EchoStar may have to shut off broadcast-network signals to hundreds of thousands of customers after a federal judge ruled last week that the satellite TV distributor is illegally providing as many as 800,000 subscribers with programming imported from distant TV markets.
Despite finding that EchoStar willfully and repeatedly violated the law governing when satellite TV distributors can provide viewers with network signals imported from out-of-town markets, the company was hit with no penalty beyond stopping the unlawful practices.
EchoStar and several Wall Street analysts framed the decision as a victory for the Littleton, Colo., company because it dodged a "death penalty" that could have stripped it of its ability to carry local channels as well as imported network signals.
"This has been a long and hard-fought legal case that attempts to balance the rights of broadcasters and consumers," said EchoStar Chairman Charles Ergen. "We look toward moving forward with broadcasters by continuing to add local cities."
EchoStar currently offers local channels in 68 markets. Roughly 10% of its 8.5 million customer base receives imported network signals.
The NAB declared victory despite the lack of severe sanction. "EchoStar's years of copyright violations will finally come to an end," said NAB President Eddie Fritts.
The court's order did require EchoStar to make sure all customers continuing to receive distant network signals are eligible, meaning they are unable to get an acceptable picture from the local network affiliate or O&O.
Scrubbing its subscribership lists could force many current distant network subs to lose those signals, but all living in the 68 markets where local signals are provided could easily keep access to network shows by switching to programming packages that include local affiliates rather than out-of-town network feeds.
Nevertheless, there's going to be some financial hit to EchoStar: Customers in markets where the company's Dish network doesn't provide local channels would face the risk of losing access to broadcast-network programming. EchoStar pockets roughly $5 a month from customers who add imported signals to their standard programming packages.
The case began in 1998, when the four major broadcast nets complained about EchoStar's loose standards for qualifying subscribers for distant network signals.
The court found that EchoStar had not relied on signal measurements or accepted predictive models of signal strength to qualify individual customers but had simply asked if they liked their signals. Those who said no were signed up for the extra service. After an earlier court ruling stopped that practice, liberal signup measures continued to bolster the ranks of network subscribers. For instance, the company relied on two consulting firms to determine which customers were eligible. When the companies' opinions differed, the one declaring eligibility was always relied on.