Election Section

Feds may end up settling Disney-EchoStar dispute

By Gary Gentile The Associated Press
Thursday January 03, 2002

LOS ANGELES — The battle between The Walt Disney Co. and EchoStar Communications started in the courtroom, but may eventually be settled by federal regulators weighing EchoStar’s proposed merger with rival DirecTV. 

Disney has not yet said whether it will oppose the merger as it did the joining of America Online and Time Warner Inc. 

But as its legal troubles with EchoStar escalate, it becomes more likely that the giant creator of movies and television programs will muster its forces against a combination that could control access to nearly 17 million pay TV subscribers. 

“It is causing us to take a long hard look at the position we will take,” Disney President Robert Iger said Monday, referring to Disney’s lawsuit against EchoStar. “They are two separate issues. But you have to pay heed when a distributor acts in a way we believe is somewhat of a monopolistic manner.” 

Monday, a federal judge issued a temporary restraining order preventing EchoStar from dropping the ABC Family channel from its satellite television service. EchoStar had planned to drop the channel, which is owned by Disney, as early as midnight Monday. 

A hearing is scheduled for Jan. 10. 

EchoStar spokeswoman Judianne Atencio said the company will comply with the ruling, but believes it has the right to drop the channel. 

Earlier this month, a Disney subsidiary, International Family Entertainment Inc., sued EchoStar Satellite Co., operators of the Dish Network, seeking to prevent it from dropping ABC Family. EchoStar reaches 6.4 million subscribers. 

EchoStar said it needed to drop channels with low ratings to make room for hundreds of local stations the satellite service is required to carry under new federal rules. 

The company said it was within its rights to break its contract with IFE because the channel has substantially changed its programming over the years. The channel was begun by television evangelist Pat Robertson, who sold it in several years ago to a partnership formed by Rupert Murdoch’s News Corp. and Saban Entertainment. 

The station was renamed Fox Family and was renamed yet again when Disney bought it earlier this year. 

Disney claimed EchoStar is using the threat to force Disney to lower the fees it charges providers to carry its channels. 

In court papers filed last week, EchoStar shot back, claiming a senior Disney executive threatened to oppose the proposed merger of EchoStar and Hughes Electronics Corp., which operates the DirecTV satellite network. 

Iger said no such threat was made, but that EchoStar’s actions will influence Disney’s final decision. 

“It is definitely a factor. I wouldn’t call it absolute,” Iger said. “It makes me wonder aloud just how indicative this behavior is in terms of the manner they might behave if they became bigger.”