EchoStar said it may cost the company $100 million to come into compliance with any new rules that propose to ban the delivery of local channels to two dishes, along with disruptions for customers who rely on the two-dish solution for local TV.
EchoStar disclosed its issues with the proposed two-dish ban in a filing sent to the Securities and Exchange Commission Monday. The filing covers EchoStar's sale of 6 5/8-percent senior notes due 2014 for EchoStar DBS Corp., which is the company's current $1 billion debt offering, and the filing lists certain risks related to its business. These items, such as the potential effect of a two-dish/locals ban, are typically disclosed by a company for certain transactions or quarterly reports.
In the filing, EchoStar pointed out that Congress is considering key legislation for the satellite TV business that may require the company to offer local channels for particular markets via a single dish. EchoStar said in the filing it plans to transition all local TV markets to a single dish by 2008, but "if a two-dish prohibition with a shorter transition period is enacted, we would be forced by capacity limitations to move the local channels in as many as 30 markets to new satellites, requiring subscribers in those markets to install a second dish to continue receiving their local channels.
"We may be forced to stop offering local channels in some of those markets altogether," the company added.
The transition would result in service disruptions for a "substantial number of customers," EchoStar said in the SEC filing, and the cost of compliance could exceed $100 million. "To the extent those costs are passed on to our subscribers, and because many subscribers may be unwilling to install a second dish where one had been adequate, it is expected that subscriber churn would be negatively impacted," the company added.
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