McCain Bill Picks Up TV, Cable Opponents

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Washington -- Sen. John McCain (R-Ariz.) has to win over
two groups without alienating a third if he hopes to pass broad satellite legislation this
year.

Right now, McCain, the Senate Commerce Committee chairman,
has the TV-station and small-cable-operator lobbies howling over his bill (S. 303). The
measure -- when paired with a second bill (S. 247) sponsored by Sen. Orrin Hatch (R-Utah)
-- would allow direct-broadcast satellite carriers to serve home-dish owners with their
local-TV signals in a bid to crack cable's market dominance.

McCain's job, it seems, is to placate broadcasters and
small cable operators without losing the support of the satellite industry. That industry
could end up supporting a narrow renewal of the Satellite Home Viewer Act, rather than
endorsing the broader McCain-Hatch effort if it ended up reflecting the interests of its
lobbying foes.

McCain and his staff, after stumbling last year, are
attempting to bring the factions together without undercutting their chief objective --
the removal of regulatory barriers to DBS provision of local-TV signals. In statements
last month, both McCain and Hatch said expanding choice in cable markets was their primary
mission.

Under current law, DBS carriers are restricted to providing
distant-network signals to a subset of dish owners who reside in "white areas,"
or locations that prevent reception of grade-B signals using conventional rooftop antennae
-- a measurement standard that is not a TV-screen picture-quality test.

Because the license under the SHVA to provide
distant-network and superstation signals expires Dec. 31, the satellite industry is under
enormous pressure to compromise on the McCain-Hatch legislation.

The National Association of Broadcasters is agitated
because McCain's bill has the potential of allowing 2.2 million home-dish owners to
continue illegally receiving distant signals of Fox and CBS. Those dish owners are facing
a cutoff between Feb. 28 and April 30, under a federal court injunction.

Andy Paul, vice president of government affairs for the
Satellite Broadcasting and Communications Association, said the idea that his industry has
its back to the wall due to the Dec. 31 deadline was wrong.

Paul said the prospect of 2.2 million dish owners
complaining to Congress about the cutoff could help the DBS industry to negotiate
McCain's bill, as the resulting political tumult could deny the NAB the ability to
use the Dec. 31 deadline to squeeze concessions from the DBS industry.

"We know [dish owners] are already starting to call
into Congress, and they are very unhappy about this," Paul said. "If you are a
congressman and you are getting 3,000 phone calls, you can't ignore that."

Nevertheless, the NAB believes that McCain's bill
should not interfere with the cutoff, which a judge imposed after finding that the dish
owners' suppliers were in violation of copyright law for selling them the out-of-town
network affiliates. The invasion of distant-network signals saps audience and ad revenue
from the local affiliates.

"Delivery of distant-network signals to millions of
grandfathered subscribers strikes at the heart of the local over-the-air system by
diluting audiences with duplicative programming and undermining the ability of local
stations to serve their communities," NAB president Edward O. Fritts said in a Jan.
29 letter to McCain, expressing his "disappointment" with the bill.

The NAB isn't worried about the cutoff because angry
dish owners should be able to get their local-network signals with off-air antennae.

"Very few subscribers … if any … will in
fact be harmed by enforcement of the judge's order," Fritts told McCain, adding,
the "vast majority" of those cut off could rely on "in-home" antennae.

In a Feb. 2 reply to Fritts, McCain and Sen. Conrad Burns
(R-Mont.) said the bill was designed to protect as many distant-signal subscribers as
possible without harming local broadcasting.

And, they added, without evidence of harm to broadcasting,
the massive cutoff that awaits millions of dish owners "might be legal, but it would
hardly be equitable."

"First and foremost, to needlessly deprive any
consumer of an existing service that the consumer enjoys and wants to keep would -- at
least in our judgment -- constitute 'harm,'" the senators said.

They noted that any Federal Communications Commission
action designed to save some of the 2.2 million affected dish owners would take a
two-thirds majority.

Small cable operators don't like McCain's bill,
either, because DBS providers of local-TV signals would not face full must-carry until
Jan. 1, 2002. The Small Cable Business Association argued that DBS companies will use
their clout with Congress to postpone full must-carry so that it never becomes a reality.

"A phase-in of must-carry is no must-carry," said
Matt Polka, president of the SCBA, which represents about 280 cable operators serving 2.3
million subscribers. "If they want to be a cable operator by offering these services,
let them play by the same rules."

Polka said he expects to make repeated visits here in the
coming months to persuade McCain to change the must-carry language.

While the NAB and the NCTA are in philosophical agreement
with Polka, they have already told McCain that they would reluctantly cooperate on a
phase-in approach.

EchoStar Communications Corp. -- the only DBS carrier with
an operational local-into-local service to the limited white-area audience -- is asking
McCain to modify the must- carry provision.

EchoStar wants the bill to read that full must-carry would
take effect "three years after the date of enactment," rather than "Jan. 1,
2002." The change would give EchoStar more time to meet its full must-carry
obligations.

National Cable Television Association spokesman Scott
Broyles said his organization would not object to EchoStar's modification. He added
that the NCTA's view is that a phase-in must be accompanied by a date certain on full
must-carry.

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