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Satcasters castigate bill

Congress backing b'casters

WASHINGTON — EchoStar CEO Charlie Ergen is going ballistic over Congress’ latest proposal on satellite reform — a proposal he says has come down so squarely on the side of the broadcasting industry that he no longer supports the bill.

“The draft bill is not something we would support as a company,” Ergen told Daily Variety Tuesday.

Ergen’s protests notwithstanding, House and Senate staffers are now putting the final touches on a bill that will set the ground rules for satcasters who want to offer a package of programming that includes local broadcast channels. A final vote could come as early as this week.

Satcasters said they were shocked that congressional staffers took a sudden turn in the last few days toward positions supported by the broadcasting industry.

Among the issues that upset satcasters is a decision by staffers that would force satellite services to shut down their national network feeds in markets where they offer local channels. Under the proposed bill changes, the national feed would be shut down on the same day that local signals are introduced — whether or not the subscriber signed up for the local service.

Until now, satcasters, including both DirecTV and EchoStar, have been providing network programming by uplinking a local station’s signal and distributing it to other markets.

For instance, DirecTV subscribers in Atlanta may find that their network programming originates from stations in New York. But under the bill, Atlanta subscribers will lose the New York signals on the day DirecTV offers local service in Atlanta — whether or not they subscribe to the local programming package.

Willing to change

Ergen did say that he still hoped the legislation could change in ways that would win back his support.

Ergen’s opposition to the draft bill is a dramatic turnaround for the satcaster, who has spent the last three years lobbying Congress to allow his company to offer local channels.

EchoStar’s larger rival, DirecTV, has also voiced opposition to the draft bill.

“Taking things away from people that they currently have and currently receive is a cause of concern for us,” said DirecTV’s Steve Cox, senior vice president of new ventures. Cox, like Ergen, said he did not like the bill in its current form.

Cox said DirecTV had hoped to offer potential customers a package of local programming in time for the holiday buying season — the most important time of year for satcasters when it comes to signing up new customers. “We are now halfway through the fourth quarter, and we still don’t have a bill,” Cox said.

Lobbyists for EchoStar and DirecTV are also angry over a provision in the bill that would force satcasters to negotiate a retransmission deal with stations before they could begin offering the signal to subscribers. Satcasters point out that cablers were allowed to carry broadcast channels for a full year while simultaneously negotiating deals with TV stations.

Top markets affected

Despite the furor, the bill will affect only the nation’s top 20 or so markets. DirecTV and EchoStar have room on their satellites to carry only the four top stations in the largest markets.

Another problem for satcasters is that the bill requires them to carry every station in a market where the satcaster offers local service. However, that mandate does not take effect until Jan. 1, 2002.

Broadcasters defended the bill Tuesday, insisting satcasters will see significant benefits if the legislation passes in its current form. The bottom line, said Dennis Wharton, of the National Assn. of Broadcasters, is that satcasters “will be able to offer (local broadcast channels), and the lack of those channels is the main reason potential buyers turned down satellite.”

Meanwhile, EchoStar reported Tuesday that its third-quarter loss had widened to $123.4 million from $51.9 million a year ago. The amount of the loss, which translated to 55¢ a share, surprised Wall Street analysts, who were expecting a loss of only 50¢ a share, the average estimate of analysts surveyed by First Call Corp.

EchoStar’s revenue in the quarter rose 82% to $427.5 million from $235.4 million.

The company attributed its loss to higher-than-expected marketing costs, which topped $200 million during the quarter as it added 375,000 subscribers. That was less than the 423,000 customers added by rival DirecTV.

EchoStar ended the quarter with 2.97 million subscribers.

EchoStar shares Tuesday fell $2.50 to $63.50. The stock has surged more than ninefold this year.

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