Feud Kills McCains DBS Effort

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Washington — The effort by Senate Commerce Committee
chairman John McCain (R-Ariz.) to permit direct-broadcast satellite operators to deliver
local-TV signals collapsed last week.

McCain had planned to vote the bill out of committee last
Thursday, and to attach it to copyright legislation sponsored by Senate Judiciary
Committee chairman Orrin Hatch (R-Utah), which was also scheduled for an Oct. 1 vote.

Hatch kept his side of the bargain, as Judiciary approved
S. 1720 unanimously and virtually unchanged. McCain, however, refused to call the roll
when it became obvious that talks between the broadcast and satellite industries were
going nowhere.

Congress is scheduled to adjourn Oct. 9., but senior Senate
aides said last week that the target adjournment date could slip to Oct. 16, buying McCain
a little more time to pull off a miracle.

In a statement, McCain expressed disappointment with
broadcasters and satellite companies, saying that cable operators would benefit from the
delay of DBS entry into local markets.

The breakdown was the result of a fight over the
appropriate legal standard in two provisions that McCain aides added last week.

The first concerned a rulemaking by the Federal
Communications Commission to determine the scope of local-TV markets for the purpose of
delineating who with a home dish may legally receive distant-network signals via
satellite.

To satisfy demands by the National Association of
Broadcasters that Congress must limit the FCC's power to shrink a TV station's audience,
McCain's bill ordered the FCC to rely on local-market boundaries and the grade-B contour
maps predicting signal strength that are preferred by the broadcast industry.

McCain's bill said the FCC could abandon the NAB-favored
approach if the satellite industry made a "clear and convincing showing" that a
different standard for measuring signal strength "would better serve the public
interest."

The second provision at issue dealt with application of
network-nonduplication, sports-blackout and syndicated-exclusivity rules to DBS Jan. 1,
2002. Again, the bill contained a strong presumption that the rules would apply unless DBS
operators made a "clear and convincing" case that they should not.

Charles Hewitt, president of the Satellite Broadcasting and
Communications Association, said the "clear and convincing" standard was too
high to meet in both instances.

"The changes in the language that occurred today [mean
that] we oppose the bill," Hewitt said.

"It's clear that [DBS wants] to shrink the grade-B
area so that they can increase the importation of distant signals," NAB spokesman
Dennis Wharton said. "And if localism and free, over-the-air television are to
survive, preservation of grade B is essential."

Broadcasters and satellite operators have been battling
over local-market definitions for months.

On Feb. 28, 1999, about 800,000 dish owners are set to lose
their distant CBS and Fox signals. Broadcasters won a preliminary injunction to enforce
the Satellite Home Viewer Act's ban on the sale of distant-network signals to dish-owners
who can receive local affiliates with conventional rooftop antennae.

McCain is concerned that many of the 800,000 dish-owners
will switch to cable for their local signals, one month before the FCC's authority to
regulate expanded-basic tiers sunsets.

McCain said cable's continued dominance and pricing power
would spur Congress to launch "yet another repressive and ultimately misguided regime
of cable regulation."

Leo J. Hindery Jr., Tele-Communications Inc.'s president
and chief operating officer, repeated his industry's view that DBS should be allowed to
offer local signals.

"I think that the DTH [direct-to-home] industry is
entitled to pursue that issue. We have stood down," Hindery said.

McCain's bill would have delayed the imposition of
must-carry on DBS until Jan. 1, 2002.

Hatch's bill, a copyright measure, authorizes DBS operators
to retransmit local signals into local markets without having to pay copyright fees.

The bill also trims the copyright fees that DBS services
pay for distant-network signals from 27 cents per subscriber, per month, to 15 cents, and
for superstations from 27 cents to 19 cents. It carries no must-carry provisions, which
could kill the bill, since broadcasters would object.

This was all that EchoStar Communications Corp. needed to
execute its strategy of competing with cable by being the first DBS operator to offer
local TV signals and hundreds of cable networks in discrete or combined packages.

EchoStar chairman Charles Ergen said the issues that took
down McCain's bill were not germane to his company's business plan.

"Our issues are to provide local-into-local and
competition to cable," he said. "But we are not going to break ranks with our
industry over something that clearly is so important to the rest of our industry."

Ergen is showing more loyalty to the SBCA than the
association showed to him when he unveiled his local-TV-signal plan and began lobbying
Congress for legislative changes to make it a reality. At the time, the SBCA said its
focus was on the repeal of a large increase in copyright fees to distribute superstations
and distant-network signals.

A McCain aide said it was possible that the bill could be
revived, but the impetus would have to come from the industries. MCN

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