The giant Goliath corporation, DirecTV, which is owned by Rupert Murdoch's, News Corporation has recently been using tactics to make subscribers of Pegasus Satellite Corporation believe the relationship between DirecTV and Pegasus is ending. When in fact, Pegasus has won recent court cases that DirecTV must provide satellite operations to Pegasus.

In addition to posting a message on DirecTV's satellite channels that the relationship between DirecTV and Pegasus is ending, which by the way is not true, DIRECTV has been using unfair business practices by also stating in this message on DirecTV's channels that subscribers of Pegasus might be able to save money by switching to DirecTV. This is not necessarily true. This attempt by DirecTV is in my opinion another fradulent attempt by DirecTV to distort the truth to the subscribers of Pegasus.

This appears to be nothing more than a cynical and diobolical corporate attempt takeover by a huge corporation of a smaller company. Evidently, DirecTV doesn't like they haven't been able to get what they wanted, and therefore resorted to unlawful business practices as ruled by a recent court. DirecTV is not playing fair and just in the business world. This is nothing new with huge corporations. Huge corporations will try any means to take over a smaller company.

Before I continue with this story, I want to clarify one thing. I am not a stockholder of either Pegasus Satellite, DirecTV, or any other company that is mentioned in this article. I am simply trying to bring the facts and truth out about this atrocity.

The Rest Of The Story....

In the 1990's when the satellite business was forming in this country, two major corporations emerged. DirecTV bought out USSB in the late 1990's. USSB was a DirecTV competitor offering ONLY premium movie channels. DirecTV combined the premium movie channels from USSB with the DirecTV channels. USSB served all of the US, not only rural communities. PrimeStar was another competitor acquired by DirecTV a number of years ago. So that you understand what is involved here, you need to understand there were different markets for the satellite business. One market being the major metropolitan areas and the other market, the rural areas where the only way people living in these areas could get television was by satellite.

Now this is where the facts are. DirecTV did not want anything to do with the rural market. They did not want to put the financial resources into developing the market. Nor did the other satellite service that was eventually bought out by another corporation. Neither company wanted to invest in the time or money to service the rural area satellite market.

Yes, Pegasus may have been charging slightly more than DirecTV, however, DirecTV did not expend the financial resources in developing this large rural market which was expensive. Therefore, Pegasus had higher operations cost than DirecTV had by DirecTV employees driving to a city street address. Some people in rural areas live 30-50 miles away from large cities and this was Pegasus higher operation costs to service and develope this market. Pegasus is entitled to this. They built the market in these rural areas which DirecTV did not want to go to the expense of. But now...DirecTV sure wants that revenue without having to pay for this developed market. In addition, the fees, royalties that Pegasus has to pay was set by the NRTC, which were higher in many instances than what other NRTC members were paying. So, if you wish to blame anyone that Pegasus has been charging customers more, blame the NRTC.

So, in 1994, Pegasus Satellite Corporation was formed and given the exclusive right by the NRTC , National Rural Telecommunications Cooperative, to service the rural areas for satellite service until 2016 or beyond and or until the satellites that were put in place did not work any longer. Pegasus built their rural subscriber base with the exclusive right to provide DirecTV to more than 8.4 million homes in 41 states and serves 1.1 million rural subscribers. Pegasus Satellite Television had annual revenues of $831.2 million in 2003 and DBS operating profit before depreciation and amortization (EBITDA) of $213.8 million. Of course, the huge Goliath corporation DirecTV wanted this revenue and they were going to make any attempt to get it. Even if it meant doing things in a very cynical and diobolical way.

After an attempt by DirecTV to "buy out" Pegasus which was rejected by the stockholders of Pegasus, DirecTV then initiated a nasty attempt to limit Pegasus's valuable rights and damage Pegasus. DirecTV filed a claim against Pegasus in Federal District Court in Los Angeles seeking a court ruling that the term of Pegasus' exclusive distribution rights was limited to only the first DirecTV satellite, DBS-1, and not other satellites that provide Pegasus's exclusive services.

Additionally, There are other smaller NRTC satellite service providers that DirecTV has been buying out, but at a much higher price per subscriber than what DirecTV offered to Pegasus Satellite. Now why is this? Isn't the NRTC suppose to monitor and regulate this and if they didn't, why? The NRTC has also been price gouging Pegasus on royalty fees, ( some of which went to DirecTV ), to the tune of millions compared to what other NRTC members did not have to pay.

On May 14, 2004, the District Court dismissed DirecTV's previous claims. The District Court's decision made clear that DirecTV's cynical attempt over the last five years to persuade the District Court and the public that the term of Pegasus exclusive rights were limited to the life of DBS-1 failed. Previously however, a trial in the U.S. District Court for the Central District of California, a jury had returned a verdict on April 14, 2004, finding that DirecTV had substantially performed its obligations under a joint marketing contract between DirecTV and Pegasus, and that Pegasus had breached the contract. The jury's $51.5 million damage award represents amounts unpaid by Pegasus under the contract. This is being appealed based on the May 14, 2004 ruling.

But it doesn't stop there.

On June 2, 2004, even though the Court dismissed DirecTV's claims on May 14, 2004, Pegasus Satellite Television received notice that the National Rural Telecommunications Cooperative ("NRTC") purporting to terminate Pegasus Satellite Television's exclusive distribution arrangements with NRTC, which provide to Pegasus Satellite Television the exclusive rights to distribute DirecTV services in specified rural territories of the United States. The notice provides that this action is based upon an agreement between NRTC and DirecTV, Inc. to terminate the distribution agreement

However, it is good to know that there is still justice in this country.

On June 10, 2004, the Honorable James B. Haines, Jr. of the U.S. Bankruptcy Court for the District of Maine has issued a ruling in which he determined that DirecTV, Inc. had engaged in unlawful practices in violation of the automatic stay imposed by the U.S. Bankruptcy Code. As a result, DirecTV must stop using Pegasus subscriber information for any purpose. The ruling also bars DirecTV from any actions inconsistent with Pegasus's ownership of and rights in subscriber information. Besides the practice of DirecTV posting messages that the relationship between DirecTV and Pegasus had ended, which is not true, DirecTV had also been evidently been contacting Pegasus's subscribers telling them the same thing in hopes of getting the subscriber to switch to DirecTV.

Pegasus has filed a Chapter 11 Bankruptcy, however, I want to stress one important fact here. Pegasus has not filed a Chapter 11 bankruptcy because they are necessarily in financial trouble. The bankruptcy is to protect Pegasus from being taken over by DirecTV or to manipulate a buy out from stockholders because of the unlawful practices DirecTV has used in trying to convince subscribers and possible stockholders of Pegasus that what DirecTV has falsely put out that the the relationship is ending with DirecTV there would be no more Pegasus.

Mark Pagon, Chairman and Chief Executive Officer of Pegasus Communications Corporation, parent of Pegasus Satellite Television, stated in a press release in June,

"Action this morning by NRTC and DirecTV that purports to terminate our long-standing agreements is unlawful. We intend to take all appropriate actions necessary to prevent NRTC and DirecTV from implementing this latest scheme to deprive our stakeholders of the substantial value that we have successfully created in our satellite television business since 1994. It is with the greatest reluctance that we have concluded that Pegasus Satellite Television must seek the protection of Chapter 11 in order to protect our customers, employees, business partners, creditors and owners - while we seek affirmation of our rights. We intend to pursue a resolution of these matters as expeditiously as possible."

On June 15, 2004, Pegasus filed suit against DirecTV and the NRTC charging the defendants with acting independently and in concert in an effort to destroy Pegasus and steal its business for their own enrichment in violation of substantial fiduciary, contractual and other duties owed to Pegasus. The lawsuit makes clear, that Pegasus believes the NRTC and its Officers and Directors have engaged in a pattern of improper conduct that violates Pegasus' contractual rights, which constitutes a breach of NRTC's and its Officers' and Directors' fiduciary duties, and that violates settled principles governing cooperative associations. In addition the lawsuit charges at the same time, DirecTV has conspired with and aided and abetted the NRTC in this effort, and has breached its own duties to Pegasus. We believe the defendants have engaged in these unlawful activities in order to steal our business and divide the spoils amongst themselves."

UPDATE: 6-21-2004
The federal judge in the U.S. bankruptcy court in Portland, Maine, denied today Pegasus' request for a temporary restraining order against DirecTV to prevent DirecTV from marketing its service directly to consumers in areas served by Pegasus Satellite Television, Inc. The court's ruling allows DirecTV to continue to market its service and activate new customers in Pegasus territories.

The above ruling has me puzzled. Pegasus spent considerable financial resources since 1994 to build subscribers and to "buyout" other NRTC members in these areas when no other company wanted to development these areas. Now since Pegasus has 1.6 million subscribers, it appears to me that someone wants this business despite Pegasus's claims that there are suppose to be their areas of service.

UPDATE: 6-22-2004
DirecTV filed has suit against EchoStar for false advertising. According to a press release issued by DirecTV, "EchoStar's false and misleading advertisements have caused, or are likely to cause, actual confusion and have misled and deceived customers," according to the suit filed Friday in U.S. District Court in Los Angeles."

What I find really hypocrital of DirecTV regarding this suit against EchoStar is the fact that DirecTV has more or less been doing the same thing to Pegasus. DirecTV's was and still is running an advertisement on DirecTV's channel 205 that the relationship between Pegasus and DirecTV was ending when the matter had not even been settled in the courts yet.

This, in my opinion, only proves to me that DirecTV wants the revenue from Pegasus subscribers one way or another, without having to pay a fair price to Pegasus for these subscribers. And remember, way back when this all started years ago, the government, through the NRTC loaned at low interest rates, Hughes Electronics, ( owned by General Motors then ), who owned DirecTV at the time, $100 million for the developement of the satellite service in this country. However, DirecTV did not want to expend the resources to development the rural market. That is when Pegasus was formed. Through the years, Pegasus did buy up other smaller compaines that had been awarded areas by the NRTC in rural markets. If DirecTV is claiming they own the other markets and those customers in those areas are theirs, then why in heaven's name are the customers that Pegasus has not Pegasus customers that everyone wants for the revenue.

The actual court documents and exhibits can be viewed at:
www.pgtv.com/283cc/legal.htm
www.pegasussatelliterestructuring.com

This is the most flagrant act of unlawful business practices I have ever seen used by a huge corporation such as DirecTV to acquire a smaller company. DirecTV and its' officers need to be brought up on unfair business practices by the Federal Trades Commission and by the Security and Exchange Commission.

Regardless whether Pegasus has charged more, does or does not provide good service, has nothing to do with the unfair and unlawful business tactics that DirecTV and Dish Network has done towards Pegasus. Nothing should have been done by DirecTV or Dish Network in any manner until this matter was resolved completely in the courts one way or the other. That is the whole point I am trying to make with this column.

You might want to ask yourself this question at this point.

Why is it that you have not heard a word about any of this on any of the major news networks, especially FOX News, who everyone hails as being the most unbiased news network?

Here's why, at least for Fox. As far as the other networks, one really has to wonder why there has not been anything reported about this is on those networks.

DirecTV is owned by Rupert Murdoch's, News Corporation. He purchased it from General Motors, Hughes Electronics Division. Murdoch's News Corporation owns DirecTV now.

In a column I wrote about the American Idol phone fiasco last year, I disclosed who News Corporation is.

The Fox Television Network as well as DirecTV is owned by Rupert Murdoch's News Corporation. It is a global media and entertainment empire. The company, which is one of the world's largest media conglomerates, publishes scores of newspapers The Times of London and books HarperCollins. The company's 80%-owned Fox Entertainment Group has significant entertainment holdings, including FOX Broadcasting, a TV network with 200 US affiliates in the US. It also owns Twentieth Century Fox films, and the Los Angeles Dodgers. It also owns 35 US TV stations and cable and satellite operations in Asia, Australia, Europe, and Latin America. More than 75% of News Corp.'s sales are from its US businesses. Murdoch's family owns about 30% of the company.

News International PLC,( which is owned by Murdoch's News Corporation) is the UK newspaper arm for The News Corporation. It publishes four national newspapers The Sun, The Times, News of the World and The Sunday Times. It also has Internet operations and interests in satellite broadcasting, telemarketing, and distance education.

Murdoch's News Corporation also owns NDS Group around. The company is a leading provider of set-top box software that manages customer access to digital satellite, pay-television, and Internet services. Its VideoGuard software and smart-cards link viewers set-top boxes with broadcasters databases of subscriber profiles and preferences to allow authorized pay-per-view access. Cable and satellite broadcasters use NDS software to control programming access to more than 30 million subscribers. In addition, NDS develops operations software for managing digital broadcasting systems. Customers include British Sky Broadcasting, Cablevision, and DirecTV. News Corporation also owns STATS, which offers sports information and statistical analysis to fans, professional teams, media organizations, software developers, and interactive service providers.

Murdoch's News Corporation purchased 34% of Hughes Electronics. General Motors was also the majority partner in Hughes Electronics before the sell of Hughes which included the DirecTV Division to Murdoch's News Corporation. Hughes produces all the electronic parts for GM cars. I find this very interesting in how a newspaper organization is allowed to own a company making electronic parts for cars. How can a newspaper, who is suppose to report the facts and truth on all issues, especially consumer matters, be unbiased should a major defect is discovered in the electronic parts of the very cars they are making the electronic parts for? This gets into a another matter which I wrote about in another column FCC Delivers Blow to Democracy. Make sure you read this column as well. It is important to understand what has occurred and why Congressman must be contacted to reverse this deregulation.

UPDATE 6-25-2004 - COURT THROWS OUT FCC OWNERSHIP RULES

On Friday, June 25, 2004, a federal appeals court struck down the efforts by the FCC, Federal Communications Commission, to make changes in allowing media corporations to own more radio and television stations and newspapers. The ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia threw out the rules that would have allowed companies in single markets to own more. This is a victory for Americans to insure that only a few do not wind up controlling the news media in this country.

Murdoch's news corporation owns over 1,500 other companies. Here is a listing from records filed with the Securities and Exchange Commission News Corporation Subsidiaries - Sec Regulatory Reports This is information is available on the Securities and Exchange Commission detailing the purchase of News Corporation from General Motors of Hughes Electronic Corporation which included the DirecTV Divison.News Corporation purchases Hughes Electronics - General Motors company. - Sec Regulatory Reports

Also, if you want to know more about who also owns the Fox American Idol shows, which links back to Bertelsmann of Germany. Bertlesmann is a privately held family company and has been since its inception. The Gunther Thielsen family owns the majority of the company. Thielsen is related to the Thyssen family of World War II. The Thyssen family owned the German steel factories. They were in business with Preston S. Bush and W.A. Harriman before and during the war furnishing the steel to the German Thyssen steel factories. Thyssen was making Nazi tanks and military hardware for Hitler's Germany. Preston S. Bush is President George Bush's grandfather.

BBC Story about Bertelesmann -Germany- Bertelesmann was also convicted of collaborating with the Nazi's during WWI and for using Jewish slave labor. - BBC - England. More details about this in my column of July, 2002.

FURTHERMORE
DO NOT BELIEVE WHAT YOU ARE SEEING IN DISH NETWORK ADS

Since the court ruling in favor of Pegasus on June 14, 2004, ( view court documents - warning they are large .pdf downloads ) , Dish Networks Inc. has been playing the same unethical games by running newspaper ads like the above in rural newspapers across the country. This particular ad ran in a rural newspaper June 16, 2004. What I do not understand is why the Federal Trade Commission has not put a stop to this blatant abuse of unfair business practices against Pegasus.

This is a list of the majority stockholders of Dish Networks Inc., otherwise known as Echostar Satellite obtained from SEC filings, Schedule A, April 4, 2003. Dish has yet to file for 2004 a list of majority owners.

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Have a great day!

~ ~ David Lawrence Dewey