Cable operators aren't the only ones with retransmission-consent problems.
At midnight last Tuesday, EchoStar Communications Corp. pulled four of 125 local broadcasters from its Dish Network lineup after failing to successfully negotiate retransmission-consent agreements within the six-month grace period that ended last Monday.
The dispute lacked the news-making heft of Time Warner Inc.'s since-settled May standoff with ABC Inc. owner The Walt Disney Co.
But retransmission disputes with broadcasters could foil direct-broadcast satellite companies' plans to compete more aggressively with cable by offering local broadcast packages in markets representing more than 50 percent of the U.S. population by the end of the year.
In authorizing DBS providers to deliver local-into-local feeds, Congress late last fall gave DBS companies until May 29 to get approval from stations' owners or remove their signals from their local-into-local packages.
About 100,000 Dish customers were affected last week in Minneapolis, New York, Salt Lake City and Nashville, Tenn.
"This is not a case where we had any choice" but to pull the plug on the stations involved, EchoStar chairman Charlie Ergen said last week in a conference call.
EchoStar dropped Clear Channel Broadcasting Inc.'s Minneapolis station, Fox Broadcasting Co. affiliate WFTC, but restored the signal last Thursday after signing a multiyear consent agreement with the station group. Clear Channel had granted Dish retransmission consent for its Cincinnati station before the May 29 deadline.
Also dropped from Dish last week were two stations owned by Chris-Craft Industries Inc., KTVX (ABC) in Salt Lake City and WWOR (United Paramount Network) in New York.
Chris-Craft issued a press release last Tuesday stating it had offered EchoStar an extension to transmit the signal, but an EchoStar spokesman said the extension was tied to certain conditions, and would have only been good for four days.
Landmark Communications Inc.'s Nashville station, CBS affiliate WTVF, was also pulled last Tuesday and, like WTVX and WWOR, it remained off the air at press time late last week, although both sides said they were back in talks.
Last Tuesday, EchoStar filed complaints with the Federal Communications Commission against all three station groups, claiming the broadcasters failed to negotiate in good faith.
EchoStar said it would credit Dish local-to-local customers in Minneapolis, Nashville and Salt Lake City the full $4.99 price of the local package for any month in which the signal was dropped even part-time, even though another three local stations remained up in each of those markets.
In New York, superstation-package customers will receive $1.50 credits for WWOR, which was still available outside the New York DMA.
DBS rival DirecTV Inc. has signed retransmission-consent agreements with all four major broadcast networks for their owned-and-operated stations, as well as with at least one-dozen other station groups.
DirecTV senior vice president of programming Stephanie Campbell would not say last week whether DirecTV was operating under extensions from any station owners. It did not pull any of its local signals last week.
EchoStar was working under negotiation-deadline extensions ranging from several weeks to several months with a number of station owners last week, Ergen said.
While he declined to name which groups had signed agreements and which had granted extensions, spokesmen for CBS Corp. and NBC said their networks had granted one-month extensions for their O & O stations. EchoStar has consent agreements for Fox and ABC O & O stations.
The news last week allowed the DBS rivals to act in accordance with their preassigned personas. DirecTV was the senior statesman, and EchoStar was the scrappy competitor, quick to battle all from cable and DirecTV to Washington and broadcasters.
According to Campbell, DirecTV began retransmission talks with broadcasters one year ago, "as soon as it was clear that there would be legislation" enabling local-to-local. "We wanted to establish good relationships with the broadcasters," she said. "Good agreements come out of good relationships, and vice versa."
DirecTV lent its public support to the local-to-local fight relatively recently, leaving Ergen to lobby Washington for support in earlier days.
"We hope we're not being singled out [by the broadcasters] for fighting local-to-local for three years," Ergen told reporters. "I'll refresh your memory: It was a lonely fight."
But some would say Ergen is continuing to fight publicly with at least a few broadcasters in order to push for more favorable treatment of DBS in Washington.
"Charlie [Ergen] wanted to make a point," Alpert & Associates president Mickey Alpert said. "If he was truly motivated, he would have closed all of the deals."
In FCC filings, EchoStar listed points of contention with the broadcasters. They include disagreements over subscriber fees and attempts to tie retransmission consent for the major network affiliates to carriage of less compelling channels owned by the station groups-echoing complaints made by Time Warner and other cable operators in recent months.
Landmark, for example, wants to tie retransmission consent for the Nashville CBS affiliate to a local cable news network, NewsChannel 5+.
"All of our properties fit together and promote each other," WTVF general manager Debbie Turner said last week, adding that the talks with EchoStar have not moved beyond carriage of the news channel.
EchoStar balks at devoting nationwide bandwidth to smaller local stations.
"Nobody has requested the [news] channel," Ergen said. "We have agreed to carry networks linked to retransmission if it's something the consumer wants or if it is of value."
Campbell admitted that programming carriage was tied to some of DirecTV's retransmission discussions, as well, primarily for broadcasters that also operate national cable networks.
DirecTV agreed to carry SoapNet as part of its deal with ABC; the Olympic Games following its NBC retransmission agreement; and Do It Yourself as part of an affiliation with E.W. Scripps Co.
It also extended deals with certain MTV Networks services as part of a recent deal with CBS and Viacom Inc.
Some station groups also asked DirecTV to carry their regional news channels, Campbell said, adding, "It's problematic for us for capacity reasons."
DirecTV does not broadcast local channels into Nashville, and it has not yet negotiated with Landmark for retransmission consent.
Misunderstandings about the current state of DBS technology may have provoked some of EchoStar's recent problems with station groups. Turner, for example, believed Dish already had the ability to regionalize its bandwidth through spot beams.
But Turner also said WTVF has never demanded that EchoStar put NewsChannel 5+ on its lineup immediately. "We've offered a time frame of six months as a starting place," she added.
EchoStar took its fight with the broadcasters public last week, running newspaper ads in Minneapolis and Nashville and airing infomercials in place of the four local stations that were pulled.
The DBS company encouraged irate viewers to contact congressional representatives, local broadcasters and even the advertisers who run ads on those stations.
In Nashville, the ads took WTVF by surprise. Turner said the station offered EchoStar an extension at 11:30 Monday night. But EchoStar spokeswoman Judianne Atencio responded that the extension was offered verbally, and not in writing, and it came in at 11:30 Central Standard Time, a half-hour past the midnight East Coast cutoff.
Turner insisted that viewers' complaints should be with EchoStar, and not with WTVF. The station countered with statements in the local press, with its own newspaper ad last Thursday and with a recorded phone message at the station asking viewers to call EchoStar programming vice president Michael Schwimmer directly with complaints.
EchoStar took the calls and comments in stride, going so far as to publish an e-mail address for Ergen in local papers and hosting a special on-air "Charlie Chat" for viewers in the four markets last Tuesday.
"I've talked to every Brenda and Earl in Nashville," Atencio said, adding that Ergen had a chance to weigh in on any e-mail responses that went out to subscribers.
Ergen warned last week that EchoStar might have to pull additional stations if it cannot reach agreements before the broadcaster-granted extensions expire. "Consumers should still be wary," he added.
Even after EchoStar finishes its current round of negotiations, the matter is far from over. Both Dish and DirecTV plan to add new local-to-local markets later this year.
In fact, DirecTV last Friday launched its 24th local-to-local market, Salt Lake City, although it went up without the local ABC affiliate, WTVX. Like EchoStar, DirecTV failed to reach a retransmission-consent agreement with Chris-Craft before the May 29 deadline, but it is currently in talks with the station group.
EchoStar said last week that Chris-Craft was seeking guarantees that Dish would air its UPN affiliates in several larger markets by 2002, even if the courts strike down must-carry requirements for DBS. EchoStar refused to sign such a deal.
Unlike some of its other negotiations, EchoStar did not have DirecTV to trailblaze an agreement with Chris-Craft and Landmark because Echo-Star put stations from those companies up first.
"EchoStar basically has a follower's strategy, and that's by design," Tellus Ventures Associates president Steve Blum said. "They let DirecTV break ground for them, and then they try to improve on those deals."
According to filings with the FCC, EchoStar did not begin talks with some of the station groups until this spring, and its relatively small staff worked down to the wire.
"We worked through the [Memorial Day] holiday weekend, and so did some of the broadcasters, and we're very appreciative of that," Ergen said. "We had dozens of deals to do. Obviously, we were stretched pretty thin."
Typical retransmission-consent fees negotiated were for about 12 cents per subscriber, sources said, although stations asked for 25 cents in some cases and for as much as $1 in at least one case, according to EchoStar's FCC filings.
Campbell would not comment directly on the cash payments DirecTV negotiated with broadcasters, but she said the company remained open to whatever issues the station groups raised.
DirecTV is particularly eager to build partnerships with local broadcasters because it opens a much-needed avenue for promoting the local-to-local packages on a market-by-market basis, Campbell said-something that's hard for a national DBS provider to do on its own.
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