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2 Direct Broadcast Satellite Firms File Suit Challenging Federal Law

Courts: EchoStar, Hughes Electronics unit DirecTV call 'must-carry' rule unconstitutional.

September 21, 2000|From Reuters

WASHINGTON — Two direct broadcast satellite companies filed suit Wednesday challenging a federal law that will require them to carry all local broadcast stations that seek carriage in a market where the DBS providers offer even one local station.

EchoStar Communications Corp. and DirecTV Inc., a unit of Hughes Electronics Corp., said that the law was unconstitutional and would waste precious airwaves carrying many urban stations that have little interest for subscribers.

" 'Must-carry' limits local channel availability and consumer choice," DirecTV President Odie McDonald said. "With must-carry, DirecTV will be able to serve only the largest TV markets with local channels."

The DBS companies said that they would have to carry about 23 stations in both Los Angeles and New York City, forcing them to not carry any local broadcast signals via satellite in Richmond, Va., and Hartford, Conn.

The lawsuit was filed in Federal District Court for the Eastern District of Virginia and targeted the U.S. government, the Federal Communications Commission and the U.S. Copyright Office. The FCC, which drew up the rules, declined to comment.

The Satellite Home Viewer Improvement Act of 1999 allows satellite companies to broadcast local stations to the residents in that market and initially left it up to the broadcasters to decide which stations they carried.

Television stations had until May 30, 2000, to agree to be carried on the satellite system, otherwise the station could be dropped by the DBS company.

If the satellite providers agreed to carry local stations in a local market, they then must carry all stations that want to be broadcast beginning Jan. 1, 2002, according to the FCC.

The DBS companies said Wednesday that the 1999 law violates the 1st Amendment of the U.S. Constitution because it favors some stations over others and forces the satellite firms to carry every station without monetary compensation.

DirecTV has more than 8.7 million customers; EchoStar's DISH Network has more than 4.3 million customers.

EchoStar shares closed down $1.81 to $46.38 on Nasdaq; stock in DirecTV parent Hughes closed down $3.25 to $34.25 on the New York Stock Exchange.

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