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Industry Infighting Marks Satellite Show’s First Day

Despite the consolidation that has left the direct-to-home satellite industry with only two major direct broadcast satellite platforms, the industry infighting was as severe on the first day of the 1999 satellite show as it had been when five programmers were scrapping for subscribers.

The turbulent feelings shared by a number of retailers were underscored in the opening minutes of the event, when keynote speaker Eddy Hartenstein, DirecTv president, was ambushed on stage, in mid speech by a disgruntled satellite dealer. The dealer, John MacDougal, (a.k.a. Captain Midnight), walked onstage and up to Hartenstein to hand him his DirecTv dealer pin.

“Your company can no longer represent me, I’m sorry,” MacDougal said as he dropped the pin into Hartenstein’s hand.

Hartenstein, who appeared slightly stunned by the episode, recovered by saying: “I never met the gentleman. That’s what’s great about this industry, there’s a passion involved in it. That’s what’s going to make us different. That’s what’s taken us to where we are today.”

After the speech, MacDougal said he was distressed by DirecTv’s recent agreement with the National Association of Broadcasters to allow broadcasting local-TV channels into local markets in exchange for a number of concessions from DirecTv. One concession objected to by MacDougal and others was a provision that keeps the current “Grade B signal” language of the previous satellite act. This designation makes it illegal for a consumer living in an area that can receive a weak analog signal to receive a distant network channel from a satellite provider.

Although the agreement would give many affected consumers the right to receive a local network channel instead, there are still many markets that neither DirecTv nor EchoStar will be able to serve with the local-into-local technology. This means these consumers would have no option for seeing a clear network TV broadcast if they are not wired for cable.

While a number of dealers appeared to agree with MacDougal’s outrage, few condoned his action. Many members of the audience called MacDougal an extremist and pointed out that he earned the name “Captain Midnight” in 1986 when he transmitted a signal that disrupted HBO’s satellite broadcast for several minutes to protest the premium movie channel’s decision to scramble its signal to non-subscribers.

During his keynote address and a later press conference, Hartenstein stressed the importance of moving forward with the agreement as quickly as possible because “everyday satellite TV is unable to deliver local channels is another day lost to cable.”

Hartenstein’s rival, EchoStar chairman Charlie Ergen, called Hartenstein’s address “disingenuous,” adding that DirecTv’s agreement with the NAB may be good for DirecTv but it is not good for the rest of the industry.

Ergen said that EchoStar would not seek to reach its own agreement because “we believe that associations should work with other associations” (meaning Satellite Broadcasting and Communications Association and the NAB should have brokered a deal).

Chuck Hewitt, SBCA president, said that his group has tried on many occasions to come to terms with the NAB on the matter, but has been unwilling to give the same concessions that DirecTv has agreed to. Hewitt said the SBCA would continue to lobby Congress for new legislation that protects the rights of disenfranchised television viewers. Lawmakers are expected to iron out the new home viewers legislation this fall.

In other news, DirecTv formerly announced a deal with SBC Communications, giving the telephone company the right to market DirecTv’s DBS service to its 18 million customers in California, Nevada, Texas, Oklahoma, Missouri, Arkansas, and Kansas. Starting in the fall, Pacific Bell, Nevada Bell and Southwestern Bell companies will offer DirecTv packages and equipment to residents of single-family and multi-dwelling-unit complexes. The TV service will be bundled with other services including local and long distance telephone service, and Internet access. The agreement is an extension of a 1998 pact with SBC, through which member telephone companies could sell DirecTv service to MDU customers. DirecTv also offers a similar program to Bell Atlantic.

On the HDTV, DirecTv formally announced that it would begin offering the East Coast feed of HBO’s high definition channel to consumers beginning August 1. DirecTv currently broadcasts the channel along with a “barker channel” of sample high definition programming for retail demonstration purposes.