Satellite Viewers Don’t Receive Local Programs Despite New Law

When Congress eased federal copyright laws last year so satellite television operators could carry local stations for the first time and more directly compete with cable TV, James Harris was delighted.

Like many Americans, the 53-year-old owner of the Prairie Lights Bookstore in Iowa City, Iowa, had come to loathe his cable provider. Now, his satellite TV company would be able to offer access to local Iowa stations--in addition to traditional cable fare such as MTV and Home Box Office.

But 10 months after the law took effect, records show that DirecTV, EchoStar and other satellite TV operators are carrying barely a tenth of the nation’s 1,616 local TV stations.

EchoStar said its Dish Network system currently offers 133 local stations across 33 markets. DirecTV, meanwhile, airs 150 local stations in 36 markets. The offerings are mostly concentrated in big cities such as Los Angeles, where six stations--the four major network affiliates as well as independent stations KTLA-TV Channel 5 and KCAL-TV Channel 9--are offered by satellite TV operators.

Although DirecTV and EchoStar say limited satellite capacity constrains their ability to offer a full roster of local sports, news and other programming, some broadcasting officials say the companies are simply protecting their bottom lines. These critics say satellite TV operators would prefer to offer MTV, CNN, HBO, plus channels for pay-TV movies and other lucrative fare, rather than add more local TV stations that don’t generate any direct income and that satellite TV operators have to pay licensing fees to carry.

“Satellite TV operators have hundreds of channels, but they would rather offer the 30 or 40 pay-TV channels than carry all the local stations,” said David L. Donovan, vice president of legal affairs for the Assn. of Local Television Stations.

Donovan added that “some of these local TV stations [that] the satellite industry is not carrying are a lot more popular than pay TV. . . . We’re talking about shows like ‘Dawson’s Creek’ ” on the WB television network, which attracts about 4.5 million viewers.

The irony is that last year satellite TV companies, including the two biggest--El Segundo-based DirecTV and EchoStar of Englewood, Colo.--said they were pleased to get the chance to offer local stations. At the time, the satellite TV industry--with 16 million subscribers--said it was eager to compete on more equal terms against the far larger cable industry, which has 66 million customers.

Since then, satellite operators have filed a nasty lawsuit to block these local TV reforms.

“We ultimately would like to serve every market, but we have a limited amount of capacity [and] the law unfairly interferes with our right to choose what programming we want to carry,” said Charles C. Hewitt, president of the Satellite Broadcasting & Communications Assn.

The association joined EchoStar and DirecTV in filing a lawsuit in September against the Federal Communications Commission and the U.S. Copyright Office to overturn the “must carry” local TV provision of the federal Satellite Home Viewer Act. The groups argue that the new law violates the 1st Amendment right of satellite TV operators to pick what programs they want to carry on their systems.

Meanwhile, 6 million rural customers--such as Harris--are left without any satellite access to local stations.

“When they passed that law, I fully expected my [satellite TV provider] to offer local channels,” said Harris, who can’t receive the eight local stations serving the Iowa City-Cedar Rapids market. “I would have loved to watch the World Series, but I can’t get the local Fox affiliate over satellite and my outdoor antenna provides poor reception,” he said. “It’s just plain anti-competitive, if you ask me.”

Rep. Bob Goodlatte, a Virginia Republican who has been a strong advocate of providing local TV signals in rural areas, said lawmakers are being swamped by calls from constituents seeking more competition.

“This is the No. 1 issue that members of Congress say they get the most telephone calls about--the inability to get local stations over their satellite dish,” Goodlatte said. “Currently, millions of people who live in rural areas can only get their local television stations with the use of ‘rabbit ear’ or other antennas, and many can’t get them at all.”

Satellite TV executives said they never wanted a law that would require them to carry all of the nation’s TV stations. EchoStar and DirecTV satellites say they have the capacity to each carry only about 500 channels of programming now. Both companies plan to launch more satellites. But they say they still won’t have the capacity to carry all local stations.

Since the passage of the Telecommunications Act of 1996, which was aimed at deregulating the broadcast, telephone and cable industries, lawmakers and regulators have been frustrated with the industry’s slowness to provide consumers everything from high-speed Internet access and digital TV to lower cable TV and phone rates, especially in rural areas.

But satellite TV representatives say that if the government wants greater competition, the “must-carry” provision of the Satellite Home Viewer Act should be abolished. Under the provision, a satellite TV operator must carry every TV station in a local market by Jan. 1, 2002, if the operator chooses to offer any TV station in that local market.

“If Congress wants more competition they should get rid of the ‘must-carry’ law,” said Andrew G. McBride, a Washington lawyer who represents EchoStar, DirecTV and SBCA in their lawsuit. “If you didn’t have ‘must carry’ you could carry all the local stations” in as many as 100 of the 210 local markets, he said.

But the lawsuit probably will take three or more years to resolve--a delay that the fast-moving industry can ill-afford, said some satellite TV operators. What’s more, some fear the lawsuit will widen the rift with broadcasters and rural lawmakers who were once among the satellite industry’s closest allies.

The satellite TV industry’s lawsuit is “irresponsible behavior,” said Mark Pagon, chairman of Pegasus Communications Corp., a DirecTV reseller in mostly rural markets. The satellite industry “needs to get to a point where we are offering everything the cable industry is offering. That’s how we can best serve our customers,” he said.

Others note that both EchoStar and DirecTV have opposed competing video technologies that might offer greater local TV service--such as a plan by Washington-based Northpoint Technology to use terrestrial transmitters to beam TV signals to small rooftop receiving dishes. The satellite companies counter that the technology, which uses the same airwaves occupied by satellite TV, would cause interference.

Still, satellite TV remains one of the fastest-growing consumer products of the last century. And some experts say backing by such companies as America Online Inc., which recently invested $1.5 billion in DirecTV, may again alter the competitive playing field in subscription-video services.

“These issues about the lack of local TV service are valid,” said Sean Badding, a vice president of the Carmel Group, a media research firm. “But . . . the winner [in subscription video] is still going to be determined by the same traditional ways. That is, who has the best service, the most channels and the lowest price. That’s what consumers care about.”