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SHERVA Saves Satellite Opportunities

Recent passage in Congress of new satellite legislation helped to thwart a growing war between broadcasters and satellite providers, but the compromises reached ultimately left both sides less than fully satisfied.

On Dec. 31, 2004, the 1999 version of the Satellite Home Viewer Improvement Act (SHVIA) was scheduled to terminate. But on Nov. 20, Congress renewed the legislation’s most critical provisions under a new measure called the Satellite Home Viewer Extension and Reauthorization Act (SHVERA).

The new statute included four new provisions which helped to address issues that in recent months had grown into a heated battle between broadcasters and satellite providers:

One of those provisions addressed so-called “digital white areas,” which are areas of the country that for a variety of reasons do not have access to over-the-air digital broadcasts. The SHVERA now allows Direct Broadcast Satellite (DBS) companies to deliver digital (including HDTV) signals to millions of rural Americans who cannot receive that programming over the air in digital form.

SHVERA adds new limitations on the ability of subscribers to receive distant analog network signals. The legislation will prevent new subscribers from electing to receive distant networks after the enactment of SHVERA, if local-into-local (LIL) service is offered in their area.

In areas where LIL service is available, subscribers who receive distant networks as grandfathered subscribers must elect to receive either the distant network signal or LIL, but not both.

As for digital, many complain that digital signals cannot be carried by DBS providers to rural Americans until broadcasters have had from 17 months to 30 months to deliver their own digital signals into their markets.

This means that subscribers, who reside outside the FCC’s analog predictive model for signal reception, may eventually receive a distant digital network signal. Those who reside inside the model may still obtain distant network signals if their local signal strength is inadequate; however, these tests may be done only after April 30, 2006, for subscribers in the top 100 DMAs (Designated Market Area), and only after July 15, 2007, for those in all other DMAs.

SHVERA further requires the FCC to determine whether the current analog signal strength test should be modified to create a new digital predictive model of signal availability.

Finally, the compulsory license allowing for analog carriage of superstations and distant network signals (i.e., ABC, NBC, CBS and FOX) from either New York City or Los Angeles (depending on a consumer’s geographical location) has been renewed for five years, or until December 31, 2009.

At some point in the future, local broadcasters will either have to fully serve each rural consumer or grant him/her the right to go elsewhere for network signals.

The U.S. DBS industry can also carry “significantly viewed” local stations in adjacent markets. Thus, for example, in the Connecticut area bordering New York City, EchoStar and DirecTV will now be permitted to carry “significantly viewed” local broadcast stations, in the same manner as cable companies in Connecticut have been doing for years. This right is conditioned on the subscriber receiving local-into-local service.

Another SHVERA provision took aim specifically at DBS provider EchoStar and forces it to end a practice of using two dishes to provide local network and other programming in one DMA, something which many consumers complained about as “discriminatory.”

The claim here is that most religious and Spanish language channels are offered separately on the so-called “second dish,” and that consumers are less likely to go to the trouble of installing a second dish — when they can get all the locals and the basic channel programming on the first dish alone.

Eighteen-months hence, all consumers must be able to obtain all local channels in a single DMA, via a single dish. Presently, because of its FCC-licensed orbital and channel assignments, EchoStar states it has been necessary to deliver all of the local channels in 38 of its 150 total DMAs via two dishes.

On the consumer electronics side, typically, a satellite or cable viewer tends to be more sought after by CE dealers than the typical over-the-air broadcast-only viewer.

This is because more hardware sales from improved signal reception mean not only more sales of set-tops, remotes, antennas and wiring, but also the sale of more TVs and ancillary devices, such as home theatre equipment.

Plus, dealer commissions are paid by DBS operators for retail sales of satellite services to new consumers; however, no such direct payment exists if more broadcast over-the-air viewers are delivered to a particular local broadcaster.

Under the new SHVERA, more digital set-tops are likely to roll off the CE dealer shelves sooner.

On the broadcast industry’s side, the new SHVERA legislation pushes its terrestrial free-TV members on two sides. First, they are pressured by the legislation to roll out digital services more quickly and at higher signal power levels, reaching more viewers.

Additionally, broadcasters get pushed by the satellite operators because, at a certain point, those satellite operators get to vie for the same over-the-air viewer if the local broadcaster cannot offer a quality digital local signal.

For local broadcasters, more distant network signal viewers in their local regions diminish the value of the local network telecast and local ads, because the advertisers figure they reach fewer viewers with their ads in that local viewing area.

Yet, the SHVERA compromise favors broadcasters in the short run, by giving them an extended time to build their towers, broadcast digital signals in full-power, and return their 700 Megahertz analog spectrum to the government — before DBS providers can reach the same consumers with distant network signals.

If those same broadcasters do not deliver a strong signal as widely and a soon as they can, they risk ceding business to the satellite services offering distant digital signals.

Ultimately, in passing SHVERA, Congress reached a compromise. DBS got some good and bad, broadcasters got some of the same, consumer electronics providers can look forward with additional optimism toward more sales, and consumers — especially rural ones — will get more and better TV, less expensively (although not as quickly as some had hoped).