McCain Plugs Limited Must-Carry for DBS

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Washington -- Senate Commerce Committee chairman John
McCain (R-Ariz.) is circulating draft legislation that would phase in must-carry on
direct-broadcast satellite carriers that opt to offer local-TV signals.

The cable and broadcast industries opposed that approach,
saying that DBS companies should comply with full must-carry requirements from the outset.

The McCain bill -- a cooperative effort with Senate
Judiciary Committee chairman Orrin Hatch (R-Utah) -- is unlikely to pass this year because
of more pressing Senate business in the five weeks left before lawmakers recess for the
campaign.

The bill would permit DBS carriers to offer local-TV
signals, but full must-carry would not take effect until Jan. 1, 2002. Hatch's
contribution would set distant-signal copyright fees at 19 cents per subscriber, per month
for each superstation and at 15 cents for each network, compared with the current 27-cent
rate for both.

McCain and Hatch would toss to the Federal Communications
Commission the job of clarifying by April 1 which dish-owners are eligible to receive
distant-network signals.

The issue has developed into an "emergency
situation," the Senate source said, because a federal district court injunction
against distant-signal-provider PrimeTime 24 could cut off hundreds of thousands of
dish-owners from CBS and Fox distant-network feeds by Oct. 8.

Local-to-local legislation alone can't solve the
white-area problem, said Chuck Hewitt, president of the Satellite Broadcasting &
Communications Association, because no satellite provider currently serves all local
markets.

One industry source said Congress could pass a version of
McCain-Hatch if broadcasters were willing to negotiate, adding that this was unlikely
because the satellite industry has the upper hand.

A spokesman for the National Association of Broadcasters
declined to comment.

The NAB and the SBCA waged a heated war of words in press
releases last week.

At immediate issue was the Oct. 8 deadline given to SBCA
member companies. One week earlier, the NAB said CBS, Fox and certain of their affiliates
would not enforce the federal district court judge's preliminary injunction until
January.

But last week, SBCA president Chuck Hewitt told reporters
that satellite companies fully intend to meet the Oct. 8 cutoff unless Congress itself
issues a stay ahead of time.

A Senate source said Sen. Ernest Hollings (D-S.C.) is
trying to broker a compromise between the two industries.

"The Jan. 1 date gets you past the election," the
source said, "but it's also before the Super Bowl, and it's not enough time
for either Congress or the FCC to come in and settle this hash in a responsible way."

In the long-standing debate, broadcasters have accused
satellite providers of copyright infringement and of stealing eyeballs away from local
affiliates and their advertisers. The DBS companies have argued that the Satellite Home
Viewer Act is too vague to apply in the real world, and that the recent injunction
threatens to cut off service to viewers who may have no other way of receiving network
signals.

"Both have legitimate interests, but the consumer is
caught in the cross fire," a Senate source said.

In a letter sent Sept. 3 to Rep. Howard Coble (R-N.C.),
chairman of the House Courts and Intellectual Property Subcommittee, NAB president Eddie
Fritts said the satellite industry is using its distant-network-signal customers "as
pawns in a cruel political game designed to get Congress to legalize the illegal conduct
that the satellite companies have been engaged in for years."

Earlier in the week, Hewitt told reporters that the
broadcasters' offer to extend the injunction deadline until January was politically
motivated.

Bob Marsocci, spokesman for DirecTv Inc., said the company
is complying with the court's injunction, and it wants to have the matter taken care
of before its biggest subscriber-acquisition period, in November and December.

DirecTv began notifying subscribers who would be affected
by the injunction late last month. In the notification letters, DirecTv includes
information on how to contact Congress and the FCC.

EchoStar Communications Corp. is taking the matter one step
further, asking viewers to contact the top 40 broadcast-television advertisers, too, to
tell them that they could lose part of their audience if the injunction is upheld.

The irony there is that EchoStar no longer carries PT24
feeds, and it is not directly affected by the injunction.

EchoStar last month asked the FCC to issue a rulemaking to
measure grade-B intensity for the purpose of the SHVA. Comments were due to the commission
Sept. 11.

Last Tuesday, the NAB filed a motion asking the FCC to
reconsider the expedited rulemaking, especially given the summer-vacation schedule and the
long weekend that fell right before the comments are due.

It's still difficult to predict how many satellite
subscribers would have their distant-network feeds turned off under the preliminary
injunction.

Hewitt said last week that the number was probably in the
hundreds of thousands, about 400,000 of which were big-dish subscribers. He contended that
not all distant-network subscribers legally qualify for the service.

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