EchoStar Wins Reprieve

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A federal court in Atlanta ruled last Wednesday that EchoStar Communications Corp. is not immediately required to cut off hundreds of thousands of subscribers who have been illegally receiving out-of-town signals of ABC, NBC, CBS and Fox.

A three-judge panel of the U.S. Court of Appeals for the 11th
Circuit granted EchoStar a stay from a lower court ruling in June that in all likelihood would have put an end to viewing of distant network signals by a large number of EchoStar subscribers.

"We will not have to, in the third quarter, terminate subscribers who we think are, in fact, very legal subscribers," EchoStar chairman and CEO Charlie Ergen told Wall Street analysts during a conference call last Wednesday.

The two-page ruling was handed down by U.S. Circuit Judges Gerald Bard Tjoflat, Stanley F. Birch Jr., and Frank M. Hull. Under a lower court order, EchoStar had until Aug. 11 to cut off customers illegally receiving distant networks.

In April 2002, EchoStar had 1.8 million distant network subscribers. At trial in a Miami federal courtroom, EchoStar failed to demonstrate that even one of them was legal, U.S. Judge William P. Dimitrouleas ruled.

The 11th
Circuit stay marked another twist in a long-running feud between EchoStar and affiliates of the Big Four networks. Under federal law, DBS subscribers who can pick up local network affiliates with an off-air antenna are ineligible to receive distant signals via satellite. Local affiliates, fearing a loss of viewership and ad revenue, have fought hard to block DBS importation of distant signals.

Judge Dimitrouleas found that EchoStar had violated the law by signing up "hundreds of thousands" of illegal customers. The judge could have barred EchoStar from offering broadcast signals anywhere in the country, a move with potentially devastating consequences for EchoStar.

But saying such a remedy was extreme, the judge instead issued the injunction requiring EchoStar to cut off all illegal subscribers by last Monday.

As a result of the 11th
Circuit stay, EchoStar may continue to provide distant signals to the subscriber base the lower court judge considered illegal. In the stay order, the 11th
Circuit said it would hear EchoStar's appeal on an expedited basis.

"It's pleasing to fight a battle that we feel passionately about and have a higher court stay what we think is in part an erroneous decision down in Miami," Ergen said. National Association of Broadcasters spokesman Dennis Wharton said local TV affiliates expect to triumph in the end.

"We are heartened that the court decided to consider the appeal on a very expedited basis. We're confident the appeals court will sustain the trial court's injunction," Wharton said.

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