NAB Contests DBS Local-Signal Rules

In late 1999, Congress decided that direct-broadcast satellite carriers should be allowed to compete with cable operators by offering broadcast-TV signals in local markets.

But it granted that authority with a key condition: Starting in 2002, DBS carriers would be required to carry all local signals in any market in which they elected to carry just one.

Fashioning rules to implement features of the law, the Federal Communications Commission said the "carry one, carry all" mandate did not mean DBS subscribers were required to purchase all of the available local-TV signals if they decided to buy any of them.

"We do not believe that the statute requires satellite carriers to sell all local television stations as one package to subscribers," the FCC said in its Nov. 30 rulemaking. In other words, DBS carriers could create local-TV tiers, or packages.

The FCC's decision last November to endorse the àl a carte sale of local TV signals by DBS didn't garner much attention. But the agency's action has angered the broadcast industry.

On Feb. 1, the National Association of Broadcasters took the FCC to court in a suit filed in the U.S. Court of Appeals for the District of Columbia Circuit.

That same day, the Satellite Broadcasting and Communications Association and EchoStar Communications Corp. filed suit against the agency's rules implementing the "carry one, carry all" mandate. SBCA filed in the U.S. Court of Appeals for the 4th Circuit in Richmond, Va.; EchoStar filed in the U.S. Court of Appeals for the 10th Circuit in Denver.

The three cases have been consolidated and will be reviewed by 4th Circuit judges in Richmond, according to satellite- and broadcast-industry attorneys.

Broadcasters have challenged the àl a carte rules, claiming DBS operators, like cable operators, are required to provide all local signals in a single package.

NAB is concerned that DBS operators will create several packages designed to favor some local stations over others.

"There is a huge concern on our part about satellite companies cherry-picking certain local broadcast signals and favoring some over the others," said NAB spokesman Dennis Wharton.

James Hedlund, president of the 135-member Association of Local Television Stations (ALTV), said he was troubled that the DBS industry might employ an à la carte strategy to persuade Congress to remove the must-carry mandate.

He said DBS operators could create one package that consists of the four major networks, then sell other stations in a second package or individually.

If few subscribers take the second package, Hedlund said, DBS operators could "go back to the Congress three months later and say, 'Nobody subscribed to this package, and therefore it means nobody wants these signals.'"

"If that is your objective-simply avoid the intent of the law-you could do all sorts of things that have that effect," he said.

ALTV did not join the NAB's suit. Instead, Hedlund said ALTV would soon file a petition asking the FCC to reconsider its decisions.

In passing the Satellite Home Viewer Improvement Act, Congress allowed DBS carriers to offer local signals for the first time. DirecTV Inc. and EchoStar responded by offering the four major networks and a national PBS feed to subscribers in the top 35 to 40 markets.

The local stations are sold in a package for $4.99.

DirecTV spokesman Bob Marsocci said the only broadcast signals his company offers à a carte are distant network signals, available only to a narrow class of eligible subscribers.

Pantelis Michalopoulos, a Washington attorney for EchoStar, said SHVIA afforded no authority to require DBS carriers to provide all local TV signals in one package.

"What [broadcasters] are trying to do is use the SHVIA as a vehicle to introduce rate regulation," Michalopoulos said. "It's sort of the reverse of unbundling. It's sort of a bundling requirement."

Marsocci said it was unlikely DirecTV would create multiple packages for local TV signals or sell them individually when the full must-carry rules take effect next year. The company would want to generate revenue from all local signals that take up channel space on its satellites, he said.

"All along our plan has been to offer in a package whatever channels we offer in that market," Marsocci said. "To create a separate package, economically, it doesn't make sense."

DBS analyst Mickey Alpert, president of Washington, D.C.-based Alpert & Associates, said he expects DirecTV and EchoStar next year to offer all local TV signals in one package and not try to discriminate against the weaker stations in a market.

"I suspect that's what they are going to do," Alpert said. "From a purely economic standpoint, they are much better off raising the price $1 or $2 and giving them everything."

Although suspicious of DBS-mainly because the SBCA, EchoStar and DirecTV have all filed suit against the underlying must-carry law-Hedlund said he believes DBS carriers would have an economic incentive to carry all local signals in one package to recoup the cost of carrying the signals.

"Off the top of my head, that's what I would say," Hedlund said.