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DirecTV, EchoStar Team For Washington Battles

By | September 8, 2003

      Hughes Electronics’ [NYSE: GMH] DirecTV unit and EchoStar Communications [Nasdaq: DISH], the two high-powered U.S. satellite TV service providers, are joining forces in trying to fend off two threats that have surfaced in Washington.

      One issue involves efforts by the cable and consumer electronics industries to get the Federal Communications Commission (FCC) to update existing rules that allow the manufacture of so-called “plug-and-play” TV sets without involving satellite operators in the talks.

      Another challenge for the satellite TV industry bubbled up last week when the Senate Appropriations Committee passed an amendment that would give proposed multichannel TV competitor Northpoint access to direct broadcast satellite (DBS) spectrum at no charge without having to participate in auctions.

      Both matters drew strong reaction last week from top satellite industry representatives who vowed to fight back.

      In a rare display of unity, DirecTV and EchoStar complained to FCC Chairman Michael Powell that they had been “frozen out” of the plug-and-play rulemaking process, despite previously seeking to be included.

      “We remain hopeful that in crafting its final order in this proceeding, the commission will take into account the 20 million DBS subscribers and the countless cable subscribers who benefit from the competition our companies provide. To date, that has not been the case,” the companies wrote in a letter to Powell.

      If the FCC adopted the proposed plug-and-play standard, it would exclude the interests of the DBS industry and its 20 million subscribers, warned Jimmy Schaeffler, a satellite and media consultant who heads The Carmel Group consulting firm. Satellite TV representatives should be closely involved in the drafting of any plug-and-play rules, he added.

      “Satellite TV serves one of every five U.S. television households,” Schaeffler said. “How can you proceed without an industry that has that great of a customer base? The exclusion of the satellite industry makes no sense.”

      Northpoint Rises

      Andy Wright, president of the Satellite Broadcasting and Communications Association, said the legislation aiding Northpoint is one more attempt by that fledgling company to gain “an unfair advantage” in the marketplace by obtaining valuable publicly owned spectrum for free.

      “If ultimately permitted to share the DBS spectrum, Northpoint will cause interference to millions of DBS subscribers,” Wright said. “This battle is not over and we will continue to fight to protect our DBS customers.”

      DirecTV and EchoStar have warned that their subscribers would be vulnerable to “harmful interference” if the new service is allowed to use DBS spectrum.

      Northpoint, however, praised passage of the amendment offered by Sens. Mary Landrieu (D-La.) and Kay Bailey Hutchison (R-Tex.), as a way to rapidly deploy a new terrestrial wireless video service.

      “This is a real win for consumers, who last year saw their cable rates surge at a pace over five times the overall inflation rate because of a lack of competition in the marketplace,” said Northpoint Executive Vice President Toni Cook Bush. The amendment also would help rural residents who cannot obtain access to broadband service or their local TV stations via cable or satellite services, she said.

      Attached to the Commerce-Justice-State Departments Appropriations bill, the amendment extends the ORBIT Act’s prohibition on holding spectrum auctions for international satellite services to terrestrial wireless video applicants.

      –Paul Dykewicz

      (Andy Wright, Rob Udowitz, SBCA, 703/739-8351; Jimmy Schaeffler, The Carmel Group, 831/643-2222; Robert Marsocci, DirecTV, 310/726-4656; Toni Bush Cook, Northpoint, 202/737- 5711)

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