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Ergen: Must-Carry Is Due for a 'Tweak'

Armed with market-coverage maps, Dish Network chairman Charlie Ergen sat down with reporters last week for a breakfast briefing here before his testimony on reauthorization of the Satellite Home Viewer Extension and Reauthorization Act, the bill that sets the rules of the road for satellite carriage of local TV stations.

Ergen is a veteran of SHVERA reauthorizations and he has pitched many of these concepts before -- he even said that he sounds like a broken record sometimes. But Ergen doesn't hold many press conferences and time was short, so it was all briefing and no breakfast.

The following are highlights from that conversation, in which Ergen argued that it was time to overhaul the law to "tweak" must-carry, reform retransmission consent -- to rein in monopolist broadcasters -- and allow pay TV providers and viewers, not government, to decide what local-into-local really means.

On must-carry: "One of the problems with must-carry is that we have a spotlight on the entire United States. If we have a channel that doesn't have any local content and we put that up today, we cover all the constituents with that one channel. There is no reason to put that up in every local market. Take home shopping, you might have 30 home-shopping [stations] that don't have any local news or commercials, doesn't cost them anything. If we put that channel up one time instead of 30 times, it doesn't cost home shopping anything, saves us money, saves consumers money, so it seems to make sense.

"Cable has to put it up because they only have local signals. If the country wants to be efficient and effective in the world, why are we forced to put up channels by law that don't have any local content? Broadcasters have always said the reason we have to have must-carry is we are serving the local community. But if you don't have local content, you're not serving the local community.
"Shopping channels, religious channels, or Univision stations carrying the national Univision feed, why do we have to put that up? The practical thing would be that to qualify for must-carry, you should have some kind of local content. We've said 20 hours a week seems to be reasonable. But the concept is: no local content, no must-carry.

"We carry 1,400 stations, about 240 are no local content, and many others have very little."

On DMA reform, which he says is his company's priority: "An omnibus [compulsory license] would allow you to do local into local with retrans and must-carry, but it could also be expanded to adjacent DMAs. The copyright office has said you should be able to bring in adjacent DMAs, so that consumers in Colorado can get what he wants, which is Colorado news, weather and politics [DMAs in about 45 markets cross state lines]. That is one part of it. Another part of it is that when you get into retrans disputes, it is not a level playing field. In the old days, it used to be the cable company and the broadcaster. Both of them were heavyweights. Now you have two satellite providers, a cable company and a phone company. Cable is now a smaller percentage of the pie, so what has happened is that the broadcaster is a monopoly that gets to negotiate with four different parties.

"Distributors like Dish or cable have to deal with monopoly power. So, if you can bring in a station from an adjacent DMA and if ABC in Denver doesn't want to negotiate in good faith, then we could bring in ABC from Colorado Springs. ... So you could do a deal with either one of them. But that is a foreign concept to a monopoly. But if broadcasters had competition over the last 30 or 40 years, they would probably not be in the situation they are today with many of them filing for bankruptcy. They are getting competitoin in the form of Internet and cable and they haven't known how to react to it."

On carrying local stations in all 210 markets: "Rep. Bart Stupak (D-Mich.) says carry all 210 DMAs [he has just introduced a bill to that effect]. There are two problems. One is economic. Even if we got all the customers in the DMA, we probably couldn't make money at it. It costs more than $1 million per DMA to build a satellite. And you'd have ongoing costs of about $250,000 a year to import the signal via fiber to your uplinks. It could be more. So, take Glendive, Mont., with 3,000 homes. If you got every single home to buy your service, you could never cover the cost.

"But, even if we wanted to be good-deed doers, and we do uneconomical things as we did in the DTV transition by selling a converter box for $40, we still have a fundamental problem. We do 178 markets, the rest of the 210 don't have all four [network affiliates]. We don't have the right under copyright law today to bring in an adjacent DMA. So, if you expand the definition of local into local to include adjacent DMAs, you solve that problem. So that in Glendive, where they don't have a CBS affiliate you could bring it in from Great Falls.

"So, an [omnibus] license and expanding local into local to include adjacent DMAs I think you solve all the fundamental problems in SHVERA, plus the tweak to must-carry to bring reality to that by making sure there is some local content.

The net result of that would be that you would see both us and DirecTV build out most, if not all, 210 DMAs. You have an expanded economic model to help subsidize costs and a competive factor between the two satellite providers to see who could get there first.

Take Salisbury, Md., which is missing NBC. That would be economical to do today except we can't bring NBC to our customers, so nobody is going to buy it from us."

On the possibility of digital broadcast-signal losses after the June 12 DTV hard date allowing for widespread distant-signal importation: "What you are talking about already happens. DirecTV when they do analog in a local market, they will sell a distant HD signal to someone unserved analog-wise. On June 12, they would be able to sell a distant signal to the whole DMA, as could NPS (National Program Service) or anybody else who is leasing transponder space. If that is a concern to broadcasters, why not focus on passing the bill June 12, you have to pass it by the end of the year anyway, and I think you avert a kind of a train wreck there."

On a la carte: "I have always been for a la carte. I am the only [distributor] other than Cablevision [Systems] that is for a la carte. The reason is, it's already a la carte on the Internet. So, if you want to go buy just ESPN 360 today you can do it. I don't know when a la carte will be here, but there will be a day when customers have a choice a la carte. It may only be on broadband, but it is going to happen regardless of people who are against it because the Internet allows it, and it allows you to do local channels anywhere in the country. And yet we have 1956 analog laws. It's frustrating because you want productivity and competition."