Satellite must-carry has its day in court

Sep 24, 2001  •  Post A Comment

The satellite television industry’s effort to rid itself of must-carry requirements that take effect Jan. 1 will enter a critical phase Sept. 25, when a federal appeals court in Richmond, Va., hears oral arguments on the industry’s challenge to the rules.
Under a law passed by Congress two years ago, direct broadcast satellite services such as DirecTV and EchoStar must carry every broadcast station in a market if they retransmit at least one local signal there.
But this “carry one, carry all” policy is under attack from the dish TV industry, which says the approach is unfair because satellite companies have limited channel capacity.
Broadcasters, who strongly support must-carry, say the capacity issue is a myth and note that DBS systems have plenty of room for pay-per-view movies. They also argue that if some TV stations are not carried by DBS, they could lose substantial viewership, particularly if DBS continues to gain market share from cable.
DBS wants to cherry-pick-i.e., carry the Big 4 networks and perhaps a few independent stations in major cities and as many small and midsize cities as possible.
Dish TV services insist that’s impossible under the current must-carry regime. If they offer, for example, the Big 4 signals in Los Angeles, they have to retransmit every broadcast station in L.A. That amounts to 23 stations, some of which are tiny independents or duplicative shopping channels, filling up satellite capacity they need elsewhere.
“If we did not have to comply with must-carry, it’s likely we could offer local channels in 70 markets,” said Bob Marsocci, spokesman for DirecTV, which offers local signals in 41 markets.
The Satellite Broadcasting and Communications Association, Direc- TV and EchoStar filed suit in 2000 in the Fourth Circuit Court of Appeals in Richmond against the Federal Communications Commission, Justice Department and the U.S. Copyright Office. The National Association of Broadcasters intervened on behalf of the defendants.
The satellite challenge rests mainly on this argument: The must-carry law violates the First Amendment rights of satellite companies by preventing them from exercising editorial discretion and forcing them to give preferential treatment to some stations.
From the government’s perspective, satellite must-carry enables regulatory parity with cable, which is also subject to must-carry restrictions.
The defendants have raised the specter of eliminating satellite’s so-called compulsory license if must-carry is tossed out. The compulsory license makes life easier for dish TV companies by letting them pay copyright fees for programming without negotiating individually with each programmer. Congress conditioned satellite’s compulsory license on its acceptance of must-carry. The satellite industry says the government would never terminate the license because many DBS viewers would lose local signals they’re now getting.
DBS sources said two Supreme Court rulings upholding cable must-carry are not relevant because the court said those restrictions are needed since cable is a monopoly. DBS, by contrast, commands only 15 percent of the video services market.