DirecTV Follows EchoStars Local Lead


Washington -- EchoStar Communications Corp. chairman
Charles Ergen -- father of the idea that satellite-TV services should deliver local
broadcast signals -- said he wasn't surprised that DirecTV Inc. decided to follow

"I think it's great," he said last week.
"It's taken a while, but we always expected it."

DirecTV -- the largest direct-broadcast satellite company,
with about 5 million subscribers -- unveiled plans to offer millions of homes access to
their local TV signals via satellite, after claiming for years that it had no plans to use
its spectrum in that fashion.

DirecTV said its rollout was contingent on the passage of
enabling legislation and on Federal Communications Commission permission for the company
to buy 11 frequencies at 119 degrees west longitude from Tempo Satellite Inc.

DBS analyst Jimmy Schaeffler, chairman and CEO of The
Carmel Group, said DirecTV was attempting to pressure Congress to pass legislation that is
hospitable to the DBS industry and to put EchoStar on notice that it would not have the
local-into-local market to itself.

"They are trying to hedge their bets," Schaeffler
said. "There's an old saying: A wise man changes his mind often, a fool

Congress is working on legislation that would authorize DBS
carriers to retransmit local TV signals for the first time, hoping to increase competition
to cable. The House of Representatives has already passed a bill, while Senate action is

Upon passage of the law, DirecTV said it could immediately
begin serving the New York and Los Angeles markets without requiring its subscribers to
buy any new equipment.

DirecTV intends to use the Tempo license to roll out
local-into-local service in two-dozen markets -- which the company declined to name --
reaching about 50 million households.

"We are obviously going to focus on the largest
markets in the country," DirecTV spokesman Bob Marsocci said.

Marsocci added that existing DirecTV subscribers outside of
the New York and Los Angeles markets would need to buy new dishes in order to receive the
company's local-signal package.

"Your existing dish would not capture that
signal," he said.

Although he saw many political benefits to DirecTV's
latest move, Ergen took a swipe at his competitor for jumping on the local-into-local
bandwagon late in the game.

"I think if you're getting run out of town, you
get in front of it to make it look like a parade," he said.

Ergen added that his ability to offer local signals would
cut cable rates.

"The day when I can go do local channels … the
next price change from the cable company will be down, not up," Ergen said before
heading to Capitol Hill to lobby lawmakers.

Ergen met with reporters last week to complain about two
features in the House bill.

He said he was worried that the legislation would allow
cable operators to use their market power to obtain better retransmission-consent deals
from the major networks than he could.

"We are very concerned that this bill not become a
revenue-generation bill for broadcasters. If they want to charge cable $1 [per subscriber]
per channel, we're happy to pay $1. We don't want to be in a situation where
cable gets it for free," Ergen said.

National Association of Broadcasters spokesman Dennis
Wharton said Ergen's fears were misplaced because the networks want to maximize

"It's silly for broadcasters not to want as many
eyeballs as possible watching their programming. That's the only way we make
money," Wharton said.

Ergen also complained that the bill would require him to
offer all local signals in a market if he elects to provide even one, effective Jan. 1,

He said the full must-carry mandate would limit the number
of markets he could serve and frustrate the goal of greater cable competition.

Ergen added that EchoStar should not be forced to comply
with full must-carry until it has reached 15 percent-penetration in a market.

Now that his company has local-market ambitions, Marsocci
said, DirecTV agreed with Ergen that must-carry would take up spectrum and restrict the
number of markets DirecTV could serve with local TV signals.

"The rationale for the application of must-carry to
cable is absent in the DBS arena," Marsocci added.

Ergen said he had "no current intention" to
challenge the constitutionality of a DBS must-carry mandate, but he suggested that cable
networks that get dropped from EchoStar's platform just might go to court.

"We believe [must-carry] was a squeaker on cable, and
it should be a no-brainer on DBS," C-SPAN vice president and general counsel Bruce
Collins said.