Ergen Grades Congress D On SHVA

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Washington -- If Charlie Ergen were a high-school teacher,
not many of his students would make it to college. He is one tough grader.

Ergen, chairman and CEO of EchoStar Communications Corp.,
bitterly denounced the satellite bill that passed the House two weeks ago before running
into obstacles in the Senate.

Under a report card prepared by EchoStar as the bill was
taking its final form, Ergen wound up giving Congress a "D" average for its
efforts -- an abysmal review that has cost him support on Capitol Hill.

"People are saying that Charlie is burning a lot of
bridges, and that [EchoStar's] reaction is way, way over the top," a Capitol Hill
source said. "[EchoStar] saying such unrestrained bad things about it has left a sour
taste in the mouths of a lot of conferees and their staffs."

As brash in the world of politics as he is in the world of
business, Ergen was saying that the bill was bad for consumers while its legion of
supporters in Congress, like Rep. Tom Bliley (R-Va.), were promising real cable
competition by Christmas.

"The truth of the matter is that we think on balance,
if they looked at it objectively, they'd sort of like the bill," a Capitol Hill
source said.

In the end, Congress decided to ignore Ergen and codify a
compromise struck by DirecTV Inc. and the National Association of Broadcasters.

Ergen's current problems on Capitol Hill stem from the fact
that many view his grading system as downright unfair.

In some cases, he didn't even award grades for things
Congress included in the bill at EchoStar's request -- for example, authorization to
provide dish owners with their local TV signals.

Senate Judiciary Committee chairman Orrin Hatch (R-Utah) --
who claimed that Ergen "signed off" on the bill -- shrugs his shoulders every
time he's told that EchoStar thinks the bill is lousy.

"You can't please everybody on the bill because
everybody would like it written exactly their way. So it's a classic compromise of trying
to bring everybody together and to help the consumers," said Hatch, who used last
week to clear away the remaining roadblocks.

A few issues illustrated the view of some that Ergen was
too tough on the bill's author.

On retransmission consent for local signals, Ergen gave the
bill an "F." Why? Because Ergen's position was that there ought to be no
retransmission consent at all. Congress split the difference between the NAB and DirecTV
by prohibiting exclusivity but allowing TV stations to charge direct-broadcast satellite
companies more than cable operators if doing so is justified by marketplace
considerations.

Another example is must-carry. In the report card, Ergen
said the most pro-consumer option was no must-carry. Pressured by the cable and broadcast
industries, Congress agreed to postpone full must-carry until Jan. 1, 2002. That decision
caused Ergen to award Congress an "F."

The third flunking grade he handed down came with regard to
the so-called signal-strength test. Under current law, households that receive grade-B
signals using conventional rooftop antennas are ineligible to receive distant network
signals.

Ergen said the test is archaic, denying distant-signal
access to homes that cannot receive clear off-air pictures. Congress decided to keep the
grade-B test with instructions to the Federal Communications Commission to study the issue
for one year and return with recommendations on alternatives.

With respect to retransmission consent for distant signals
and the treatment of dish owners who lost distant network signals under a court
injunction, Ergen was less demanding.

He awarded the bill a "C" for not requiring
retransmission consent for distant network signals and superstations. He withheld higher
marks because reducing network and superstation copyright fees by 45 percent and 30
percent, respectively, was not bold enough.

The highest grade he gave out -- a "B" -- was for
the decision to restore distant network service to thousands of dish owners.

Congress would have received an "A" from Ergen
had it restored service to dish owners living closest to TV towers -- a proposition that
was anathema to broadcasters.

As noted by one Capitol Hill aide, the bill would have
performed much better in the report card if Ergen had expanded its scope.

Ergen failed to grade Congress for creating a new
compulsory license for satellite delivery of local TV signals; for ending the 90-day
waiting period when former cable subscribers buy distant network signals via satellite;
for extending the distant network compulsory license for five years; and for refusing to
phase out distant networks in markets that can obtain local signals via satellite.

"They want things that are beneficial to them --
abolition of the 90-day provision, reduction of the [copyright] rate, the grandfather of
all of these grade-B subscribers, local-into-local, delay must-carry -- then he wants to
be able to trash the bill," a Capitol Hill aide said. "They want to have their
cake and eat it, too.

Karen Watson, EchoStar's top Washington lobbyist, said the
Capitol Hill aide touted provisions that were noncontroversial.

"We want things that are beneficial to the consumer,
not to any one industry. They gave us a broadcaster-protection bill," she said.
"They barely achieved the bare minimum for promoting competition to cable."

But Ergen has least one ally: Sen. John McCain (R-Ariz.).
McCain, a main sponsor of the bill, would end up rejecting his own creation because of
changes made by the 18-member House-Senate panel that drafted the final version.

McCain, one of the conferees, called the six-month
retransmission-consent phase-in "anti-competitive," fearing that EchoStar would
either drop signals if no deals were reached or pay too much to networks to avoid a
consumer backlash when signals were dropped.

"It's truly unfortunate that we didn't work to help
the consumer in the ways the original legislation passed by the House and Senate
intended," McCain said.

A Capitol Hill source said McCain's rejection of the bill
was a surprise, and his criticisms hurt. "Most of the conferees are sure disappointed
by where Sen. McCain came out," the source added.

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