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Motion seeks to block EchoStar

Broadcasters act in copyright case. They want to squelch a deal the satellite-TV firm has struck to provide distant-network signals.

By Kimberly S. Johnson
Denver Post Staff Writer
DenverPost.com
Article Last Updated:11/30/2006 09:35:06 PM MST

Local broadcasters are trying to block EchoStar Communications' last-ditch efforts to offer relief for 900,000 customers who have lost or will lose distant-network signals on the Dish Network.

The broadcasters have filed a motion to block a deal EchoStar recently struck with National Programming Services LLC, an Indianapolis-based provider of C-band or big-dish satellite services, to deliver local TV signals to its out-of-market customers.

Today is the deadline for EchoStar, a Douglas County-based satellite provider, to shut off distant-network signals to its customers, after a U.S. district court in October ordered the shutoff.

The ruling was the culmination of a seven-year court battle with affiliate ABC, NBC and CBS stations and 25 stations owned by Fox.

"EchoStar demonstrates again its arrogant and flagrant contempt for the rule of law," said Dennis Wharton, a a National Association of Broadcasters spokesman. "We're hopeful the courts recognize this latest stunt for what it is: a serial copyright abuser's refusal to comply with numerous court verdicts and federal statutes that preserve the enduring value of local broadcasting."

EchoStar general counsel David Moskowitz said Thursday that National Programming Services will lease a transponder, or a portion of a satellite, from EchoStar to provide distant-network stations. Customers must order the service directly from NPS and are billed separately.

"We asked the court to confirm that the arrangement with NPS is entirely appropriate," he said. "We're confident it's permitted by law."

NPS approached the nation's second-largest satellite-TV provider a few months ago, but EchoStar wasn't interested because it was focused on a $100 million settlement with broadcasters and lobbying for legislation that would save distant-network signals, Moskowitz said.

The court didn't approve the settlement, however, and Congress isn't immediately expected to consider two bills regarding distant networks. EchoStar said it will meet today's deadline to turn off all distant-network signals.

"Our other legal avenues are pretty much exhausted," said Moskowitz. "At this point, we are getting out of the distant-networks business."

He said EchoStar faced an uphill battle because News Corp., the owner of Fox, and EchoStar's larger competitor, DirecTV, are working to scuttle any congressional action.

EchoStar's distant-network service brought in about $3 million a month in revenue. The company's stock dropped 7 cents Thursday to $36.01.

EchoStar Communications said Friday that it would terminate the delivery of distant ABC, CBS, NBC and Fox signals to 900,000 customers by day's end.

But the broadcasters, angered by the direct-broadcast satellite service's actions, have gone to court accusing EchoStar of crafting a business deal designed to circumvent the court-ordered shutoff.

"Everyone will be turned off today if they haven't been already. We are meeting the deadline," EchoStar director of corporate communications Kathie Gonzalez said Friday.

But two days earlier, EchoStar announced it would lease a satellite transponder to National Programming Service, an Indianapolis-based provider of satellite programming to eight- and 10-foot C-band dish owners for more than 20 years.

NPS said it would begin marketing a package that includes ABC, CBS, NBC and Fox signals to EchoStar customers.

NPS CEO Michael Mountford -- in separate letters to member of Congress and broadcast law offices -- announced his plan to use the satellite capacity to offer distant network signals to EchoStar customers who would be legally eligible to subscribe if they had not been covered by injunction.

"These subscribers will become our customers and be able to regain their network stations in a hassle-free manner," Mountford said in the undated letter to members of Congress.

NPS -- with call-center and back-office staff in place -- is ready to sign up customers immediately, said Chuck Hewitt, an NPS consultant and former president of the Satellite Broadcasting & Communications Association.

One day after the NPS deal was disclosed, TV stations aligned with the Big Four broadcast networks returned to the U.S. judge in Florida who issued the permanent injunction with the Dec. 1 effective date. The stations claimed that the EchoStar-NPS deal was "a transparent sham" to evade the injunction and "an act of contempt."

In a reply, EchoStar explained that NPS was an independent company that agreed in an arms'-length transaction to pay $150,000 per month for the opportunity to provide distant network signals to EchoStar subscribers who got cut off.

NPS' distant signal package, called All American Direct, would not require subscribers to buy any programming from EchoStar, and EchoStar customers would not be automatically converted to the NPS service, EchoStar said.

"It is not a handoff," Hewitt said, adding that NPS would compete in the free market with DirecTV to acquire EchoStar's former distant network subscribers.

Satellite subscribers may buy distant network signals -- programming that originates on stations in other markets, usually New York and Los Angeles -- if they can't use an antenna to receive local stations. The courts slapped EchoStar with an injunction after finding that the company cheated by selling signals to hundreds of thousands of illegal customers.

The central question before U.S. Judge William Dimitrouleas is whether the EchoStar-NPS deal is consistent with the terms of his injunction issued Oct. 20, which applies to "those persons in active concert or participation" with EchoStar.

"EchoStar's scheme with NPS is flatly barred by the permanent injunction," the broadcasters told the court.

EchoStar, in response, argued that the terms of the transponder-lease agreement gave NPS total control over the programming delivered and that NPS wasn't required to provide distant signals.

"A court cannot enjoin the world at large," EchoStar said. "NPS ... is not, and cannot be, bound by the permanent injunction."