FCC Yields To DirecTV, Dish On HD Carriage

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Washington -- DirecTV and Dish Network have won major concessions from the Federal Communications Commission on the carriage of local TV signals in HD format following completion of broadcasters’ digital transition early next year, FCC and industry officials said Wednesday.

DirecTV and Dish Network struck a deal with the FCC that was far better than the HD carriage rules the FCC imposed on all cable operators, regardless of size, last September.

The five-member FCC did not announce the vote or release the text of the rules on Wednesday.

An FCC official said the vote was unanimous.

The National Association of Broadcasters, which did not return requests for comment, is probably going to be unhappy because the FCC plans to allow DirecTV and Dish to down convert broadcasters’ HD signals to a less pristine picture resolution for several years.

The satellite giants—which combined serve about 30 million pay-TV subscribers—convinced FCC officials that they lacked the channel capacity to provide every eligible station in HD immediately. They insisted that they needed several years to prepare for a full HD carriage requirement.

HD signals stress capacity because they take up much more bandwidth than digital signal transmitted at lower resolution.

The FCC’s HD rules for satellite were far more lenient than the ones originally proposed by FCC chairman Kevin Martin. He started off at full HD carriage in February 2009, coupled with a market-by-market waiver process.

Martin scuttled his original plan after DirecTV and Dish Network complained that it was draconian and damaging to their ability to compete with cable.

Instead, the FCC decided to give DirecTV and EchoStar until 2013 to carry all stations in HD within any market where they have elected to carry any station's signal in HD format.

The “carry one, carry all in HD” principle kicks in when a satellite company starts carrying local signals in HD. DirecTV’s decision to carry local TV signals in HD does not force Dish to do likewise in the same market.

All the FCC demanded was that DirecTV and Dish comply with its benchmarks.

For example, by Feb. 17, 2010, DirecTV and Dish Network need to provide full HD carriage in 15% of their HD markets. Dish Network has 35 HD markets today. If a 15% quota were in place today, EchoStar would have a “carry one, carry all in HD” obligation in just 5 markets.

The benchmark jumps to 30% in the second year, 60% in the third and 100% in the fourth.

Because the FCC didn’t specify the markets that had to be served, DirecTV and Dish Network are free to pursue a large-market strategy, which could keep rural consumers waiting a long time for their local TV signals in HD via satellite.

With regard to cable, the FCC imposed a much harsher regime on every cable operator without exception. The agency required cable carriage of TV signals in digital and analog formats for three years with respect to any station that demands cable carriage after Feb. 17, 2009.

The FCC also insisted that cable systems pass through HD feeds, potentially leading to triple carriage in some cases.

The FCC did exempt all-digital cable systems; but since so few are actually all-digital, the exemption was almost worthless.

In February, major cable TV programmers, including C-SPAN, Discovery Communications and The Weather Channel, sued the FCC in a federal appeals court over the digital TV station carriage mandates.

With respect to small cable systems—which made the same channel-crunch concerns as DirecTV and Dish Network—the FCC, at Martin's insistence, refused to show any flexibility. Martin would not accommodate even mom-and-pop cable companies with a blanket waiver to carry DTV “must carry” signals in analog only for a period of years.

Instead, these small cable outfits need to hire D.C. lawyers to file waivers at the FCC.

Martin explained his attitude last year when he told a House subcommittee that he thought the cable industry wanted to use the digital TV transition as an "excuse" to remove TV stations from their systems.

Cable never argued that. It said that as a legal matter, all cable operators had to do was carry DTV signals once and provide set-tops to requesting customers, just as customers needed to acquire analog TV sets to view local TV signals that the FCC forces cable to carry.

To assist with the DTV transition, the National Cable & Telecommunications Association volunteered in congressional testimony to comply with dual must carry for three years, coupled with an exemption for small cable systems.

DirecTV and Dish Network caught another big break from the FCC.

At least for the time being, if digital TV stations demand HD carriage, the satellite carriers are not require to provide a standard definition copy to customers that do not have HD set-top boxes. In others words, none of the dual must carry obligations that the FCC imposed on cable would apply to DirecTV and Dish.

The FCC will study DBS dual must carry in a further notice of proposed rulemaking, also adopted Tuesday night.

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