EchoStar, DirecTV sue Ohio over tax

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Shortly after Ohio Gov. Bob Taft signed it into law, direct-broadcast satellite operators went to
court Thursday to block a 6% sales tax on satellite-TV service.

The tax is discriminatory because it was not imposed on local cable-television services, argued officials from DirecTV Inc. and EchoStar Communications Corp.

The lawsuit was filed in the Court of Common Pleas in Franklin County, Ohio.

EchoStar's Dish Network and DirecTV "are vigorously defending the rights of
the satellite-television customers in Ohio who have selected a competitive and
affordable alternative to cable television in the free marketplace," said
Michael McDonnell, EchoStar's chief financial officer. "We will aggressively and
proactively challenge any state that pursues a discriminatory and unfair tax
policy that disenfranchises consumers, and our customers, while benefiting local
cable operators."

The suit seeks a declaratory judgment holding that the satellite-only tax is
unconstitutional and requests a permanent injunction against enforcement of the
tax on approximately 700,000 satellite-TV customers in Ohio.

Several states have imposed sales taxes on DBS.

Some apply only to the service, while others cover cable, as well.

Cable companies have lobbied for DBS-only taxes in many states, arguing that
it is a way to balance against the local franchise fees they pay and to eliminate
what they say is in an unfair cost advantage that helps DBS to keep subscriber
prices lower than those of their cable competitors.

DBS companies say cable companies are exploiting state budget crises by
promoting satellite-only sales taxes.

"Applying a discriminatory tax on satellite providers ... gives a direct
commercial advantage to local cable services that access and place a burden on
the state's public infrastructure, while discriminating against out-of-state
satellite-television services that do not use the public infrastructure nor put
demands on the state for the delivery of their services," DirecTV CFO
Michael W. Palkovic said.

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