In what has been described as quick action by Congress, the House and Senate passed omnibus appropriations legislation that included the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA) on Nov. 20.

Among the act’s provisions is a requirement that direct-to-home (DTH) satellite television service providers, namely EchoStar Communications Corp. [DISH] with its Dish Network service, transmit all analog local-to-local signals they provide to one dish within 18 months. EchoStar has used in certain areas required subscribers to use two dishes to receive their television service. EchoStar employs a two-dish solution in about 30 markets covering approximately 1.3 million subs.

A company update issued from Oppenheimer estimates that the conversion of Dish customers from a two-dish solution to a one-dish solution will cost the company $100 million. Additional, the legislation “will also reduce the overall number of markets in which [EchoStar] can provide local channels because the company will have to reconfigure (sub- optimally) which satellites transmit channels to individual markets. This may hurt the company’s subscriber growth.”

However, a research note from Bear Stearns doesn’t see the act as having a long-term effect on EchoStar. “Though there could be an impact on churn and [average revenue per user] should EchoStar chose not to continue to continue providing local service in these 30 markets, we believe the possibility is unlikely,” analysts wrote.

EchoStar understandably isn’t happy. In a prepared statement, the company said it is “disappointed that the bill inappropriately singles out EchoStar for unfair treatment with respect to channel positioning.”

As for The DirecTV Group [DTV], operators of the DirecTV satellite television service, “the bill has no real impact on [DirecTV] because it does not employ a two-dish solution,” Oppenheimer wrote. DirecTV “should benefit, however, from the ability to transmit distant [high definition] signals.”

“Bottom line, we do not believe that the new legislation will have a significant impact on the [DTH satellite broadcasting] industry near term,” added Bear Stearns.

Other Bill Provisions

Outside of the EchoStar requirement to eliminate the two-dish solution, the act’s passage was greeted with open arms throughout the satellite and broadcast communities.

Significant attention is being paid to provisions establishing a “digital white area.” SHVERA allows satellite television service providers to offer distant digital network signals — beginning in May 2007 in the top 100 markets and after July 15, 2007 in all other markets — if they are unable to receive an over-the-air digital broadcast signal.

The Digital Transition Coalition said in a statement that the act’s passage “is a win for American consumers and an important step in the digital transition. The Digital Transition Coalition commends Congressional leaders for passing [the act] that includes the digital white area language.”

“The forward-thinking digital white area provisions will motivate local broadcasters to build their towers and broadcast at full power in order to serve their communities,” EchoStar said.

Other provisions in the bill include:

• The ability of satellite broadcasters to transmit “significantly viewed” stations to their subscribers from neighboring markets, as long as the satellite provider transmits a local-to-local signal, an authority that cable companies currently enjoy;
• The ability for satellite providers to negotiate voluntarily the royalty fees paid to superstations for the right to retransmit their signals; and
• The ability for satellite services to transmit superstations to commercial establishments. However, the provision does not apply to distant network signals.
• The bill’s passage also received praise from Rep. Joe Barton (R-Texas). In an prepared statement, he said the passage will “increase competition and consumer choice by both allowing satellite providers to continue to provide local network broadcasts to viewers otherwise unable to receive local programming in their area and to carry certain out-of- market signals in a comparable way to what cable operators are currently permitted to do. These provisions mean rural Americans will not be cut off from the world of information.”

(Robert Peck, Bear Stearns, 212/272-6665; Adam Bromberg, Digital Transition Coalition, 703/683-5004 x102; Steve Caulk, EchoStar, 303/723-2010; Thomas Eagan, Oppenheimer, 212/668-5769; Camille Osborne, SBCA, 703/999-5441)