Local-Signal Delivery Fuels EchoStar Debate

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EchoStar Communication Corp.'s entry into local-signaldelivery this month has sparked a heated debate over a series of related issues.

These include must-carry rules, retransmission consent andwhether a direct-broadcast satellite company has the authority to delivernetwork-affiliate signals to served as well as unserved homes within a given market.

According to those who follow the actions of EchoStarchairman Charlie Ergen, creating a controversy was all part of the plan.

'He's going to start a huge grass-rootsuproar,' said Mickey Alpert, president of Washington-based communications consultantsAlpert & Associates. 'It's a great tactic.'

Ergen is betting that consumer demand for competition tocable and for digital-quality local channels will be enough to bring broadcasters andgovernment officials around to his side.

Already, the National Association of Broadcasters, the U.S.Copyright Office, the Federal Communications Commission and some members of Congress aredevoting time to issues concerning delivery of local signals via DBS. If EchoStar had notannounced this month that it is now delivering the top four local network-affiliatesignals in New York; Chicago; Washington, D.C.; Atlanta; Dallas; and Boston, chances aresuch discussions could have lagged indefinitely.

In a meeting of its joint board of directors last week, theNAB endorsed congressional reauthorization of the Satellite Home Viewer Act, which givesDBS providers a compulsory license for certain local signals, and is set to expire in1999.

The NAB board also said last week it supports legislationthat would authorize DBS delivery of local signals -- with conditions.

According to Dennis Wharton, senior vice president ofcorporate communications, the NAB is calling for must-carry of all full-power stationswithin a given market, retransmission consent from broadcasters (like that required forcable operators) and a ban on distant-network signals imported to areas where a DBSprovider delivers local stations.

'By law, we could import a distant signal or all thedistant signals' and deliver them to unserved households within a local market, Ergensaid at a press conference earlier this month. 'We're not going to do that.We're sensitive to local broadcasters who don't want to lose eyeballs. Webelieve we're very broadcast friendly.'

Not all broadcasters agree.

'You can't just cherry-pick stations,' saidRob Hubbard, president of Minneapolis-based Hubbard Television station group and executivevice president of DBS service U.S. Satellite Broadcasting. 'Once you disrupt thelocal television environment, it potentially threatens our free, over-the-air broadcastsystem.'

And according to Hubbard, it's not just a matter ofeconomics for the local broadcasters. A move away from strong local broadcast stationscould damage public service programs and crisis information systems, such as floodwarnings.

'Current satellite technology does not permit the NAB'must-carry' suggestion to be implemented,' Ergen said in a statement lastweek. 'However, as technology improves, EchoStar intends to invest in additionalsatellites to deliver local signals in more markets, and covering a greater number ofchannels in each market.'

Today, DBS and other competitors to cable, such as wirelesscable, are not subject to must-carry rules.

'We believe must-carry should apply now,' saidHubbard, 'whether it's cable or satellite.' Hubbard said there's adanger that if EchoStar is exempted from must-carry rules, it becomes easier for cableoperators to argue against them as well.

While EchoStar may have a fight on its hands before it winsfull support from broadcasters, its local-to-local plan seems to be winning favor from thegovernment.

Ken Johnson, spokesman for U.S. Rep. Billy Tauzin (R-La),who is also chairman of the House Commerce Subcommittee on Telecommunications, Trade andConsumer Protection, said Tauzin is encouraged by EchoStar's local plans and is notinclined to require must-carry now. He noted that some smaller cable companies were givenmust-carry exemptions before they had enough channel capacity.

'Technology should not be a barrier to entry into themarketplace,' said Johnson. 'EchoStar doesn't have the bandwidth'today to carry every station in a given market. 'Half a loaf is better than no loafat all,' he added. 'Let's get competition started.'

Last week, the FCC released its Annual Report onCompetition in Video Markets, claiming that lack of local channels was impeding DBS frombecoming a stronger competitor to cable.

'We are going to do everything we can in 1998 to levelthe playing field between cable and its competitors,' said Johnson. 'We believethere are millions of Americans who would pull out their cable in a heartbeat if there wasa viable alternative.'

Today, EchoStar is offering local signals only to unservedhouseholds, those in so-called white areas beyond the reach of an acceptable off-airsignal. The company has asked the U.S. Copyright Office to clarify whether it can alsodeliver local signals to served households within the given market. Today, the CopyrightOffice is silent on the matter.

Bill Roberts, senior attorney for the Copyright Office,said that since EchoStar filed its petition in late December, the office has alreadyreceived three objections, all from broadcast interests. The Register of Copyrights isexpected to make a decision by the end of the week on whether to proceed with a notice ofproposed rulemaking.

Until the issue is clarified, EchoStar plans to sendsignals only to 'unserved' homes. To date, there has been no universallyaccepted definition of a 'served' household, although the NAB has come up withits own ZIP-code system that it hopes broadcasters and DBS interests will adopt.

'We don't understand why a local broadcasterwould object to a served home receiving local signals within their own market,' saidErgen. 'But if they do object and tell us, we will turn those customers off. Thenwe'll give them the phone number of the station manager and their congressman, andlet them deal with it.'

Steve Blum, president of consultant Tellus VentureAssociates, said broadcasters will eventually come around to Ergen's plan to deliverdigital-quality local signals.

'They're not going to want their signal to lookworse than MTV's or HBO's signal,' Blum said.

In the meantime, EchoStar must play a balancing act ofcourting local broadcast stations without backing away from a business plan in which ithas invested millions of dollars.

'We're not going to break the law,' saidErgen, 'and we're not worried about people suing us.'

Raleigh, N.C.-based Capitol Broadcasting is pushing a planto deliver every local station to every market via Ka-band satellite. If the company issuccessful, the service would launch in the year 2000.

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