Capitol Forges Ahead with Local TV on Bird

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Raleigh, N.C.-based Capitol Broadcasting Company Inc. has
been lobbying Washington lately, keeping Congress abreast of its plans to offer all local
television stations to direct-broadcast satellite customers in each television market
across the country.

Dianne Smith, special counsel for the broadcaster and
project manager for Capitol Broadcasting's Local TV on Satellite spin-off, said the
company backs provisions in separate bills by Rep. Howard Coble (R-N.C.) and Sen. Orrin
Hatch (R-Utah), which would require must-carry of DBS companies that send any local
signals within a local market.

"Our primary focus now is on getting
legislation," said Smith. "We hope it's passed within the 105th
Congress," before officials return home in October.

But it's not yet clear whether must-carry requirements
would ultimately be included in legislation that would allow for satellite delivery of
local broadcast signals or whether Congress will pass such laws this year. In the past two
weeks, DBS must-carry requirements have come into question by Rep. Billy Tauzin (R-La.),
and Sen. John McCain (R-Ariz.).

In addition, the Federal Trade Commission said in a recent
filing with the U.S. Copyright Office that consumers would benefit from permitting DBS
operators to retransmit local channels in their home markets, arguing that must-carry
rules should not apply to DBS.

EchoStar Communications Corp. has already started offering
local signals to qualified customers in select markets in the eastern half of the country,
although service is typically limited to the top five network stations in a market. The
DBS provider plans to launch a fourth satellite within the next several weeks that would
allow it to offer local signals in additional markets on the West Coast.

Capitol does not plan to launch a satellite for its service
until favorable legislation is passed.

"It's illegal to do this without the
legislation," Smith said.

In the meantime, Capitol Broadcasting's Local TV on
Satellite is moving forward to ensure that it will be ready to act aggressively once
Congress backs its plan. The company has enlisted Babcock & Brown to help raise
financing. And the spin-off will move into new office space, also in Raleigh, on June 1.
Smith expects the company to hire several people at the executive level at that time.

Once the company is given the go-ahead from Washington, it
will take another two years or more before the service is up and running.

"It takes that long to build a satellite," Smith
said.

Smith would not comment on the status of talks with
satellite companies regarding how Capitol would acquire the Ka-band satellite spectrum
needed for the Local TV plan, other than to say, "we're confident we'd get
the spectrum."

The company does not plan to launch the satellite -- or the
business -- without commitments from a certain number of broadcast stations and DBS
companies, although Smith would not give those numbers.

"We've had good reception to our plan,"
Smith said, "because we're including all stations in all markets. We came at
this from the broadcaster's standpoint. We want local signals in as many homes as
possible with as many choices as possible."

Some Washington officials believe that two years is too
long to constrain DBS competition by prohibiting companies like EchoStar from delivering
local signals. EchoStar has said that it does not have the technology available today to
comply with must-carry in every market.

"We see ourselves as a national solution,"
countered Smith, "and that's what DBS needs. They need to make a statement once
and for all that 'yes, you can get your local signals with DBS, just like you can
with cable.'"

Analysts praised Capitol's plan, but wondered if it
can pull it off.

Steve Blum, president of Tellus Venture Associates, a
California-based DBS consultants company, said, "The Capitol plan is a good one, but
it requires a large degree of cooperation that there might not be an attention span
for" now, as broadcasters are focusing on their conversion to digital.

"It's tough getting broadcasters to agree on
anything," Blum said. "It's like herding cats."

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