DBS Focuses On Washington

By | August 2, 2004 | Feature

Congress is giving significant attention to multichannel video services, and its actions have the potential to affect the competitive balance between satellite and cable TV operators.

Bills to reauthorize the Satellite Home Viewer Improvement Act (SHVIA) have cleared the House Energy and Commerce committee and the Judiciary committees along with the Senate Commerce and Judiciary committees. Before Congress adjourns Oct. 3, a final version of the SHVIA legislation is expected to allow satellite TV providers to retain their authority to carry superstations and distant network signals but it most likely will not include several other less critical provisions their representatives are seeking. In addition, the Oct. 3 adjournment date could be pushed back to allow the completion of legislation but too little time and support appears to be available for satellite industry representatives to win all their objectives, especially because El Segundo, Calif.-based DirecTV and Littleton, Colo.-based EchoStar Communications [DISH] have different priorities on matters that include the use of two satellite dishes to provide local channels in local markets.

Satellite TV providers’ right to offer distant network signals and superstations expires Dec. 31. The need for them to retain that operating authority in order to stay competitive with their cable rivals is high, said Camille Osborne, director of communications at the Satellite Broadcasting and Communications Association (SBCA).

“This is critical, must-pass legislation,” Osborne said. “We are very hopeful that Congress will continue to view this legislation as a priority. We have every indication that they will get this passed before adjournment for the year.”

The Senate Commerce Committee marked up its version of the bill July 22, giving the Federal Communications Commission (FCC) two years to develop a model for predicting where digital white areas exist. Such areas currently receive no digital service from their local broadcast stations.

The SBCA supports the development of a predictive model to determine digital white areas that potentially could be served by satellite TV providers. Broadcasters oppose it.

SBCA President Richard DalBello said the Senate Commerce version of the bill would give U.S. consumers access to digital and high-definition signals, no matter where they live. The bill includes language that would allow satellite providers to offer a distant digital or HD signal to areas currently lacking such service by local broadcasters.

Congress has mandated that 85 percent of U.S. television households receive a digital signal prior to implementing a plan to auction off billions of dollars worth of spectrum or to give it to such first-responders as police and fire departments to enhance their communications systems. However, that distant network signal provision is one that could be dropped from the final version of the legislation due to staunch opposition from the National Association of Broadcasters (NAB).

According to NAB President and CEO Edward Fritts, broadcasters reject the notion that viewers might be better served by distant out-of-market stations. However, the NAB supports the bill’s recognition that EchoStar should end its existing policy of providing all the local signals in a given market by requiring a consumer to have two satellite dishes rather than one.

Bob Marsocci, DirecTV’s vice president of communications, said in an interview that his company remains concerned about several provisions in the Senate draft that include copyright royalty fees, the digital white area provision and the timeframe for EchoStar to end its practice of “relegating” certain broadcasters to a second dish.

EchoStar responded that the 18-month deadline set by the Senate bill to allow the company to transition from a two-dish local channel service to a one-dish solution was too strict but its officials acknowledged it was better than the House Energy and Commerce Committee’s version.

The time limit may well be cut in the final version of the legislation, because EchoStar has limited support on Capitol Hill compared with the visibility NAB and other organizations have. Those other organizations also have far more dollars to spend in supporting the re-election campaigns of lawmakers.

Royalty Rumble

One of the industry’s big concerns with SHVIA is a potential large increase in royalty fees that might be imposed by the U.S. Copyright Office if a bill is passed that links the rate hike to the Consumer Price Index (CPI). The last time satellite TV providers went through a similar process, the formula that determined the royalty rates caused the fees to soar more than 300 percent, Osborne said.

“Congress then needed to go back a year later to modify those exorbitant rates to more reasonable levels,” Osborne said. Based on the previous experience, the SBCA is emphasizing that the previous process does not work and should not be restored.

The SBCA also wants the U.S. government to avoid multicast must-carry rules that impose restrictions on the use of compression and that force satellite providers to retransmit all digital broadcast signals, including data signals used for non-video services. In addition, the association is requesting a strengthening of existing rules that allow residents of apartment buildings and multi-dwelling units to choose satellite as their multi-video service.

“Currently, many residents are prevented from subscribing to satellite TV because their unit does not have a private patio or balcony or the patio and balcony do not face in the right direction,” Osborne said. The SBCA, therefore, is asking for consumer-friendly modifications in the so-called “over-the-air reception devices (OTARD)” rules.

DBS penetration is much lower in apartments and condominiums than it is in single-family homes. Ten percent of condominiums and 7 percent of apartments subscribe to DBS in the United States, compared with 21 percent for single-family households, according to Leichtman Research Group findings reported at SkyForum April 13.

The last issue the SBCA has with the competition report is the “terrestrial loophole” the association wants “fixed,” Osborne said. This loophole lets cable operators or broadcasters that deliver programming terrestrially to retain exclusive rights to the transmissions.

One example is in Philadelphia, where Comcast retains exclusive rights to many local sports programs that would be popular with DBS subscribers as well. As a result, the DBS providers are unable to offer local sports programming, Osborne said. That issue, however, is another one of the less critical matters the satellite industry may well not win.

Despite what likely will be a mixed legislative result for the DBS industry, it is the fastest-growing competitor to cable television, with more than 23 million subscribers in the United States (22 percent of U.S. television households). This growth is sustained by factors that include lower prices, superior customer service based on independent studies and digital-quality audio and video as well as a growing national footprint.

In the SBCA’s recent filing to the FCC about multichannel video competition, the association claimed the industry had “tremendous momentum.” One reason is that the satellite industry has led the way in advance technological services, according to the SBCA. Since its launch in 1994, DBS has offered 100-percent digital-quality programming to all its consumers, and it has spurred cable to spend in excess of $70 billion to upgrade its capabilities.

The DBS industry also has used its all-digital platform to direct further technological advancements, including high-definition programming, interactive services and personal/digital video recorders. –Paul Dykewicz

(Camille Osborne, SBCA, 703/739-8351; Jeffrey Yorke, NAB, 202/429-5350; Bob Marsocci, DirecTV, 310/726-4656; Jimmy Schaeffler, The Carmel Group, 831/643-2222)

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