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Program access or excess?

In 1992, when Congress ordered top cable networks to sell programming to DBS companies, the actual launch of the DBS industry was still two years away.

Thanks to the program-access rules, DBS providers DirecTV and EchoStar have since grown into the third- and eighth-largest pay-TV operators in the country and are snagging new customers at a pace that leaves cable operators in the dust.

But the program-access requirements are scheduled to expire a year from now, and the two industries are squaring off over the fate of the government's mandate. On Thursday, the FCC will launch a review of the program-access rules to decide whether measures once critical to incubating competition to cable are still needed.

The rules generally bar cable networks from striking exclusive deals with their affiliated cable operators and prohibit discriminatory pricing for DBS companies. That means "vertically integrated" companies such as AOL Time Warner and Comcast must make available to DBS such top-drawing fare as HBO, CNN and regional sports nets.

DBS providers say the rules are critical to competing with cable and, in fact, should be expanded.

"If we're going to have continued competition, the government needs to make sure we're not prohibited from airing top programs just because a cable operator has an ownership stake in a network," says David Goodfriend, EchoStar's Washington attorney.

Although the cable industry says networks have no reason to shun business from two of the country's top-10 multichannel providers, Goodfriend contends that corporate parents may decide that shielding local cable franchises from competition is a more important long-term goal.

"DBS is still very much the insurgent and lacks the market power as an industry" to force cable networks to come to the table, he says.

Comcast has been the most assertive MSO in the cable industry's attack on the FCC rules. Comcast attorneys told the FCC last month that the rules are unfair not only because of the phenomenal growth of satellite broadcasting but also because DBS programming offerings such as DirecTV's NFL Sunday Game Ticket
are not available to competitors. The right to create distinct program offerings would spur more investment and creativity, they argued.

Cable-industry officials also note that, with AT&T spinning off of its Liberty Media programming subsidiary, AOL Time Warner becomes the only vertically integrated company with control over a significant number of major cable networks.

"Competitive circumstances do not justify maintaining this restriction," wrote James Casserly, Comcast's outside counsel in Washington.

Comcast officials refused to comment last week.

The FCC has taken important steps beyond the program-access rules to ensure the viability of DBS, such as stripping landlords' and community associations' authority to ban DBS dishes. But the FCC's proposal will not take sides in the debate and will only ask for public input on their fate. Privately, however, few inside the agency predict the FCC will dump the rules.

The real controversy may be over a DBS proposal to expand the types of programming covered by the program-access requirements. Right now, only programming transmitted to a distributor via satellite falls under the rule. This means that some local programming delivered via terrestrial lines is exempt.

DBS fought bitterly to win rights to terrestrially delivered regional sports nets delivered by Cablevision in New York City and Comcast in Philadelphia only to be rejected by the FCC. The satellite broadcasters argued that cable operators abused the exemption solely to keep them from receiving a key local audience draw.

Comcast says, however, that terrestrial delivery is a "common, cost-effective and legitimate method of delivering local and regional programming."