FCC Mulls Need for DBS Digital Must-Carry

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Washington-The Federal Communications Commission is pondering whether direct-broadcast satellite operators need to carry both the analog and digital TV signals of local broadcasters.

The FCC floated the idea in a June 9 proposed rulemaking meant to implement a law that requires DBS carriers to carry all analog local-TV signals in markets where they opt to retransmit at least one TV station, starting in 2002.

The agency did not announce any tentative conclusion. Instead, it asked a series of questions after noting that the law-the Satellite Home Viewer Improvement Act (SHVIA)-stipulates that were the FCC to apply digital must-carry to cable, it must apply "comparable" requirements to DBS.

Although the FCC launched its cable digital must-carry rulemaking in July 1998, agency officials have declined to issue any orders.

On at least two occasions this year, FCC chairman William Kennard has said he is in no rush to impose digital must-carry on cable.

The FCC said it was necessary to seek comment on DBS digital must-carry issues because the satellite industry did not supply any comments in the cable digital must-carry rulemaking-an indication the FCC believes cable and DBS have overlapping policy concerns on that front.

Broadcasters are required to return their analog licenses at the end of 2006. If more than 15 percent of households in a market do not have the necessary digital-TV receiving equipment, however, local stations may retain both licenses.

Many observers maintain that the high cost of digital-TV sets and the digital set-top rollout curve suggest the 2006 deadline is unrealistic.

In its questions, the FCC suggested that it wants to move cautiously on DBS digital must-carry for several reasons, including the possibility that it might impede the satellite industry's ability to compete head-to-head with cable.

For instance, the FCC sought comments on whether DBS digital must-carry might "limit the number of markets satellite carriers can serve with analog broadcast signals alone."

Along those same lines, the FCC said it wanted to know if DBS carriers would have "to drop existing non-broadcast programming to accommodate digital TV signals."

Neither DirecTV Inc. nor EchoStar Communications Corp. would reveal their positions on DBS digital must-carry.

The National Association of Broadcasters, the TV stations' trade group, has strongly supported the imposition of digital must-carry on cable systems.

Asked about DBS digital must-carry, NAB spokesman Dennis Wharton said, "We are reviewing the issue and we will file comments at the appropriate time." Initial comments are due July 7.

The cable industry, which has fought digital must-carry during the analog-to-digital transition, believes satellite carriers are not obligated to carry both signals.

"We think there is no double dose of must-carry under the statute," said Dan Brenner, senior vice president of law and regulatory policy at the National Cable Television Association.

Nevertheless, Brenner said cable should not have to shoulder the burden of digital must-carry alone, should the FCC impose that requirement.

"It is inconceivable that a dual requirement would apply to cable but not to DBS," he added.

The FCC sidestepped to some extent the constitutional questions associated with DBS must-carry, whether analog, digital or both.

In the report accompanying the SHVIA law, the FCC noted that Congress said DBS must-carry provisions "neither implicate nor violate the First Amendment."

That's because must-carry applies only to the extent that DBS elects to offer local-TV signals in a market and to the extent that satellite carriers offer local-TV signals pursuant to the copyright license that allows free local-TV retransmissions.

Were a DBS provider to carry just one local-TV signal in a market after 2000 without reliance upon the copyright license-meaning that the DBS carrier had negotiated copyright clearances with the station and its programmers-then must-carry would not apply, the report said.

"Rather than requiring carriage of stations in the manner of cable's mandated duty, [SHVIA] allows a satellite carrier to choose whether to incur the must-carry obligation in a particular market in exchange for the benefits of the local [copyright] license," the SHVIA report said.

The report went on to say that tying must-carry to the free copyright license was "a matter of legislative grace," akin to financial subsidies that a court should review under the most favorable standard to the government.

The cable industry does not have the same legal ability as DBS to bypass must-carry requirements.

"Must-carry applies to any cable system by virtue of its operation as a cable system," said Bill Roberts, senior attorney in the U.S. Copyright Office. "The satellite must-carry obligation is only triggered when you start carrying broadcast stations in a market."

Cable industry sources said Congress created the DBS must-carry regime in that manner to improve the government's chances of withstanding a court challenge from the DBS industry.

Last week, a spokesman for the Satellite Broadcasting and Communications Association, which has hinted at possible court action, said it was still studying the DBS must-carry law and a decision on court action was not imminent.

EchoStar chairman Charlie Ergen last month said his company would not go to court to strike down DBS must-carry.

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