Despite Satellite Policy, Ads Fly

Advertising is the lifeblood of TV networks. But for the 40 or so channels that are reserved for nonprofit programmers on the nation’s satellite television services, commercials are a no-no.

At least they’re supposed to be.

Under an 8-year-old rule that Congress designed to increase educational fare on satellite, DirecTV and rival Dish Network, owned by EchoStar Communications Corp., must set aside 4% of their channel capacity for nonprofit programmers that serve the common good with ad-free content.

But critics say ambiguities in the guidelines and weak enforcement have resulted in rampant abuses. Several nonprofit channels ignore the rules and air advertisements, according to consumer advocates and industry insiders. Some also sell airtime to programming suppliers, a practice that is not explicitly forbidden but critics say raises questions about whether some channels are wrongly profiting.

In comments this month filed with the Federal Communications Commission in support of a complaint last year, Farm Journal Inc., a for-profit media company, alleged that RFD-TV, a public interest channel about rural living, has aired commercials for bluejeans, lawn mowers, horse saddles and quilting books.

“Such conduct mocks the congressional and FCC requirements,” the filing stated.

Patrick Gottsch, the founder of RFD-TV, said, “We feel we are fully in compliance and look forward to this being resolved.”

Some public interest programmers complain that those requirements are so fuzzy that compliance is difficult.

“Some of the FCC rules are not as clear as they should be,” said Marcus Lamb, chief executive of Daystar Television Network, a Dallas-based Christian broadcaster that is under FCC investigation for allegedly airing commercials and selling airtime on its public interest channel. “We have tried our best to follow the rules, but the FCC is probably not totally clear about their own rules.”

Critics also claim that flaws in the guidelines for awarding the channels have allowed one group to benefit more than any other. Today, religious broadcasters occupy about 40% of all set-aside channels despite the fact that both satellite firms were providing similar faith-based programming when those channels were added.

The result: Many educational programmers with no other access to the airwaves have been shut out.

“Congress intended the set-aside channels for people without any other way of getting onto satellite TV, not for broadcasters that are already carried,” said Angela Campbell, a professor at Georgetown University Law Center and director of its Institute for Public Representation, a consumer advocacy group.

Campbell complained that the FCC had given low priority to most public interest issues.

The slots are highly sought after. Last year, about 60 nonprofit programmers, including the University of California and the L.A. Unified School District, were on the waiting list to be distributed by the nation’s biggest satellite provider, DirecTV. The only public interest opening on the El Segundo-based service in 2005 went to National Religious Broadcasters, a powerful lobbying group that represents such televangelists as Pat Robertson and Jerry Falwell.

The NRB received its channel in the aftermath of its alliance with News Corp. chief Rupert Murdoch in his fight for control of DirecTV.

Religious broadcasters were not necessarily the beneficiaries intended by Congress. The set-aside law was passed to make room on satellite for educational channels that lacked commercial potential. In announcing guidelines for implementing the law in 1998, then-FCC Chairman William Kennard envisioned alternative education programs “for children, senior citizens, distance learning, healthcare applications and for celebrating our diversity.”

The FCC -- fearful of restraining an emerging industry that promised to break cable’s monopoly -- gave satellite operators broad discretion in doling out public interest channels. Although then-FCC Commissioner Gloria Tristani pushed for a selection process based on a lottery or a survey of subscribers to reduce the chances of bias and corruption, the agency took a more hands-off approach.

To qualify for a slot, a programmer needs only to have nonprofit status and pay a monthly fee equal to at most half the satellite distributor’s cost to make the channel available.

The FCC also decreed that public interest channels may not air advertisements from for-profit companies, though they can run ads from nonprofits and take on sponsors.

The agency, however, does not proactively enforce its rules, instead relying on the public to object. As a result, the rules are routinely broken. Some public interest channels are selling airtime to their program suppliers for as much as $14,000 a half-hour, according to industry insiders, media buyers and complaints filed with the FCC.

Andrew Schwartzman, president of the Media Access Project, a Washington-based public policy law firm, called the airing of product advertisements “blatantly illegal.”

“The FCC is asleep at the switch when it comes to the commercialization,” said Schwartzman, adding that in general, the set-aside program’s “implementation is not consistent with the intent of the law.”

Industry executives privately acknowledge that the program should be overhauled.

“The whole thing is broken,” said a longtime satellite executive who requested anonymity. “It was a good public policy on paper but not in practice.”

Though loath to say so on the record, satellite executives explain privately that one reason they bestow public interest channels upon religious broadcasters is that they are among the few nonprofit groups that reliably produce quality television.

Even if a nonprofit group has a good idea for a channel, satellite carriers have learned from experience that funding in this realm is often temporary. If it runs out, it falls to the satellite carrier to scramble for a replacement.

By comparison, well-funded religious broadcasters offer stability.

Consumer advocates say EchoStar has been better than DirecTV at divvying up the public interest spectrum to a diverse group. EchoStar, the nation’s second-largest satellite TV provider, has awarded five of its 22 public interest channels to religious broadcasters, according to public filings.

Its other channels include a liberal political channel called Free Speech TV, a network from the University of California, the Classic Arts Showcase and the Documentary Channel.

EchoStar would not comment for this article.

For its part, DirecTV has awarded eight of its 14 public interest channels to religious broadcasters. A Los Angeles subscriber to DirecTV could tune in Thursday and Friday to pastors Paula White and Rod Parsley and Bishop T.D. Jakes on four channels, including some categorized as public interest.

Susan Eid, vice president of government relations for DirecTV, said one reason religious broadcasters accounted for nearly 60% of its public interest slots was that they made up the biggest share of applicants, about 40%.

“The reason we have more religious channels is that these groups are better organized, have a higher-quality product and are more efficient about getting in their applications,” she said.

A DirecTV spokesman said many of the company’s religious channels reached discrete audiences. While Brigham Young University TV serves the Church of Jesus Christ of Latter-day Saints, for example, the Word is aimed at African Americans. DirecTV says it carries the nation’s largest religious broadcaster, Trinity Broadcasting Network, for competitive reasons.

DirecTV acknowledges that some of its other offerings -- the NRB Network, Daystar Television Network, World Harvest Television and TCT Network -- focus on Christian teachings but said each had a distinct voice, just as Fox News and CNN do.

Eid said DirecTV was not obligated to monitor its public interest channels for advertising. A spokesman said he did not believe that any were doing so.

Yet during Robertson’s “700 Club,” which airs on the NRB Network, viewers have seen commercials for Curves Fitness Centers and Oreck vacuum cleaners, and “At Home Live” has been crammed with ads for weight-loss remedies, Geico and Colonial Penn insurance, and titanium razors.

NRB executives said the ads were aired in error soon after the channel was launched in December.

“During our start-up phase, some programmers mistakenly gave us their commercial feed,” Frank Wright, NRB’s chief executive, said by e-mail. “This was subsequently corrected. There are no commercial spots airing on the NRB Network today.”

However, NRB aired ads as recently as this month. “CBN Newswatch,” a program from Christian Broadcasting Network that runs on the NRB Network, ran commercials for Gem Magic, and a program called “Worship” included ads for Revita, Nature Made and Osteo Renew, all health remedies.

One might think such commercialism would prompt a raft of complaints to the FCC from nonprofits that are seeking their own satellite channels. In fact, complaints are rare.

Schwartzman said part of the reason was that nonprofits feared retribution by DirecTV and EchoStar. Ever since one applicant, the American Distance Education Consortium, was “punished” for complaining to the FCC in 1999, he said, other programmers have been wary of protesting.

The nonprofit group of 70 land-grant colleges and universities, known by the abbreviation ADEC, filed a complaint with the FCC in 1999 alleging that EchoStar was trying to relegate public interest channels to a satellite that reached only part of the country.

The FCC sided with ADEC and ordered EchoStar to change its practices. But the consortium never got the channel it wanted for its distance learning programming.

“When we went to visit the FCC, the commissioners said a loophole lets providers choose what channels get on,” ADEC President Janet Poley said. “We didn’t have the resources to fight it.”

The complaints against RFD-TV and Daystar are among the few to be filed since.

Documents included in the Daystar complaint, filed by a tiny rival of EchoStar’s, illustrate how the public interest rule’s ambiguity has made it vulnerable to potential manipulation.

One is a sworn statement by Lamb in which the Daystar chief bemoans the loss of revenue from “advertising, donations and ... from the sale of airtime” should his public interest channel be removed from EchoStar’s service.

In a recent interview, however, Lamb said Daystar did not profit from the revenue but only covered its incidental expenses, as allowed by the law.

Lamb said Daystar had never charged for airtime on its public interest channels. Rather, he said, it was donated to ministries that purchased time on its commercial stations.

“It’s part of our giving back,” he said.

Critics complain that some religious broadcasters, including Daystar, won channels not on their merits but because of the leverage they wield as station owners.

For instance, Lamb acknowledges that Daystar waived rights that require satellite providers to carry eight of its local TV station signals in exchange for one public interest channel each on EchoStar and DirecTV.

He said this kind of horse-trading “is not some unusual thing.”

DirecTV’s Eid said it had struck similar trades with Trinity Broadcasting and two other religious broadcasters.

Eid argues that such trades free up valuable space the satellite service can use for commercial purposes. She said it prevented duplication, because most local stations of a religious broadcaster carried the same programming.

The FCC is looking into the legality of these trades as part of the Daystar investigation.

Critic Schwartzman, however, said the religious broadcasters were trading spectrum worth “hundreds of millions of dollars” to DirecTV and EchoStar -- far more than the satellite operators are allowed to be compensated for public interest channels under the law.

Currently, DirecTV charges nonprofit programmers $6,350 a month, and EchoStar’s rate is $10,000 a month, according to their public filings.

Unlike Daystar, the NRB had no station rights to waive in exchange for being awarded a public interest channel. But according to satellite insiders and religious broadcasting sources, it had something else of value to trade: political capital.

In 2001, News Corp.’s Murdoch -- still bruised after losing a heated bidding war with EchoStar for DirecTV -- launched a campaign to derail the deal in Washington. His plan was to buy the satellite TV provider if regulators blocked the merger.

To help make that happen, Murdoch enlisted the help of the politically well-connected NRB.

In a meeting with the NRB’s executive committee at its convention in Nashville in February 2002, Murdoch agreed to give the ministers a public interest channel if he prevailed in his bid to buy DirecTV, according to people familiar with the discussions. He explicitly asked them to lobby against the deal, those sources said.

The NRB asked EchoStar for the same promise -- a guaranteed channel -- in exchange for supporting the deal. A representative of EchoStar turned down the executive committee’s request, according to a person at the meeting.

Murdoch got his wish: The NRB formally objected to the EchoStar-DirecTV merger, regulators blocked it and News Corp. scooped up DirecTV in late 2003.

NRB’s Wright acknowledges asking Murdoch about securing a public interest channel when the media mogul, during meetings in 2001, asked the group about its position toward the merger. But according to Wright, there was no quid pro quo, and a News Corp. spokesman said NRB went through the standard application process.

“NRB’s public opposition to the proposed Dish Network-DirecTV merger was based solely on the advice of our communications attorneys,” Wright said.

But last year, when DirecTV had a rare opening for a public interest programmer, the NRB got its channel.