SkyBOX: Did We Win? Or Lose?

[Gregg Lengling]

by Evie Haskell evie@Mediabiz.com

Whenever Fast Eddie Fritts heaps praise upon a piece of satellite legislation, most dish heads get the shakes. And rightly so. Thus it was with genuine horror that we read Fritts' PR proclamation on last week's passage of the SHVIA (or SHVERA, depending) legislation. Intoned the lobbying kingpin for the National Association of Broadcasters, "Congress has hit the trifecta by passing a pro-consumer bill that enhances broadcast localism, slams the door on EchoStar's abusive two dish practice that discriminates against Hispanic and religious TV viewers, and thwarts efforts to establish 'digital white areas.' We salute Congressional leaders for recognizing the enduring value that local television stations provide to the viewing public."

Yikes. If Fritts is happy, you can pretty much depend on the fact that satellite got the shaft. So the real question is, exactly how bad is it?

Not as horrible as it could have been. For one thing, the satellite industry absolutely, positively had to have some legislation passed. So that's good. What's more, says our friend Chuck Hewitt, a well-connected consultant who once headed the Satellite Broadcasting and Communications Association (SBCA), given the current "dysfunctional state" of the satellite industry, "It's a miracle that we got anything out of the legislation."

And that's true too. With two King-Kong dominant players unable to cooperate on anything ... With one of those players having successfully alienated the vast majority of players on the Hill ... With an industry association whose budget would barely cover toilet paper costs for its rivals ... Any good news at all is pretty astonishing. And the SBCA's Richard DalBello and his severely understaffed staff pulled off a miracle - and then some - in protecting the industry's back as well as they did.

So here's what looks like a win from the legislation: Compulsory licenses for analog superstations and distant network signals were extended (an absolute gotta-have for the industry); satellite at last got parity with cable in the authority to transmit "significantly viewed" stations to their subscribers; plus it appears that white area rules - a ridiculous set of standards by any measure - might someday be revisited for digital signals.

And on the negative side? We count two big losses here: First, the royalty fees that DBS platforms pay to copyright holders for the right to retransmit superstations and distant networks will no longer be determined by Congressionally-mandated arbitration but by negotiations between platforms and copyright holders. At first blush, this might look like a win. But, as Hewitt points out, satellite already pays significantly more than cable in copyright fees. "And there's only one way these fees go," he notes. "That's up."

The big, big loss, of course, was the decision that EchoStar must eliminate its two-dish "local channels" solution within 18 months. To be sure, the broadcasters wanted the clock to run out in 12 months. So we guess six additional months is something of a benefit. But the fact is, as Hewitt and others point out, most of the so-called "local" channels offered on the second dish have absolutely nothing to do with localism. Rather most are niche-type networks taking advantage of must-carry rules to force their carriage. Not that we believe EchoStar necessarily had its customers' best interests in mind when it established its two-dish policy. But forcing the company to change its policy at this point will not only be very expensive (although we tend to doubt the $100 million Echo claims) but could also prove very disruptive to many DISH customers. Which, in turn, could dim the entire industry's reputation, something that satellite definitely does not need in today's increasingly cut-throat environment.

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