EchoStar Fights Cash-for-Carriage Demands


Washington -- How much cash will Charlie Ergen have to
cough up to carry local TV signals?

The answer, still several weeks away, might come not from
the marketplace, but from rulings handed down by the Federal Communications Commission.

Ergen, chairman and CEO of EchoStar Communications Corp.,
is providing local feeds of Fox Broadcasting Co., CBS Corp., NBC and ABC Inc. in 22
markets. Except for Fox, Ergen is doing so without the permission of the TV stations under
an exemption in new satellite-competition legislation that is to expire May 29.

Failure to obtain "retransmission consent" would
force Ergen to stop carrying the signals, perhaps triggering a consumer backlash that
could make all involved -- Congress, the FCC, EchoStar and the TV stations -- look bad.

"If we don't get retransmission consent on May 29, we
will have to turn off channels, and some consumers will be denied fully effective
competition to cable," EchoStar senior vice president and general counsel David
Moskowitz said last week.

EchoStar's direct-broadcast satellite competitor, DirecTV
Inc., is less concerned about the May 29 deadline.

DirecTV, which now serves 19 local TV markets, decided long
ago that it would not launch any local signals unless it had the stations' consent.
"If we don't have a retransmission agreement with the local affiliate in that market,
we made the decision not to air that station," DirecTV spokeswoman Gina McGee said.

In the new satellite law, Congress told the FCC to draft
rules ensuring fair bargaining between DBS and broadcasters. An FCC ruling is several
weeks away from announcement.

EchoStar is taking a hard line, insisting that broadcasters
can't demand money from DBS carriers if cable operators aren't paying cash for
retransmission consent. Broadcasters, meanwhile, said cash payments are a reasonable
outcome in a competitive marketplace.

"It's axiomatic that we can't provide effective
competition to cable if we have to pay 10, 20, 50 times what cable does for the same
programming," Moskowitz said. In talks with TV stations, he added EchoStar is being
asked to pay "exorbitant amounts of cash."

Although cable operators typically refuse to pay for local
TV signals, it is possible that those fees are implicit in the license fees charged by
cable networks affiliated with broadcasters, including ESPN (The Walt Disney Co., owner of
ABC) and MSNBC (General Electric Co., owner of NBC).

Moskowitz said EchoStar is carrying all of the
broadcaster-affiliated cable networks. Therefore, it would be unfair to force his company
to also pay cash for retransmitting the broadcasters' signals.

The National Association of Broadcasters, in comments filed
at the FCC, said the agency had no authority to limit TV stations' rights to seek money
from DBS carriers. The NAB said that if TV stations are unhappy with proposed DBS deals,
they are under no legal obligation to grant retransmission consent.

"It's ironic that Charlie Ergen, whose net worth is
now over $10 billion, refuses to recognize the value of local programming," NAB
spokesman Dennis Wharton said. "We believe the marketplace will resolve
retransmission-consent negotiations with EchoStar, just as they have with the cable
companies and DirecTV."

EchoStar's demands didn't stop at money. The company told
the FCC that the new law also prohibits TV stations from demanding carriage of their
digital-TV signals and from using retransmission consent in one market to obtain carriage
for other commonly owned stations.

In the law, Congress laid out a two-part test. On the one
hand, it required TV stations to bargain "in good faith" and barred them from
signing exclusive agreements until Jan. 1, 2006. On the other hand, the law provided that
carriage deals with DBS could have "different terms and conditions" from cable
deals if they were based on "competitive marketplace considerations."

In a Jan. 27 letter to FCC chairman William Kennard that
emerged last week, key House and Senate lawmakers decided to back the NAB by saying that
cash payments for retransmission consent were not inconsistent with requirements to
bargain in good faith.

Nine lawmakers signed the letter, including Senate
Judiciary Committee chairman Orrin Hatch (R-Utah), Sen. Ted Stevens (R-Alaska), Sen.
Patrick Leahy (D-Vt.), House Judiciary Committee chairman Tom Bliley (R-Va.) and House
Telecommunications Subcommittee chairman Billy Tauzin (R-La.).

"We did not intend that the FCC use the 'good-faith'
provision to second-guess the pricing decisions of those individuals engaged in
free-market negotiations," the letter said. "We did not envision a laundry list
of responsibilities or a cookbook of regulations for market-by-market price

A broadcasting source said the letter emerged in reaction
to comments Time Warner Cable filed in the rulemaking.

Time Warner said the FCC should consider it a violation of
the good-faith standard for a TV station to use retransmission consent to demand -- either
from a cable or DBS operator -- carriage of cable networks on a
"take-it-or-leave-it" basis.

Moskowitz called the Capitol Hill letter an
"outrageous" attempt by a few members of Congress to influence the FCC's
rulemaking. "It doesn't represent the consensus of all of Congress, nor even all of
the committees that were involved in drafting the legislation," he added.

Tauzin's signature on the pro-broadcaster letter seemed
strange because he has routinely supported the DBS industry over the past decade.

Tauzin "wanted to send a clear signal to the FCC not
to get any ideas about trying to set rates, terms or conditions," spokesman Ken
Johnson said.