.
851) includes a provision that prohibits local TV stations from signing exclusive
retransmission-consent agreements with cable operators.

A cable-industry source said the provision was unnecessary
because Federal Communications Commission rules prohibit exclusive retransmission-consent
deals. But EchoStar chairman and CEO Charles Ergen told a Senate panel that he wanted the
provision just to be sure that there were no impediments to his local-into-local strategy.

The Commerce bill would also require satellite carriers to
obtain retransmission consent for TV signals sent to distant markets. That provision --
which takes effect seven months from enactment -- might force DBS carriers to pay
retransmission-consent fees on top of copyright royalties.

The Commerce bill also includes a provision added last week
by voice vote that would require the National Telecommunications and Information
Administration to prepare a report studying "the technological capability,
availability and affordability of a broadcast-only basic tier of cable service."

Tauzin said many cable consumers are unaware that cable
operators sell basic tiers. He suggested that legislation might be necessary to force
cable operators to alert subscribers to the availability of a "skinny tier,"
which they could then combine with a DBS service if that is more attractive than the
package of satellite signals offered by cable.

Rep. Michael Oxley (R-Ohio) sounded a note of caution,
however, saying that many small cable operators offer only one tier of service, and they
may not have the financial strength to offer two.

"I think that the next step could potentially be
mandating a one-size-fits-all, price-regulated, broadcast-only basic tier, and I think
that there are some shortfalls to that," Oxley said.

Monica Hogan contributed to this story.

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