Washington -- EchoStar Communications Corp. is complaining
to the Federal Communications Commission that some TV stations are making cash-payment
demands for retransmission consent, which Congress allegedly banned in
satellite-competition legislation passed last year.
EchoStar said stations in Missouri, Texas, Washington,
North Carolina, Michigan and New Mexico are seeking 50 cents per subscriber, per month.
In a Feb. 11 FCC filing, EchoStar argued that cash demands
are illegal because "broadcasters have not requested and do not receive any cash
payment in exchange for their retransmission consent from cable operators."
Under the new law, broadcasters are required to bargain in
"good faith," the exact meaning of which the FCC in considering in a rulemaking
expected to be released in a few weeks or sooner. The law did not proscribe cash if such
payments were based on "competitive marketplace considerations."
But EchoStar said none of the stations, which it did not
name in the FCC filing, have offered proof that a 50-cent fee was market-based.
The No. 2 direct-broadcast satellite carrier, with 3.4
million subscribers, EchoStar is providing local TV signals in 23 cities and charging
$4.99 per month for the four major networks. It has announced retransmission-consent deals
only with Fox Broadcasting Co.
Without retransmission consent for CBS Corp., ABC Inc. and
NBC signals, EchoStar will be forced to drop them May 29, perhaps igniting a consumer
backlash on Capitol Hill.
EchoStar director of government relations Karen Watson said
the company declined to provide the FCC with the names of the TV stations in order to keep
the discussions flowing.
"We considered it, but the prudent thing to do at this
time was not to name names. We are trying to get retransmission consent, and we are not
trying to antagonize the broadcasters," she said.
Broadcasters claimed that the burden will be
EchoStar's if retransmission-consent talks collapse.
"It's ironic that [EchoStar chairman and CEO]
Charlie Ergen, the $10 billion man, does not think local broadcasters should be fairly
compensated for the value we bring to viewers," National Association of Broadcasters
spokesman Dennis Wharton said.
DirecTV Inc. -- the No. 1 DBS provider, with 8 million
subscribers -- is offering the four major TV networks in 21 markets. The company has
retransmission consent for the owned-and-operated stations of ABC, NBC and Fox, but not
CBS, DirecTV spokesman Bob Marsocci said.
In the FCC filing, EchoStar said TV stations are making
other demands contrary to law. It said stations are linking retransmission consent to an
EchoStar pledge to stop importing distant network signals into the stations' markets.
And some stations are trying to prevent EchoStar from beaming their signals into distant
markets despite EchoStar's possession of a copyright license to do so.
"EchoStar's experience to date strongly indicates
that local broadcasters are attempting to leverage their significant market power to gain
an anti-competitive advantage. The [FCC] must not permit the broadcasters to do so,"
EchoStar has maintained that the only fair outcome is zero
payment for local TV signals. In support of that view, it cited trade-magazine reports as
evidence that cable has refused to pay cash to TV stations -- a claim confirmed by at
least one large MSO.
"We have never felt that cash was something we would
be willing to pay. That does not mean that it's illegal for the broadcasters to ask
for it," Time Warner Cable spokesman Michael Luftman said.
Some argued that broadcasters that own cable networks
effectively collect retransmission-consent fees through their cable-network-license fees,
but Luftman disagreed.
"I don't think that is true. The license fees are
based on a lot of factors," he said. "We would certainly disagree that there is
a buried or implicit [retransmission-consent] fee that goes through the back door in a
Jimmy Schaeffler, a DBS analyst with The Carmel Group, said
he viewed the 50-cent demand as not unreasonable, yet he understood Ergen's aversion
to paying cash.
"Breaking the math out, it doesn't shock me. It
doesn't sound really all that outrageous. On the other hand, if you are Charlie
Ergen, you are looking at every single freaking penny," Schaeffler said.
Marsocci wouldn't say whether DirecTV is paying cash.
"We don't disclose terms, conditions or agreements. Suffice it to say, it is
similar to cable's agreements," he said, adding that ABC granted retransmission
consent in exchange for carriage of SoapNet, a network that will rerun ABC's soap
Schaeffler said he expects that DirecTV will wind up with
better deals than EchoStar because DirecTV has more twice the subscribers and its
corporate parent, General Motors Corp., is one of broadcasting's largest advertisers.
But in the end, Schaeffler said, TV stations would be smart
to treat both carriers fairly.
"You just never know who is going to be your partner
these days. It wouldn't surprise me for an instant to see the satellite broadcasters
start buying local stations. There is a natural alliance there now," he added.