Dish Network 1997 Annual Report Download - page 22

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video, data and voice services and may provide EchoStar with another method for delivery of local broadcast network
channels to DISH Network subscribers. There can be no assurance that ALTA will submit the winning bid for any
LMDS frequencies, or that EchoStar would be able to successfully capitalize on any resulting business opportunities.
Failure to comply with applicable Communications Act requirements and FCC rules, regulations, policies, and
orders may result in the FCC’s revoking, conditioning, or declining to review or extend an authorization.
Other Regulation
Foreign Ownership Limitations. The Communications Act, as amended, and the FCC’s implementing
regulations provide that, where subsidiaries of a holding company hold certain types of FCC licenses, foreign nationals
or their representatives may not own in excess of 25% of the total equity of the holding company, considered on a
fully-diluted basis, except upon an FCC public interest determination. While the FCC’s International Bureau has ruled
that these limitations do not apply to DBS authorizations, the ruling has been challenged and the question remains
open. Indeed, the FCC’s recent proposed rulemaking on DBS matters has invited comment on this question.
Furthermore, the limitations will apply to EchoStar’s FSS authorizations if EchoStar holds itself out as a common
carrier or if the FCC decides to treat it as such a carrier. The FCC has noted that EchoStar proposes to operate some of
its proposed fixed satellite services on a common carrier as well as a non-common carrier basis.
A recent survey of EchoStar’s equity owners discloses that EchoStar’s foreign ownership in December 1997
was under 5%, well below these limitations, if they were to apply. However, if the purchase by foreign nationals or
their representatives of EchoStar’s existing or new equity securities or exercise of any right to convert existing or new
securities, would cause the foreign ownership limitations to be exceeded, a separate FCC determination that such
ownership was consistent with the public interest would be required in order to avoid a violation of the Act and/or the
FCC’s rules.
The 1996 Act. The 1996 Act clarifies that the FCC has exclusive jurisdiction over DTH satellite services and
that criminal penalties may be imposed for piracy of DTH satellite services. The 1996 Act also offers DBS operators
relief from private and local government-imposed restrictions on the placement of receiving antennae. In some
instances, DBS operators have been unable to serve areas due to laws, zoning ordinances, homeowner association rules,
or restrictive property covenants banning the installation of antennae on or near homes. The FCC recently promulgated
rules designed to implement Congress’ intent by prohibiting any restriction, including zoning, land use or building
regulation, or any private covenant, homeowners’ association rule, or similar restriction on property within the
exclusive use or control of the antenna user where the user has a direct or indirect ownership interest in the property, to
the extent it impairs the installation, maintenance or use of a DBS receiving antenna that is one meter or less in
diameter or diagonal measurement, except where such restriction is necessary to accomplish a clearly defined safety
objective or to preserve a recognized historic district. Local governments and associations may apply to the FCC for a
waiver of this rule based on local concerns of a highly specialized or unusual nature. The FCC also issued a further
notice of proposed rulemaking seeking comment on whether the 1996 Act applies to restrictions on property not within
the exclusive use or control of the viewer and in which the viewer has no direct or indirect property interest. The 1996
Act also preempted local (but not state) governments from imposing taxes or fees on DTH services, including DBS.
Finally, the 1996 Act required that multichannel video programming distributors such as DBS operators fully scramble
or block channels providing indecent or sexually explicit adult programming. If a multi-channel video programming
distributor cannot fully scramble or block such programming, it must restrict transmission to those hours of the day
when children are unlikely to view the programming (as determined by the FCC).
The Cable Act. In addition to regulating pricing practices and competition within the cable television industry,
the Cable Act was intended to establish and support existing and new providers of subscription television services, such
as wireless cable and DBS. EchoStar has benefited from the programming access provisions of the Cable Act, in that it
has been able to gain access to previously unavailable programming services and, in some circumstances, has obtained
certain programming services at reduced cost. Any amendment to, or interpretation of, the Cable Act or the FCC’s
rules that would permit cable companies or entities affiliated with cable companies to discriminate against competitors
such as EchoStar in making programming available (or to discriminate in the terms and conditions of such availability)
could adversely affect EchoStar’s ability to acquire programming on a cost-effective basis. Certain of the restrictions
on cable-affiliated programmers will expire in 2002 unless the FCC extends such restrictions.