DIRECTV, NEWS CORP. COMMIT TO LOCAL CHANNELS IN 210 DMAS BY 2008

Hartenstein said the local channel commitment was included in an FCC filing by both companies Sept. 22 that was intended to update the Commission on their discussions since they filed their application for approval of their merger. He said the Commission hadn’t approached the companies with any unexpected issues and that, while he didn’t know where they were in the process, the companies remained “cautiously optimistic” that both the FCC and Department of Justice (DoJ) would come to final conclusions and recommendations by the end of the year: “We hope that we're near the culmination of the process.”

To achieve the local channel commitment, a $1 billion investment will be needed between now and 2008, Hartenstein said, money that will come from operations. He said that money could have been generated without completing the deal, but the company “needs a board that’s willing to plow those cash flows back into investing in the business.” Setting the goal at 2008 also will leave time for new technologies in satellite design and the possibility of using other orbit locations in other frequency bands, such as the Ka-band, to reach the goal, Hartenstein said. He said the company was looking at participating in the DBS auction in Jan. and was even willing to obtain spectrum from other companies, such as SES Americom and Cablevision, but there were no discussions under way now: “There are things that we're looking at that [would allow] us… to make the kinds of statements we made yesterday [at the FCC] and to deliver that as a very tangible benefit.”

The companies’ FCC filing also committed to: (1) Increasing high-definition (HD) programming by 2004. (2) Providing 200-300 national HD channels by 2008. (3) Providing more powerful set-top boxes (STBs), personal video recorders (PVRs) and interactive TV (ITV) services by 2008. Hartenstein said the takeover by News Corp. was essential to meeting all of those goals because of a combination of News Corp.’s experience and its “willingness to invest and look at these businesses in the long term. They are investments which under the GM structure just could not be made because it’s not core and central to GM.” On a basic level, Hartenstein said: “News Corp. gets it, they get us because they've done what we're doing.”

Hartenstein spoke at length about Northpoint and that company’s bid to use the DBS spectrum for its terrestrial services. An amendment was added recently to the Commerce Justice State (CJS) Appropriations bill (S-1585) to allow the company to access the spectrum without buying it through an auction. “A very small group of politically well-connected individuals could potentially have access to well over $100 million worth of spectrum for free,” Hartenstein said. DirecTV, EchoStar and the SBCA all plan to be “very active and vigilant for the backdoor sneakiness that goes on on that specific issue,” he said. Rally attendee Charles Hewitt, former SBCA pres., said Hartenstein was absolutely correct in his comments about Northpoint: “The best word to describe [the proposal] is outrageous.”

SBCA Pres. Andrew Wright also mentioned Northpoint in his address, saying that the company’s proposal would only hurt DBS companies. Northpoint’s service would degrade the quality of DBS signals, he said, and it must be prevented from going through with its plans. Wright said retailers were essential in taking the message of satellite broadcasters to Congress. The industry faces “increasing scrutiny from competitors, consumer advocates and the government at the federal, state and local levels. As my dad used to say, there’s a lot more going around in the dark other than Santa Claus.” In his last speech as SBCA pres., Wright thanked the retailers and Hartenstein for their support during his term. Wright announced his resignation earlier this month (CD Sept 8 4).