EchoStar Distant Signal Appeal Seen Likely, But Not Success
EchoStar probably will try -- and fail -- to overturn an injunction to stop importing distant signals unless joined by broadcast affiliates, said 2 attorneys in the case. The order nullifies an agreement Echostar reached with affiliates of 4 broadcast networks to keep carrying their signals (CD Aug 29 p1). The company must stop delivering the signals Dec. 1, U.S. Dist. Judge William Dimitrouleas, Ft. Lauderdale, said in a permanent injunction Fri. in CBS et al. v. EchoStar. Fox sought the nationwide injunction after EchoStar and ABC, CBS, Fox and NBC affiliate groups agreed to a $100 million settlement. The lawsuit was filed in 1998.
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EchoStar likely will ask the 11th U.S. Appeals Court, Miami, to stay and overturn the order, said a 3rd lawyer in the case. The appeals court, which sent the case back to Dimitrouleas, asked him to set a permanent injunction. EchoStar sought an injunction against importation of Fox’s signals only, which analysts said would have affected few of the roughly 800,000 Dish subscribers who now stand to lose imported signals. But Dimitrouleas repeatedly said if he granted EchoStar’s request, he would be 2nd-guessing the 11th Circuit. EchoStar and network affiliates tried to settle their dispute but the judge rejected that, too.
“The court has an obligation to implement the mandate issued by the Eleventh Circuit,” Dimitrouleas wrote: “The law is clear that this court does not have discretion to review or alter the Eleventh Circuit’s mandate nor can it limit the scope of the injunction… EchoStar’s violations occurred ‘on a substantially nationwide basis.'” The judge rejected arguments by EchoStar and network affiliates that Fox gave up its right to seek a nationwide injunction because the network “abandoned its cross-appeal before the Eleventh Circuit.”
EchoStar believes the settlement should have figured in the lower court ruling, said a lawyer in the case. The deal, “a change of circumstances,” should have led to a narrower decision, because it left only Fox in dispute with EchoStar, said the attorney.
The DBS provider will do everything possible to avoid cutting off distant signals to customers, it said late Mon.: “We will ask Congress to clarify the statutory language, and ask the courts to re-consider their decision.” The proposed settlement with the affiliate groups would have covered 90% of network-affiliated U.S. TV stations, said EchoStar. The company will lose $50 million in annual revenue and cash flow if the signals are cut off, estimated Sanford Bernstein analyst Craig Moffett. Customer turnover may rise if Dish Network customers defect to rival DirecTV, he said.
EchoStar’s chances of succeeding on appeal will rise significantly if it convinces broadcast affiliates to join in, said 2 lawyers involved in the case. It’s debatable whether the company has legal standing for an appeal on its own, since the agreement with the affiliates would have taken effect only if approved by the judge. “It is not clear that EchoStar has anything to appeal, because the agreement itself had the critical term” that it was subject to court approval, said a lawyer.
Broadcasters like the court’s ruling because it upholds distant signal rules, we're told. “The affiliates are comfortable with the court’s decision and will be having discussions with EchoStar about what if any further action should be taken,” Wade Hargrove, lawyer for some affiliates, told us: “It has not been decided by the affiliates whether they would join any appeal with EchoStar.”
EchoStar could go to Congress for a law to narrow the injunction, said Stanford Group analyst Paul Gallant. Sens. Allard (R) and Salazar (D), from EchoStar’s home state of Colo., said Fox’s refusal to settle raised antitrust issues because sister company DirecTV stands to benefit from the distant signal cutoff. But the legislative approach could fall victim to a lame duck session, wrote Gallant: “While there is some support for passing emergency legislation, fallout from the November elections could keep Congress focused on other matters.” That sentiment was echoed by Moffett, who called congressional intervention “improbable… DirecTV is likely to be the biggest beneficiary, since the customers that are affected are overwhelmingly rural. In many cases, cable is not an option.”