Distant-Net Subs Cut Off

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Washington— EchoStar Communications Corp. has been ordered by a federal court to cut off probably hundreds of thousands of customers around the country who have signed up for packages of ABC, NBC, CBS and Fox programming that originate on local stations in markets like New York and Los Angeles.

Satellite subscribers like distant signals because they offer time-shifted viewing of network fare, including popular shows such as Late Show With David Letterman. National Football League games unavailable locally are also popular with distant-network subscribers.

A three-judge panel of the U.S. Court of Appeals for the 11th Circuit found EchoStar's Dish Network was illegally providing distant-network signals to at least 630,000 ineligible homes, violating hundreds of TV stations' copyright protections.

Under federal law, satellite customers are barred from buying out-of-market network stations from EchoStar and DirecTV Inc. if they can rely on conventional rooftop antennas to watch their home-market stations.

The 11th Circuit panel found that EchoStar engaged in a “pattern and practice” of violating that standard and ordered a lower court to issue a nationwide permanent injunction barring EchoStar from selling distant-network signals.

The ruling, in the view of many, requires EchoStar to terminate distant-network service even to customers who had been legally receiving the programming.

The court's illegal-subscriber totals were several years old and probably stale. EchoStar, the court said, had 1.2 million distant-network subscribers, both legally and illegally served, in April 2002. Company spokeswoman Kathie Gonzalez declined to provide any subscriber data in connection with the court case.

Jimmy Schaeffler, senior financial and consulting analyst at The Carmel Group, said EchoStar will likely have to cut distant-network service to “hundreds of thousands [of subscribers. Whether or not it's millions, that's something probably only someone at EchoStar could judge.”

Janco Partners cable analyst Matt Harrigan said he thought the financial impact overall would be minimal.

EchoStar charges $5.99 a month for a distant network packing. Cutting off 630,000 customers would cost about $45 million in annual revenue and cutting off 1.2 million would cost $86 million.

EchoStar said it was disappointed. In recent years, it said, it had settled with hundreds of TV stations, “including all ABC, NBC and CBS owned-and-operated stations,” but was not able to reach settlement agreements with Fox Network or the companies owning the remaining stations. Fox is controlled by News Corp., as is satellite-TV rival DirecTV.

DirecTV, having settled with broadcasters a few years ago, was not included in the ruling.

The “Big Four” networks and their affiliates have been waging a court battle against EchoStar since 1998 in an effort to protect their copyrights. EchoStar could seek a stay, rehearing by the full 11th Circuit or file an appeal with the U.S. Supreme Court.

EchoStar could also turn the ruling to its political, if not legal, advantage by relying on angry customers to complain to Capitol Hill about their loss of service.

But the ruling affirmed “the importance of localism in television and vindicates an eight-year effort by TV broadcasters to stop EchoStar's blatant and massive abuse of copyright law,” said David Rehr, president of the National Association of Broadcasters, which represents hundreds of network affiliates.

The outcome could have been far worse for EchoStar. At times in the litigation, broadcasters pushed to have the courts ban EchoStar from providing local TV signals as the penalty for being a distant-signal renegade. Last week's court ruling did not address a local-signal ban as a remedy.

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