Washington— Direct-broadcast satellite carriers may offer local broadcast TV signals on an à la carte basis, the Federal Communications Commission said last week.
The agency's order was intended to clarify previously adopted local TV-station carriage rules as the DBS industry prepares for the onset of full must-carry in January.
The FCC decision was a setback for public broadcasters, independent stations and affiliates of small networks, which fear the à la carte option will limit their penetration in DBS households.
Today, EchoStar Communications Corp. and DirecTV Inc. distribute ABC, NBC, Fox, and CBS in a package, which in some markets also includes a PBS outlet and a strong independent station.
But in less than four months — when DBS carriers will be required to carry all local stations in any local-into-local market — some small stations fear they could be harmed if sold by DBS at à la carte prices unattractive to consumers.
"If [DBS] went à la carte, [consumers] perhaps could be steered in that way," said Bob Branson, vice president and general counsel of the Association of Local Television Stations (ALTV), which represents 135 stations, including independents and affiliates of UPN and The WB. ALTV had asked the FCC to ban à la carte.
In another important ruling addressing a recent controversy, the FCC said DBS carriers were not entitled to summarily reject must-carry requests by local TV stations.
In the unanimous ruling, the FCC said DBS carriers had to have a reasonable basis for rejecting must-carry requests, and were barred from requiring that TV stations demonstrate at the outset that they are entitled to must-carry.
The FCC's second holding came in response to EchoStar's recent move to reject dozens of must-carry requests chiefly on the basis that the stations failed to demonstrate that they could deliver good-quality signals to EchoStar's local-signal reception facility.
"This is not a valid reason for rejecting a request for mandatory carriage," the FCC said, without mentioning EchoStar by name.
An EchoStar executive acknowledged that the FCC imposes a higher standard of proof on DBS carriers when they decide to reject a must-carry request from a local TV station.
"We can still say no [to must-carry requests], but the commission has clarified the degree to which we have to document our basis for saying no," said EchoStar director of business and legal affairs David Goodfriend.
A broadcasting industry source voiced support for the FCC's ruling on the EchoStar dispute.
The FCC ruling, which settled numerous other issues in the rules, was contained in a 40-page order. None of the five FCC members issued a statement.
In the DBS must-carry decision, the FCC said carriers must provide all local stations either on an à la carte basis or as one package. To promote consumer choice, the FCC said DBS carriers were allowed to provide both options in a market.
The FCC said the relevant law — the Satellite Home Viewer Improvement Act of 1999 — did not mandate the establishment of a broadcast basic tier for DBS, as the 1992 Cable Act did for regulated cable operators.
On Jan. 1, DBS carriers are required to carry, upon request, all local TV stations in markets where they have elected to carry even one local TV station under what's sometimes called the "carry one, carry all" mandate.
The DBS industry is fighting the constitutionality of that statutory regime. Oral arguments in the case are set for Sept. 25 before a panel of the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va.
As part of that appeal, the National Association of Broadcasters is asking the court to overturn the FCC's à la carte carriage policies as originally adopted on Nov. 30, 2000.
In stating that DBS carriers could provide consumers the one broadcast tier and an à la carte option, the FCC said its rules would prevent the kind of discriminatory pricing that would effectively deter consumers from buying some local TV signals.
Having said that, the FCC declared that DBS carriers that opt for à la carte do not have to charge the same price for each channel. It said per-channel prices must be comparable, not identical. The agency plans to evaluate price-discrimination complaints on a case-by-case basis.
"Although the prices need not be the same, they should be within a nondiscriminatory range," the FCC said, adding that pricing decisions should be related to "relevant economic factors."
In another twist on the pricing front, the FCC said that DBS carriers were free to price the TV station package below the total price a consumer would pay to buy all the TV stations individually. Consumers who purchased the discounted package or opted to buy just a few stations would benefit under either scenario, perhaps because the stations they didn't buy could be received with an off-air antenna, the FCC said.
On the other hand, the FCC said it would not allow DBS carriers to offer multiple tiers of local TV stations in a market, nor would it allow satellite providers to offer one tier with a few TV stations and the remainder of the TV stations à la carte.
"Allowing satellite carriers to offer some stations as a package and others on an à la carte basis could operate as a deterrent to the purchase of certain local stations without furthering consumer choice," the FCC said.