Ruling May Drive Up Rates for Satellite TV

In a ruling that may boost monthly rates for the nation’s 5.5 million satellite TV subscribers, the U.S. Copyright Office on Monday more than doubled the fees that satellite operators pay to air network TV programs.

The decision, which becomes effective Jan. 1, will boost the satellite industry’s annual copyright royalty payments by as much as $55 million and deals a setback to recent federal efforts to foster more competition with the $27-billion cable TV industry.

The increase is a result of recent federal legislation that changed the method by which the Copyright Office and the librarian of Congress set crucial broadcasting fees. An appeal by the satellite industry is expected.

“This is outrageous,” said Bob Marsocci, a spokesman for El Segundo-based DirecTV Inc., the broadcast satellite TV market leader, with 2.6 million subscribers. “This is going to hurt our customers by putting us at a substantial competitive disadvantage” to cable, he said, adding, “We plan to appeal this decision.”

The ruling’s impact will fall heavily on viewers who must depend on satellite TV for most of their programming. Among subscribers hit hardest will be those in rural areas who don’t have access to cable, as well as the 550,000 satellite dish owners in California, who number second only to Texas.

The decision affects two types of satellite programming: network TV stations, such as KNBC-TV in Los Angeles, and big independent superstations. The superstations distributed by satellite include Atlanta’s WTBS-TV, which carries the Atlanta Braves, and Chicago’s WGN-TV, which carries the Chicago Bulls.

The decision evoked a swift reaction on Capitol Hill.

“This decision defies common sense,” said Rep. W.J. “Billy” Tauzin (R-LA), who chairs the House Commerce subcommittee on telecommunications. “It will force consumers to pay significantly higher rates for satellite services and slow competition in the marketplace. . . . It may be time to begin exploring some legislative remedies.”

But the rate hike is a result of recent changes in federal law that require the Register of Copyrights to set satellite royalty rates at “fair market value,” rather than to rely on the cable royalty rates that are set by federal law, said Jackie Cleary, a Washington communications lawyer.

A three-judge panel this summer had recommended boosting the monthly fees to 27 cents per subscriber for superstations and network TV stations. Previously, the satellite industry paid between 14 and 17 cents per subscriber for superstations and 6 cents per subscriber for network stations.

The controversial fee hike was finalized Monday by James H. Billington, the librarian of Congress, who presides over the Copyright Office. An appeals is expected to be filed by the satellite industry in federal court.

Officials of the Copyright Office could not be reached for comment.

The price hike comes amid a bitter marketing war between the direct-broadcast satellite industry (DBS) and cable companies. The competition has driven the cost of home satellite equipment as low as $99--or eight times lower than what it fetched when introduced three years ago.

The low price come-on enabled the satellite industry to entice consumers to sign up for long-term programming contracts.

But the ruling by the Copyright Office, if upheld, will mean DBS operators may now have to raise their monthly fees. The amount of future increases is unclear, since the ruling only affects a portion of the programming provided by DBS operators. Excluded from the ruling are premium channels.