Pending DBS/DTV Legislation

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fredfa

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This week’s edition of Multichannel News has done, it seems to me, a good job of summing up the DTV legislation currently awaiting action in the House of Representatives:

Bill Could Cost EchoStar $100M Satellite Legislation Would Put End to Two-Dish Platform

By Ted Hearn -- Multichannel News, 10/18/2004
Washington— Evidently, Charlie Ergen has 100 million reasons to see satellite legislation crash and burn.
The House left town last week, just after passing a bill that one Wall Street analyst claims would cost Ergen’s EchoStar Communications Corp. $100 million to comply.
The bill, passed by voice vote, would require EchoStar to stop forcing subscribers in 38 markets to obtain a second dish in order to receive all their local analog TV stations.

PRICE EXPLAINED

Oppenheimer and Co. Inc. analyst Thomas Eagan, in a report released Oct. 11, estimated that a one-dish rule taking effect within one year would not only cost EchoStar $100 million, but would also cause the company to terminate local-TV station service in about a dozen markets. EchoStar’s Dish Network currently offers local TV service in 150 markets.
“The $100 million figure he is picking up from our [Securities & Exchange Commission] documents,” EchoStar spokesman Steve Caulk said.
But Sanford C. Bernstein and Co. analyst Craig Moffett earlier in the year pegged the cost at $40 million.
The one-dish rule is not material to DirecTV, because that company’s subscribers need just one dish to receive local TV stations.
For broadcasters, the one-dish rule was a key objective. The National Association of Broadcasters complained that EchoStar relegated religious and minority TV stations to the second dish, believing that consumers would not take the trouble to hook up a second dish when ABC, NBC, CBS and Fox affiliates were available via the main one.
“[The two-dish ban] is a critical piece of legislation that would ensure that local broadcasters don’t get discriminatory treatment from EchoStar,” NAB spokesman Dennis Wharton said.
Actually, the House bill would permit EchoStar to require a second dish, provided that all local TV stations were located on it.
The two-dish ban was buried in a complex bill (HR 4518) that makes a number of changes — some clear, others subtle — to copyright and communications laws that govern direct-broadcast satellite access to the programming of network affiliates of ABC, NBC, CBS and Fox and to independent stations, most notably superstation WGN, the broadcast home of Major League Baseball’s Chicago Cubs.
The most politically sensitive issue is the DBS compulsory copyright license, which permits EchoStar and DirecTV to deliver imported feeds of ABC, NBC, CBS and Fox to subscribers around the country who live in so-called white areas, or dead zones where it’s impossible to pick up the signal of the local affiliates with a rooftop antenna. The license to retransmit local stations within the same market is permanent.
Congress is facing a deadline to complete work on the bill. The distant network and superstation licenses expire on Dec. 31, 2004. If Congress fails to extend the copyright licenses, about 2 million satellite subscribers would lose access to network programming and superstations.
That’s a major problem for the satellite companies. But it’s also a potential headache for lawmakers, who would undoubtedly feel the heat from angry satellite subscribers who lost access to popular programming.
Although the House completed worked on satellite legislation, Senate floor action has been stymied for months because the Senate Commerce Committee and the Senate Judiciary Committee passed conflicting bills that have not been reconciled.
Congress is scheduled to return for a lame-duck session on Nov. 15, but it’s not clear whether lawmakers will just pass spending bills or hang around to deal with such loose ends as the satellite legislation.
“Right now, we don’t know. Everything is up in the air,” said Camille Osborne, spokeswoman for the Satellite Broadcasting and Communications Association, the DBS industry’s D.C. trade group.
In his report, Eagan indicated that Congress did not have time this year to complete work on a comprehensive bill. Instead, he predicted lawmakers would attach a rider that extended the DBS compulsory licenses to a must-pass spending bill.
If Congress produces satellite legislation, EchoStar wants to include a Senate Commerce Committee provision that would permit DBS operators to import distant network HDTV signals to consumers eligible to receive the analog version of the same programming.
“We think it’s extremely important to the American public, because it will accelerate the adoption of high-definition technology if we are able to start providing HD in areas where people can get it right now,” EchoStar’s Caulk said.

'DIGITAL WHITE AREA’

An EchoStar-backed group recently released a report claiming that 40 million U.S. households can’t receive digital programming from their local network affiliates with an over-the-air antenna.
However, the NAB said the so-called “digital white area” provision is unnecessary because 1,411 digital TV stations are on the air, serving 207 markets that include 99% of all U.S. television households. It added that 88% of TV households “are in markets served by five or more digital television signals.”
Moreover, the NAB is concerned that HDTV imports would fragment the local audience and drain ad dollars from the stations. Such revenue is the lifeblood of their existence.
“The problem is you destroy the business model of local broadcasting if you allow distant-network signals to be imported into areas that can be served by local stations,” NAB’s Wharton said.

A summary of the pending House legislation:

Extends Compulsory Licenses For Five Years:

Allows DBS operators, under a five-year license extension that expires on Dec. 31, 2009, to distribute superstations on a national basis, as well as distant feeds of ABC, CBS, NBC and Fox to a narrow base of customers considered “unserved” by their local network affiliates. No retransmission consent is required.

Two-Dish Ban:

Gives satellite providers one year to provide all analog local TV stations on a single dish. A second dish might be required to receive all analog local TV signals. A second dish might be required to receive all local digital TV signals as well.

Broadens Good Faith Retransmission-Consent Bargaining:

Requires all pay TV distributors and TV stations to negotiate carriage deals in good faith until Jan. 1, 2010. Before, only TV stations had to bargain in good faith.

Extends Ban on Exclusive Carriage Deals:

Bars TV stations from entering into exclusive carriage deals until Jan. 1, 2010.

Carriage of Significantly Viewed Stations:

Generally, permits DBS operators to provide “significantly viewed” stations from adjacent markets to subscribers that already subscribe to a local-TV signal package. Retransmission consent needed from the significantly viewed station.

Restrictions on Delivery of Distant Signals:

Several provisions are designed to migrate subscribers from distant network service to local TV service, including one that bans a new DBS subscriber from purchasing distant network signals if a local TV signal package is available, even if the subscriber is eligible as an “unserved household” to buy distant signals.

Extends Cable Privacy Protections to DBS:

Generally requires a DBS operator to obtain subscriber permission to collect and disseminate “personally identifiable information.” Mirrors cable law adopted in 1984.

Sources: HR 4518; Multichannel News research
 
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