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Congress Ready to Tackle DBS Legislation

Washington -- As expected, Sen. John McCain (R-Ariz.) last
week unveiled his bill that would set the must-carry ground rules for direct-broadcast
satellite carriers that elect to provide local-TV signals.

EchoStar Communications Corp. chairman and CEO Charles
Ergen said he was "very confident" that McCain's bill (S.303) -- when
paired with a second bill (S.247) offered by Sen. Orrin Hatch (R-Utah) -- would expedite
his quest for profitability, which he pegged at 4 million subscribers, or twice his
current total.

While McCain's bill deals with must-carry,
Hatch's bill, introduced Jan. 19, would amend copyright law in the manner necessary
to authorize DBS carriers to offer local dish-owners their local-TV signals.

In Senate testimony last week, Ergen said 80 percent of
home-dish shoppers give up when they learn that their program packages would exclude
local-TV signals.

He said EchoStar -- which is already at 2 million
subscribers and growing rapidly -- would be a much more formidable competitor to cable if
it could bundle local-TV signals with hundreds of satellite networks.

"The problem is that we don't [carry] ABC, CBS,
NBC and Fox," Ergen told the Senate Subcommittee on Antitrust, Business Rights and

Subcommittee chairman Sen. Mike DeWine (R-Ohio) said he was
hopeful that Hatch's bill would fly through the full Judiciary Committee.

But DeWine voiced some concern over whether McCain,
chairman of the Commerce Committee, can get broadcasters and satellite carriers to
compromise on the distant-network issue, which, as of now, will cost 2.2 million dish
subscribers their Fox and CBS signals sometime between Feb. 28 and April 30.

"I hope to move pretty quickly. I can't predict
about Commerce," DeWine said.

The Satellite Broadcasting & Communications
Association, the lobbying arm of the direct-to-home industry, said in a prepared statement
that it was "encouraged" by McCain's bill -- especially provisions that
could shield some dish-owners from a distant-network-signal cutoff as a result of a
Federal Communications Commission rulemaking mandated by the bill.

DeWine told reporters after the hearing that he felt that
DBS provision of local signals was a key development in promoting cable competition.

"I think that you are going to see a fundamental
change in competition," DeWine said.

The focus of DeWine's hearing was EchoStar's $1.6
billion acquisition of a prime DBS license from News Corp. and MCI Communications Corp. --
a transaction that has already been approved by the Department of Justice, and that is
awaiting FCC approval.

Assuming a favorable ruling by the FCC in a few months and
quick enactment of the Hatch and McCain bills, Ergen said he could be offering local-TV
signals in 20 markets by "this summer."

However, he added, a requirement that EchoStar carry all
stations in a market, to the extent that it carries any, would scale back his
local-into-local strategy to just five cities.

Within three years, he said, EchoStar would deploy
"spot-beam" technology that allows for the reuse of spectrum in a manner that
would permit the company to "provide the vast majority of the country" with
local signals on a full must-carry basis.

"We think that technology exists," Ergen added.

McCain's bill would address Ergen's must-carry
concerns by not requiring carriage of all local signals in a served market until Jan. 1,

In testimony before the same Senate panel, National Cable
Television Association president Decker Anstrom reaffirmed his support for a DBS phase-in
-- more so as a concession to political reality than as an endorsement of a policy that
would enshrine a regulatory disparity between competitors.

"We very much hope to reduce the role of government in
the video business, " Anstrom said, in response to a question from Sen. Herb Kohl
(D-Wis.) on the NCTA's willingness to endorse a must-carry phase-in.

The National Association of Broadcasters is also backing a
phase-in as a concession to policymakers whose chief priority is establishing DBS as a
potent rival to cable.

While the NCTA and the NAB have ceded some ground in the
must-carry debate, small cable operators are incensed that Congress could be close to
handing EchoStar a regulatory break that they said it doesn't deserve.

"They're just looking for an end-around to gain
an advantage over smaller businesses, and that is unfair," said Matt Polka, president
of the Small Cable Business Association. "Our position is that full retransmission
consent and must-carry should be required immediately."

After acquiring the new DBS license, EchoStar intends to
launch two new satellites to join the four already deployed, for a total capacity of 660
video channels at a 10-to-1 compression ratio.

Ergen said 100 channels would be devoted to data services
and 120 channels to local-TV signals. The remaining 440 would be used for national cable
networks and high-definition television.

HDTV is bandwidth intensive, he added, using up five
channels at 10-to-1 compression. Use of the MCI-News Corp. license will allow EchoStar to
provide all of these services to subscribers, who will need just one dish, and not two.

"We are not talking about a company that needs
help," Polka said.

Hatch, at a Jan. 28 Judiciary Committee hearing on his
bill, said in a prepared statement that he hopes to advance the measure to the Senate
floor "quickly."