FCC Lets Broadcasters Dun DBS for Cash

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Washington -- When a TV station sits down at the bargaining
table with a satellite carrier, it now has the green light to say two magic words: Pay me.

In new rules, the Federal Communications Commission made
clear it won't stop broadcasters from demanding cash from direct-broadcast satellite
companies during retransmission-consent talks.

Negotiations have been going on for months. DirecTV Inc.
has deals with ABC, NBC and Fox, but none with CBS. EchoStar Communications Corp. has a
deal with 22 Fox stations, but will not reveal the status of talks with the other
networks.

"We continue to pursue retransmission deals and we
remain hopeful that the broadcasters will make fair deals," said EchoStar spokeswoman
Judianne Atencio.

DirecTV and EchoStar have until May 29 to obtain
retransmission consent or they must drop the signals, perhaps triggering a nasty response
from DBS subscribers that could come back to haunt the FCC and Congress.

The FCC said it hoped TV stations would permit DBS carriage
past May 29 to protect consumers as retransmission-consent talks continued.

In a lengthy discussion of its role under a new
satellite-competition law, the FCC said Congress wanted TV stations and DBS carriers to
reach private deals with as little regulatory guidance as possible.

"The statute does not appear to contemplate an
intrusive role for the commission with regard to retransmission consent," the FCC
said in its March 16 order.

Instead, the FCC adopted a host of procedural guidelines --
some specific and some general -- that require TV-station owners to bargain in good faith.

But the FCC said it would not pre-empt TV stations from
seeking cash or other forms of compensation, including carriage for its digital signals
and affiliated cable networks.

The emphasis on process rather than substance suited
broadcasters just fine, but worried the DBS industry.

"The fact that local-to-local deals are being made all
over the country validates that the marketplace is working," said Dennis Wharton,
spokesman for the National Association of Broadcasters.

But Satellite Broadcasting and Communications Association
senior vice president Andrew Paul said, "It's really hard to determine how
procedural-type rules are going to accomplish reasonable retransmission consent for
satellite companies."

In comments leading up to the ruling, EchoStar urged the
FCC's to ban cash demands and block TV stations from increasing the fees for those
affiliated cable networks that it already carries as a backdoor method of obtaining cash
for their local TV signals. But the FCC rejected that request.

"This seems to us precisely the judgment that Congress
generally intended the parties to resolve through their own interactions and through the
efforts of each to advance its own economic self-interest," the FCC said.

The imposition of a cash-for-carriage ban, the FCC said,
might have made it harder for the parties to reach agreement.

Congress ordered broadcasters to bargain in good faith and
prohibited them from signing exclusive retransmission-consent deals.

The terms and conditions of retransmission-consent deals
could vary if based on "competitive marketplace considerations," Congress also
said.

Relying on published reports, EchoStar claimed that because
cable operators do not pay cash to TV stations, DBS carriers shouldn't have to. Cash from
DBS but not cable would violate the "competitive marketplace considerations"
mandate of the law, EchoStar said.

"We are disappointed the commission missed an
opportunity to provide a specific road map as to what does and does not constitute
competitive marketplace considerations," EchoStar's Atencio said. "That road map
would have gone a long way toward minimizing the chances that retransmission disputes
would arise."

In its procedural rules, the FCC said a TV station was
required to show up at the bargaining table, but not obligated to sign any deals. It said
a TV station could not propose "take-it-or-leave-it" terms, but could issue a
"blanket rejection" of a DBS offer, provided the broadcaster offer an
explanation for its decision.

"You can't lay your offer on the table and walk out
and say, 'Have a nice day,' " an FCC source said.

In a concession to DBS, the FCC said it would be willing to
review a TV station's conduct based on "the totality of the circumstance" in
instances where the DBS carrier could not pinpoint a procedural violation.

The rules take effect after publication in the Federal
Register. Typically, FCC rules don't take effect until 30 days after their publication.

The FCC established a complaint process. Although the law
requires TV stations to bargain in good faith, the FCC said the DBS carrier had the legal
burden of demonstrating a violation of its rules.

The FCC said it would not award damages, but reminded
parties that it had the authority to impose fines. DBS carriers face statutory fines of
$25,000 per station, per day for carrying a local TV station without consent.

EchoStar is currently serving 26 markets with local TV
signals, while DirecTV serves 23. Both companies said they cover about 50 percent of U.S.
TV households.

EchoStar said it has retransmission consent for about
one-third of the stations and expects to close deals with another third. Talks with the
remaining one-third, however, are still in progress.

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