Cable, DBS Fan Must-Carry Flames

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

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

National Cable Television Association president Robert
Sachs 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-carry
provisions were watered down.

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

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

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

"'Must-carry' requirements must be
re-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's
reason for pressing for enactment of full must-carry was to confine DBS local-signal
service to a limited number of markets.

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

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

Hatch wants to conclude the negotiations as quickly as
possible, 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 a
market.

Congress responded by mandating full must-carry, but not
until Jan. 1, 2002 -- a phase-in designed to accommodate DBS' channel-capacity
limitations.

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

They want the 2002 date postponed indefinitely, claiming
that they can't serve rural markets if they chew up channel capacity by offering
every TV signal in the large markets. On prior occasions, Ergen has called for no
must-carry until a DBS provider has 15 percent market share.

"DBS holds the greatest promise of any extant
technology 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 limited
and 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 should
not enjoy too many regulatory advantages over cable.

For example, he noted, a DBS carrier is obligated to carry
all 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 News
Network unless they buy the broadcast basic tier first.

"The conferees should reject any attempt to further
extend the must-carry effective date or reduce the scope of the satellite must-carry
provision to something less than 'full' must-carry, or to effectively do so by
delegating such authority to the FCC [Federal Communications Commission]," Sachs
said.

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

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

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

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