Satellite Act Down to Wire

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Charlie Ergen is running out of time. And that’s not necessarily a bad thing for him.

Congress is facing a deadline to extend the law that provides millions of rural satellite subscribers with access to out-of-town feeds of ABC, CBS, NBC and Fox, known as the Satellite Home Viewer Improvement Act.

Without an extension, those subscribers would lose network programming after Dec. 31, 2004 — and would probably complain bitterly to Capitol Hill.

LEVERAGE AND LIMITS

That scenario gives Ergen, chairman and CEO of EchoStar Communications Corp., some leverage with risk-averse lawmakers in his effort to block TV broadcasters and various copyright holders from padding the bill with provisions anathema to his company.

For example, the National Association of Broadcasters is attempting to stop EchoStar from requiring subscribers in 42 markets to obtain a second dish in order to receive all their local TV signals.

Hollywood studios and Major League Baseball — industries that own the copyrights to lucrative programming carried by the major TV networks — are demanding that EchoStar and DirecTV immediately pay higher royalties for network programming and superstations, such as Chicago’s WGN or WSBK in Boston.

These provisions, combined with others, have made the legislation controversial — which in turn makes it harder to pass in an election year, with a legislative calendar tightened by political conventions and fall campaigning.

Two weeks ago, the House Energy and Commerce Committee postponed a vote on its SHVIA renewal legislation, owing to a disagreement with the House Judiciary Committee. A new date has not been announced.

Nevertheless, House Energy and Commerce Committee chairman Rep. Joe Barton (R-Texas) last week indicated that the obstacles were being removed.

“We’re basically ready to move that bill,” Barton said last Tuesday to an American Cable Association audience.

HATCHING A PLAN

Time constraints and industry bickering likely explain why Sen. Orrin Hatch (R-Utah), chairman of the Judiciary Committee, has signaled that he would be comfortable with a simple, five-year reauthorization of the distant network and superstation licenses.

“I can live with that,” Hatch told reporters. “But I also think if we can fix some of these problems, I’d be glad to do it. I’m open to suggestions.”

Hatch, who introduced a straight reauthorization bill in January, identified EchoStar’s two-dish policy as one problem he’d like to fix.

“I believe that the Senate should prohibit discriminatory placement of certain stations on a second satellite, requiring subscribers to obtain a second dish to receive them,” he said, adding that EchoStar had relegated religious and Spanish-language stations to the second dish.

But Hatch’s panel does not have jurisdiction to include a two-dish ban. That’s the province of the Commerce Committee, under the chairmanship of Ergen ally Sen. John McCain (R-Ariz.).

Ergen told reporters that complying with a two-dish ban within one year, as House legislation would propose, would cost his company $100 million, though Wall Street analysis firm Sanford C. Bernstein and Co. has put the figure at closer to $40 million.

“There are 250 million people in the country and no one is complaining about two dishes,” Ergen said. “The political reality is, the NAB has the power; we don’t.”

Since 1999, EchoStar and DirecTV Inc. have been allowed to offer local TV signals within those stations’ markets under a permanent license. A political train wreck over distant networks at year-end would not jeopardize local-into-local service to those subscribers, which total in the several million.

COMPROMISE AFOOT?

A compromise on the two-dish dispute could be afoot in the House.

Andrew Halataei, legislative director for Judiciary Committee member Rep. Randy Forbes (R-Va.), floated the idea that a two-dish solution could be acceptable if EchoStar automatically installed a second dish when consumers signed up for the local-signal package.

“I think in the end there’s probably going to be something in the bill that’s going to require EchoStar to make sure they have everything on one dish or always install two dishes when they go to install it the first time,” Halataei told an ACA forum here last Tuesday.

Right now, EchoStar provides a second dish to requesting customers without charge.

ERGEN ON OFFENSIVE

Ergen isn’t merely playing defense. He wants approval to beam HDTV versions of ABC, CBS, NBC and Fox from New York and Los Angeles to subscribers around the country who can’t get the same programming locally.

But the NAB is fighting him, arguing that Ergen’s plan is a scheme to poach customers from local stations that are facing technical and regulatory hurdles to providing HD.

“EchoStar has no intention of returning these viewers to their Salt Lake, Burlington [Vt.] or any other local broadcast service. If EchoStar really wants to be a partner in the DTV transition, it should bring local HD signals to local television markets,” said Bruce Reese, president of NBC affiliate KSL-TV in Salt Lake City.

In filings with the Federal Communications Commission, EchoStar has argued that it does not have the satellite capacity to retransmit hundreds of local stations in HD format.

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