FTC Staff Says Consumers Would Benefit if Direct Broadcast Satellite Operators are Permitted to Retransmit Local Broadcast Signals in Their Home Markets

The Federal Trade Commission staff has concluded that consumers would benefit from a policy that would permit direct broadcast satellite (DBS) operators to retransmit local broadcast channels to their home markets. A proposed interpretation of existing law that would give DBS operators, such as EchoStar’s Dish Network, this authority is being considered by the Copyright Office of the Library of Congress. The FTC staff has submitted a comment to the Copyright Office that addresses the competitive implications of this proposal. Placing programming costs for DBS operators on an equal footing with the costs of franchised cable operators, the dominant competitors of DBS operators, would enhance economic efficiency and lead to lower prices for consumers, the staff said.

The Copyright Office solicited comments about whether satellite carrier compulsory licenses should be interpreted to permit DBS operators to retransmit local broadcast signals into their home markets, and, if so, whether the same regulations governing the conditions under which franchised cable operators deliver these local broadcast signals should apply to DBS. Compulsory licenses provide the legal framework through which multichannel video programming distributors, including franchised cable operators and DBS operators, retransmit broadcast signals to consumers’ homes. Allowing DBS operators to employ the compulsory license to retransmit local broadcast channels into their home markets will make DBS a closer substitute for franchised cable service, the FTC staff commented.

The staff comment also concludes that the “must-carry” rules should not apply to DBS.

Under these rules, franchised cable operators are required to carry all local broadcast channels on their systems. “Must-carry” was enacted under a specific legislative finding that franchised cable operators possess market power and exercise that market power against local broadcasters. In contrast with franchised cable operators, the comment notes, DBS operators lack market power now, and they are unlikely to acquire it in the near future. In addition, “must-carry” would have a disproportionate impact on the channel capacity of DBS operators.

These comments represent the views of the staff of the FTC’s San Francisco Regional Office and the Bureau of Economics and not necessarily the views of the FTC or any individual Commissioner.

Copies of the comment are available from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 3128; TTY 1-866-653-4261. To find out the latest news as it is announced, call the FTC’s NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web Site at: http://www.ftc.gov (no period).

(FTC Matter No. V980004)