EchoStar filed a lawsuit against DirecTV late Tuesday, saying that the satellite operator's efforts to "monopolize" DBS is damaging its business. RCA manufacturer Thomson Consumer Electronics and DirecTV's sister company Hughes Network Systems also were named as defendants. The suit was filed in U.S. District Court in Colorado. In the filing, EchoStar said its success in obtaining subscribers for its DISH Network service has forced DirecTV to "exploit its dominant market position in a variety of illegal ways to attempt to exclude competition, force retailers to boycott DISH Network products and services, restrain trade and monopolize the DBS market." Among the specific allegations EchoStar laid out in its suit is that DirecTV pays retailers to keep DISH Network away from store shelves. "DirecTV conspired with RCA and others to force these retail outlets and others through which DirecTV-compatible DBS receiving equipment is sold to exclude DISH Network," EchoStar said. EchoStar said that after it came to terms with retail leaders Best Buy and Circuit City to sell DISH Network services, DirecTV offered the two chains cash payments and other inducements "to boycott DISH Network and to refuse to sell DISH Network service and equipment." The filing also touches on DirecTV's exclusive lock on satellite-delivered sports packages, specifically NFL Sunday Ticket. EchoStar said its DBS competition has induced the NFL and its member teams "into an agreement to jointly sell their rights in all football games on DirecTV, permitting sales to C-Band and specifically boycotting only DISH Network entirely." In another twist, EchoStar also alleges that DirecTV has entered into illegal agreements with TV manufacturers to monopolize the market for HDTV. "In what DirecTV hopes will be the final blow to competition, DirecTV has entered into schemes to see that new HDTV televisions will be manufactured with DirecTV receivers built in the TV. In this way, DirecTV attempts to take the choice away from consumers on which high-power DBS system to purchase." In general, EchoStar is asking the court to force DirecTV and its partners from engaging in some of the practices outlined in the suit. The company also wants the court to declare DirecTV's lock on pro sports packages illegal. EchoStar also is seeking some compensation, though a dollar amount wasn't listed in the filing. The 65-page lawsuit asks for a jury trial. DirecTV spokesman Bob Marsocci said the company will have no comment until it has time to review the lawsuit.

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Hearings Begin on Rural Loan Guarantees

WASHINGTON, D.C. - The Senate Committee on Banking, Housing and Urban Affairs held a two panel hearing in the Dirksen Senate Office Building on loan guarantees and rural television service Tuesday. Representatives from the DTH industry, broadcast and cable industries and several government agencies expressed their views on how a rural loan guarantee program should be structured. Members of the Banking Committee and panelists agreed that the loan program shouldn't be limited to DBS companies, and that a "technology neutral" solution should be enacted for delivering local stations and Internet and broadband access to rural markets. Senate Banking Committee Chairman Phil Gramm said a rural guarantee program involves the formation of a committee and appointment of a government agency to oversee the administration of the loans. Gramm said he envisions the committee being comprised of three individuals: One named by the Secretary of the Treasury and one by the Chairman of the Federal Reserve Board of Governors. The third party would likely come from an agency such as the Federal Communications Commission or the Department of Agriculture. National Association of Broadcasters' Joint Board Chairman K. James Yager said DirecTV and EchoStar should be allowed to participate in the program. Permitting "established satellite vendors to participate may be the quickest way to solve a host of problems related to rolling out local-into-local in rural areas," he said. Yager also said that the committee should reject any calls for dropping must-carry for the DBS industry. DirecTV Senior Vice President Steve Cox said that the "biggest impediment to serving additional communities is the must-carry requirement imposed by the Satellite Home Viewer Improvement Act (SHVIA). Cox also pointed out that DirecTV is "ultimately limited by the spectrum allocated to us by the FCC." Cox said he concurred almost 100 percent with the comments of EchoStar Senior Vice President and General Counsel David Moskowitz on resolving must-carry, spectrum allocation and encryption format issues. "Since DirecTV may be less familiar to the Banking Committee, let me tell you that such an event is rare," Cox remarked. NRTC CEO Bob Phillips said that the recently enacted SHVIA did not address two important areas: The lack of competition to cable, and the lack of local signals in rural America. Phillips proposed that these problems could be solved through satellite TV, with the assistance of the Banking Committee "in the form of a loan guarantee." Gramm said the Banking Committee will, "try to write a loan guarantee program that maximizes the probability that the loans will be paid back, and the taxpayer will not be left holding the bag." The Senate Banking Committee will hear testimony on guaranteed loans for rural television service from Sen. Conrad Burns, among others, in a hearing scheduled for Feb. 9.

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Biz As Usual At Hughes Despite GM Move

It will remain business as usual at Hughes Electronics despite the plans of parent General Motors to restructure its stake in the satellite company. On Tuesday, GM revealed plans to lower its economic interest in Hughes from 68 percent to 35 percent. Under the auto giant's transaction, GM will repurchase its stock in exchange for $8 billion in Hughes shares. It also will contribute $7 billion worth of Hughes stock to some of GM's benefit plans. GM stressed that it doesn't plan to spin off Hughes. However, GM said that it would evaluate a complete separation of the two companies in the future. Less than two weeks ago, Hughes unveiled a plan to realign its businesses. The company placed an emphasis on consumer products with DirecTV and DirecPC and commercial services with satellite provider PanAmSat. Under the strategic move, Hughes sold its satellite manufacturing business to Boeing. Despite the GM moves Tuesday, Hughes said it's still on track with its operations. "We are focused entirely on the execution and delivery of our business plans," said Hughes Chairman and CEO Michael T. Smith. "We are concentrating on the convergence of entertainment, data, voice, Internet nd other communications on a variety of platforms, including television, desktop computers, mobile telephones, automobiles, airplanes and others," he said. "We believe the combination of delivering on our commitments and long-term investment will support great value for our shareholders." One analyst, Armand Musey with Banc of America Securities, said GM's move "should be viewed as a positive for Hughes." "Though far from the complete spin-off investors ideally hoped for, we believe the reduced GM interest does indicate GM's view that Hughes is becoming less of a core asset, and increases the likelihood of a spin-off within the next 12 months," he said. Tom Watts of Merrill Lynch said the new structure will have no near-term impact on Hughes’ fundamentals. He pointed out in research that the action comes at a time when Hughes is taking steps toward independence, including the naming of four independent directors. Hughes closed up more than $2 in trading Tuesday, finishing the day at $114.75.

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Sirius Gets DaimlerChrysler

Sirius Satellite Radio tagged DaimlerChrysler as a partner, giving the developing DARS player an exclusive link to North America's third largest automobile manufacturer. Under a deal announced by the two companies Tuesday, DaimlerChrysler will purchase Sirius common stock in a transaction valued at $100 million. The auto giant also will exclusively factory-install Sirius receivers in its cars and light trucks. The arrangement includes all DaimlerChrysler brands sold in the United States, including Mercedes-Benz, Chrysler, Jeep and Dodge. DaimlerChrysler and Sirius also will partner in the development of vehicle-based wireless security, convenience and navigation services that use Sirius' digital broadcast network. Sirius' competitor in the DARS business, XM Satellite, has a similar deal in place with top automobile manufacturer General Motors.

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ICO Works On Satellite Deals

ICO Global Communications, the developing satellite operator trying to climb out of bankruptcy proceedings, renegotiated its contract with Hughes Electronics for the proposed purchase of 12 satellites, the Wall Street Journal reported. In addition to securing better terms on the satellite purchase, ICO is close to securing options for four additional birds. The deals are still in the preliminary stages, the financial paper said. ICO, which plans to launch its service in 2001, is getting financial help from cellular phone pioneer Craig McCaw. The company is refocusing its efforts on Internet and data rather than its original mission of voice and telephony.

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