Good for Divi now good for HLIT
US Senate Approves Satellite TV Legislation
Washington, Nov. 19 (Bloomberg) -- The U.S. Senate gave final approval to legislation that will allow satellite television companies such as Hughes Electronics Corp.'s DirecTV to carry local TV signals for the first time.
The lack of local programming is the biggest reason that consumers choose cable television over satellite TV, the satellite industry has said. Cable TV companies dominate 82 percent of the market for home subscription TV service today, and lifting the local restriction will help chip away that edge.
``This is the most important reform in helping satellite compete with cable,' said Senator Patrick Leahy, a Vermont Democrat and co-sponsor of the measure. ``Consumers are clamoring for this service.'
The legislation was attached to the federal budget bill approved by the Senate tonight and by the House yesterday. It will now go to President Bill Clinton for his signature.
DirecTV and EchoStar Communications Corp., which operates the DISH network, immediately will be able to begin offering local TV signals, though they'll have to negotiate compensation arrangements with the stations within six months. At the end of six months, the satellite companies will face stiff penalties if no agreement has been reached and they're carrying the signals.
The companies are likely to see an increase in subscribers in 2000 as a result, analysts said.
``We know that 2.25 million customers get both cable and satellite, and the reason why they keep their cable, we think, is to keep their local channels,' said Thomas Eagan, an analyst with PaineWebber Inc. ``Certainly there are a lot more people out there that would get satellite if they could get local signals.'
All-Station Requirement
By 2002, the satellite companies will have to carry every local TV station in the markets where they provide the service, not just the most popular network-affiliated stations. Satellite companies lack the capacity to carry station in every market, so DirecTV and EchoStar plan to offer the local programming in the top 50 or 60 markets.
DirecTV is likely to benefit more from the local-into-local legislation than EchoStar because it's more aggressive in the major markets, analysts said.
``We think the impact will be pretty immediate,' said Steve Cox, senior vice president of new ventures at DirecTV.
EchoStar argues that the six-month requirement to negotiate retransmission agreements with broadcasters and the stiff penalties give DirecTV greater leverage because it has more than 7.7 million subscribers compared with EchoStar's 3.1 million.
``DirecTV also has better relationships with broadcasters and twice as many subscribers as EchoStar,' said Armand Musey, an analyst with Banc of America Securities.
In a statement, EchoStar Chairman Charles Ergen said the legislation falls short in some ways.
``With no statutory guarantee of fair pricing, the best we can do is hope that broadcasters will not demand terms and prices from us that are higher than cable pays.'
Rural Loans Removed
Because the satellite companies won't serve rural markets to start, legislators from rural areas tried to add a provision during negotiations that would have created a $1.25 billion rural loan guarantee program.
Senate Banking Committee Chairman Phil Gramm, angered by effort to add the loan program, nearly derailed the legislation by threatening to block a vote on the floor. He argued that the hastily crafted measure was a billion-dollar corporate giveaway and his committee should have jurisdiction over the issue.
Late Wednesday night, a compromise was reached to strip out the loan guarantees with the understanding that Gramm's committee would address the issue no later than April 1.
The measure includes other provisions to help satellite companies compete with cable. For instance, it eliminates a requirement that cable subscribers who want to sign up for satellite TV must wait 90 days after canceling their cable service. It also slashes by 45 percent the fees that satellite companies pay for the right to air network signals from far-away cities.
Finally, the legislation allows satellite TV customers who had been illegally receiving TV signals from distant markets to continue receiving that service for five years. A court last year ordered the signals shut off.
Nov/19/1999 20:42
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