A Reprieve for Echostar (Sort of)

August 28, 2006 ,

Last week I wrote about an 11th Circuit Court of Appeals decision that would have required Echostar Communications (or Dish TV, as most people know it) to stop sending distant network TV signals to all of its customers, regardless of whether those customers were receiving those signals illegally. The Court was required by law to issue that penalty because it had found that Echostar had engaged in a “pattern or practice” of providing illegal signals.

Today, Echostar and all the network affiliates groups (ABC, CBS, NBC and Fox) announced that the parties had settled. Under the terms of settlement, Echostar agreed to expand its “local-into-local” TV service from 165 to 175 markets by the end of the year and agreed to pay the affiliates' trade association $100 million. Of course, Echostar also agreed to no longer send distant signals to those who do not qualify for them.

So Echostar and its legal customers are ok now, right? Well, not so fast. The ABC, CBS and NBC “owned and operated” TV stations settled with Echostar a long time ago, but the Fox network “O&Os” pulled out from the settlement at the last minute last week. Not surprisingly, Fox's parent company, News Corporation, owns Echostar's closest competitor, DIRECTV. While of late there has been some talk about a thaw between Echostar's CEO Charles Ergen and NewsCorp Chair Rupert Murdoch – they recently teamed up in an unsuccessful bid to obtain spectrum at an FCC auction – this will certainly send a chill back into the relationship. Some may recall that Murdoch successfully blocked Echostar's attempt to buy DirecTV in 2002, which permitted News Corp to waltz in an buy it instead.

Even if Fox ends its holdout, the settlement must still be approved by a Federal District Court in Florida. But chances for the court approving that settlement, and preserving service for legal customers, would be helped enormously should Fox come into the fold. It is hard to fathom why Fox refuses to settle, other than its desire to punish its closest competitor. I, for one, hope the court sees this maneuver for what it is, and accepts the settlement. But here is the silver lining in the cloud – by keeping the issue alive, Fox is opening the door for Congress to reconsider whether the “distant signal” law is anticompetitive and an anachronism in the Internet age.