Distant Signal Dust-Up Back to Court

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Washington — Rupert Murdoch's Fox Broadcasting last Thursday asked a federal judge in Florida to block EchoStar Communications Corp. from offering ABC, CBS, NBC and Fox programming to hundreds of thousands of viewers around the country.

If Fox's legal move pays off, EchoStar subscribers that lose access might turn to DirecTV Inc. for their network programming. Murdoch's News Corp. owns a controlling stake in DirecTV.

At issue is the delivery of “distant network” programming. Satellite carriers are allowed to beam the Big Four signals from New York and Los Angeles and sell them to customers around the country, but those consumers are ineligible if they can pick up their local affiliates over-the-air, via antenna.

COURT MOVES

A federal appeals court in Atlanta found that EchoStar sold the programming to hundreds of thousands of ineligible subscribers. It then ordered a lower court to issue a permanent injunction that would ban EchoStar from providing distant-network signals to anyone, even legally eligible customers.

The draconian scope of an injunction caught the attention of several House lawmakers, who expressed concern about the political fallout when thousands of legally eligible consumers lose their distant signals.

Last Monday, EchoStar announced a settlement with the independent affiliates of ABC, CBS, NBC and Fox, hoping the deal would moot issuance of the injunction. But the Fox network and its owned-and-operated local stations, both controlled by News Corp., refused to go along in an effort to bring the 8-year-old case to a close.

“We won the court case. Why would we settle? Winners don't normally settle,” News Corp. vice president of community affairs and communications Andrew Butcher said. “They have to change their behavior.”

The TV stations sued EchoStar because when local viewers watch distant network programming, they hurt local ratings on which advertising rates are based.

But the vast majority of broadcasters yielded to the wishes of Congress and reached a deal with hard-bargaining EchoStar chairman and CEO Charlie Ergen.

“We hope that the court will accept and implement this solution. Broadcasters remain committed to minimizing disruption to viewers and NAB will work to ensure consumers are aware of their many options to receive the broadcast network programming,” said David Rehr, president of the National Association of Broadcasters

Fox's filing last Thursday sets up a key ruling by U.S. Judge William Dimitrouleas, who sits in Fort Lauderdale. In the view of some, the judge could ignore the settlement and issue the injunction or issue an injunction with regard only to Fox programming.

In its motion, Fox claimed that Dimitrouleas had only one legal option: the “issuance of a nationwide permanent injunction” that would stop EchoStar from providing distant network service involving any of the Big Four networks.

“We are not even sure the settlement is valid. The court is not in a position to accept a settlement,” Butcher said.

Dimitrouleas, in an order released last Monday, gave EchoStar until Sept. 12 to tell the court why “it should not immediately enter a nationwide permanent injunction.”

The case is not about EchoStar's ability to provide local TV stations within their home markets.

As part of the settlement, EchoStar agreed to expand local service from 165 to 175 markets by Dec. 31. The company also agreed to pay the TV stations $100 million.

LOCAL OPTIONS

EchoStar, which has 12 million subscribers, said that less than 1 million customers purchase distant-network signals. Subscribers that lose distant network service in many cases could rely on EchoStar's local signal package. About 95% of U.S. households should be capable of viewing their local TV stations via EchoStar's satellites by the end of the year.

Butcher dismissed reports that Murdoch refused to settle because an injunction could help DirecTV swipe some EchoStar subscribers.

“That part is just ridiculous because we had been consistent in our position for five years before we owned part of DirecTV,” Butcher said.

The litigation with EchoStar began in 1998. News Corp. won approval from the Federal Communications Commission to take operational control of DirecTV in December 2003.

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