Tauzin: No DBS Must-Carry

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Washington -- In a break with the cable operators and
broadcasters, Rep. Billy Tauzin (R-La.) last week said he supports gradual introduction of
must-carry for direct-broadcast satellite carriers that elect to offer local TV signals.

Tauzin, chairman of the House Telecommunications
Subcommittee, said he disagreed with the position taken by the two industries that DBS
providers should be required to offer all local stations in a home market if they opt to
provide even one.

"I happen to support the broadcasters in many areas
when they happen to be right. I think they are wrong in this area," Tauzin told
reporters after staging a four-hour hearing on competition in multichannel video markets.

James Popham, vice president of the Association of Local
Television Stations, told Tauzin's panel that he supports immediate must-carry to
protect independent stations and to block DBS companies from lobbying to postpone any
sunset on partial must-carry rules.

At the hearing, National Cable Television Association
president Decker Anstrom voiced support for must-carry and retransmission consent as a
recognition by Congress that there ought to be some regulatory parity between cable and
DBS.

"If the DBS companies are given the right to
retransmit local broadcast signals, they should at least have to meet the requirement of
must-carry and retransmission consent," said Anstrom. He gave Tauzin's panel a
list of 18 cable regulations from which DBS is exempt except for one dealing with Federal
Communications Commission equal employment policies.

Tauzin is planning to advance legislation that would freeze
an increase in copyright fees that DBS carriers have to pay to provide superstation and
distant network signals. He might attach to that bill (HR 2921) provisions that would
authorize DBS companies to provide local TV signals to local markets.

"I lean towards getting that accomplished," he
said. "And that means for making some provision of phased-in must-carry."

Tauzin is eager to jump-start competition to cable to fend
off efforts to price-regulate cable operators -- an approach he rejects. FCC chairman
William Kennard told Tauzin's panel that DBS provision of local TV signals might not
reach enough subscribers by March 31, 1999, when the FCC's power to cap cable rates
expires.

"DBS is not, in my view, a perfect substitute to cable
because of the local signal problem that exists," Kennard said. "Even if we were
to correct that problem tomorrow, I still have serious doubts as to whether DBS would be a
sufficient competitor a year from now to constrain rates."

EchoStar Communications Corp., the only DBS provider that
packages local signals with national programming, has claimed it would not have the
channel capacity to offer all local signals in a market and be competitive in more than a
few markets.

In addition, EchoStar chairman and CEO Charles Ergen told
Tauzin's subcommittee last week that the application of must-carry would be unfair
because his company has no market power. He said 15 percent DBS penetration -- the
percentage that triggers cable deregulation -- might be sufficient DBS market share to
warrant full must-carry in a particular market.

"Cable had 30 years to develop their marketplace
before they came under full-time must-carry," Ergen said. "We haven't been
given 30 days."

Rep. Edward Markey (D-Mass.) said EchoStar deserved
regulatory relief, reminding Anstrom that Congress protected cable operators from
telephone company competition, permitted exclusive franchises and secured cable access to
TV signals and telephone poles.

"Mr. Ergen is in his infancy. I am very sympathetic to
his interests," Markey said.

Tauzin's phase-in approach to must-carry could wind up
being the compromise position.

House Commerce Committee chairman Rep. Tom Bliley (R-Va.)
showed up at Tauzin's hearing to say that Congress first had to determine the
"underlying purpose" of must-carry and decide whether the application of
must-carry to DBS carriers was consistent with the purpose.

"Is [the purpose] to promote 'localism'
through any and all distribution platforms?" Bliley asked. "Or is
'must-carry' only necessary when there is a proven threat to free, over-the-air
television, and if so, how does minimal DBS market penetration pose a threat to free,
over-the-air television?"

In a related matter, analysts at the Federal Trade
Commission issued a report last week stating that must-carry should not be applied to DBS
because DBS carriers do not possess market power and are unlikely to acquire market power
in the near future.

At the hearing, Anstrom noted that cable operators had to
comply with must-carry in 1965 when operators had 20 percent household penetration,
compared to about 70 percent today. He also pointed out that Congress has not always
linked must-carry obligations with market power, saying that phone companies that buy or
build cable systems have to obey must-carry rules.

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