Nonprofits courting DBS for set-aside channels
PBS, ITVS and Free Speech TV are among first-round applicants

Originally published in Current, Aug. 16, 1999

By Karen Everhart Bedford

A ground-floor chance to secure channel space on direct broadcast satellites is opening up for noncommercial organizations that have the wherewithal to deliver educational or informational public-service programming.

DirecTV, the largest DBS system, has set a Sept. 1 [1999] application deadline for prospective programmers to be considered in its initial selection of new channels. PBS, Internews, and Free Speech TV are among the nonprofits vying for the space.

DBS services--a once-crowded field of competitors that has merged down to two major players--are under orders from the Federal Communications Commission to allocate 4 percent of their video channel capacity for noncommercial educational programming. The commission requires operators to reserve capacity--the "DBS set-aside"--to fulfill new public-interest obligations adopted last fall (Current, Nov. 23, 1998). The FCC deadline to establish set-aside channels is Dec. 15.

America's Public Television Stations sought the DBS set-aside as part of its effort to create a "public right of way" for pubcasting and other nonprofits within new media delivery systems [Current Briefing]. Congress wrote the set-aside into the Cable Act of 1992, but it had to survive a federal circuit court review in 1996 before the FCC decided how to enforce the provision last fall.

Public TV sought the reserved channels to avoid being left out of DBS as it was in cable TV--when a stampede of commercial programmers filled most available cable channels in the 1980s.

Now two major DBS companies are competing with cable by delivering programming via small home satellite dishes. Through a recent spate of acquisitions, DirecTV recently preserved its rank as the leading DBS provider, with some 7.4 million subscribers. The company, owned by General Motors' Hughes Electronics, bought United States Satellite Broadcasting Company (USSB) and the medium-power DBS system Primestar. DirecTV's subscriber base is growing at the rapid clip of more than 100,000 households per month, according to the company.

Echostar, the operator of the Dish Network, recently settled a legal dispute over its failed venture with Rupert Murdoch's News Corp. and MCI WorldCom, acquiring the DBS assets of News Corp./MCI in exchange for stock valued at $1.2 billion. The company has 2.1 million subscribers, and also claims to be adding more than 100,000 new customers a month.

Exactly how many channels the two operators will ultimately reserve for noncommercial programming is difficult to pin down. Both have plans for satellite launches that will expand their channel capacity in the near future. Echostar's Dish Network now offers customers 350 channels of digital video and audio programming, according to Marc Lumpkin, spokesman. By the end of the year, it aims to offer 500 channels. If all goes as planned, the new capacity would boost the number of set-aside channels to as many as 20.

DirecTV now delivers more than 210 channels, which puts its 4 percent set-aside reservation at 8 channels. It also intends to enhance its offerings through a planned satellite launch and repositioning, but exactly how many new channels this will add won't be known until later this fall, according to Bob Marsocci, spokesman.

Assigning channel space

DirecTV and Echostar are managing start-up of their set-aside channels differently. Early this summer, DirecTV formally solicited programmers' proposals by Sept. 1. The criteria for applicants aren't much more explicit than those laid out by the FCC. DirecTV is reviewing applications in-house.

Echostar appears to have pitched the task of set-aside start-up to Educating Everyone, a Sarasota-based private foundation personally endowed by its founder and c.e.o., Charlie Ergen. Ergen is a former accountant for Frito-Lay who pioneered the direct-to-home satellite industry by selling C-band dishes in the early 1980s. Scott Zimmer, a former Echostar vice chairman, established Educating Everyone in March 1998.

The foundation aims to assign channels to programmers that can deliver "purposeful education" via satellite, according to Monica Pilkey, spokeswoman, although it is accepting applications from all interested parties through a "very open" process.

Educating Everyone has a contract with Echostar to broker at least one of its set-aside channels--a task it is about to complete with a university that Pilkey declined to identify--and is working out a broader agreement with Echostar that will officially define its role. Pilkey describes Educating Everyone as working "in the middle" to bring prospective programmers and Echostar together.

"We are hoping that in the process of helping programmers launch, we're able to build an association for their channels, and perhaps structure ourselves as a membership organization," explains Pilkey. As such, the foundation would offer "economies of scale" to programmers in cross-promotioning and marketing their channels as the DBS "education neighborhood."

As permitted by the FCC, DBS providers intend to charge set-aside programmers for half of the direct costs they incur in making the programming available. These include labor costs associated with uplinking feeds or authorizing viewers to receive channels, and incremental costs of compression equipment, according to a summary provided by Echostar.

Pilkey says that Echostar has set these costs at $10,000 a month. DirecTV intends to charge about $6,300 a month.

How consistently these fees will be applied "depends on what the channel is and how commercially viable it is," predicts Greg Ferenbach, PBS general counsel. "I'm sure the arrangements will be all over the place." PBS anticipates that DBS providers will pay it a share of subscriber fees for its planned channel, PBS Kids.

Educating Everyone has received at least 20 serious inquiries or applications for the set-aside channels, estimates Pilkey. "If you ask from there 'How many are ready to take advantage of it from a structural standpoint?', that number decreases greatly to a half dozen." Few organizations are lined up financially with a viable business model and "ready to go."

Programmers wanted

PBS has been eyeing opportunities on DBS for several years, and is proposing its PBS Kids Channel to DBS providers as its first set-aside offering. Another channel in development is a hybrid of how-to programming and explicitly educational fare with "Lifelong Learning" as its working title, says Ferenbach.

PBS also holds the rights to distribute Annenberg/CPB Project instructional programming on DBS, and may fold this content into the new channel, according to several sources.

FCC regulations on the set-aside prohibit DBS providers from awarding more than one channel to any one programmer; but, based on a recent exchange of letters with the FCC on the issue, PBS has learned that the channel limitation "isn't going to be as big of a problem as we thought," says Ferenbach. Early this year, PBS and APTS petitioned the FCC to reconsider the rule, a request that's still pending.

The one channel per programmer provision "really relates to the initial selection of programmers," he explains. "Once the initial selections are made, the DBS providers will not be subject to the cap. As capacity expands, we'll be in there with everybody else trying to get additional channels."

If a multitude of organizations are considering applying for the channels, some of the obvious suspects are not among them.

To Current's home page

Earlier news: A federal appeals court upholds the noncommercial set-aside for DBS, 1996.

Later news: PBS prepares to launch its Kids Channel for DBS and other electronic pathways to the viewers.

Outside links: Web sites of DirecTV and EchoStar's Dish Network.


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