Dish Starts Cutting Signals

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Washington— EchoStar Communications said Friday it would terminate the delivery of distant ABC, CBS, NBC and Fox signals to 900,000 Dish Network customers by day’s end. But the broadcasters, angered by the satellite service’s actions, have gone to court, accusing EchoStar of crafting a business deal designed to circumvent the court-ordered shutoff.

“Everyone will be turned off today if they haven’t been already. We are meeting the deadline,” EchoStar director of corporate communications Kathie Gonzalez said.

But on Wednesday, direct-broadcast satellite provider EchoStar announced it would lease a satellite transponder to National Programming Service LLC, an Indianapolis-based provider of satellite programming to eight- and 10-foot C-band dish owners for more than 20 years. NPS said it would begin marketing a package that includes ABC, CBS, NBC and Fox signals to EchoStar customers.

NPS CEO Michael Mountford — in separate letters to members of Congress and broadcast law offices — announced his plan to use the satellite capacity to offer distant-network signals to EchoStar customers who would be legally eligible to subscribe if they had not been covered by the injunction.

“These subscribers will become our customers and be able to regain their network stations in a hassle-free manner,” Mountford said in the undated letter to members of Congress.

NPS — with call-center and back-office staff in place — is ready to sign up customers immediately, said Chuck Hewitt, an NPS consultant and former president of the Satellite Broadcasting and Communications Association.

A day after the NPS deal was disclosed, TV stations aligned with ABC, CBS, NBC and Fox returned to the U.S. Judge in Florida who issued the permanent injunction with the Dec. 1 effective date.

The stations claimed the EchoStar-NPS deal was “a transparent sham” to evade the injunction and “an act of contempt.”

In a reply, EchoStar explained that NPS was an independent company that agreed in an arm’s-length transaction to pay $150,000 a month for the opportunity to provide distant network signals to EchoStar subscribers who were cut off.

NPS’s distant-signal package, called “All American Direct,” would not require subscribers to buy any programming from EchoStar, and EchoStar customers would not be automatically converted to the NPS service, EchoStar said.

“It is not a handoff,” Hewitt said, adding that NPS would compete in the free market with DirecTV to acquire EchoStar’s former distant-network subscribers.

Satellite subscribers may buy distant-network signals — programming that originates on stations in other markets, usually New York and Los Angeles — if they can’t use an antenna to receive local stations. The courts slapped EchoStar with an injunction after finding the company cheated by selling to hundreds of thousands of illegal customers.

The central question before U.S. Judge William Dimitrouleas is whether the EchoStar-NPS deal is consistent with the terms of his injunction issued Oct. 20, which applies to “those persons in active concert or participation” with EchoStar.

“EchoStar’s scheme with NPS is flatly barred by the permanent injunction,” the broadcasters told the court.

EchoStar, in response, argued that the terms of the transponder lease agreement gave NPS total control over the programming delivered and that NPS wasn’t required to provide distant signals.

“A court cannot enjoin the world at large,” EchoStar said. “NPS … is, and cannot be, bound by the permanent injunction.”

EchoStar charged $5.99 monthly for a distant signal package. The cutoff will cost the company about $65 million in annual revenue, not including revenue from the NPS deal.

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