NRTC Sues DirecTV Again

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The National Rural Telecommunications Cooperative late last
month filed its second lawsuit of the summer against business partner DirecTV Inc.

NRTC members and affiliates have exclusive rights to sell
most DirecTV programming in certain rural territories.

The nonprofit organization has been at odds with DirecTV in
an increasingly public way over contractual and philosophical issues.

In the latest suit, the NRTC alleged that DirecTV
disadvantaged NRTC programming resellers by not sharing tens of millions of dollars in
network launch fees and programming discounts with the NRTC.

The suit, filed Aug. 26 in Los Angeles, claimed that 10
business entities or individuals acted with DirecTV to keep money from the NRTC.

Pegasus Communications Corp., the NRTC's biggest
affiliate, raised its programming rates above those of DirecTV for the first time this
summer. A Pegasus spokeswoman blamed the increase on rising programming costs and the
company's inability to get the volume discounts that an operator with 600,000
subscribers should command.

"We dispute the allegations in the complaint,"
DirecTV spokesman Bob Marsocci said last week. He called the lawsuit part of the
NRTC's "ongoing efforts to obtain benefits beyond those provided in the
partners' agreements."

Marsocci said DirecTV invested more than $500 million in
new satellites, added a new broadcast center, bought new programming services and spent
heavily for national advertising and promotional activities.

Pegasus vice president of operations Howard Verlin agreed
that his company benefited from DirecTV's expenditures. But he said that didn't
give DirecTV the right to change the terms of the contract without prior consent from its
business partners.

Verlin suggested that DirecTV was engaging in strong-arm
tactics in an effort to intimidate publicly traded NRTC affiliates into selling out to
DirecTV, as former business partner U.S. Satellite Broadcasting did.

"They'll continue to try to scare the investment
community to try to force our stock price down," he said.

Verlin said he didn't believe the NRTC filed suit to
protect its publicly traded affiliates' share prices.

In the earlier suit, the NRTC sought to keep DirecTV from
marketing premium-movie services such as Home Box Office and Showtime within NRTC
territories. A Los Angeles judge denied the NRTC's request for a temporary
restraining order. The case is headed for the courts.

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