Johnson Broadcasting Inc., which owns a pair of Texas TV stations denied carriage by DirecTV Inc. and EchoStar Communications Corp., is taking the satellite carriers to federal court in a suit that also alleges conflict of interest by an official at the Federal Communications Commission.
Johnson's stations in Houston and Dallas were rejected for carriage by DirecTV and EchoStar on the basis that the broadcast company had sent letters invoking its mandatory-carriage rights July 2, 2001, or one day late under FCC rules.
Johnson filed complaints with the FCC against DirecTV, but not EchoStar.
FCC Cable Services Bureau chief W. Kenneth Ferree ruled in favor of DirecTV, saying that denying carriage based on letters being sent after the deadline was lawful under FCC rules.
In the suit, Johnson said it was entitled to send the letters July 2 because July 1 was a Sunday and the FCC had typically postponed deadlines to the next business day to accommodate cut-off dates falling on Saturdays, Sundays and federal holidays.
Johnson filed the suit Jan. 15 in U.S. District Court for the Southern District of Texas in Houston.
According to Johnson, EchoStar broke a promise to carry the stations Dec. 7, 2001, two days after the FCC dismissed the company's first complaint against DirecTV.
Johnson did not lodge must-carry complaints with the FCC against EchoStar as it did against DirecTV, even though the EchoStar must-carry letters were also sent one day after the deadline.
Instead, Johnson bypassed the FCC and named EchoStar as a co-defendant in the suit.
EchoStar spokesman Marc Lumpkin said Johnson's stations were denied carriage consistent with the FCC's ruling, adding that he doubted that direct-broadcast satellite company had been served with the suit.
DirecTV spokesman Bob Marsocci said his company had not seen the suit. He said DirecTV would defend its actions in court, if necessary.
"Needless to say we agree with the FCC's decision. A deadline is a deadline, whether you miss it by a day or by a month," Marsocci said.
In the 12-page suit, Johnson alleged that in deciding the company's dispute with DirecTV, Ferree had a conflict of interest that denied it procedural safeguards at the FCC.
"The FCC bureau chief who issued . . . the opinion failed to recuse himself notwithstanding the fact that his largest client while he was in private practice prior to being appointed to the FCC in May 2001 was PanAmSat [Corp.], a sister company of DirecTV," the suit said.
An FCC spokeswoman said Ferree would not comment.
As a private attorney with Washington-based law firm Goldberg, Godles, Wiener & Wright, Ferree represented PanAmSat in that company's effort to block FCC approval of Lockheed Martin Corp.'s acquisition of 49 percent of Comsat Corp.'s stock and agency approval to transfer to Lockheed FCC authorizations held by a Comsat affiliate.
Ferree is heading the FCC's task force charged with reviewing EchoStar's merger with DirecTV's corporate parent, Hughes Electronic Corp.
The agency also needs to approve EchoStar's deal to pay $5 billion for Hughes' 80 percent interest in PanAmSat.
After consulting with FCC ethics officials, Ferree said he would not bow out of the PanAmSat portion of the transaction based on his prior representation of the company.
Home of the Astros
Johnson's Houston station, KNWS, is an independent and the broadcast home of Major League Baseball's Houston Astros. In Dallas, Johnson operates station KLDT, also an independent.
EchoStar and DirecTV serve about 600,000 subscribers combined in the Houston and Dallas markets.
Under the FCC ruling, Johnson's stations are not entitled to obtain DBS carriage until Jan. 1, 2006.
Johnson plans to appeal the CSB's ruling on the DirecTV complaint to the four FCC members, who seldom reverse bureau rulings.
Johnson is also planning to ask the FCC to deny EchoStar's merger with DirecTV, a lawyer for the company said Tuesday.
Under the Satellite Home Viewer Improvement Act of 1999, EchoStar and DirecTV were required on Jan. 1, 2002, to carry all requesting local TV stations in markets where they have elected to carry any local TV stations. Stations denied carriage can seek relief from the FCC and in court.
In the suit, Johnson said the FCC's rejection of its first DirecTV complaint was arbitrary and capricious because the agency ignored precedent regarding the movement of deadlines that conflict with weekends and holidays. An FCC spokeswoman said TV stations had many months to meet the July 1 deadline.
Johnson has asked the court to award damages for the period of noncarriage by DirecTV and EchoStar. The suit alleged breach of contract by EchoStar and violations of state and federal antitrust laws, entitling Johnson to treble damages.
Based upon "information and belief," Johnson said DirecTV encouraged EchoStar to reverse its carriage commitment so that if their merger were approved, the new company would not have to carry Johnson's stations.
Johnson said EchoStar's decision not to carry the stations at DirecTV's request was a "combination and conspiracy" in violation of Texas and federal antitrust laws.