DBS Challenges Must-Carry Rules

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The direct-broadcast satellite industry has opened a new front in its legal
war against the mandatory carriage of local TV signals.

On Friday, EchoStar Communications Corp. filed suit against the Federal
Communications Commission over 'must-carry' rules the agency adopted in
November. EchoStar filed in the U.S. Court of Appeals for the 10th District in
Colorado.

The Satellite Broadcasting & Communications Association filed a nearly
identical suit the same day in the U.S. Court of Appeals for the Fourth Circuit
in Richmond, Va.

'We are challenging the rules because we believe they unconstitutionally
impinge on satellite providers' freedom of speech and editorial judgment,' SBCA
lawyer Andy Wright said.

EchoStar is the country's second-largest DBS provider with about 4.5 million
subscribers. The SBCA, based in Alexandria, Va., is the industry's chief trade
association, representing both EchoStar and DirecTV Inc., the No. 1 DBS company,
with about 9.5 million subscribers.

In 1999, Congress passed a law requiring EchoStar and DirecTV to carry all
local TV signals in a market to the extent that they carry any. The 'carry one,
carry all' mandate starts Jan. 1, 2002.

The SBCA, in a suit joined by EchoStar and DirecTV, challenged the
constitutionality of the DBS must-carry law in September in U.S. District Court
for the Eastern District of Virginia.

U.S. Judge James Cacheris is scheduled to hear arguments Feb. 9 on a motion
to dismiss filed by the National Association of Broadcasters and the Department
of Justice.

The DBS industry claimed that must-carry violates the First Amendment because
local TV signals they don't want to carry occupy channels in short supply that
could be used to serve additional markets with just the signals of the four
major networks or to provide consumers with more cable networks.

The industry is also asserting a violation of the Fifth Amendment, which
prohibits the taking of private property without just compensation. Under the
must-carry law, DBS carriers are barred from demanding payment from local TV
stations in exchange for carriage.

In the suits filed Friday, the SBCA and EchoStar raised the same
constitutional concerns about the FCC's rules, which tracked closely with the
directions established by Congress in the Satellite Home Viewer Improvement
Act.

EchoStar said the FCC rules also violated the Administrative Procedure Act,
claiming that the agency's actions were arbitrary, capricious and an abuse of
discretion.

A broadcast-industry spokesman said he expects the court to uphold the
constitutionality of DBS must-carry.

'The lawsuits are without merit, and we expect the courts to dismiss them
summarily,' NAB spokesman Dennis Wharton said.

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