DirecTV Drops Echo Suit

DirecTV Group Inc. on Tuesday dropped a lawsuit it filed last week against EchoStar Communications Corp. after EchoStar agreed to stop running advertisements that said customers who received DirecTV in rural areas might lose service.

DirecTV, the biggest U.S. satellite television provider, claimed in a federal lawsuit in Los Angeles that the EchoStar ads falsely stated that some subscribers might lose service because of a contract dispute between DirecTV and Pegasus Communications Corp., which resells DirecTV’s programming.

DirecTV and the National Rural Telecommunications Cooperative this month ended Pegasus’ exclusive contract to resell service to 8.4 million U.S. households in 41 states.

The move, effective Aug. 31, prompted Pegasus’ satellite TV unit to file for bankruptcy protection.

“While we’re pleased with the corrective action taken by EchoStar, the case will be dismissed without prejudice” so that DirecTV can return to court if EchoStar resumes “any form of misleading advertising,” El Segundo-based DirecTV said.

Englewood, Colo.-based EchoStar, the second-largest U.S. satellite TV provider, issued a statement saying it was “pleased that DirecTV has decided to withdraw its complaint.”

DirecTV, which is controlled by Rupert Murdoch’s News Corp., said it wanted to take back rights to market its service in the rural areas served by Pegasus because it had been losing customers there to EchoStar. Bala Cynwyd, Pa.-based Pegasus said it provided DirecTV service to 1.16 million people at the end of last year, 12% fewer than a year earlier.

DirecTV shares rose 10 cents to $17.05 on the New York Stock Exchange. EchoStar shares rose 54 cents to $30.39 on Nasdaq.