In a major setback for digital satellite providers, the 4th Circuit Court of Appeals upheld the Federal Communications Commission's must-carry rules for satellite TV, forcing DirecTV and EchoStar to comply with all-or-nothing local station carriage requirements on Jan.1.
The standing must-carry rules require satellite providers to carry every local station in any region the satellite provider chooses to serve with local TV coverage. Previously, the satellite providers had elected to carry only affiliates of major TV networks ABC, CBS, FOX and NBC, with the occasional inclusion of UPN and The WB. Now they will be forced to add channels, which may carry home shopping networks, religious programming and other content, much of which is already carried by the satellite operators on other channels.
The satellite companies and the Satellite Broadcasting and Communications Association (SBCA) had fought the constitutionality of the must-carry edict, claiming it violated the First Amendment and other provisions.
The Appeals Court opinion said the carry-one, carry-all rules don't violate the Constitution and that the FCC's ruling was not arbitrary, capricious or contrary to law.
The SBCA said, "We are extremely disappointed in the decision from the 4th Circuit Court of Appeals. This is a tremendous loss for consumers and competition in small- and mid-size markets because it limits the ability of Hughes' DirecTV and EchoStar's DISH Network to roll out local broadcast service in additional markets.
"The SBCA, DirecTV, EchoStar and the many programmers that support our legal challenge to satellite must carry, are reviewing the details of the decision and will explore all of our legal options."
The case could eventually be taken to the Supreme Court. More than a week ago the satellite interests had asked for a delay in the Jan. 1 deadline because further litigation was expected beyond that date.
EchoStar spokesman Marc Lumpkin said the company would let the SBCA speak to plans for future litigation.
"The decision is a tremendous loss for consumers and competition to cable in small and mid-sized markets because it limits the ability of EchoStar's DISH Network to expand local TV service via satellite in more than the current 36 cities we serve today," Lumpkin said. "However, DISH Network will comply with must carry on Jan. 1, 2002. This decision underscores the need for a speedy approval of the proposed merger between EchoStar and Hughes Electronics.
"By combining our satellite spectrum and resources, we will deliver local TV channels into over 100 metropolitan areas, which will reach about 85 percent of the U.S. households while complying with the full must carry rules. This is the only way to offer true competition to cable. We don't anticipate removing any channels in the 36 cities that we serve today."
Similarly, DirecTV plans to maintain its current local TV services, using the additional transponder capacity from the recently launched DirecTV 4S spot beam satellite, a company spokesman said. DirecTV will begin expanding local channel service in all of its local channel markets by the end of the year.
"The Court's decision is a tremendous loss for consumers and competition in small- and mid-size markets because as we have previously stated, must carry limits our ability to roll out local broadcast networks in additional markets due to our limited spectrum," stated DirecTV spokesman Bob Marsocci. "We are still reviewing the details of the Court's decision, and are exploring all of our business and legal options."
Not everyone was disappointed with the ruling. Eddie Fritts, National Association of Broadcasters (NAB) president, celebrated the decision.
"The NAB is pleased the 4th Circuit Court of Appeals has upheld the will of Congress, recognizing the unique value provided by free local television stations," Fritts said. "This is a New Year's Day gift for DBS subscribers — on Jan. 1, they will begin receiving all local stations in markets where 'local-into-local' service is being offered."