The Federal Communications Commission, the agency in charge of implementing rules governing retransmission consent agreements, is discovering a potential mine field surrounding the sticky and vague subject of "good faith" in the negotiation process. The "good faith" wording for retransmission consent negotiations is in the Satellite Home Viewer Improvement Act signed into law by President Clinton in November. The aim of the provision is to allow satellite operators and local TV stations reach an accord on carriage. It's a key component of local-into-local service. Because of the "nebulous concept" of good faith, the FCC could create "a regulatory swamp by trying to impose a code of conduct on routine marketplace negotiations," the National Association of Broadcasters said in its filing with the agency. "If the commission adopts an intrusive regulatory regime about good faith, each of these negotiations could become the subject of a complex, costly and time-consuming adjudication," the broadcaster organization said. "The commission also needs to be concerned that some multichannel video providers will use frivolous accusations of supposed violations as a tactical weapon to harass local stations." The NAB went further, saying negotiations in good faith doesn't restrict negotiating positions or require any side from making any concessions. The Satellite Broadcasting and Communications Association, in its filing with the FCC, said it agreed with commission leaders that SHVIA mandates should be implemented "aggressively to ensure that the pro-competitive goals underlying this important legislation are realized." The organization said the copyright license authorizing local-into-local service "would literally be useless if the broadcasters were free to hamper or prevent altogether retransmission of their local signals by abusing their right to grant retransmission consent." The SBCA urged the FCC to adopt "specific, concrete" rules that define what constitutes bad faith in negotiations. It also urged the commission to establish rules prohibiting TV stations from entering exclusive deals.

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DBS Erodes Cable Market Share

Home satellite continues to erode away market share from cable, putting a dent into cable's dominance in the multichannel business last year. The Federal Communications Commission, in its sixth report on competition in the multichannel marketplace, said 82 percent of all subscribers to multichannel services received their programming from a local franchised cable operator as of last June. That compares to 85 percent reported a year earlier. Between June 1998 and June 1999, DBS subscribers grew from 7.2 million households to 10.1 million households, according to the report. DBS now has 12.5 percent of all multichannel subscribers. The ability to receive local signals from satellite operators, mandated in the recently signed Satellite Home Viewer Improvement Act, "should have a significant and positive effect on competition - and increased competition is the best way to keep cable rates reasonable," the FCC said. Cable subscribers numbered 66.7 million as of June 1999, up almost 2 percent over the 65.4 million cable subscribers reported in June 1998. The total number of non-cable multichannel households, which includes DBS as well as SMATV and MMDS, grew from 11.2 million as of June 1998 to 14.2 million homes as of June 1999. That represents an increase of 26 percent. The FCC report was released Friday.

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Wall Street Likes the New Hughes

News that Hughes Electronics plans to tell its satellite manufacturing unit to Boeing garnered favorable response from Wall Street last week. Hughes said it will go through a restructuring process designed to make the company more consumer-oriented. The new Hughes Consumer Sector will include DirecTV, Galaxy Latin America, DirecTV Japan, and consumer marketing applications for DirecPC and the developing Spaceway broadband platform. A second business, the Hughes Enterprise Sector, will include Hughes Network Systems, PanAmSat and enterprise applications for DirecPC and Spaceway. Banc of America Securities' Armand Musey said the $3.75 billion sale of the company's satellite division to Boeing was favorable for Hughes and reiterated his Buy rating. That echoed other industry analysts, who also raised their 12-month price targets for the company's stock. Vijay Jayant of Bear, Stearns upped his 12-month target from $110 to $130. Tom Eagan of PaineWebber raised his 12-month target to $140, a 27 percent upside from current trading levels. This "reflects an incremental $3 per share value due to the sale of the manufacturing business, as well as a lower risk to the overall company from shedding this line of business," he said. William Kidd of C.E. Unterberg Towbin also applauded the restructuring plan. "In our view, the most important announcement was the realignment of company by market focus rather that by technology type," he said. "Imagine the possibilities that coordination will bring."

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DirecTV Gets Locals-DISH Plugs Latino

DirecTV added two more markets for its local-into-local service over the weekend, while EchoStar's DISH Network released plans to promote its Spanish-language DISH Latino offering. On Saturday, DirecTV began delivering local broadcast network channels for Minneapolis/St. Paul and in the Tampa/St. Petersburg/Sarasota area. The package is available to consumers for $5.99 per month. The Minneapolis/St. Paul package includes KARE (ABC), WCCO (CBS), KSTP (NBC) and WFTC (FOX). The Tampa/St. Petersburg/Sarasota offer includes WTS (ABC), WTSP (CBS), WFLA (NBC) and WTVT (FOX). Both have a national PBS feed. Meanwhile, EchoStar will launch a national print and radio advertising campaign, "Join the DISH Latino Revolution," on Jan. 24. The push will promote its DISH Latino 20-channel Spanish-language package. DISH Latino, which was launched in August, offers such channels as Univision and Galavision, Telemundo, FOX Sports World Espanol, Discovery en Espanol, GEMS, Cine Latino, CBS TeleNoticias, TV Chile, HTV, MTV S and six channels of DISH CD Latin. It's available through EchoStar's DISH 500 system.

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SkyBOX: Hughes the Less Huge

Nearly lost amid last week's shrieking Time Warner/AOL headlines was some nearly as big broadband news starring General Motor's prize Hughes Electronics subsidiary. In a series of steps worthy of a swing dance competition, the giant satellite maker-cum-services company dropped its "maker" portion, shuffled its key executives and shook its services into a new market (as opposed to the old technology) focus. The moves, most investors and analysts agreed, were brilliant. They recognized - and reorganized for - the key role which satellite services can play in today's booming broadband markets. And they reinforced the company's best executives. (Having watched Eddy Hartenstein's success with DirecTV over the past six years, we will be most interested to see what he can do with the new Hughes Consumer Sector.) The sale of Hughes' satellite manufacturing business to Boeing for a cool $3.75 billion (of which GMH should net around $3 billion) adds nicely to the services' marketing and development budget. This, along with Hughes' new focus on the broadband landscape, should add up to some interesting developments over the next year or so. Some key factors and players to keep your eye on: