DirecTV Files FCC Complaint Against iN DEMAND on Pricing

IN DEMAND, with music, movies and sports, wanted DirecTV to pay based on the number of digital, not HDTV, customers. It wanted 10 cents monthly per digital subscriber for HDTV channels, INHD and INHD2, the filing states. Since all of DirecTV’s more than 14 million subscribers get digital service -- unlike cable-TV customers -- the DBS provider claims the pricing is discriminatory. DirectTV said it would be fairer to charge on the basis of number of HDTV customers. Only 5% of DirecTV subscribers pay extra for a package that includes HDTV, said Vp-govt. affairs Susan Eid. Figures for Comcast and Time Warner, which already have carriage deals with iN DEMAND, are similar, she said.

Charging for INHD based on number of digital customers instead of high-definition subscribers is unfair, DirecTV said. “They've created this fiction in the middle which is digital customers -- they've crafted a scheme that I think intentionally discriminates,” Eid said. “I don’t know of any programming service that assesses a fee based on the possibility of receiving the programming,” she said, citing ESPN and HBO as examples of channels that charge pay-TV providers for each customer who can watch them.

Programmers owned by cable operators can’t limit distribution of their service under existing FCC rules. Time Warner Entertainment-Advance/Newhouse Partnership, Comcast iN DEMAND Holdings and Cox all own part of iN DEMAND, according to previous corporate statements. INHD, cable’s most widely distributed HDTV-only network, said in an October announcement that it was carrying a series “exclusively on cable in high-definition.”

IN DEMAND confirmed it’s held “numerous” talks on DirecTV carrying INHD and a second channel, INHD2. In a response to our questions, the company said in a statement it has “always been, and remain(s) willing to negotiate carriage with any distributor. Our pricing policies are in full compliance with FCC rules.” The company expects a favorable FCC ruling.

EchoStar said that its DISH Network also has pursued “a non-discriminatory” agreement with iN DEMAND, “so far without success.” EchoStar said in a statement to us they “agree that a pricing model based solely on digital subscribers is inherently discriminatory against DISH Network subscribers and the entire satellite TV industry.”

DBS firms want to add HDTV programming at a time when cable operators enjoy some technical advantages, said one industry analyst. Cable operators must transmit only several local high-definition stations, while DirecTV and EchoStar must transmit all local high-definition station to the entire country, said Tellus Ventures Assoc. pres. Steve Blum. “They are trying to get ahead of the cable guys on HD by putting as much content up there as they can,” he said: “In this case cable has more of an advantage.”

DirecTV has been investing heavily in satellite and terrestrial hardware for an HDTV expansion slated for this fall. A DirecTV spokesman said if DirecTV were to bring on iN Demand’s HD channels, the “programming would be part a much larger HD offering. HD programming from iN DEMAND would be just one aspect of our overall HD lineup.” The Spaceway F1 and Spaceway F2 satellites, coupled with 2007- slated DirecTV 11 and 12, are expected to provide DirecTV with capacity for 150 national and 1,500 local HD channels.

Spaceway F1 was launched successfully in late April. Spaceway F2’s launch, set for earlier this month aboard an Arianespace vehicle, is being rescheduled. The launch was delayed by problems with the electrical system aboard passenger satellite Telkom 2, built for PT Telekomunikasi Indonesia by Orbital Sciences (CD June 13 p13). A DirecTV spokesman confirmed that the Spaceway F2 launch will likely be pushed to August.