Law in Hand, DBS Ops Eye Local Push

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Washington -- Following a three-year lobbying battle on
Capitol Hill, President Clinton signed satellite-TV-competition legislation into law last
Monday, giving direct-broadcast satellite providers access to local television signals.

At a chilly Rose Garden ceremony, Clinton signed the bill
at 12:38 p.m. The satellite legislation was included in a giant $400 billion spending
bill. In remarks before signing the bill, Clinton did not mention the satellite
provisions.

The law allows DBS providers to offer any local TV signal
for six months. After that, they must have permission from the stations.

The Federal Communications Commission has until Jan. 13 to
launch -- and one year to complete -- a rulemaking governing retransmission-consent deals
between DBS providers and broadcasters.

Among other things, the rules are to ensure that TV
stations bargain in good faith and do not enter into exclusive deals. An FCC source said
implementing the good-faith mandate is likely to be complicated.

DirecTV Inc. president Eddy Hartenstein told CNNfn last
week that the company had already signed retransmission-consent agreements with three of
the four major broadcast networks' station groups. DirecTV had earlier announced a deal
with Fox Broadcasting Co. A spokesman for DirecTV would not disclose the other two
networks, but he said announcements would likely follow early this week.

One day after Clinton signed the bill, DirecTV hit the
ground running, with ads in local newspapers in New York and Los Angeles geared toward
attracting new subscribers with the local channels. Additional markets will be added soon.

EchoStar Communications Corp. last week began offering
local channels in 13 cities on a wide-scale basis.

Pending favorable retransmission negotiations, EchoStar
also plans to add local channels in 20 of the following 30 markets: Philadelphia; Detroit;
Houston; Seattle; Cleveland; Minneapolis; Tampa, Fla.; Sacramento, Calif.; St. Louis;
Orlando, Fla.; Baltimore; Portland, Ore.; Indianapolis; San Diego; Hartford, Conn.;
Charlotte, N.C.; Raleigh, N.C.; Cincinnati; Nashville, Tenn.; Milwaukee; Columbus, Ohio;
Kansas City, Mo.; Roanoke, Va.; Oklahoma City; Albuquerque, N.M.; Las Vegas; Memphis,
Tenn.; New Orleans; Jacksonville, Fla.; and San Antonio.

DirecTV said last week that it would give current customers
in New York and Los Angeles free local broadcast service for 30 days. The package
typically sells for $5.99 per month, including CBS, ABC, NBC and Fox affiliates, as well
as a national PBS feed.

Must-carry rules don't take effect until Jan. 1, 2002.

Cable executives pointed to the lack of additional local
channels as one reason why cable still offers advantages over DBS, even where DirecTV or
EchoStar are able to deliver local network feeds.

"What we've been saying all along is that you still
need cable to get all of the local programming that's important to you," Cox
Communications Inc. director of product development Lynne Elander said.

The Yankee Group analyst Bruce Leichtman thinks cable
operators should stop running negative ads, "But I think the exact opposite will
happen."

Rather than eliminating any references to local channels in
competitive advertising, Cox plans to play up the local programming that DBS still doesn't
have, such as local PBS feeds, independents and especially regional news channels that are
available only on cable.

Elander added that local-channel availability is only one
competitive advantage that cable promotes over DBS. Others include free service calls,
on-time installation guarantees, free additional outlets for televisions that don't
require set-top boxes and freedom from product obsolescence.

"One of the hidden stories here is that for many
customers, you have to buy a new dish or a second dish" to access local channels over
satellite, Elander said.

EchoStar's on-air "Charlie Chat" tonight (Dec. 6)
between chairman Charles Ergen and subscribers is expected to detail a hardware-upgrade
program for current Dish Network customers who want to add local channels.

Despite the advantages that cable claims, DBS continues to
outscore cable in consumer polls.

In the December issue of Consumer Reports, DBS
providers outscored cable in overall customer satisfaction and on specific product
attributes including picture quality, sound quality, channel selection, value and customer
service. Digital-cable customers are more satisfied with their service than their analog
counterparts, the report said.

"Certainly, we would have loved it if the cover of the
magazine had said, 'Digital cable rules,'" Elander said. "The good news is that
digital cable is seen as consumer-friendly."

Bob Davis, managing director for Davis Consulting, thinks
cable operators should react to concerns about competition from DBS by addressing
customer-service issues that crop up in studies like the ones from Consumer Reports
and J.D. Power and Associates.

"We still hear stories every day about missed
appointments for installation," Davis added.

The timing of recently announced cable-rate hikes plays
right into the hands of the pro-DBS publicity from the Consumer Reports cover story
and local-to-local news. "You have many cable operators announcing Jan. 1 rate
hikes," Davis said, "at a time when DBS is lowering hardware costs and keeping
programming prices stable."

MediaOne Group Inc. spokesman Steve Lang said there are
"many, many things that distinguish cable services from satellite," including
lower cost of installation, bundled packages with high-speed Internet access and telephone
and upcoming services such as video-on-demand.

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