[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
            REAUTHORIZATION OF THE SATELLITE HOME VIEWER ACT

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 24, 1999

                               __________

                            Serial No. 106-6

                               __________

            Printed for the use of the Committee on Commerce


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 55-153CC                    WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                    ------------------------------  

                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

   Subcommittee on Telecommunications, Trade, and Consumer Protection

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,              EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio                BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California          ANNA G. ESHOO, California
NATHAN DEAL, Georgia                 ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma              ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JAMES E. ROGAN, California           RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois               THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico           GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)



                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Collier, Sophia, President and CEO, Northpoint Technology....    50
    DeVaney, Al, President, Newsweb Broadcasting, representing 
      the Association of Local Television Stations...............    54
    Fisher, Andrew S., Executive Vice President, TV Affiliates, 
      Cox Broadcasting...........................................    41
    Hewitt, Charles C., President, Satellite Broadcasting........    25
    Hutchinson, John, Executive Vice President and Ceo, Local TV 
      on Satellite...............................................    65
    Kimmelman, Gene, Co-Director, Washington Office, Consumers 
      Union......................................................    32
    Lathen, Deborah A., Chief, Cable Services Bureau, Federal 
      Communications Commission..................................    16
    Moskowitz, David K., Senior Vice President and General 
      Counsel, EchoStar, and Bruce Franca, Deputy Chief of the 
      Office of Engineering and Technology.......................    70
    Perry, Jack, President and CEO, Decisionmark.................    44
Material submitted for the record by:
    Goss, Hon. Porter J., a Representative in Congress from the 
      State of Florida, prepared statement of....................   103
    Lathen, Deborah A., Chief, Cable Services Bureau, Federal 
      Communications Commission, letter dated March 17, 1999, 
      enclosing response for the record..........................   104
    Sanders, Hon. Bernard, a Representative in Congress from the 
      State of Vermont, prepared statement of....................   103

                                 (iii)



            REAUTHORIZATION OF THE SATELLITE HOME VIEWER ACT

                              ----------                              


                      WEDNESDAY, FEBRUARY 24, 1999

              House of Representatives,    
                         Committee on Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:30 p.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Oxley, Stearns, 
Cox, Deal, Largent, Cubin, Shimkus, Wilson, Pickering, 
Fossella, Blunt, Bliley (ex officio), Markey, Boucher, Eshoo, 
Wynn, Luther, Sawyer, Green, and Dingell (ex officio).
    Staff present: Justin Lilley, majority counsel; Mike 
O'Rielly, professional staff member; Cliff Riccio, legislative 
clerk; and Andy Levin, minority counsel.
    Mr. Tauzin. This hearing will now come to order.
    Today the subcommittee begins its review of the Satellite 
Home Viewer Act. SHVA is one of the most important consumer-
related issues we will deal with as we wind down this century. 
Everywhere I go Members are asking me the same thing: ``Billy, 
are we going to do anything?'' and ``What are we going to do?'' 
Tens of thousands of Americans have contacted their elected 
representative here in Washington pleading with us to resolver 
the festering problem: How can they receive their local 
television stations or a network feed on their home satellite 
dishes? These issues are known as local and wide area issues.
    In many respects this hearing is a continuation of the 
subcommittee's inquiry into the state of competition in the 
market for multi-channel video programming distribution. SHVA, 
after all, was enacted with the intent of promoting competition 
with incumbent cable operators. Now that SHVA is scheduled to 
expire on December 31, 1999, Congress must begin its work now 
to reauthorize and reform this important statute.
    When the Commerce Committee first passed SHVA in 1988, I 
stated in the committee report that satellite television was 
the genie of competition, and that Congress would continue to 
monitor the genie to see whether it flourishes in the 
marketplace or whether it retreats back into the bottle. Eleven 
years later, we can safely say that the genie has not retreated 
to its bottle, nor will it. Satellite television is here to 
stay.
    Indeed, subscribership for satellite television services is 
growing exponentially. With the advent of digital high-power 
DVS systems, the industry has now moved to new levels. It is 
now able to compete in urban and suburban markets that 
heretofore were inaccessible. But, will satellite-delivered 
television continue to flourish in the 21st century or will we 
revert back to this [indicating]? Will we simply step back in 
time or will we step into the future?
    Isn't it ironic that broadcasters are investing billions of 
dollars into new digital equipment to deliver the knocks-your-
socks-off pictures that they promised us, and yet, millions of 
Americans are being told that they must hook up antennas and 
rabbit ears like these kinds of antennas and rabbit ears that 
formerly were hooked up to television sets in order to receive 
some kind of local picture? Or are they going, indeed, to have 
to wrap hangars in tinfoils to get some kind of fuzzy reception 
of their important local network pictures?
    I don't believe this is the new millennium technology 
expected by consumers today. This is an important question, for 
there are serious and substantial issues that need to be 
addressed in order for competition to continue to grow.
    Local-into-local is one important example. This committee 
has long had an important history of removing artificial legal 
barriers to competition. This, after all, was what the 1996 
Telcom Act was all about. The time has now come for us to apply 
that abiding principle to satellite television. Technology no 
longer prevents satellite delivery of both distant and local 
broadcast signals. Technology is in place, but the legal 
authority is not. The law, therefore, must give way. That is 
why we have introduced legislation in the 105th Congress to do 
just that, and that is why I intend, with our committee's help, 
to do the same thing this Congress.
    Another potential regulatory impediment to competition is 
the disparity in royalty fees paid by satellite provider and 
cable operators. Mr. Markey and I, with the help of Mr. Bliley 
and Mr. Dingell, pushed legislation through the House last year 
that would have frozen these royalty rate increases. The 
legislation, unfortunately, died in the Senate. But we have a 
chance to address these royalty fees again this Congress, and I 
expect that we will prevail this time.
    Finally, we have to address the wide area dispute. In some 
respects, Congress is a victim of its own success. We set out 
to promote competition with cable, and we succeeded to some 
extent. As the old saying goes, be careful about what you wish 
for.
    Indeed, the flip side of the coin of successful has been 
enforcement headaches. The Federal court now in Miami has found 
that satellite television distributors have violated the 
Satellite Home Viewers Act.
    Let me also say that we are concerned about the court 
solution, and that it may go too far. Today I want to explore 
with our witnesses whether the predictive model used by the 
court unnecessarily terminates network programming, so many 
consumers are, in fact, unserved, as defined by the act.
    In the end, consumers should not be caught in the middle. 
The burden is upon all of us here today, the Congress as well 
as the industry participants, to find solutions for consumers. 
If consumers can get access to local signals through other 
means, then let's talk about what legal and regulatory 
impediments exist in the development of these alternative 
delivery mechanisms. Likewise, if the court's predictive model 
sweeps in too many consumers, then we owe it to those consumers 
to ensure that service is not unnecessarily disrupted.
    Just this week we learned that 700,000 consumers may, in 
fact, be divested of their right to receive network programming 
over their satellite, in view of this Federal court decision. 
In that light, I want to announce that Chairman Bliley and I 
are preparing, with the help of the committee--and I know I 
received similar requests from members on the other side--to 
offer legislation as early as this week to set up a moratorium 
on that, so you are going to give us some time to get the 
local-into-local problems worked out. We are preparing that 
legislation and will file it imminently.
    This weekend, of course, we may or may not see the cutoff 
of service to a great many consumers in America. When the 
phones begin to ring to the Members of Congress all over this 
country, I think the message will go out loud and clear: It is 
time for Congress to act and to ensure that local programming 
is available to satellite consumers in America.
    I look forward to this hearing on more of these critical 
issues. Let me say, as we proceed to the legislation, we will 
continue to ask for all of your help in finding the right 
answers. Our committee has devoted substantial time and 
resources to finding ways to promote competition. Part of that 
effort needs to be the reauthorization of the Satellite Home 
Viewers Act, and we will do that, but we will reform it as 
well. Our laws simply have to keep pace with technology, as 
well as with consumer demand, and we will do our best to 
accommodate both of those requirements.
    The Chair is now pleased to welcome and recognize my good 
friend, the ranking minority member, Mr. Markey, for an opening 
statement.
    Mr. Markey. Thank you, Mr. Chairman, and thank you so much 
for calling this very timely hearing today. The backdrop for 
the issues that will be raised here today are interpretations 
of provisions of the Satellite Home Viewer Act, which is often 
referred to by its acronym and pronounced, ``shiva,'' the way a 
New Englander would describe how southerners react to cold 
weather.
    The debate on SHVA, which is not an ancient statute by most 
standards, having been enacted in 1988 to deal with the eight-
foot dish industry, underscores both how much has changed 
recently in technology and how much we need to remind ourselves 
of our historic policy goals in telecommunications policy.
    The cornerstones of communications are, for decades--and I 
think continue today to be--universal service, localism, and 
diversity. SHVA was enacted to fulfill one of those 
cornerstones--namely, universal service--by permitting 
consumers who could not receive an adequate signal from a 
local, over-the-air broadcaster to import, by way of satellite, 
the distant network TV signals from afar. People who were not 
served by local broadcasters are said to reside in ``white 
areas.''
    Yet, we were mindful in fulfilling the goal of getting 
network programming to people in white areas, not to trample on 
another important communications value; namely, localism. We 
sought to safeguard localism by stipulating that people who 
could receive local signals should do so, rather than bypass 
their local TV stations, because local TV stations need the 
advertising revenue to keep on the public affairs and news 
programming for people in their community. And unless there was 
a good reason why not to, people should continue to avail 
themselves of their local broadcast stations, for those good, 
solid localism-related reasons.
    Of course, in 1988, when we wrote this statute, the direct 
broadcast satellite revolution had yet to begin. In 1992, Mr. 
Tauzin and I and others passed a program access statute, which 
gave birth to the 18-inch dish revolution, and that was our 
goal. So, only beginning in 1993 has this 18-inch dish 
revolution been in place.
    Of course, that is not by definition the hollows of West 
Virginia or farmland in Iowa that the eight-foot dish dealt 
with, but, rather, we are now talking about urban and suburban 
America inside of the historic area where television stations 
were able to send their signals.
    So while we try to encourage the 18-inch dish industry, we 
come back now 4 or 5 years later with a bunch of public policy 
questions to get raised in terms of the impact on local TV 
stations and their ability to serve the poorest people in their 
community, who can't afford cable or satellite in terms of the 
quality of the programming, the public affairs, the news, which 
go into those local community homes.
    So the U.S. District Court, as the chairman said, in Miami, 
which interpreted the white area provisions, has ruled. In 
response to a lawsuit brought by a number of broadcasters, the 
court issued rulings that will require the termination of 
satellite delivery of distant network signals effective on 
February 28 and April 30 to almost 2 million consumers. Once 
again, this committee will be tasked with addressing universal 
service while simultaneously balancing localism.
    Thankfully, the technology is arriving that will help deal 
with a portion of the problem. Satellite providers are 
exploring how to provide consumers with local TV signals, which 
is referred to as local-to-local service. This would help 
satellite consumers offer a more comparable service to cable 
operators and more effectively compete in the marketplace.
    However, it is important to recognize that it will not be 
possible for satellite providers to bring every local channel 
to everyone in every local market in the near future. Yet, 
local-to-local is an improvement over the current situation, 
and Congress must help get it underway on a transitional basis 
at the very least, and do so this year.
    In addition, wireless cable alternatives may help to 
supplement DVS signals, to provide a complete programming 
package to consumers that includes local TV signals. I believe 
that the Congress and the FCC should do what can be done to 
foster such alternative choices and get them to the marketplace 
as soon as possible.
    That is because there is another backdrop to our action in 
committee, in addition to the court-ordered cutoff of distant 
network signals, and that is that price controls on cable 
programming services will end after March 31, next month. In my 
opinion, fixing the white area problem and approving 
legislation permitting DVS to provide local TV signals will not 
in themselves provide enough of a marketplace check on price 
hikes in the cable industry.
    Moreover, head-to-head wireline video competition on a 
massive basis is also clearly not going to happen before cable 
programming is deregulated at the end of March. My personal 
feeling is that cable monopolies should be deregulated only 
when effective competition makes such protection unnecessary, 
and that we should not end consumer price protections on the 
basis of a date chosen long ago, making an assumption that 
every telephone company in America by this date would be 
providing cable and telephone service. It did not happen.
    That is why I believe that Congress must do more. We need 
to explore how to make competitors more effective and remove 
impediments to more robust cable competition, and we must make 
sure that, prior to the emergence of effective competition in 
particular markets, that consumers are not treated unfairly.
    Mr. Chairman, this is about as important a hearing as we 
are going to have this year. I am glad to get started off the 
year with it, and I hope that all of the members are able to 
hear these witnesses today, because it sets a wonderful table 
for us to be able to work from for the rest of the year.
    [The prepared statement of Hon. Edward J. Markey follows:]
   Prepared Statement of Hon. Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts
    Good Afternoon. I want to start off by commending Chairman Tauzin 
for calling this timely hearing today. The backdrop for the issues that 
will be raised today are interpretations of provisions of the Satellite 
Home Viewer Act (SHVA).
    The debate on SHVA--which is not an ancient statute by most 
standards, having been enacted in 1988--underscores both how much has 
changed recently in technology and how much we need to remind ourselves 
of our historic policy goals in telecommunications policy. The 
cornerstones of communications policy in the United States for decades 
have been universal service, localism, and diversity.
    SHVA was enacted to fulfill one of these cornerstones, namely, 
``universal service,''--by permitting consumers who could not receive 
an adequate signal from a local over-the-air broadcaster to import, via 
satellite, the distant network TV signals from afar. People who were 
not served by local broadcasters are said to reside in ``white areas.'' 
Yet we were mindful in fulfilling the goal of getting network 
programming to people in ``white areas'' not to trample on another 
important communications value, namely ``localism.'' We sought to 
safeguard localism by stipulating that people who could receive local 
signals should do so rather than bypass their local station.
    Of course, in 1988, when we wrote the statute, the Direct Broadcast 
Satellite (DBS) revolution had yet to begin. We return today and DBS 
has around 9 million customers. As we return to SHVA in 1999, the 
touchstone will be to address the fallout from a series of recent court 
decisions from the U.S. District Court in Miami, which interpreted the 
``white area'' provisions of SHVA. In response to a lawsuit brought by 
a number of broadcasters, the court issued rulings that will require 
the termination of satellite delivery of distant network signals--
effective on February 28th and April 30th--to up to almost 2 million 
consumers. Once again, this Committee will be tasked with addressing 
universal service while simultaneously balancing localism.
    Thankfully, technology is arriving that will help deal with a 
portion of the problem. Satellite providers are exploring how to 
provide consumers with local TV signals--what is referred to as 
``local-to-local'' service. This would help satellite consumers offer a 
more comparable service to cable operators and more effectively compete 
in the marketplace. However, it is important to recognize that it will 
not be possible for satellite providers to bring every local channel to 
everyone in every local market in the near future.
    Yet ``local-to-local'' is an improvement over the current situation 
and Congress ought to help get it underway on a transitional basis at 
the very least. In addition, wireless cable alternatives may help to 
supplement DBS signals to provide a complete programming package to 
consumers that includes local TV signals. I believe that Congress and 
the FCC should do what can be done to foster such alternative choices 
and get them in the marketplace as soon as possible.
    That's because there is another backdrop to our action in Committee 
in addition to the court-ordered cutoff of distant network signals. And 
that is that price controls on cable programming services will end 
after March 31st.
    In my opinion, fixing the white area problem and approving 
legislation permitting DBS to provide local TV signals will not in 
themselves provide enough of a marketplace check on price hikes in the 
cable industry. Moreover, head-to-head wireline video competition on a 
massive basis is also clearly not going to happen before cable 
programming is deregulated at the end of March.
    My personal feeling is that cable monopolies should be deregulated 
only when effective competition makes such protection unnecessary, and 
that we should not end consumer price protections on the basis of a 
date chosen for political reasons.
    That is why I believe Congress must do more. We need to explore how 
we can make competitors more effective and remove impediments to more 
robust cable competition. And we must make sure that prior to the 
emergence of effective competition in particular markets that consumers 
are not treated unfairly.
    Again, I commend Chairman Tauzin for calling the hearing and look 
forward to working with him, as well as Chairman Bliley, Mr. Dingell, 
Mr. Boucher, Mr. Oxley, Mr. Burr and our other colleagues as we 
proceed. Thank you.

    Mr. Tauzin. The Chair is now pleased to recognize the 
chairman of the full committee, the gentleman from Richmond, 
Virginia, Mr. Bliley.
    Chairman Bliley. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I ask unanimous consent to insert my full 
statement in the record.
    Mr. Tauzin. Without objection, and that will apply to all 
members of the committee.
    [The prepared statement of Hon. Tom Bliley follows:]
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you, Mr. Chairman.
    I want to commend you for holding this hearing on reform and 
reauthorization of the Satellite Home Viewer Act. It is both timely, 
and critically important.
    What began in the 1970s as a hobby for only a few, has become an 
important and serious competitor in the market for video programming.
    Satellite television now boasts about 10 million subscribers 
nationwide. Two out of every three new subscribers to multichannel 
systems are choosing DBS.
    Satellite television, in other words, has become what many of us 
predicted it would become when we first passed the Satellite Home 
Viewer Act in 1988--a competitor to cable.
    I have often said that the best way to protect consumers against 
cable rate increases is through competition, and not rate regulation.
    Only competition will discipline cable operators in the long run.
    Admittedly, though, our successes in promoting competition have not 
been without growing pains.
    Which explains, in part, why we are here today.
    Pursuant to a federal court injunction, about 2.2 million American 
households will lose access to their satellite-delivered network 
programming.
    This concerns me, for a number of reasons. To begin with, it 
indicates that some providers of satellite television service have 
flaunted the law. These providers should account for their willful 
conduct.
    Moreover, in reforming SHVA, Congress must do everything it can to 
avoid a repeat of this scenario. As many of us noted in the debates 
over the Telecommunications Act of 1996, telecommunications policy 
should not be made in the courts.
    It should be made here, at the Commerce Committee. While I have 
great respect for our courts, they often look through a very narrow 
prism when making telecommunications policy. And too often, the result 
is the situation in which we find ourselves today, where consumers are 
caught in the crossfire of industries at war with each other.
    I am also concerned about the implications of the court injunction 
on competition. These 2.2 million households play a critical role in 
promoting competition with cable. Satellite television, in their minds, 
is simply a better product. This, in turn, forces cable to improve its 
own product.
    But if these subscribers lose their network programming--which is a 
key component of any offering--will they be driven into the arms of 
cable?
    Lastly, I am mostly concerned about the impact on consumers, 
particularly because the scope of the court's injunction is extremely 
broad. Will the injunction terminate network programming for some 
consumers who would otherwise qualify as ``unserved households''?
    The court used a predictive model that is not as refined as the 
model recently recommended by the FCC. If so, then it's very possible 
that a large number of consumers may unfairly and unnecessarily lose 
access to their network programing packages.
    To this concern, some might say: ``No problem, Bliley. These 
consumers can apply for a waiver.''
    But I say that the burden is on the industry, and not the consumer, 
to minimize service disruptions. If the law permits a consumer to 
receive these signals, then why put the burden on the consumer?
    I note that the FCC has done some fine work in this area, and I 
commend Ms. Lathen and her staff for their fine efforts in helping 
Congress find a solution.
    I therefore recommend that the parties to this litigation consider 
asking the court to look at the FCC's model as well. It may help to 
avoid some unnecessary terminations, and in so doing, help promote 
competition.
    Again, Mr. Chairman, I commend you for holding this hearing, as 
well as your leadership in this area. You will recall that we spoke 
last December about this important matter. And at that time, and still 
today, you have my support in your endeavors.

    Chairman Bliley. I just want to commend you, and I look 
forward to working with you as we hope to put this moratorium 
in place, while we sort out these complex issues dealing with 
local-to-local in the days ahead.
    I thank you, and yield back the balance of my time.
    Mr. Tauzin. Thank you, Mr. Bliley. The Chair is now pleased 
to recognize the gentleman from Texas, Mr. Green--I am sorry, 
the ranking minority member of the full committee, Mr. Dingell 
is here. Mr. Dingell.
    Mr. Dingell. Thank you, Mr. Chairman. I thank you for 
calling this hearing today on the reauthorization of the 
Satellite Home Viewer Act. I do wish it were held under other 
circumstances. It is no coincidence that hearings on this topic 
are being held 3 days in a row on Capitol Hill this week. We 
all know too well that this rush to hold hearings on a statute 
that won't expire until the end of the year is being driven by, 
quite frankly, a very sorry set of circumstances.
    We are faced with a situation in which satellite television 
providers have flagrantly violated and disregarded Federal law 
by willfully and repeatedly selling packages of distant 
broadcast signals to customers they knew, or should have known, 
were ineligible to receive them. These companies claim that the 
eligibility test Congress wrote into the law is somehow unfair, 
imprecise, or otherwise improper. This is, then, their 
justification for violating the law. They claim the test needs 
to be changed.
    There may be some validity to these claims, and we 
certainly have an obligation to examine whether it is so. Such 
a claim in no way, I would note, however, justifies taking the 
law into one's own hands, thwarting the will of Congress, and 
consciously choosing to ignore it. And, frankly, I want the 
people how have been engaged in that practice to understand 
that it doesn't generate much kindness up here.
    By this purposeful and callous disregard for the law, these 
companies have now put Members of Congress in a difficult 
position of having to choose between sanctioning illegal 
behavior on the part of open and callous wrongdoers and 
alienating consumers who have come to rely on the service that 
they were never legally entitled to receive.
    There are probably also a number of serious 
misrepresentations by persons in the satellite industry about 
how this is Congress' fault. It is not. The source of the 
wrongdoing and the misbehavior is plain for all to see, and the 
statute describes it with remarkable clarity. This may be an 
effective tactic to bring one's gripes before the Congress, but 
I can't say that it is either right or conducive to receiving a 
sympathetic ear.
    Now where does this leave us? The court correctly found 
that the law was violated and has ordered satellite companies 
to cease providing distant network signals to households 
currently served by local stations. There is no question that 
the broadcasters in this matter have the law on their side.
    Unless Congress, however, acts to overturn the judge's 
decisions by this Sunday, an obvious impossibility, the first 
wave of nearly 1 million consumers will be turned off. Clearly, 
the broadcasters have the clock at their side as well. I am 
sure the broadcast industry is already focused on this matter 
and performed this calculus.
    I also have little doubt that this calculus has played a 
role in the apparent stalemate between the two sides in 
negotiating an independent private settlement of this fiasco. 
The intransigence of both parties in working to solve this 
problem is lost on no one and entitles neither side to much 
sympathy. While it is true that the satellite companies are 
guilty of breaking the law, and that behavior is inexcusable, 
it is my belief that neither party comes to this hearing with 
entirely clean hands.
    The broadcast industry has known for a considerable period 
of time that the model used for determining unserved households 
was imperfect. Many households who are technically defined as 
served cannot get an adequate signal over the air. Yet, the 
industry has been steadfast in relying on a statutory model 
that unfairly deprives these consumers from receiving a distant 
broadcast signal. A similar situation obtains with regard to 
the FCC, which needs to direct its attention forcefully to 
defining the areas properly, and not properly, served within 
the different circles of reception.
    Clearly, Congress will act to reauthorize SHVA this year. I 
believe the law we pass will also redefine the standards for 
determining what constitutes an unserved household. This is 
entirely proper. There are myriad ways in which new standards 
can be designed, and key factors that will drive the breadth of 
change, and this standard is the degree to which we receive 
assistance from the constituents who have strong views on this 
matter.
    I hope both sides in this matter will consider the 
situation carefully because each party independently has the 
power to significantly influence this matter and the outcome. I 
strongly believe that it is in the best interest of both sides 
to redouble their efforts in reaching a compromise with all due 
haste.
    Hearing that, I would encourage the broadcast industry to 
voluntarily, in good faith, minimize the pending disruption to 
consumers through the waiver process or by other appropriate 
means. The future of that industry and its commitment to free 
community-based broadcasting is critically dependent on going 
forward, distant signal rules being devised rationally outside 
the frenetic environment created by phone lines, faxes, and e-
mail systems.
    Mr. Chairman, I thank you for holding this hearing. I look 
forward to working with you to solve the problems that we 
confront. I look forward to hearing from the witnesses. Again, 
I urge the interested parties to take a look at what is going 
on. You have a lot at stake here, and shooting craps with the 
public interest is probably something you could be comfortable 
with, but shooting craps with your own interests in this matter 
carries with it a significant measure of personal peril. I urge 
you to look carefully at the situation in which you have placed 
yourself.
    Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman for his statement, and 
would now recognize the vice chairman of the committee, the 
gentleman from Ohio, Mr. Oxley, for an opening statement.
    Mr. Oxley. Thank you, Mr. Chairman. I welcome our 
witnesses.
    As has been noted, the issue before is a timely one. 
Satellite television has emerged in recent years as a major 
competitor in the multi-channel video marketplace. This is 
especially true in more rural regions, such as Ohio's fourth 
congressional district. It is a development of which members of 
this committee may be justifiably proud, especially the 
chairman of the subcommittee, who has devoted so much time and 
effort to this issue.
    As we consider the reauthorization of the Satellite Home 
Viewer Act, I believe it is important that we look at the 
larger issue of competition in multi-channel video services. 
Communications policy should be set by Congress and this 
subcommittee, at the Federal Communications Commission, but not 
in Federal court.
    Three years ago, Congress took back the reins of 
communications policymaking from an unelected judge when we 
enacted the Telecommunications Act of 1996.
    Satellite policy is one of the few areas largely 
unaddressed by the 1996 act. But look at the issues involved: 
competition, localism, the question of who is served and 
unserved, the survival of free over-the-air TV. I would suggest 
that the issues before us are more about communications policy 
than the fine points of copyright law. The current state of 
affairs isn't serving anybody's long-term interest.
    We have a responsibility to the consumer to get the white 
area issue out of the courts and into the hands of 
communications policymakers. Last August, I signed onto a 
bipartisan letter with Congressman Rick Boucher, and several 
other members of the committee, urging the Commission to adopt 
a technically accurate pro-consumer definition of a Grade B 
standard for purposes of interpreting the Satellite Home Viewer 
Act. I continue to hold the view that the standards for signal 
strength need to be modernized by the Commission at the 
direction of the Congress. I hope we can work together toward 
that goal, and the goal of enhanced competition, better 
service, and lower prices in the video marketplace.
    I yield back the balance of my time.
    Mr. Tauzin. Thank you, Mr. Oxley. The gentleman from 
Virginia, Mr. Boucher, is recognized for an opening statement.
    Mr. Boucher. Thank you, Mr. Chairman. I will simply put my 
statement in the record.
    Mr. Tauzin. Without objection, so ordered.
    The Chair now recognizes the gentleman from Florida, Mr. 
Stearns, for an opening statement.
    Mr. Stearns. Thank you, Mr. Chairman. This is probably 
perhaps in this subcommittee one of the most important issues, 
I think, for the 106th Congress, and the significant of sorting 
through this satellite programming delivery system and how we 
are going to do it is going to be difficult, because we are 
trying to protect the local broadcast industry who invests 
billions in developing their companies and providing the most 
popular avenue of entertainment for the American people.
    We are tasked with determining what is in the best interest 
of the consumer who deserves, and often demands--fairly, in my 
opinion--to receive the latest movies, sporting events, and 
local programming with the most flawless picture and audio 
quality. I think everyone agrees that the delivery and 
reception of local television signal is in everyone's 
interest--from the local broadcaster to the cable industry, to 
the satellite providers, and to the consumers. The sticking 
point comes from the transition to the carriage of local 
signals and the carrying of all the local broadcasters on their 
satellite systems. I agree that we must insist on a must-carry 
option for satellite providers just as the cable industry is 
required to do.
    The satellite industry is still developing itself as a 
natural competitor to cable, and the industry deserves certain 
regulatory and legislative privileges in the role of a 
developing competitive force. At the same time, the satellite 
industry should have to meet the other obligations as must-
carry that other MVPD providers are required, for reasons of 
equity and fairness in the marketplace.
    What I am concerned with is, what happens if a satellite 
provider, for technological reasons, cannot fully comply? 
Should they be denied delivering any of the local signals until 
they carry all of them?
    I hope, Mr. Chairman, in developing legislation, we 
consider a limited waiver option for those satellite providers 
who cannot, for technological reasons, carry all of the local 
channels. My thinking is that when the must-carry date arrives 
in the year 2002 or 2003, and a provider still cannot transmit 
all the local channels, then I think that they should be able 
to apply for a 1-year waiver through the FCC for the specific 
markets where they cannot meet the must-carry standards. The 
satellite provider would have to sufficiently prove to the 
Commission that they do not have the capacity to achieve must-
carry in whatever market they apply for a waiver.
    Finally, Mr. Chairman, the transition to local-into-local, 
I encourage local broadcasters to continue to provide waivers 
for consumers, as they must have done in many instances for my 
consumers who have legitimate claims that they cannot receive a 
proper television signal. Unfortunately, the current Grade B 
standard, even with the current FCC revision, still does not 
account for those consumers in the contour who cannot receive a 
proper signal.
    I represent a largely rural district in north central 
Florida with many constituents who do not live near urban 
centers or even near television broadcasting towers. These 
constituents rely on satellite television signals, including 
the reception of distant signals. But the current predictive, 
Longley-Rice model still considers many of my constituents as 
able to receive a local signal, even for those who cannot do 
so, primarily to topographical reasons such as dense forest 
covering. So providing waivers where needed, broadcasters will 
stay on the better side of Congress.
    But one other question I have which I hope the panelists 
will address: Is there a compromise that can be reached to 
allow consumers in parts of the Grade B who prefer to receive 
distant network signals during the transition to local-into-
local, or would like to have distant signals in addition to 
their local signals, to continue to receive distant signals? Is 
there a compensation structure we can arrange so that the 
satellite providers can sell the distant signals at higher 
rates than they do today, and then the satellite providers 
would directly compensate local broadcasters for the number of 
consumers who receive the additional distant signals? Or would 
this be a bigger can of worms than it is worth? So I look 
forward to your response.
    Mr. Chairman, I compliment you on having us here.
    Mr. Tauzin. Thank you, my friend. The Chair now recognizes 
the gentlelady from California, Ms. Eshoo, for an opening 
statement.
    Ms. Eshoo. Thank you, Mr. Chairman, for having this very 
important hearing. Many of us, or perhaps all of us, are 
hearing from a cross-section of our constituents about this 
issue. So it is none too soon for us to hear from experts out 
in the field.
    I want to especially welcome Sophia Collier from Northpoint 
Technology. I met with representatives from Northpoint last 
week, when we were home for our in-district work period. In 
fact, I think if their advanced digital wireless system makes 
it in the market, that it could make the whole discussion today 
actually moot. So we look forward to what they are going to be 
coming out with.
    Let me just say something about the issue itself. I don't 
think--and I have a fuller statement to submit for the record. 
In reading yesterday's Wall Street Journal, there is a quote 
that especially caught my eye. Of course, it is from a 
broadcaster. But he says, ``The satellite operators created 
this problem and shouldn't profit from it. They may operate 
above the Earth, but they don't operate above the law.''
    So if we are going to go into ``shivering'' and SHVA, I 
think that, obviously, we have the responsibility to correct 
this and do allow for the local-to-local with the must-carry 
provisions that others have to provide, but we are going to 
have to stretch our vision to match the technologies that are 
going to be coming on, so that the law doesn't antiquate itself 
within moments of the decision and the votes that we take.
    So I will yield back the balance of my time, and thank you 
again for holding the hearing. I look forward to the experts 
that have come from across the country to guide us. How many? 
Two, four, six, eight, nine. Well, we are getting better; we 
have two women at the table. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentlelady. The Chair is now 
pleased to recognize the gentleman from California, Mr. Cox, 
for an opening statement.
    Mr. Cox. Thank you. I will be exceptionally brief. In fact, 
during this period of opening statements, I have been able to 
enjoy not only the wisdom of my colleagues, but also read the 
written testimony of all of our witnesses.
    But it is important that we do this, that we have this 
hearing, and that we move on with the reauthorization of the 
Satellite Home Viewer Act because the act is going to sunset in 
10 months, even sooner now than when we began the hearing.
    It is clear that the increase in cable rates that is much 
remarked upon in several of the testimonies that we will hear 
shortly has occurred under the existing regime of rate 
regulation. What we have got to do is find other ways, 
specifically, ways to enhance competition, so that we can 
achieve the results that we seek. I don't have any question in 
my mind that increased competition, far better than price 
controls, will give us what we are after. It will reduce the 
cost. It will improve the quality and expand the choices for 
consumers.
    I hope that we can change the rules that prevent satellite 
broadcasters from offering signals from local TV stations, and 
do so in a way that does not destroy the advertising base that 
makes over-the-air local television work.
    So I am just anxious to hear what you all have to say. I 
will yield back. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman. We will try to get that 
as soon as we can. The Chair now recognizes the gentleman from 
Ohio, Mr. Sawyer, for an opening statement.
    Mr. Sawyer. Thank you, Mr. Chairman. I know you have been 
waiting to hear my opening statement.
    I am going to have to deny you that privilege. I will 
simply insert it into the record. I just have three 
observations.
    I would like to associate myself with the remarks of the 
gentleman from Michigan. I just wish he had been a little more 
direct.
    I want to associate myself with the remarks of the 
gentleman from Richmond, Virginia--probably just because it is 
always a good idea to associate yourself with the remarks of 
the chairman.
    And, finally, Mr. Chairman, I want to make an observation 
that that question that you cited to us at the beginning, I 
suspect this is not the first time you have heard this. 
``Billy, are we going to do anything? And what are we going to 
do?''--you have been hearing since you have been going out on 
Saturday night as a kid in southern Louisiana.
    [The prepared statement of Hon. Thomas C. Sawyer follows:]
   Prepared Statement of Hon. Thomas C. Sawyer, a Representative in 
                    Congress from the State of Ohio
    Thank you Mr. Chairman for holding this hearing today on the 
reauthorization of the Satellite Home Viewer Act (SHVA). I also want to 
thank our witnesses for coming to testify before us.
    The Satellite Home Viewer Act allows a satellite company to 
transmit distant broadcast signals into ``unserved'' households or into 
those that cannot receive a measured local network signal of Grade B 
intensity using an over-the-air antenna. Consumers must also verify 
that they have not subscribed to cable within the past ninety days in 
order to receive distant broadcast programming. The last time Congress 
made major revisions to the SHVA was in 1994. A lot has happened since 
then. Technology has become more advanced--stronger signal penetration. 
Satellite dishes are much smaller than when they first arrived on the 
market, and they are much more affordable. As a matter of fact, 
satellite programming has become so popular that nearly 10 million 
people subscribe to satellite service. Despite the advances made in 
this area, the standard being used to determine whether a household can 
receive a local broadcast signal, in the opinion of many, is not an 
accurate calculation model and it needs to be revised. Fortunately, we 
have the opportunity to revisit this law because the Satellite Home 
Viewer Act expires at the end of this year. However, the circumstances 
in which we have to consider reauthorizing this Act are unfortunate.

    Mr. Tauzin. Thank you, Mr. Sawyer.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Deal, for an opening statement.
    Mr. Deal. Thank you, Mr. Chairman. I will submit my 
statement for the record, but I wish to welcome Mr. Fisher from 
my home State.
    As I look to the chart that is to the right, I notice that 
most of my congressional district is in the white area, and I 
would concur with that.
    I look forward to hearing the testimony of the witnesses 
and will submit my statement for the record.
    [The prepared statement of Hon. Nathan Deal follows:]
 Prepared Statement of Hon. Nathan Deal, a Representative in Congress 
                       from the State of Georgia
    Thank you, Chairman Tauzin, for holding this important hearing 
today regarding satellite network television. This is an issue that 
greatly affects my rural district in Georgia.
    As you well know, the conflicts between satellite service providers 
and broadcasters over service have affected satellite subscribers, and 
I am quite concerned that many unknowing constituents will lose access 
to some of their television channels as of next Monday. My personal 
feeling is that the federal government should be working to open up 
markets and provide consumers with choices. Many people in my district 
have only one cable provider to choose from and have no place to turn 
if they do not like that provider. Whether competition comes from 
another cable provider or from a satellite provider, I would like to 
see more competition. For this reason, I feel that we either need to 
modify the SHVA or assist satellite companies in their bid to provide 
local-to-local service.
    Toward that end, I am a cosponsor of the Satellite Access to Local 
Stations Act (SALSA) which would establish a mechanism for satellite 
service providers to offer local network feeds to their subscribers. I 
also cosponsored the Satellite Consumer Protection and Competition Act 
of 1998, introduced by Chairman Tauzin in the 105th Congress. I look 
forward to reviewing similar legislation in the near future to 
establish rules and regulations for the redistribution or 
retransmission of local signals by satellite broadcasters.
    Some areas of our rocky terrain are simply unable to obtain a clear 
picture via local broadcasting. Therefore, I believe it is important to 
devise remedies with respect to the reception of satellite-delivered 
network signals. Many subscribers have complained that they have spent 
hundreds of dollars on satellite equipment without being told that they 
may not be eligible for service of certain network signals. We must 
also provide subscribers, whose service of network signals is 
challenged by their local network affiliates, a direct means of 
determining whether they are still eligible for service.
    A fair re-authorization of the Satellite Home Viewer Protection Act 
is a top priority for me in the 106th Congress. I thank the witnesses 
for attending this hearing today and look forward to the testimony.

    Mr. Tauzin. I thank the gentleman. The gentleman from 
Maryland, Mr. Wynn, for an opening statement.
    Mr. Wynn. Thank you, Mr. Chairman. I won't have an opening 
statement at this point. I would like to request to submit at a 
later date.
    Mr. Tauzin. Without objection, so ordered.
    The gentlelady, Ms. Cubin, is recognized for an opening 
statement. Mr. Largent, then, is recognized. Mr. Shimkus, 
opening statement. Mr. Green, for an opening statement.
    Mr. Green. Mr. Chairman, I will submit it, my opening 
statement. But since I am in an urban area, there is nothing I 
like better than seeing the weather from downtown Denver, 
Colorado.
    [The prepared statement of Hon. Gene Green follows:]
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    Thank you Mr. Chairman for holding this hearing on the Satellite 
Home Viewer Act.
    Currently, over ten million people subscribe to satellite TV, and 
it is one of cable's most important and viable competitors in the 
multichannel video programming distribution market.
    In the past few months the satellite community received a shock. A 
federal judge in Miami imposed an injunction on a satellite carriers 
for illegally transmitting distant network signals to ineligible 
customers. Many questions arise from this problem. How do we make it so 
that the 2.2 million people do not have their network signals shut off. 
Do we have the FCC redefine Grade B Signal? Do we pass legislation 
allowing for local into local service? If we do pass local into local 
do we impose a phased or full must carry.
    I somewhat understand the appeal of satellite TV. You can receive 
hundreds of channels, purchase sports packages where you can watch 
every college basketball game, and have a countless number of pay-per-
view channels. But right now you can not watch your local network 
affiliates. If you own a satellite TV, you would miss out on your local 
news, sports and weather.
    If we do change the Satellite Home Viewer act I hope we act 
responsibly, and I hope that we maintain the integrity of all of our 
local stations from the four networks to the two emerging networks and 
to all of our independent stations especially the minority broadcast 
stations.
    Again Mr. Chairman thank you for holding this hearing.

    Mr. Tauzin. The gentleman from Missouri, Mr. Blunt, is 
recognized for an opening statement.
    Mr. Blunt. Thank you, Mr. Chairman. I just want to thank 
you for having this hearing. I began to get calls on this last 
week. I am sure I am going to get a lot more calls next week, 
if we don't reach some conclusions pretty quickly. I think it 
is an important matter we need to deal with in an immediate 
way, and then, clearly, in a long-term way as we do what we 
need to do to increase competition, and also to understand the 
importance of those local franchises. Thank you.
    Mr. Tauzin. I thank the gentleman. And, finally, Mr. Luther 
is recognized for an opening statement. Mr. Luther.
    Mr. Luther. Thank you, Mr. Chairman. First of all, I want 
to tell you how pleased I am to be a member of the 
subcommittee. As a new member, I am, obviously, looking forward 
to the testimony of the witnesses. I thank you very much.
    Mr. Tauzin. Probably with bated breath by now.
    Thank you, Mr. Luther. And Mr. Fossella for an opening 
statement. That is a New York signal. Terrific. We can move on.
    I want to thank the gentleman.
    [Additional statement received for the record follows:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Thank you, Mr. Chairman, for holding this hearing.
    Although the issue before us is the reauthorization of the SHVA, 
which is due to expire at the end of this year, the main focus of this 
hearing will be the frustration and anger that millions of consumers 
are going to experience this Sunday when such popular television shows 
as the Simpsons and 60 Minutes will no longer be available over their 
satellite dishes.
    Thankfully, with your leadership and the leadership of Chairman 
Bliley, the Telecommunications Subcommittee will work toward a 90-day 
moratorium to give the Committee time to address issues such as local-
to-local.
    Conventional political wisdom tells us to never get between a 
constituent and his television set. However, this is not a situation 
that Congress created, but unfortunately it's one that now has us 
caught in the middle.
    Thousands of satellite tv viewers bought systems under the 
impression that their providers could supply them with major network 
programming, but will find out differently on February 28 when that 
service is ended.
    The bottom line is satellite companies are providing their 
customers programs from networks, such as CBS and Fox, that they are 
illegally rebroadcasting. If that's not bad enough, they've acted as if 
they're blameless, and have the gall to encourage their customers to 
call Congress and complain about the shut off.
    I would like to hear possibly from Mr. Hewitt, since there is no 
representative here today from Primestar, why the company sent out 
cutoff notices to its customers asking them to contact their 
representatives in Washington asking them to fix this problem.
    The good news is that no satellite dish owner will be left without 
an alternative to receive network television shows. Fortunately, 
Congress crafted the Satellite Home Viewer Act (SHVA) in a way that 
enables consumers to receive network programming either from a 
satellite company or a conventional outdoor roof-top antenna.
    Specifically, the SHVA establishes a limited exception to the 
exclusive programming copyrights assigned to television networks and 
their local affiliates in order to help ensure that all consumers have 
access to network programming.
    My colleagues here on the House Commerce Subcommittee on 
Telecommunications and I have worked hard to address this problem. 
Congress, unfortunately, has no control over the February 28th cutoff 
date.
    There is a short term solution however. All satellite subscribers 
who have had their network stations terminated should contact his or 
her local satellite dealer or local television broadcaster to receive a 
waiver.
    Also, a valuable service is available on the web 
. This easy to use web site enables consumers to 
seek a waiver to ensure the continued delivery of network programming 
via satellite.
    I want to ensure, however, that the waiver process is fair and 
expeditious, and that the strength of the signals be of a quality that 
is viewable.
    In the coming weeks I am hopeful that the Telecommunications 
Subcommittee will address several issues dealing with the Satellite 
Home Viewer Act. The obvious one is the reauthorization of the Act.
    The apparent answer to the current problem we are facing with the 
cutoffs, is local-to-local satellite service. This technology, which we 
will hear today from ' one of the witnesses, is already a viable option 
that will allow every household in a local market to receive a local 
station's signal.
    Another advantage local-to-local provides is the ability to carry 
community-based programming and emergency warnings.
    Finally, local-to-local is a viable, but more importantly, a legal 
way for satellite providers to compete with cable television.
    I represent a rural state and support the satellite television 
industry--they provide a very valuable service to rural television 
customers. I applaud them for being the only real competition to cable 
tv and the driving force in lowing cable rates.
    If you've been to Wyoming you know that the terrain is really not 
conducive to receiving local television transmissions. Between the 
trees, hills, buttes, valleys and the occasional 10,000 foot mountain, 
it's virtually impossible to receive a quality signal.
    The technology that accompanies satellite television is exciting. I 
am looking forward to the testimony of Ms. Sophia Collier and finding 
out more about the technological advances that are being made by 
Northpoint Technology.
    Mr. Chairman, I once again thank you for holding this hearing. I 
look forward to hearing from the witnesses.

    Mr. Tauzin. I invite our panel now to give their 
statements. As is our usual customary rule, your written 
statements are part of the record, and as Mr. Cox has pointed 
out, most of us can read them, and we do. We want to thank you 
for that. We ask you within 5 minutes--and I will use this 
little high-technology light here to signal when your 5 minutes 
are up. We would like you to summarize--have a conversational 
sort of session with us--the main points of your written 
testimony.
    We will begin by introducing you. First of all, I want to 
introduce and welcome Ms. Deborah Lathen, who is the Chief of 
Cable Services at the FCC. Deborah, also, I want to thank you, 
on behalf of the committee, for all the efforts you have 
personally made and your staff has made in helping us prepare 
for this hearing. We want to thank you for that. We welcome 
your testimony.
    Mr. Charles Hewitt, President of Satellite Broadcasting and 
Communications Association here is. Mr. Gene Kimmelman, another 
frequent witness to our committee, Co-Director, Washington 
Office of the Consumers Union. Andy Fisher, Executive Vice 
President at TV Affiliates of Cox Broadcasting. Jack Perry, 
President and CEO of Decisionmark, Cedar Rapids. Ms. Sophia 
Collier of Northpoint Technology, who has been referred to by 
the gentlelady from California. Mr. Al DeVaney, President of 
Newsweb Broadcasting. Mr. John Hutchinson, Executive Vice 
President and CEO of Local TV on Satellite of Riley, North 
Carolina. And David Moskowitz, Senior Vice President and 
General Counsel with EchoStar.
    Ladies and gentlemen, we thank you all for coming to share 
your expertise with us. We will begin the hearing with 
testimony of Ms. Lathen.
    Again, welcome, Ms. Lathen, and thanks for your efforts 
before this hearing.

STATEMENTS OF DEBORAH A. LATHEN, CHIEF, CABLE SERVICES BUREAU, 
     FEDERAL COMMUNICATIONS COMMISSION; CHARLES C. HEWITT, 
PRESIDENT, SATELLITE BROADCASTING; GENE KIMMELMAN, CO-DIRECTOR, 
WASHINGTON OFFICE, CONSUMERS UNION; ANDREW S. FISHER, EXECUTIVE 
 VICE PRESIDENT, TV AFFILIATES, COX BROADCASTING; JACK PERRY, 
PRESIDENT AND CEO, DECISIONMARK; SOPHIA COLLIER, PRESIDENT AND 
  CEO, NORTHPOINT TECHNOLOGY; AL DEVANEY, PRESIDENT, NEWSWEB 
BROADCASTING, REPRESENTING THE ASSOCIATION OF LOCAL TELEVISION 
 STATIONS; JOHN HUTCHINSON, EXECUTIVE VICE PRESIDENT AND CEO, 
    LOCAL TV ON SATELLITE; DAVID K. MOSKOWITZ, SENIOR VICE 
  PRESIDENT AND GENERAL COUNSEL, ECHOSTAR, AND BRUCE FRANCA, 
    DEPUTY CHIEF OF THE OFFICE OF ENGINEERING AND TECHNOLOGY

    Ms. Lathen. Thank you very much, Mr. Chairman. Mr. 
Chairman, Congressman Markey----
    Mr. Tauzin. Deborah, you need to turn that microphone on.
    Ms. Lathen. It says it is live.
    Mr. Tauzin. Is it live and it is on?
    Ms. Lathen. That is what it says.
    Mr. Tauzin. Just pull it closer maybe. We are going to work 
on that. Chairman Bliley has committed to me that, before this 
Congress is out, this room will be high-tech. We are going to 
work on that.
    Thank you very much, Ms. Lathen.
    Ms. Lathen. Is it working now?
    Mr. Tauzin. Yes, ma'am.
    Ms. Lathen. Do I still get my full 5 minutes?
    Mr. Tauzin. You get it all.
    We will reset you.
    Ms. Lathen. Okay. Good afternoon, Mr. Chairman, Congressman 
Markey, and members of the subcommittee. Thank you very much 
for the invitation to appear here this afternoon to discuss the 
Satellite Home Viewer Act and the Commission's recent Report 
and Order.
    I appreciate the opportunity to share with you the 
Commission's views and perspective on these important issues. I 
know the Commission shares the subcommittee's interest in 
promoting strong competition and consumer choice in the multi 
channel video programming distribution market. We look forward 
to working with you in the days ahead to promote these shared 
goals.
    We also received the numerous letters and e-mails that you 
received. We know that 700,000 people stand to lose their 
network service on Sunday. So you might wonder, well, what has 
the FCC done about this?
    First, I would like to say that when we reviewed these 
letters and there is a trend that runs through them. Many of 
the consumers say they want choice. They believe that this is 
their right. The Satellite Home Viewer Act is a copyright act, 
but this is about choice in the letters that we have received.
    What we did was, our overarching goal was to help as many 
unserved households, unserved consumers, as we could, and at 
the same time do that within the limits of the law, and adhere 
to the intent of Congress. We think we achieved that goal. We 
improved on two methodologies that the Commission uses. One is 
testing at the home, and the other is a predictive model. The 
old Longley-Rice model tested a surrounding area. We came up 
with a methodology to test at the individual home.
    Another thing that we did is that we know many consumers 
live in one-story homes and not two-story homes. We lowered the 
antenna requirement from 30 feet to 20 feet for the one-story 
home and maintained it for the larger buildings.
    We also recognize that testing is costly, expensive, and 
inconvenient. So we came up with a predictive methodology that 
can be used when the consumer goes to a store, and they can 
answer the question, ``Am I eligible to receive a satellite 
service?''
    The model, the predictive model, also focuses on the home 
and not the contour of the signal. We want to understand what 
is happening in the home.
    We also understand that hills and valleys and terrain and 
interference have an impact on one's ability to receive a 
signal. So, therefore, we attempted to take these factors into 
account in this predictive model.
    We know that this is not enough. It is not perfect, but we 
have made improvements, and I will show you that when I have 
opportunity to discuss this map. But it is not enough. Because, 
as I said consumers say, ``We want choice.'' They don't care 
about copyright. But the law says copyright matters, and so we 
had to adhere to what the law says.
    So we couldn't help many of those consumers. Many consumers 
you see sitting in the red area, we could not help because the 
law says that is a copyright area.
    In our order we have recommended things that you may 
consider to help those people, things that you have discussed 
here today, such as local-into-local.
    Mr. Tauzin. Would you move a little closer to the mic, I am 
being asked by members. We want to hear you.
    Ms. Lathen. Okay. We do need some new technology here. I am 
almost kissing this microphone.
    We knew that we could not help a lot of those people. Those 
are Prime Time 24 subscribers in the red area. These people can 
receive a signal. These people are writing you letters because 
they believe it is their right, that they have a choice to get 
the most recent technology that there is. The law says, no, 
this is a copyright area.
    What we have said in our order is that Congress can 
consider things such as local-into-local that you have 
discussed today. You can consider eliminating the 90-day 
waiting period. Currently, if you are a cable subscriber, you 
must wait 90 days, when you sign up for satellite, before you 
can receive the network signals through satellite. Congress 
could consider changing that.
    Finally, we stated that, because our individual Longley-
Rice location model is a more accurate model than the one used 
by the Miami court, we think that you should consider adopting 
it as a rebuttable presumption for a service area tied with the 
loser pay methodology. These are just a few of the suggestions 
that we make.
    I also want to say I am not an engineer. So I have brought 
a very fine engineer with me here today. He is the Deputy Chief 
in our Office of Engineering and Technology. He will be able to 
answer technical questions.
    But I look forward to answering any questions that you may 
have.
    [The prepared statement of Deborah A. Lathen follows:]
Prepared Statement of Deborah A. Lathen, Chief, Cable Services Bureau, 
                   Federal Communications Commission
    Mr. Chairman, Ranking Member, and Members of the Subcommittee, 
thank you for this opportunity to discuss the ability of American 
consumers, under the Satellite Home Viewer Act (SHVA), to receive 
broadcast network television over their home satellite dishes.
    We have all struggled lately with a problem involving the 
television broadcast industry, the direct-to-home satellite industry, 
the cable industry, and consumers who subscribe to satellite carriers 
for their video programming. I would like to define the problem and 
discuss some of the reasons for it. I would also like to describe what 
the Commission has done to help consumers--our first priority--and what 
it has not been able to do because of our limited statutory authority. 
Finally, I would like to suggest some ways that the Congress and the 
Commission can work together, through changes in the SHVA, to promote 
competition and give consumers the television choices they want.
                              the problem
    Under current law, most Americans are not eligible to receive 
broadcast network signals (ABC, CBS, Fox, NBC, and PBS) through their 
home satellite dishes, regardless of whether those signals come from 
local or out-of-town television stations. This is because the SHVA, a 
copyright law enacted in 1988, states that only those consumers who are 
``unserved'' by local, over-the-air television stations are eligible. 
The SHVA defines an ``unserved household'' as a household that cannot 
receive an acceptable television signal using an outdoor rooftop 
antenna. An acceptable television signal under the statute is ``a 
signal of Grade B intensity,'' which is a Commission-defined measure of 
a signal's strength.
    Congress crafted the SHVA to serve two primary purposes: (1) to 
ensure the availability of broadcast network programming via satellite 
to the minority of households beyond the reach of a local affiliate 
signal; and (2) to protect the integrity of the copyrights that make 
possible the existing free, over-the-air national network/local 
affiliate broadcast distribution system.1 Congress 
determined that most Americans are, in fact, able to receive an 
acceptable signal from local, over-the-air stations and believed that 
most Americans would not need to use a satellite dish to watch network 
programming. The House Report accompanying the SHVA states:
---------------------------------------------------------------------------
    \1\ See e.g., H.R. Rep. No. 100-887(II) at 20.
---------------------------------------------------------------------------
        ``[S]atellite carriers are provided an interim compulsory 
        license for the sole purpose of facilitating the transmission 
        of each network's programming to white areas unserved by that 
        network ...The Committee believes that historically and 
        currently the network-affiliate partnership serves the broad 
        public interest.'' 2 (Emphasis added.)
---------------------------------------------------------------------------
    \2\ Id. at 19-20.
---------------------------------------------------------------------------
    This legislative history indicates that Congress sought to strike a 
delicate balance between the copyright interest of the broadcasters and 
the rights of rural America and others living in areas where they could 
not receive network programming. The legislative history also shows 
that as a matter of policy Congress found that local broadcast stations 
play an important role in delivering news, weather, and public affairs 
information of local interest. Nothing in the legislative history 
suggests that Congress ever intended to extend this limited copyright 
exemption to those consumers in cities and suburbs who clearly receive 
a local station's signal.
    Furthermore, the legislative history does not indicate that at the 
time of the SHVA's enactment Congress' primary objective was to promote 
competition to cable via satellite. In fact, a key provision of the Act 
may have hindered competition. Currently, any consumer who has 
subscribed to cable within the last 90 days is ineligible to receive 
satellite-delivered broadcast service. However, it should be remembered 
that the marketplace has changed significantly since 1988. At that 
time, the home satellite industry was nascent and just developing. The 
small, pizza-sized dishes that are familiar now were not available 
eleven years ago. Additionally, the early home satellite industry 
delivered its products through direct feeds, not through today's 
packaging and retransmission of programming. Today, broadcasters, as 
well as other video programming creators, have in the satellite 
industry a viable new means of delivering their services to consumers 
eager for more entertainment sources. The SHVA, however, has not been 
adapted to reflect the significant changes in the market or in public 
policy.
    Perhaps the most important development in public policy occurred 
three years ago when Congress enacted the Telecommunications Act of 
1996. Increased competition among multichannel video programming 
distributors (MVPDs)--particularly competition to cable--has become one 
of the paramount goals of the Commission. The satellite industry, 
particularly the direct broadcast satellite (DBS) service, has proven 
to be the largest and most successful industry at drawing new 
subscribers and competing in the marketplace. Today there are nearly 9 
million DBS subscribers.
    In spite of the clear public policies underlying the SHVA and the 
1996 Telecommunications Act, we have all witnessed consumers' 
frustration when they are not allowed to receive network service 
through their satellite dishes. In numerous e-mails, letters, and phone 
calls, consumers have argued that they have a right to get network 
television in any way they choose. Others contend that they are unable 
to get local broadcast network affiliates over-the-air and that cable 
does not come to their house, so satellite is their only source of 
network programming. Some state that they do not want to subscribe to 
their local cable company and that they prefer satellite television, 
but if they subscribe to satellite they cannot get the same network 
service as cable. At its core, consumers define this issue as a 
question of choice, not copyright protection or localism.
    As the number of satellite subscribers has increased, so has the 
tension that is inherent in the SHVA regarding those who are eligible 
to receive network programming via satellite and those who are not. 
Moreover, the policy of protecting the copyrights and markets of local 
broadcasters has clashed with the pro-competitive policy of increasing 
choices among multichannel video programming distributors. Without 
careful consideration by both Congress and the Commission, advancing 
one policy may thwart the other.
                              the lawsuits
    Recently, the tensions in the SHVA were brought to a head when CBS 
and Fox sued one satellite carrier, PrimeTime 24, alleging violation of 
their copyrights and loss of viewers resulting in lost advertising 
revenue. The broadcasters sought to permanently enjoin PrimeTime 24 
from retransmitting any broadcast network signals, distant or local, to 
``served households.'' Finding that most of the subscribers could 
receive an acceptable local signal (as defined by the Commission's 
Grade B standard), the court ordered the termination of satellite-
delivered network programming to approximately 2.2 million satellite 
subscribers nationwide.
                      the commission's rulemaking
    Two satellite carriers who sold PrimeTime 24's service to their 
subscribers, the National Rural Telecommunications Cooperative and 
EchoStar Communications Corporation, subsequently filed emergency 
petitions with the Commission requesting relief for the millions of 
satellite subscribers who faced termination of their network signals 
under the court injunction. On November 17, 1998, the Commission issued 
a Notice of Proposed Rulemaking indicating that it would conduct an 
expedited rulemaking. Less than three months later, on February 1, 
1999, the Commission adopted a Report and Order that addressed the 
problem.
    The comments to the rulemaking ranged from recommending that the 
Commission should take no action because the satellite companies had 
flagrantly violated the law to proposing that the Commission create 
altogether new values for Grade B signal intensity. Some commenters 
argued that it was most important to protect local network affiliates 
and thereby promote localism. Others argued strongly that the most 
important goal is to provide competition to cable. Many commenters 
advocated creation of a new, practical and affordable measurement 
methodology. Virtually all commenters supported creation and 
endorsement of a computer model to predict signal strength at 
individual households. There was, however, considerable divergence of 
opinion on the appropriate parameters for such a model.
    The overarching values and goals of the Commission are to protect 
consumers, promote competition and, in seeking to accomplish these 
goals, maintain fidelity to the law and intent of Congress.
    The Commission worked to balance these policies in the rulemaking 
we completed on February 1. Our first concern--our overwhelming 
concern--was to assist consumers to the extent possible under the law. 
The Order, therefore, sought to more accurately identify those 
consumers who are truly unserved by their local, over-the-air 
television stations. The result is that consumers who do not receive an 
adequate over-the-air television signal will be able to receive 
broadcast stations through their home satellite dishes.
    However, the law limited the Commission's actions to find a broader 
solution. For example, the definition of an unserved household requires 
the use of the Grade B signal intensity standard and an outdoor rooftop 
antenna. Moreover, the Commission has stated that it would be unable to 
avoid the termination of satellite-delivered network signals to the 
majority of households covered by the Miami court's permanent 
injunction. Most of these subscribers are served by an adequate signal. 
We have included by way of illustration a map for the Fox affiliate in 
Charlotte, North Carolina (WCCB, Channel 18). (See attachment.) The map 
depicts which consumers are predicted to receive at least a signal of 
Grade B intensity under the prediction model used by the court in Miami 
and under the new prediction model the Commission created in its 
rulemaking, as discussed below. Superimposed on this map are black dots 
representing PrimeTime 24 subscribers in the area. The map demonstrates 
that a substantial number of these subscribers are able to receive an 
adequate television signal and are thus ineligible for PrimeTime 24's 
service.
    In its rulemaking, the Commission was able to achieve its 
objectives without changing the definition of a signal of Grade B 
intensity.
    Many commenters argued that a change to the definition of a signal 
of Grade B intensity would solve consumers' problems. The Commission 
declined to change the definition because it believes that the Grade B 
standard is still useful for determining whether a household receives 
an acceptable picture consistent with the SHVA. The Grade B standard is 
also used for many other tasks, including defining a television 
station's service area (or contour) as well as for the SHVA.
     Although the Commission concluded that it has the authority to 
modify Grade B intensity values for all purposes, we believe that it is 
significant that Congress tied the SHVA compulsory license to the 
Commission's Grade B standard. Congress' use of the widely-used Grade B 
standard in SHVA indicates that the Commission should not have adopted 
a separate Grade B intensity standard for purposes of SHVA alone. 
Moreover, additional considerations also led the Commission to conclude 
that it would be inadvisable to adopt a separate Grade B standard for 
SHVA purposes. A second set of signal strength values, also called 
``Grade B signal intensity,'' would be likely to create confusion for 
the segments of the broadcast industry affected by Commission 
regulations.
    In its rulemaking, the Commission created two accurate and readily 
available tools for determining which households receive an acceptable 
picture. The Order supports Congress' 1988 goal of ensuring that truly 
unserved consumers are able to receive satellite-delivered network 
signals.
    The tools we have created--one for measuring television signal 
intensity at an individual household and one for predicting signal 
strength--significantly improve the situation for consumers. Both tools 
reduce the number of mistakes that were previously made when 
determining whether a consumer can get an acceptable television signal. 
Importantly, our endorsement of these tools should reduce the 
occasionally virulent conflicts between the broadcasters and satellite 
carriers over how to determine who is eligible for satellite-delivered 
network service.
1. The On-Site Measurement Test
    The Commission created an on-site measurement test to determine the 
actual signal intensity at a consumer's home. It is accurate, 
relatively inexpensive, and objective and will classify any household 
as unserved if that household is unable to receive an acceptable 
picture using a rooftop antenna. To best serve the intentions of the 
SHVA and reflect what is actually happening at a particular household, 
the test must be taken as near as possible to the place where a 
consumer would install a rooftop antenna. The test also requires the 
tester to account for the height of the house. For one-story buildings, 
the testing antenna must be raised to 20-feet, and for houses taller 
than one-story, the testing antenna must be raised to 30 feet. This is 
important because a television signal could be weaker closer to the 
ground than higher in the air. Under an older testing methodology, 
which was not created to enforce the SHVA, testers were required to 
make a so-called hundred foot mobile run in the streets surrounding the 
house, and were required to raise the testing antenna to 30-feet, 
regardless of the height of the home.
 2. The Prediction Model
    Our second tool, a prediction methodology called the Individual 
Location Longley-Rice (ILLR) model, is also designed to be accurate, 
practical, and objective. Like the measurement methodology, it will 
classify a household as unserved if it is not predicted to receive an 
adequate television signal. Unlike the measurement methodology, the 
Commission is unable to mandate the use of any prediction model to 
create a presumption of service or lack of service at an individual 
household. The SHVA as currently drafted requires an on site 
measurement.
    The Commission has improved upon existing predictive models in 
several important ways. These changes more accurately reflect what 
happens to a television signal between a station's transmitter and a 
consumer's house and include:

 interference from other signals
 land use and land cover (e.g., vegetation and buildings)
 changes in terrain (e.g., hills and valleys) every \1/10\ of a 
        kilometer
 the height of the household (e.g., one-story or taller than 
        one-story)
 the perspective of the individual consumer (so-called 
        ``individual mode'' analysis) rather than the perspective of 
        the broadcaster (so-called ``broadcast mode'' analysis).
    Several of these factors were not part of previously-used Longley-
Rice models, so their inclusion adds significantly to the precision and 
accuracy of any predictive result. For example, changes in terrain were 
considered every kilometer under previous models. Under the new model, 
changes in terrain are considered every \1/10\ of a kilometer--ten 
times more frequently. Also, under previous models, every house was 
assumed to be two-stories high, so the model incorporated a 
hypothetical 30-foot antenna into its calculations. Because a large 
number of American houses are only one-story, the new ILLR model 
incorporates a 20-foot antenna for one-story houses and a 30-foot 
antenna for taller houses. Additionally, the Commission ended the 
debate over whether vegetation, buildings, and other land cover and 
land use affect television signals. These factors have an effect, but 
the Commission could not develop, in the very short time frame before 
the injunctions took effect, a reliable means of using that information 
in the model. The Commission expects that the marketplace will create 
one soon and that the new model will include these factors at that 
time. The Commission also concluded that interference from other 
signals affects a station's transmission. Unlike land cover, 
interference can be accounted for in the new ILLR model and, therefore, 
it is included.
    By accounting for these factors, the new model has significantly 
reduced mistakes that other models made. The Commission compared the 
model used for digital television (DTV) allocations with the new ILLR 
model. Significantly, the Miami U.S. District Court also relied upon 
the DTV model for its injunctive decisionmaking. On average across the 
country, the ILLR model has identified approximately 6% of unserved 
consumers that were previously and incorrectly classified as being able 
to receive an acceptable television signal. As can be expected, the 
numbers vary significantly depending on the impact that the various 
factors have in any one area of the country. The most significant 
differences appear to be caused by the presence of mountains or the 
proximity of television markets to one another, particularly in urban 
areas of the country such as the Northeast corridor.
     a. Examples Under the ILLR Model--For example, both broadcasters 
and satellite carriers agree that Charlotte, North Carolina, is a 
representative television market. In Charlotte, the average increase in 
the population of unserved consumers was 3.3 percent for the Fox 
affiliate, 6.2 percent for the NBC affiliate, 6.8 percent for the ABC 
affiliate, and 12.1 percent for the CBS affiliate. Another 
representative example is Birmingham, Alabama. The average increase in 
the population of unserved consumers there was 6.9 percent for the Fox 
affiliate, 5.1 percent for the NBC affiliate, and 5.3 percent for the 
CBS affiliate. In contrast, Cheyenne, Wyoming, and Charleston, West 
Virginia, provide examples of more extreme cases. In Cheyenne, which 
sits on a high, mostly flat, treeless plain, the new model picks up 
very few households that were incorrectly classified as unserved. For 
the CBS affiliate, there was a 2.8 percent increase in the number of 
unserved households; for the Fox affiliate, there was a 0.6 percent 
increase; and for the NBC affiliate, there was a zero percent increase. 
In Charleston, WVA. which sits in the middle of one of the most 
thoroughly mountainous states in the country, the new ILLR model 
corrects a large number of mistakes that were made by other models. For 
the CBS affiliate, there was a 23.4 percent increase in the number of 
unserved households; for the ABC affiliate, there was a 24.9 percent 
increase; for the Fox affiliate, there was a 25.7 percent increase; and 
for the NBC affiliate, there was a 20.4 percent increase.
    b. Advantages of the ILLR Model--The Commission's new ILLR 
predictive model has several other advantages. For example, it should 
significantly reduce the need for and costs of potentially millions of 
on-site measurements. This will reduce the cost of doing business for 
the satellite carriers-a cost that would likely be passed on to 
consumers--and avoid the inconvenience testing causes the industries 
and the public. Perhaps most importantly for the consumer, the model 
should answer the question, ``Can I get network signals through my 
satellite?,'' when he or she purchases a satellite dish. This point-of-
sale advantage should improve consumer satisfaction by preventing 
confusion and mistakes while cutting down on delays in the initiation 
of network service to eligible subscribers.
3. Other Considerations: TIREM and Confidence Factors
    Some commenters to the rulemaking suggested that the Commission 
adopt the so-called Terrain Integrated Rough Earth Model (TIREM) 
developed by the Department of Defense for predicting signal strength 
at individual households. The Commission concluded that this model is 
neither better nor more accurate than the new ILLR prediction model. 
Although TIREM shows promise as a tool for predicting signal intensity 
at individual locations, it is unclear that there is a publicly-
available, non-proprietary version that has undergone rigorous review. 
In some cases, the Commission discovered that TIREM might even be less 
accurate than the ILLR model.3 On the other hand, the 
Commission has many years of experience using and evaluating the basic 
Longley-Rice model on which the new prediction model is formed.
---------------------------------------------------------------------------
    \3\ See attached Letter to William E. Kennard, Chairman, Federal 
Communications Commission, from Larry Irving, Assistant Secretary of 
Commerce for Communications and Information, at 2 n.6 (January 29, 
1999) (ex parte filing in CS Docket 98-201).
---------------------------------------------------------------------------
    Some commenters argued that the Commission should increase the so-
called ``confidence factor'' in its prediction model from 50% to 
something higher (e.g., 90%). The term ``confidence'' in this context 
is misleading, as the measure does not describe how accurate the model 
is. Rather, the confidence factor is a statistical way of determining 
that a model's predicted result is the most likely reflection of the 
actual signal intensity at a household. Used in that context, a 
confidence factor of 50% results in a prediction that neither 
overpredicts nor underpredicts unserved households by weighting the 
model to produce results that favor either broadcasters or satellite 
carriers. A predictive model that includes truly served households in 
an unserved category by gaming the statistical analysis creates several 
undesired effects. First, consumers could be confused and frustrated. 
If the model overpredicts the number of unserved consumers, and those 
consumers subscribe to network service via satellite, they will face 
disappointment when the broadcaster proves that the consumer is, 
indeed, served and therefore forces termination of broadcast network 
service. Conversely, if the model underpredicts the number of unserved 
consumers, those consumers would be unjustly deprived of broadcast 
network service via satellite. Second, the SHVA protects the copyrights 
of network affiliates by making their served households off limits to 
satellite delivery of broadcast networks. A 90% confidence factor for 
served households would make many truly served households eligible for 
satellite-delivered network service, contrary to the intent of the 
SHVA. Third, if the Commission had endorsed a model that underpredicts 
the number of served households, broadcasters would have a great 
incentive to challenge the model's prediction by taking an actual, on-
site measurement. Satellite carriers would similarly pursue testing for 
any model that consistently underpredicts unserved households. Either 
result would defeat our goal of endorsing a predictive methodology upon 
which all parties would rely and which the courts would accept to 
satisfy the SHVA's requirements.
    The measurement and prediction methodologies fulfill the 
Commission's objective of more accurately identifying the truly 
unserved households that Congress intended to make eligible for 
satellite-delivered broadcast service. At the same time, the Order is 
true to the congressional policy mandate that broadcast localism should 
be preserved.
                            recommendations
    The Commission looks forward to working with Congress in examining 
alternatives to provide relief for those consumers affected by the 
injunction.
    The Commission and Congress can work together to fulfill their 
mutual objective of promoting competition. In its Report and Order, the 
Commission did what it could within the scope of its limited authority. 
The Commission also recommended that Congress consider the following 
proposals:
    1. Authorize Local-into-Local--Congress could consider changes to 
the copyright law to allow satellite companies to provide local 
television stations to local markets. Cable companies already do this 
to their distinct advantage vis-a-vis satellite companies. Local-into-
local could make satellite carriers more attractive to consumers, thus 
increasing their competitive standing with cable. Local-into-local will 
not provide a complete solution for every consumer in the immediate 
future because of technological limitations on the number of stations 
that can be retransmitted. Further, some satellite carriers have no 
plans to retransmit local signals even if they are legally able. Local-
into-local is, however, a beginning, and could provide a new option for 
a large number of television households.
    2. Eliminate the 90-Day Waiting Period--Before receiving satellite-
delivered broadcast networks, the SHVA requires an unserved consumer 
who subscribes to cable to terminate that service and wait 90 days. 
Once the cable service ends, the consumer then would face 90 days with 
no acceptable network service. He or she would be without cable, unable 
to receive network programming over-the-air, and forbidden to receive 
broadcast network stations via satellite. This requirement discourages 
a potential satellite consumer from terminating his or her cable 
service. The Commission's Order recommends that Congress consider 
eliminating the 90-day waiting period.
    3. Incorporate Prediction Models and Adopt a Loser Pays Mechanism--
The SHVA provides that the loser must pay for any on-site signal tests 
only when parties are embroiled in litigation over the eligibility of a 
household. The Commission believes that the loser pays mechanism would 
be more effective if it were applied prior to litigation and if it were 
used in conjunction with a predictive model. The Commission suggested 
that clear statutory acceptance of prediction models for creating 
rebuttable presumptions of service or lack of service would add 
certainty to the entire SHVA process. It is important not to codify the 
new ILLR model specifically, so that improvements can be made as 
technology develops, but an amended SHVA should incorporate prediction 
models in addition to maintaining the use of on-site measurements. A 
broadly applied loser pays mechanism that allocates the cost of testing 
to the party in error, in conjunction with the more reliable prediction 
model, would likely give satellite carriers an economic incentive to 
avoid enrolling consumers who are predicted to be served. Loser pays 
could also discourage broadcasters from challenging subscribers who are 
predicted as unserved. Less testing means less burden and inconvenience 
for the industries and consumers.
                               conclusion
    Mr. Chairman and members of the Subcommittee, I am pleased and 
privileged to have shared with you my thoughts on how to ensure that 
all Americans have access to broadcast network television. I also 
appreciate the opportunity to discuss with you the Commission's recent 
Report and Order and its recommendations to help the public determine 
whether a particular household can receive an adequate television 
signal. Our on-site measurement methodology and our point-of-sale 
predictive model should make it easier for the industries and consumers 
to comply with the SHVA. Finally, I believe the recommendations I have 
offered could significantly advance competition to cable and create 
more and better choices for consumers. Thank you for inviting me to 
testify today. I am pleased to answer your questions.
                                 ______
                                 
          United States Department of Commerce,    
The Assistant Secretary for Communications and Information,  
                                                           
                                      Washington, DC 20230,
                                                  January 29, 1999.
The Honorable William Kennard
Chairman, Federal Communications Commission
The Portals
445 Twelfth Street, S.W.
Washington, D.C. 20554
RE: Ex Parte Letter in Satellite Delivery of Network Signals to 
Unserved Households for Purposes of the Satellite Home Viewer Act, Part 
73 Definition and Measurement of Signals of Grade B Intensity, CS 
Docket No. 98-201, RM No. 9335, RM No. 9345

    Dear Chairman Kennard: I am writing today to applaud the Commission 
for expeditiously undertaking a rulemaking to define ``over-the-air 
signal of grade B intensity'' for purposes of the Satellite Home Viewer 
Act.\1\ It is my hope that the federal courts \2\ will benefit from the 
Commission's guidance on this important issue.
---------------------------------------------------------------------------
    \1\ Satellite Home Viewer Act of 1994, Pub. L. No. 103-369, 108 
Stat. 3477 (1994) (codified at 17 U.S.C. Sec. 119).
    \2\ See CBS Inc., et al. v. Prime Time 24 Joint Venture, Case No. 
96-3650-CIV-NESBITT (S.D. Fla. July 10, 1998); ABC Inc. v. PrimeTime 24 
Joint Venture, Case No. Civ. A. 1:97CV00090 (M.D. N.C. July 16, 1998).
---------------------------------------------------------------------------
    As noted in my September 4, 1998, letter to you, the definition of 
``signal of grade B intensity'' is key to whether many consumers will 
have real choice of programming providers. This Administration has 
strongly supported the development of robust competition in the 
multichannel video programming marketplace as the way to bring greater 
viewing choices, lower prices and better services to consumers.
    The Institute for Telecommunication Sciences (ITS) of the National 
Telecommunications and Information Administration has provided sample 
data on the number of households that could be affected by the various 
prediction methods under consideration by the Commission.\3\
---------------------------------------------------------------------------
    \3\ A number of commenters in this proceeding supported the 
adoption of TIREM (Terrain Integrated Rough Earth Model) for predicting 
unserved households. The original version of TIREM was developed by the 
Electromagnetic Compatability Analysis Center (ECAC) within the 
Department of Defense in the 1960s and has continued to be modified by 
that organization. ECAC's name was recently changed to the Joint 
Spectrum Center (JSC).
---------------------------------------------------------------------------
    ITS took a sample of one network affiliate station from 16 Neilsen 
Media Research Designated Market Areas (DMAs) ranked by number of 
households. This sample reflects significant geographic diversity, 
communities of various sizes, UHF and VHF stations with varying channel 
numbers, and equal numbers of affiliates of each of the four 
networks.\4\ ITS maps plotting the results of this sample graphically 
reveal the variations in the number of affected households of selection 
by using the prediction methods: FCC F (50,50) Field Strength Charts 
(47 C.F.R. Sec. 73.699 Figures 9 and 10), Longley-Rice ITM,\5\ and 
TIREM Version 3.\6\ Maps for the sampled stations are available at 
http://flattop.its.bldrdoc.gov/figs ntia/gifs ntia 012899/index.html.
---------------------------------------------------------------------------
    \4\ For a summary of this data, see the attached table entitled 
``Network Affiliate Sample from 16 DMAs.''
    \5\ Longley-Rice ITM (Irregular Terrain Model, Version 1.2.2) is 
available to the public from an NTIA web site at http://
elbertits.bldrdoc.gov/itm.html. The files at this site include source 
code and model description.
    \6\ TIREM Version 3 is available to the public from an NTIA web 
site at http://ntiacsd.ntia.doc.gov/msam. The files at this site 
include the source and executable code and a 30-arc second topographic 
database (i.e., the database contains the terrain elevations in height 
above mean sea level for every 30 arc-seconds of latitude and longitude 
for the earth's surface). This version is approximately 20 years old 
and was developed by ECAC/JSC. For purposes of this sample, ITS 
modified TIREM Version 3 to permit access to the 3-second topographic 
database commonly used for broadcast studies. TIREM Version 4 is the 
latest version of the model also developed and maintained by the JSC. 
This model improves on the 20 year-old coding used in Version 3 but 
fundamentally uses the same technical algorithms and yields similar but 
not identical results as Version 3. This version of the model, however, 
has limited distribution with export restrictions under the Arms 
Control Act (22 U.S.C. Sec. 2751 et seq.) or Executive Order 12460. 
While NTIA is a Federal agency eligible to receive TIREM source code, 
other organizations may not be eligible to receive TIREM Version 4 
source or executable code without explicit permission from JSC.
---------------------------------------------------------------------------
    While NTIA takes no position on the specific definition that the 
Commission should adopt, we urge the Commission to adopt a definition 
and measurement that will best promote competition and consumer choice.
    Thank you for your consideration of these views.
            Sincerely,
                                                      Larry Irving.
Enclosures
cc: The Honorable Susan Ness
   The Honorable Harold Furchtgott-Roth
   The Honorable Michael Powell
   The Honorable Gloria Tristani
   Deborah A. Lathen, Chief, Cable Services Bureau

                                                          NETWORK AFFILIATE SAMPLE FROM 16 DMAS
                                                        [CS Dkt. No. 98-201, RM Nos. 9335, 9345]
                                                Prepared by the Institute for Telecommunication Sciences
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Model: Households (Grade B or
                                                                                                                                  Greater)
                      Rank                                        DMA                  Station-Channel    Network --------------------------------------
                                                                                                                                  Longley-
                                                                                                                       FCC          Rice        TIREM
--------------------------------------------------------------------------------------------------------------------------------------------------------
17                                                                           Phoenix            KSAZ-10       FOX      818,000      815,000      830,000
2                                                                        Los Angeles             KABC-7       ABC    4,627,000    4,549,000    4,688,000
5                                                     San Francisco-Oakland-San Jose             KTVU-2       FOX    2,504,000    2,424,000    2,403,000
26                                                                         San Diego            KNSD-39       NBC      851,000    1,026,000    1,082,000
7                                                                   Washington, D.C.              WRC-4       NBC    2,324,000    2,309,000    2,483,000
16                                                              Miami-Ft. lauderdale             WFOR-4       CBS    1,477,000    1,477,000    1,506,000
3                                                                            Chicago             WMAQ-5       NBC    3,197,000    3,258,000    3,604,000
23                                                                         Baltimore             WMAR-2       ABC    2,686,000    2,685,000    3,130,000
21                                                                          St Louis             KTVI-2       FOX      976,000      997,000    1,069,000
28                                                                         Charlotte             WBTV-3       CBS    1,132,000    1,111,000    1,541,000
24                                                                          Portland             KOIN-6       CBS      778,000      716,000      735,000
19                                                                        Pittsburgh             WTAE-4       ABC    1,251,000    1,152,000    1,482,000
88                                                                    Columbia, S.C.             WIS-10       NBC      479,000      518,000      878,000
93                                                                 Tri-Cities, TN-VA            WJHL-11       CBS      576,000      262,000      309,000
59                                                               Richmond-Petersburg            WRLH-35       FOX      363,000      471,000      629,000
9                                                                            Detroit             WXYZ-7       ABC    1,978,000    2,022,000    2,316,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Mr. Tauzin. Thank you, Deborah.
    We will now welcome Mr. Hewitt, President of Satellite 
Broadcasting and Communications Association, the SBCA.

                 STATEMENT OF CHARLES C. HEWITT

    Mr. Hewitt. Thank you, Mr. Chairman. I appreciate the 
opportunity to have this talk.
    We have distributed maps that were to be attached to our 
testimony. We will unable to get it until this morning. We 
would like to have that admitted, too.
    Mr. Tauzin. Without objection, that will be admitted.
    Mr. Hewitt. Mr. Chairman, this year, under the leadership 
of USSB and Consumer Electronic Manufacturing Association, in 
conjunction with ourselves and the NAV, we launched a program 
to help retailers recognize the type of off-air antenna that 
was necessary by providing them maps to illustrate what kind of 
antennas would be necessary to be used.
    We think this program is going to be very successful, and 
we are going to push very hard for it. Millions of Americans 
will be able to use off-air antennas and actually see the 
higher-quality signal than they could through their cable 
system. However, millions of Americans will not be able to use 
an off-air antenna and receive any kind of a signal. That is 
why we are here.
    We commend the FCC for an expedited rulemaking. Deborah and 
her staff did a wonderful job with what they had to work with. 
But, unfortunately, they did not have the authority necessary 
to do what we believe needs to take place.
    Concerning the Grade B standard, in paragraph 95 of the 
rule, I quote, ``There may be better, but still objective 
standards that could be developed for identifying unserved 
households.'' Paragraph 43, quote: ``We do not believe we have 
the authority to create a special Grade B solely for the 
purposes of SHVA.'' They have also stated that they don't have 
the right to mandate a predictive methodology for industry to 
use. Obviously, a mandated would put us all on the same book.
    Realize the 1952 standard predictive methodology was 
created to determine interference between transmitting signals, 
to determine who could be where, and how, at what power 
structure. It is based on the 50/50/50 47 DBU, and as a policy, 
that means that 50 percent of the people in an area, 50 percent 
of the time, receive a signal, 50 percent confidence that it 
will happen. We do not believe this is good telecommunications 
policy to determine whether or not a person has an acceptable 
reception system.
    Now the FCC did improve the 20-foot antenna height from the 
ground on a single home, up to 30 feet for a two-story house. 
The interference issues, the vegetation and land use 
recognition, although this map will not contain that because we 
don't have the application of it, has been very helpful. 
Unfortunately, ghosting is not taken into consideration in 
their activities.
    This map over to your right is one map of four maps that we 
have put together using what is called TIREM 4. TIREM 4 is a 
very similar type of system that Longley-Rice is, which is what 
the court decided and what has been used by the FCC, except for 
it is much more sophisticated in using a great deal more detail 
in the topographical area.
    In fact, this map does not contain interference. It does 
not contain land use and vegetation, which the FCC has already 
recognized as being necessary, nor does it contain ghosting 
problems that are contained in a signal. Every place you see 
red is a place that the TIREM says is an eligible receiver that 
Longley-Rice says is not an eligible receiver.
    Of the four maps we show, three of them, actually, show a 
very interesting phenomenal. There are areas in all three of 
those cities inside Grade A that do not receive a signal. There 
are a good number of geographic regions within Grade B, and 
converse to that, outside of Grade B there are places where the 
consumer is served with a Grade B 47 DBU signal, 47 DBU being 
the acceptable signal.
    Congressman, Mr. Chairman, we are asking for five solutions 
to be enacted here by the committee and by the Congress.
    The first is to provide the FCC authority to establish a 
specific standard on behalf of the SHVA.
    Second, to provide them the authority to mandate a 
predictive methodology for us to be utilized.
    Third, for those almost 2 million who ultimately are 
destined to be turned off under the Miami court rule, that that 
be left to the FCC to determine if the local broadcaster is 
being truly harmed by those consumers retaining their signal.
    Fourth, that the FCC establish a system for a very 
consumer-friendly method of terminating those consumers who 
should be disconnected under the law.
    And, last, that local-to-local be authorized and that there 
be a 3-year phase-in for full must-carry, and also 1 year for 
retransmission consent to be negotiated.
    Mr. Chairman, in closing, I have one 20-second film I would 
like to show you of a broad author who lives in Dillard, 
Nebraska. He has been notified that he is going to be 
disconnected. This is the signal he now receives under the 
Longley-Rice methodology. In just a second, it will show a 
side-by-side film, what it shows when you have a distant 
network signal applied. That is the distant network signal, and 
now a side-by-side comparison.
    We don't think in 1999 that this an is acceptable standard, 
and we believe the FCC should be given the authority necessary 
to accept a standard--to create a standard for SHVA and to 
create and mandate a predictive methodology to support it.
    Thank you.
    [The prepared statement of Charles C. Hewitt follows:]
     Prepared Statement of Charles C. Hewitt, President, Satellite 
              Broadcasting and Communications Association
    Mr. Chairman, and members of the Subcommittee. I am Chuck Hewitt, 
President of the Satellite Broadcasting and Communications Association. 
We are the national trade association for all the segments of the 
Direct-To-Home satellite industry. That includes the Direct Broadcast 
Satellite companies that offer subscription services to consumers; the 
C-Band (large dish) side of the industry; the major programmers who 
license their offerings to service providers for viewing by consumers; 
the manufacturers and distributors of home satellite receiving 
equipment; and the retailers, mass merchandisers and cooperatives who 
are the direct point of sale to the consuming public. The SBCA is one 
of the few trade groups in Washington, D.C. that encompasses all the 
elements of the industry.
    Mr. Chairman, I greatly appreciate your inviting me to testify 
before you today. While I have had that privilege many times in the 
past, I can't remember when a hearing such as this one has taken place 
at such a critical moment. It comes at a time when the DTH industry is 
beginning to make great strides to be the kind of competitor to cable 
that is envisioned by the policies set by this Subcommittee, the 
Congress and the Federal Communications Commission. Yet, in spite of 
the hope set for our industry, it is still besieged by competitive and 
regulatory stumbling blocks that have to be removed if satellite is to 
maximize its potential to deliver a superior video service to American 
consumers.
    Our industry needs Congressional help to find a better way to deal 
with the vexing problem of ``white areas'' and the issue of how an 
objective television viewing standard can be devised to ensure consumer 
satisfaction. The Federal Communications Commission has just tried to 
address the problem, but, as I will discuss later, was only able to 
make modest adjustments in this area. The FCC stated clearly that it 
did not believe it had the authority to go further than it did in 
dealing with television signal strength issues as they relate to the 
Satellite Home Viewer Act. Our request to you today is to give the 
Commission that authority to settle this issue once and for all so 
consumers together with our industry can know with finality their 
rights with regard to the reception of distant network signals.
    The backdrop for this hearing is critical. There is enormous 
frustration in the satellite video marketplace because there has been 
no satisfactory resolution to the ``white area'' crisis. Instead, 
consumers are being trapped between the desire of the local television 
broadcast affiliates to rightfully maintain the viability of their 
service areas and the need of the satellite industry to be able to 
compete on equal grounds with cable. The result has been predictable. 
Consumers--the satellite television viewing public who is supposed to 
benefit from video marketplace competition--is instead being made an 
innocent victim because of a vague and impractical regulatory regime 
established by the 1988 Satellite Home Viewer Act.
    A very non-consumer friendly result is becoming the hallmark of the 
current ``white area'' system under SHVA. Consumers who, while located 
within the Grade A and B contours of their local television station, 
still remain ``unserved households'' by virtue of the fact that they 
are not able to receive an acceptable signal using a conventional 
outdoor rooftop antenna. Finding a remedy to this situation constitutes 
a major challenge: how to identify these consumers so they can receive 
the distant network service that they are entitled to receive under the 
SHVA.
    The DTH satellite industry has already been supplying consumers 
with television antennas for a long time. We believe that every 
consumer has the right to receive network television service. To the 
extent that acceptable local signals can be received off-air, our 
companies make every effort to see that their subscribers have the 
proper antenna equipment to facilitate their reception. So the claims 
of the broadcasters notwithstanding, satellite providers have been 
diligent regarding the ability of their subscribers to pick up local 
signals.
    A great debate has been taking place over the effectiveness of the 
Grade B standard as an appropriate measurement to apply to households 
under the SHVA. The standard was established by the FCC in 1952 for the 
purpose of, among other things, predicting the propagation area of a 
television signal emanating from the tower of a local broadcaster. Its 
main parameters are that its contour, when drawn on a map, should 
indicate a service area in which 50% of the households should receive a 
signal of 47 dBu 50% of the time with a 50% confidence factor. It is 
designed to predict areas of service coverage and prevent interference 
from other stations. However, it is not a signal reception standard, 
and there is no guarantee, and never was there intended to be one, that 
a viewer located in the Grade B will, by necessity, receive an adequate 
television signal using a conventional rooftop antenna.
    Nonetheless, that is the standard which is currently applied to 
consumer households through the SHVA, and which has now become so 
contentious. In its place, consumers deserve a receiving standard for 
the express purpose of applying the ``white area'' provisions of the 
SHVA. It should be based on the realities of today's electronic 
environment, not on the outdated assumptions that governed adoption of 
the Grade B standard in 1952. It should be promulgated to benefit 
consumers while at the same time taking into account the needs of the 
free, over-the-air marketplace.
    In an attempt to accomplish this, two of our member companies, the 
National Rural Telecommunications Cooperative and EchoStar, petitioned 
the FCC to establish a Grade B standard solely for the purpose of the 
SHVA. The FCC launched a rulemaking proceeding, and we assured both the 
Commission and the broadcasters that it was not our intention to 
``shrink'' the Grade B contour as some have claimed. In fact, the Grade 
B contour is not relevant in this instance because we were seeking a 
standard based on signal reception. We simply wanted a better 
definition of signal strength at the receiving location that would 
enable our industry to determine in an exact manner which households 
should be classified as ``unserved,'' in the context of a realistic 
appraisal of the current television signal propagation environment.
     Frankly, Mr. Chairman, a lot has changed since the FCC developed 
its Grade B standard in 1952. Areas that were once rural are suburban 
or even urban today. There is substantially more interference in the 
environment today, caused by the exponential growth of wireless 
electronic devices, microwaves, computers and many other electronic 
usages of modern society, as well as more automobiles and electric 
utility lines. Also, the existing models used to determine Grade B 
signal strength do not consider the effects of signal propagation 
interference, vegetation or land use (buildings), important components 
which must be taken into consideration. Within the household, other 
factors also come into play such as ``ghosting'' on the television 
screen or the use of splitters to feed several video devices at the 
same time. So it was important to our industry that these factors be 
taken into consideration so as to make as realistic an accounting as 
possible of the current climate for television signal reception.
    The FCC is to be commended for implementing its rulemaking in such 
a short period of time. Chairman Kennard delivered the Commission's 
report and order on time and as promised. The Commission was clear to 
state, however, that its authority in this area was limited under SHVA. 
In light of this circumstance, the rules that the Commission 
promulgated make some minimal changes with regard to the impact of the 
Grade B standard on SHVA consumers. So the benefit to consumers, 
unfortunately, is only slight. Nonetheless, we believe that there is a 
lot more in this area that can be accomplished, and it is important 
that the FCC be given the go-ahead to deal with it.
    On the positive side, the Commission adopted certain measures which 
can help make a more realistic assessment and prediction of signal 
strength at a television household possible. While they do not directly 
address the principal hurdle faced by a SHVA consumer--i.e., whether or 
not a truly acceptable and viewable television picture can be received 
with a conventional rooftop antenna--the rules are a first step toward 
addressing this core issue. First, it provided for a new measurement 
process at an individual location, requiring five individual 
measurements at a predetermined location instead of the 100-foot mobile 
run measurement that is utilized by broadcasters today.
    Second, the Commission endorsed a slightly modified version of the 
Longley-Rice predictive methodology for determining beforehand whether 
a consumer can receive a Grade B strength signal. The advantage of 
using any predictive methodology is that it reduces the cost and 
necessity of conducting an on-site measurement. While there are several 
different predictive models to choose from, it is important to remember 
that any model is only as good as the technical parameters that are fed 
into it. That is an extremely important qualification which, as I will 
graphically demonstrate to you, dictates varying results, each with 
different consequences as to whether or not a consumer household 
actually receives a Grade B signal and is thus either ``served'' or 
``unserved.''
    The satellite industry, on the other hand, proposed using a highly 
accurate prediction methodology termed Terrain Integrated Rough Earth 
Model (TIREM) developed by the Department of Defense and the National 
Telecommunications and Information Agency. For reasons explained in the 
FCC's Report and Order, it elected not to endorse TIREM at the present 
time. It elected instead to remain with the existing Longley-Rice 
methodology, slightly modified to take into account interference from 
other stations, antenna height variations, and, eventually, the effects 
of buildings and vegetation. In any event, the appendix to my testimony 
will show the greater accuracy with which the TIREM model can predict 
Grade B coverage at an individual location, compared with the Longley-
Rice Grade B propagation model.
    The Commission acknowledged that its traditional Grade B contour 
methodology does not take into account many topographic features in a 
station's area; does not factor in interference from other electronic 
signals; and does not include vegetation and land use. It stated that 
the existing Grade B model is an ``imperfect methodology for predicting 
whether an individual household can receive an adequate signal.'' 
(para. 67; our emphasis) As I stated earlier, it is designed to predict 
television coverage at certain given levels within a local television 
station's service area. That is the fatal flaw in trying to apply it to 
the ``white area'' provisions of the Satellite Home Viewer Act to 
consumer television signal reception because the Grade B standard as 
used in SHVA up to now has been formulated by the FCC as a propagation 
model, not a receiving standard. That is why we are here today trying 
to seek a more precise and equitable approach for the satellite 
consumers around the country who deserve better treatment with regard 
to their right to receive television service.
    I would also like to clarify at this point that a Grade B contour 
line, by itself, is not an indicator of whether or not it is possible 
to receive a viewable television signal within the area depicted by the 
contour. It is not a guarantee to consumers that an adequate picture 
will be available, but is simply a predicted zone of signal propagation 
for the purposes which I cited above. That is a very important 
distinction to make as you try to make a determination about the best 
course by which consumers will benefit.
    In any event, the Commission did adopt in its Report and Order the 
predictive methodology termed the Individual Location Longley-Rice 
model (ILLR). It is a point-to-point model that had been previously 
adopted by the Commission in the digital television proceeding and can 
be used to identify at a particular location--namely a consumer 
household--television signal intensity. The model, however, does not 
presently account for the effects of land use and vegetation, and those 
factors when they become available must be factored in to give more 
accurate predictions in the current environment. I would also note that 
the FCC was very careful to point out that application of the ILLR 
model would be for the purposes of SHVA and would not replace the 
Commission's standard procedures for predicting signal strength and 
service contours for individual television stations.
    In its Report and Order, the Commission also pointed out that ``the 
Grade B signal intensity standard was originally designed to depict a 
television station's service area, and that it may not address all the 
factors that determine the quality of a consumer's television picture'' 
and later that, ``the Grade B standard is still useful for determining 
signal strength and signal intensity, there may be a better ,but still 
objective, standard that could be developed for identifying unserved 
households.'' (para. 95; our emphasis) As I already stated however, the 
Commission does not believe it has the authority to go further than it 
did. Because Congress established the Grade B standard as the benchmark 
for ``white areas'' under the SHVA, the Commission felt constrained 
from exploring other alternatives.
    It is important that I describe for you now the effect of different 
methods of identifying those areas within Grade A and B contours that 
cannot receive a viewable television signal with an outdoor, rooftop 
antenna. The attachments to this testimony comprise maps from Atlanta, 
GA, Miami, FL, Missoula, MT, and Mobile, AL. The set for each city 
shows how Grade B can be measured at individual locations using the 
ILLR methodology and TIREM, using the 50/50 probability data at the 
normal Grade B signal strength of 47 dBu for low-band VHF stations and 
56 dBu for high-band VHF stations. We have overlaid the ILLR and TIREM 
results on the FCC's standard Grade A and B contours.
    1) The Individual Location Longley-Rice model that the Commission 
just adopted in its SHVA rulemaking. This technique, in addition to 
identifying signal strength characteristics at specific sites, also 
takes into account interference from other stations, but does not yet 
include the effect of buildings and vegetation. As the Commission has 
recommended, the addition of data dealing with land use and vegetation 
will improve the utility of the ILLR. We are working to obtain that 
information and plan to apply it to the model if and when it is 
available.
    2) The TIREM model which the satellite industry recommended that 
the FCC adopt as the preferred method of signal measurement. It 
identifies more accurately the effects of specific topographic features 
along a transmission path than does the ILLR model, and, from the 
perspective of predicting whether a receivable signal is present at a 
particular location, it is much more accurate.
    The use of TIREM also helps to raise the principal issues we are 
trying to address. We have clearly stated that it has never been our 
intent to reduce the Grade B coverage area. We are only trying to 
identify more readily those locations and households which cannot 
receive a Grade B intensity signal with a conventional rooftop antenna. 
The Grade B contour originally implemented by the FCC is solely for the 
purpose of defining an area of signal propagation from a television 
transmission tower. It is not meant to be a predictor of signal 
reception at a specific household, but satellite consumers must have 
that ability under the SHVA. That is why it is so important that the 
Congress give the FCC the authority to formulate a receiving standard 
for consumers so their viewing rights under SHVA can be exercised. In 
fact, there may even be other methods for predicting individual 
location receiving strengths. The Commission, as the expert agency in 
this field, should be given the task of searching out the best possible 
technique so as to avoid in the future what we are witnessing today.
     The fundamental question before us now is how do we accomplish 
this? The Commission has acted to what it believes is the extent of its 
authority. It endorsed a slightly improved model for predicting Grade B 
signal strength but was not able to go beyond that, namely the 
development of a standard governing signal reception. In order to 
address these critical competitive issues, we would ask you to 
undertake the following actions:

 Grant the Commission the authority it needs to implement a 
        television receiving standard for the purpose of accurately 
        identifying under the SHVA an ``unserved'' household. That 
        should not be too difficult a task. For many reasons, Grade B 
        may not be an acceptable viewing signal strength for many 
        consumers. While the Grade B standard was established in 1952 
        for black and white television, consumers' expectations today 
        and their reliance on television for entertainment and 
        information demand much higher quality reception than before. 
        Also, loss due to ghosting, the use of splitters, and other in-
        home interference factors can add to signal deterioration. In 
        our filings with the FCC during its recent SHVA rulemaking, we 
        suggested that a 90/90 probability was the standard which was 
        more applicable under the existing television environment. 
        Imagine, for example, telephone service based on the same 
        principle as the current Grade B television standard. It would 
        hardly be satisfactory, and in this day and age, consumers 
        demand the same reliability from their television service as 
        they do from their telephone company. Therefore it is important 
        that the FCC embark on such a rulemaking as soon as possible.
 Because the FCC concluded that it lacked the authority to 
        mandate the use of any predictive methodology in its 
        rulemaking, it could only ``endorse'' the ILLR as a predictive 
        methodology. As noted above, the SBCA believes the TIREM model 
        is much more accurate and should be used for SHVA purposes. In 
        any event, the Commission needs the authority to adopt a model 
        that will enable a consumer to know with a reasonable degree of 
        certainty whether or not, at that location, a television signal 
        at the new standard that has been created can be received with 
        a conventional rooftop antenna.
 Consumers have become the innocent party in the ``white area'' 
        dispute. Congress should take their interests into 
        consideration by directing the FCC to determine whether or not 
        local broadcast affiliates are being harmed by continued 
        distant network service to existing satellite subscribers. The 
        standard proposed in S. 303, legislation introduced in the 
        Senate by Senators McCain and Burns which the satellite 
        industry supports, is whether or not continued service would 
        cause ``projected loss of audience or revenue of such a 
        magnitude as to cause material harm to the viability of local 
        stations.''
 Congress should direct the FCC to work with the affected 
        parties in order to develop a joint, consumer-friendly approach 
        to terminating distant network service to any households where 
        distant network service is required to be disconnected. 
        Consumers deserve an orderly, agreed upon transition so they 
        can continue to receive network signals by other means and with 
        a minimum of disruption.
 Finally, it is important that Congress authorize local-into-
        local satellite service quickly. It can go a long way to 
        reducing the uncertainty attached to the ``unserved'' household 
        approach because in many areas local affiliate service by 
        satellite would be offered in conjunction with a satellite 
        subscription package. For that to happen however, we recommend 
        that 1) a reasonable transition period be granted for a 
        satellite carrier to attain a full must-carry status; three 
        years is a reasonable period within which a satellite carrier 
        could comply; and 2) a period of one year be given to allow a 
        satellite carrier to obtain retransmission consent for the 
        carriage of local broadcast signals; that is what the cable 
        industry was granted in the 1992 Cable Act, and satellite 
        providers should be afforded the same benefit.
    It is important to note, however, that the advent of local-into-
local service will not obviate the need for distant network signals. 
There will still remain a large population of satellite viewers in the 
smaller television markets, or those who live in rural areas, who will 
not have access to either local-into-local service nor be able to 
receive adequate local television broadcasts with a rooftop antenna, 
even when the changeover is made to digital terrestrial broadcasting. 
Distant network service via satellite will be the only means for them 
to receive the news, sports and entertainment programming which other 
viewers in more metropolitan areas already take for granted. We urge 
Congress to be aware of this issue because it, too, will be impacted by 
whatever new ``white area'' rules will be in effect at the time local-
into-local service is available.
    I would now like to turn my attention to another issue that, while 
not implicated in the discussion over SHVA, has serious ramifications 
for the satellite industry. I am referring specifically to the 
Northpoint project which would entail the delivery of a subscription 
video package not MDS or MMDS in the frequency bands reserved for the 
Direct Broadcast Satellite service (Ku-Band). I will not delve into the 
engineering and technical arguments as to why the Ku-Band is not the 
right place for the Northpoint proposed service. I will state for you 
as a general matter, however, that while the Northpoint concept fits 
well in a professionally engineered environment, it does not work with 
receive systems installed for consumers where antenna placement cannot 
be engineered. Furthermore, interference from the Northpoint system is 
probably unavoidable. It is simply a question of how much will result 
from the reflections of the Northpoint beam from buildings, trees, 
poles and towers. But engineering considerations are not the only 
factors involved in this matter. There lies another, equally important 
consideration which has been given short shrift , namely the policy 
grounds surrounding this issue. They have not been adequately 
considered, but are nonetheless a vital, if not the most important, 
component in the mix.
    The primary issue is why a basically terrestrial service utilizing 
microwave techniques be allowed to share the spectrum reserved for DBS. 
It is not for lack of spectrum at other locations that can accommodate 
the system application that Northpoint is proposing. Yet ironically, 
the FCC is considering the use of the Ku-Band for just that purpose. 
DBS and Northpoint are dramatically different services, and what 
Northpoint is proposing is hardly new. What is new is the idea that a 
transmission technique such as Northpoint's should be allowed to share 
in a band which was not intended for that use nor for any other use 
except DBS.
    We are deeply concerned that, whatever technical evaluations are 
made by the Commission of the Northpoint project, they do not factor in 
the broader policy issue of satellite competition with cable, 
regardless of the outcome of the FCC's tests. Frankly we are puzzled 
that Northpoint would even be considered for the Ku-Band just as DBS is 
beginning to make its mark in the video marketplace. Why would the 
Commission want jeopardize the only viable competition to cable and, in 
that regard, even entertain the thought of frequency sharing by a 
fundamentally different video transmission technology. SBCA believes 
that it would be a tragic decision to allow such sharing to occur, 
irrespective the arguments that have been submitted in an attempt to 
show that it may be ``technically'' possible to avoid interference to 
DBS receiving systems. It would be devastating to discover too late 
that an entire subscriber base would be vulnerable to interference, 
simply because policy grounds were dismissed in favor of ``technical'' 
assurances. We would urge the Subcommittee to direct the Commission to 
find other, more suitable frequency locations for the Northpoint 
service.
    In summary, Mr. Chairman, I would like to reiterate that this 
hearing has come at a most propitious time. Now more than ever 
consumers need the intercession of the Congress to look after their 
interests. They deserve a clear solution to the Grade B dilemma, and 
only the FCC, with authority granted by you, has the expertise to 
produce standards and rules that will be truly helpful.
    I have pointed out to you how much more accurately the TIREM 
predictive model can be in identifying, on a point-to-point basis, 
individual locations where a Grade B signal cannot be received. But the 
FCC also needs Congress' authority to proceed with a rulemaking to 
adopt a predictive methodology that is specifically designed to locate 
accurately ``unserved'' households. We urge you to act quickly to 
alleviate the impact the current environment is having on consumers. 
Thank you for the opportunity to testify before you today.

    Mr. Tauzin. Thank you very much, Mr. Hewitt.
    We will now hear from Gene Kimmelman, Co-Director of the 
Washington Office of the Consumers Union.

                   STATEMENT OF GENE KIMMELMAN

    Mr. Kimmelman. Thank you, Mr. Chairman. On behalf of 
Consumers Union, publisher of Consumer Reports, we appreciate 
the opportunity to testify today.
    Without even seeing it, I would like to warmly welcome your 
moratorium legislation. I appreciate your collaboration with 
the chairman to attempt to resolve this issue before consumers 
are harmed.
    I would like to bring a slightly different perspective to 
this issue and give you two choices. Cable rates are up about 
22 percent since passage of the 1996 act. That is between 3 and 
4 times the rate of inflation.
    The whole purpose of the act was to inject competition into 
the market. Obviously, we are not seeing enough of it. In the 
few communities where there actually are head-to-head wireline 
competitors, rates on average are at least 10 percent lower 
than where there is a monopoly, and we have examples in our 
testimony of communities where there is head-to-head 
competition now where there have been no rate increases the 
last year or 2 years, as compared to rates going up three to 
four times the rate of inflation, where there is only cable 
company. That is the underlying market problem out there for 
the vast majority of consumers. They don't have the competition 
they were hoping for, they were promised.
    You are going to hear--you have already heard some; you are 
going to more--important principles, business concerns that are 
totally legitimate. The concern about localism will come next 
from broadcasters--a totally legitimate concern, something that 
consumers care a lot about. The concern of the satellite 
industry about providing a good product to the consumer, 
equally legitimate, and normally, we are in the position of 
suggesting that you balance all these legitimate business and 
consumer concerns.
    However, I have to suggest a different model this 
afternoon. With regulations that do not work and regulations 
expiring, unless you do what Mr. Markey suggests and go back 
and really crack down, it seems to me there is no balancing. 
Consumers are paying, even with 5 percent cable rate increases 
per year, about $2 billion more at the hands of a monopoly each 
year. There are some advertising dollars at stake for localism. 
There is some money for an industry that wants to compete. 
There are a number of other competitors who need changes in the 
law to try to come in and take on cable. Two billion dollars, 
though, coming out of consumers' pockets per year from a 
monopoly, if we are not going to go back in and do something 
meaningful with cable rates through regulation.
    I would like to suggest that you not balance these 
interests; you declare a war on the monopoly and do everything 
in your power to break bottlenecks, impediments to competition. 
It starts with changes in the copyright law. Many of the things 
that Ms. Lathen suggested from the FCC we heartily endorse. 
Making sure that everyone can get access to local broadcast 
signals, every competitor, every potential competitor to cable, 
making sure that copyright fees are equalized, making sure that 
we have a compulsory license that is comparable for all multi-
channel video providers, making sure people can get a clear 
signal for broadcast stations--these are all critical changes 
in the law that are absolutely essential. We need them now.
    Mr. Dingell points out a number of very troubling issues 
related to whether the law has been broken in regard to the 
Satellite Home Viewer Act. I can't speak to whether it has or 
has not. There clearly has been aggressive marketing. The last 
thing in the world I would suggest is that you condone breaking 
of the law. I think Mr. Dingell had it absolutely right.
    However, think of this perspective: For the consumer who 
has been urged by all in Congress to go out and look to 
competition as the solution, to go out, get off your couch, got 
out to Circuit City, go out to some store, and invest in a 
competitive alternative. If you don't like your cable TV 
company or if you are not willing to pay their price, invest 
hundreds, if not more, dollars in an alternative. Is it fair to 
tell that consumer, ``You are going to lose broadcast signals'' 
because something isn't working right? Maybe someone broke the 
law. I would suggest that that is not a fair resolution of this 
matter.
    And, more importantly, looking forward to the future, if we 
want to promote more competition, it will chill that 
marketplace if, all of a sudden, consumers have to worry about 
investing all that money and not getting the product that is 
promised.
    So, in conclusion, Mr. Chairman, I urge you to move 
expeditiously, as fast as possible with legislation that truly 
promotes more competition to cable. Thank you.
    [The prepared statement of Gene Kimmelman follows:]
 Prepared Statement of Gene Kimmelman, Co-Director, Washington Office, 
                            Consumers Union
                              introduction
    Consumers Union 1 believes that the need to promote more 
competition in the cable industry could not be more obvious. Cable 
rates have risen about 21 percent since passage of the 1996 
Telecommunications Act 2 and continue to climb three to four 
times faster than the rate of inflation (see Attachment A). Even the 
chairman of the Federal Communications Commission (FCC) admits that 
rates are going up excessively under his agency's ``liberal''--in other 
words, meaningless--regulatory structure (see Attachment B). As a 
Congressionally mandated prohibition on regulating the most popular 
cable channels approaches (March 31, 1999),3 now is the time 
to act.
---------------------------------------------------------------------------
    \1\ Consumers Union is a nonprofit membership organization 
chartered in 1936 under the laws of the State of New York to provide 
consumers with information, education and counsel about good, services, 
health, and personal finance; and to initiate and cooperate with 
individual and group efforts to maintain and enhance the quality of 
life for consumers. Consumers Union's income is solely derived from the 
sale of Consumer Reports, its other publications and from noncommercial 
contributions, grants and fees. In addition to reports on consumers 
Union's own product testing, Consumer Reports with approximately 4.5 
million paid circulation, regularly, carries articles on health, 
product safety, marketplace economics and legislative, judicial and 
regulatory actions which affect consumer welfare. Consumers Union's 
publications carry no advertising and receive no commercial support.
    \2\ Public Law 104-104, 110 Stat. 56 (1996)
    \3\ 47 U.S.C. Sec 543 (c)(4), Public Law 104-104 Section 301
---------------------------------------------------------------------------
                      lack of competition to cable
    So far, despite rapid growth at the high end of the market, 
satellite television has failed to offer true price competition to 
cable. In inflation-adjusted dollars, cable rates are rising just as 
fast today as they did before the Direct Broadcast Satellite (DBS) 
industry began offering service.4 With up-front costs (for 
the satellite dish and related installation charges) running three to 
five times the cost of installing cable, and lacking carriage of local 
broadcast channels, satellite TV has been unable to discipline pricing 
for the most popular cable services.
---------------------------------------------------------------------------
    \4\ Dr. Mark Cooper and Gene Kimmelman, ``The Digital Divide 
Confronts the Telecommunications Act of 1996,'' Consumers Union and 
Consumer Federation of America, February 1999 at 38
---------------------------------------------------------------------------
    In addition, nearly one-half of satellite TV subscribers purchase 
both DBS and cable TV services.5 Even as satellite attracts 
previous cable subscribers, the cable industry makes more money by 
raising prices to all its remaining and new subscribers. For example, 
since passage of the Act, cable's rate increases yielded almost three 
times more revenue than cable lost to the growth in DBS subscriptions. 
See Attachments C and D. Obviously, satellite TV does not discipline 
cable prices.
---------------------------------------------------------------------------
    \5\ Id
---------------------------------------------------------------------------
    In contrast, FCC data show that where cable faces head-to-head 
competition from another transmission ``wire,'' cable rates are about 
10 percent lower than where cable faces only satellite TV 
challengers.6 Just last weekend officials from Montgomery 
County, Maryland announced an agreement with Starpower Communications, 
Inc. which proposes to offer service for about $5 per month (15 
percent) less than Cable TV Montgomery currently charges--while 
offering 21 more channels.7 That is real price competition. 
And a recent Detroit News survey provides further evidence of the need 
to discipline cable monopolies:
---------------------------------------------------------------------------
    \6\ In the Matter of Annual Assessment of the Status of Competition 
in Markets for the delivery of Video Programming, FIFTH ANNUAL REPORT, 
CS Dkt. No. 98-102, Dec. 23, 1998, at F-4, footnote 18
    \7\ Scott Wilson, ``Starpower May Take On Cable TV Montgomery'', 
Washington Post, February 20, 1999
---------------------------------------------------------------------------
          The News' survey found competition does matter. Of roughly 
        100 Metro Detroit communities with cable, 34 also have a second 
        cable company, Ameritech, which is preparing to wire six more 
        communities.
          Overall, The News' survey found the price of the average 
        basic cable package went from $ 26.31 to $ 29.03--a 10.3-
        percent increase.
          Prices went up less in areas where Ameritech competes with 
        longtime cable providers such as Comcast, TCI, MediaOne and 
        Time Warner. Ameritech, which first opened for business in 
        Canton Township in spring 1996, serves about 200,000 customers. 
        About two-thirds of Metro Detroit household get cable.
          In southern Oakland County, for instance, where longtime 
        provider TCI and Ameritech compete, prices are down. Downriver, 
        where Ameritech and TCI also compete, prices have stayed flat 
        for two years.
          Of nine Metro Detroit Comcast systems, six did not see price 
        increases for basic cable in November. The six have cable 
        competition. In the three systems that instituted increases--
        the Grosse Pointes, Pontiac/Waterford Township and Inkster--
        there's no competition. Each community saw a 5.7 percent 
        boost.8
---------------------------------------------------------------------------
    \8\ Tim Kiska, ``Cable Bills Soar 10% in Two Years,'' Detroit News, 
February 16, 1999
---------------------------------------------------------------------------
                    the need for policy adjustments
    The failure of federal policy to ensure reasonable cable rates 
makes it necessary for policymakers to devote greater attention to 
promoting increased competition to the cable industry. Legislation that 
puts cable's potential competitors on the same legal footing as cable 
companies could open the door to more choice and lower prices for all 
TV services.
    Recent deals that combine EchoStar Communications Corporation's DBS 
business with DBS facilities owned by News Corporation and MCI/
WorldCom, and DIRECTV's combination with United States Satellite 
Broadcasting and PRIMESTAR, dramatically consolidate the satellite 
industry. However, these deals also could offer consumers more choice 
and lower prices if the consolidated satellite companies more 
aggressively compete against cable.
    We believe it is critical to both enable and require these 
satellite companies to become head-to-head competitors with cable for 
the core TV services that consumers watch the most. This requires:

 Passage of legislation, which gives satellite and other 
        potential competitors comparable treatment under our nation's 
        communications and copyright laws;
 Expansion of previous laws designed to hold down cable rates 
        and make popular TV channels available to cable's potential 
        competitors;
 Aggressive regulatory oversight of potential competitor's 
        access to cable equipment, cable-owned programming or 
        programming that cable companies exert monopolistic influence 
        over; and
 Strong antitrust/regulatory review of satellite mergers to 
        ensure that satellite companies continue to reduce up-front 
        costs and eliminate other market impediments to direct price 
        competition with the cable industry.
    Because of the highly concentrated nature of the cable marketplace, 
policies designed to foster increased competition throughout the market 
require giving potential competitors breathing room as they seek to 
enter the market and expand their businesses. The two largest cable 
companies, Tele-Communications Inc. (TCI) and Time Warner, own a 
substantial stake in cable systems serving about one-half of all cable 
customers, and TCI has an ownership stake in 67 national programming 
channels while Time Warner has a stake in 30 national 
channels.9 In addition TCI owns about 9 percent of Time 
Warner. Most importantly, 29 of the 50 most subscribed-to channels, and 
nine of the top 15 prime-time watched channels are substantially owned 
by the largest cable companies.10
---------------------------------------------------------------------------
    \9\ FIFTH ANNUAL REPORT, op. cit., at Appendixes C and D
    \10\ Id.
---------------------------------------------------------------------------
    Congress must enact legislation which enables consumers who, in 
good faith, purchased satellite TV services, to continue to receive 
broadcast network channels. These consumers, who have made an enormous 
investment in exactly what Congress has been promoting--a potential 
competitor to cable TV--must not be held hostage to a battle between a 
highly profitable broadcasting business,11 and satellite 
companies over slightly greater profits.
---------------------------------------------------------------------------
    \11\ Comments of Dr. Dean Alger, In the Matter of Local Broadcast 
Ownership, FCC En Banc Hearing, February 12, 1998 at 26.
---------------------------------------------------------------------------
    In addition, Congress should ensure that satellite and other 
potential cable competitors have an opportunity to challenge cable's 
dominance and gain a large enough market presence to offer a mass-
market alternative to cable. To achieve this goal, Consumers Union 
urges you to enact legislation which equalizes copyright payments and 
the compulsory license for cable, satellite and all other potential 
competitors. Obstacles to the transmission of local broadcast signals 
by satellite TV providers, or other potential competitors, should also 
be eliminated.
    Unfortunately, experience under the 1996 Telecom Act and its 
predecessor, the 1992 Cable Act 12 demonstrates that market 
entry does not always translate into mass-market competition. The 
satellite TV industry has been enormously successful by focusing on 
high-end consumers who are willing (and able) to pay hundreds of 
dollars for a dish, want hundreds of channels, desire specialized 
programming (e.g., sports, movies) and are interested in higher quality 
(digital) signals. While recent satellite industry efforts to reduce 
up-front cost to consumers are promising, they are not enough to 
promote rapid price competition with cable.
---------------------------------------------------------------------------
    \12\ Public Law 102-385, 106 Stat. 1460 (1992)
---------------------------------------------------------------------------
    Consumers Union therefore believes that, as policymakers open the 
cable market to more competition from satellite TV providers, the 
satellite companies must be responsive to the public's demand for 
competition to the most popular cable offerings. Efforts to promote 
price competition by reducing up-front costs and adding local broadcast 
signals to popular cable programming packages must be encouraged, to 
jump-start mass market rivalry with cable. Only when satellite TV 
offers the vast majority of cable subscribers an alternative that meets 
their needs will cable companies be forced to bring down prices.
                               conclusion
    Immediate, forceful public policy measures designed to promote 
mass-market competition to the cable industry and block cable's 
monopolistic practices can offer consumers relief from spiraling cable 
rates. It is time for Congress, antitrust and regulatory bodies to 
ensure that potential competitors like satellite TV companies have a 
fair chance to compete on price with the cable television industry. 
Unless Congress puts a regulatory lid on cable rates, the only way 
consumers will see an end to spiraling prices is through a single-
minded governmental assault on all barriers to competition.
[GRAPHIC] [TIFF OMITTED] T5153.001

[GRAPHIC] [TIFF OMITTED] T5153.002

[GRAPHIC] [TIFF OMITTED] T5153.003

[GRAPHIC] [TIFF OMITTED] T5153.004

    Mr. Tauzin. Thank you very much, Mr. Kimmelman.
    Now we are pleased to recognize Mr. Andy Fisher, the 
Executive Vice President, TV Affiliates, of Cox Broadcasting. 
Mr. Fisher.

                  STATEMENT OF ANDREW S. FISHER

    Mr. Fisher. Mr. Chairman, thank you. It was very reassuring 
to hear the remarks of the committee members. This is obviously 
a group that has looked at these issues carefully, and the 
amount of knowledge here is very impressive. The issues are 
well-defined.
    Why are we here today? Essentially, we are here today 
because two Federal courts and the FCC have finally said that 
it is time to enforce a fundamental copyright law that the 
satellite companies, in the words of the judge, ``willfully and 
repeatedly violated'' for 10 years.
    The second reason we are here is that enforcement is about 
to begin. It begins this weekend.
    Last, it is because of all of the people who are victims of 
this lawbreaking--they are your constituents, and they are our 
viewers--are really mad, and they have every right to be mad. 
They didn't deserve to be put in this spot. You are hearing 
from them, and we are hearing from them, and it is simply not 
fair.
    So the question is, what are we going to do about it? 
Before I get into some solutions, I would like to clear up some 
myths that periodically get circulated about this issue.
    One myth is that consumers are going to lose their network 
service. That is simply not true. As two courts and the FCC's 
Cable Bureau have determined, 90 percent of the people who are 
illegal subscribers, who were convinced that they could do it 
when they shouldn't have been told they could, can receive 
these signals over the air. Every time this situation is looked 
at, the same results occur. The overwhelming percentage of 
these subscribers can see these television signals, and they 
can see them with a conventional rooftop antenna.
    I am 51 years old. Some of those items you had on your 
desk, Mr. Chairman, were interesting. I haven't seen them 
before. I have lived in Brooklyn. I have lived in the flatlands 
of Oklahoma. I have lived in a number of markets around the 
country. I just have only dealt with rooftop antennas. So I am 
not sure I know what those items were. But they truly work, and 
they work better than ever before.
    The second myth is that a Grade B picture is a bad picture, 
and that just isn't true. I would like to roll a tape that was 
made as part of the process of the court battle for a Raleigh 
television station. Now the first picture you are going to see 
is not a very good television picture. It is a non-Grade B 
picture. If you see this at home, you deserve to have direct 
service from an out-of-market distributor. But the next signal 
you are going to see is 70 miles from the transmitter of WTVD, 
70 miles.
    The predictives were that this would be a Grade B signal. 
They went out there and measured it, and it was a Grade B 
signal. Ladies and gentlemen, I would suggest to you that is a 
terrific signal. It is better than most cable companies 
deliver. That is the Grade B standard predicted; that is the 
Grade B standard as measured. It is a good signal. These 
comments that sometimes Grade B isn't good--a Grade B signal 
over 90 percent of the time tends to work.
    Now let's talk about solutions. The FCC did a pretty good 
job, and they are not an agency that we are always real 
comfortable with because they are tough on us. But they went 
back and they looked again, at Congress' urging, at the current 
Longley-Rice model. They tweaked it. They in some cases shrank 
our market areas a little. They have improved the terrain 
mapping. They have said we now have got to be able to have 
computer equations that can basically predict less than the 
distance of a football field mark after mark after mark. They 
are taking interference; they are taking vegetation.
    Our industry has accepted it flatly and completely. We have 
filed with the Miami court and said we are comfortable with you 
immediately amending the decision in court to accept every 
aspect of the FCC's recommendations. That is what the broadcast 
industry is right now using as their measurement standard.
    We support the proposal for loser pays. If the equations 
say that service, in fact, can be achieved, and the tape 
station turns that down, and it is measured, we should pay the 
price if it turns out that service should have been granted. We 
are comfortable with loser pays. We are doing everything we 
know how. We are granting waivers. There are hundreds of 
thousands of waivers for individual stations and individual 
consumers that have been granted across this country, and you 
are going to hear about that process.
    What about the satellite companies? Is it fair that they 
get a free ride? We suggest that they have made half a billion 
dollars--half a billion dollars--illegally selling this 
service. Those are the numbers from that industry. We think 
that some of that money ought to go to a fund to buy antennas 
for the people who were ripped off. The folks who were told 
they were legal and they weren't should be able to have access 
to the money that the satellite services have illegally been 
achieving for all these years.
    We think the ultimate solution is before this committee. It 
is local-to-local. It should include must-carry at a date 
certain. We think once local signals are available, let's get 
them in the house and get distant signals off. We are working 
hard to solve a problem that is not of our own making.
    We don't think that having continued illegal activity and 
revenue flow is right. Put the onus where it belongs, on the 
people who created the problem, and pass local-to-local with 
the same rules as cable.
    Thank you, Mr. Chairman.
    [The prepared statement of Andrew S. Fisher follows:]
   Prepared Statement of Andrew S. Fisher, Executive Vice President, 
                Television Affiliates, Cox Broadcasting
    Mr. Chairman and distinguished members of this subcommittee, thank 
you for the opportunity to speak to you today. I am here as a member of 
the television board of the National Association of Broadcasters and on 
behalf of local network affiliates.
    This Sunday, Feb. 28, the Satellite Home Viewer Act is finally 
scheduled to be enforced. This is the culmination of literally a 
decade-long struggle in which broadcasters have tried to get satellite 
companies to adhere to the law.
    This legal battle has included two lawsuits filed by broadcasters 
in federal courts in North Carolina and Florida, resulting in decisive 
rulings that the satellite industry had willfully violated the 
Satellite Home Viewer Act.
    U.S. District Judge Lenore Nesbitt, who presided over the Florida 
lawsuit, observed the following:
        ``PrimeTime 24 willfully and repeatedly broadcast copyrighted 
        network programming to served households in violation of the 
        SHVA.''
She further noted:
          ``Plaintiff's signal intensity testing at randomly selected 
        homes in a variety of markets provides overwhelming evidence 
        that the great majority of PrimeTime subscribers are ineligible 
        to receive its network service.''
    Subsequent to these court rulings, the FCC earlier this month, 
released its own decision on the SHVA matter. After a carefully 
considered rule-making proceeding, the FCC declined to change the 
definition of Grade B intensity and endorsed the continued use of 
Longley-Rice mapping technology with some modifications. In addition, 
the FCC acknowledged that the ``overwhelming majority'' of PrimeTime 24 
subscribers are receiving distant network signals illegally and stated 
that it could not assist any household receiving such illegal signals. 
While we have occasionally disagreed with the Commission, we believe 
they did an admirable job.
    The net result of all of this is that several hundred thousand 
satellite home dish owners will lose satellite delivery of CBS and FOX 
feeds on Sunday. But they are not losing access to CBS and FOX 
programming. They will simply be required to change their means of 
receiving it. That is because it is available to them, right now, via 
the local affiliates of the CBS and FOX networks for free.
    Mr. Chairman, broadcasters do not relish the fact that this is 
happening to these consumers, who are our viewers. We also appreciate 
the sympathy that you, the members of this subcommittee, have for these 
consumers, who are your constituents. And no one has a more vested 
interest in making sure the greatest number of people can see our 
programming than does the broadcast industry.
    But the question before you today is how can we assure this? For 
our part, broadcasters are granting literally thousands of waivers for 
anyone scheduled to have their service terminated who cannot receive a 
quality Grade B signal. But the burden also should fall on the people 
who broke the law--PrimeTime 24 and the satellite industry.
    In most cases, for satellite subscribers covered by the termination 
order, the only thing preventing clear reception of network programming 
from local affiliates is the lack of a properly installed antenna. 
Certainly the satellite industry knows this. Two large telephone 
companies, under co-marketing deals with DirecTV, are right now 
offering turnkey satellite services, including powerful new antennae 
capable of tapping local TV channels with the mere zap of a remote 
control. Let me also quote from DirecTV's Web site: ``Consumers are 
realizing that the combination of a DSS system and an off-air antenna 
is unbeatable.''
    If such a solution is good enough for the satellite companies' new 
customers, why isn't it good enough for the customers facing 
termination? We think the satellite industry ought to use some of the 
estimated $557 million in revenue from selling illegal service to buy 
and install antennae for those customers who are being terminated.
    As Judge Nesbitt observed:
          ``PrimeTime and its distributors have made large profits by 
        ignoring the legal standard that governs their businesses, and 
        have spent minimal amounts on compliance.''
    It seems only fair that the satellite industry should take some of 
these illegal proceeds to reconnect your constituents with their local 
CBS and FOX affiliates.
What role should Congress play?
    As many of you know, advances in technology will soon help solve 
the problems underlying this entire controversy. Satellite operators 
will be able to deliver local stations to customers in their own local 
markets just like cable operators already do. In addition to satellite 
delivered local-to-local service, other terrestrial options are 
emerging, such as Northpoint.
    To create a level playing field for satellite operators, Congress 
should add local-to-local language into the Satellite Home Viewer Act 
this year. These provisions--which both broadcasters and satellite 
carriers support--would give satellite systems essentially the same 
rights and responsibilities for the carriage of local broadcast 
stations as cable systems now enjoy. Bills introduced in both the House 
and the Senate Judiciary committees accomplish this goal.
    In our view, must-carry should be attached to local-to-local, along 
with SYNDEX and network non-duplication protections similar to those 
found in a cable environment.
    There should be statutory language that affirms the recent FCC 
order on the distant network service provisions of SHVA, the highlights 
of which are:

 Continued use of an improved Longley-Rice predictive model,
 Elimination of the 90-day waiting period for former cable 
        subscribers and,
 Enactment of a ``loser-pays'' provision for signal-strength 
        testing.
    Finally, Congress should mandate that when local signals are 
provided in a given market that the provision of distant signals will 
no longer be legal.
What should Congress not do?
    We urge Congress to resist the urge to negate the judge's decision 
by grandfathering illegal subscribers. Why?
    For the same reason that people who buy counterfeit satellite 
access cards should not be permitted to continue to use those cards. In 
Washington State, a federal grand jury last week indicted four people 
for selling counterfeit satellite access cards. DirecTV, whose signals 
were being stolen, rightfully praised the government's enforcement of 
their franchise rights.
    We only hope that they will extend the same courtesy to us as we 
try to protect our franchise rights.
    Grandfathering also has serious implications for our local 
broadcast system. It is local broadcast stations, not national 
satellite networks, which communicate with local communities. It is 
local stations that issue emergency weather reports and local news 
bulletins. It is local stations that host candidate debates and provide 
other critical information about campaigns for public office.
    There is a far larger universe of consumers--the millions of 
Americans who do not own satellite dishes, and rely on free, over-the-
air television--who will be the losers if you make an exception for 
these few illegal subscribers.
    Grandfathering also creates an expectation that it is acceptable to 
violate copyright law. And it overlooks the issue of whether or not a 
signal is available. As I said earlier, if it is available, the 
solution is an antenna. If it's not, then the consumer is eligible NOW 
to receive distant network service.
    And grandfathering continues to allow the satellite companies to 
enrich themselves to the tune of millions a month from illegal distant 
network service.
    Mr. Chairman, in closing let me reiterate a number of key points:
    We hope you will allow the law to be enforced; avoid 
grandfathering; enact local-to-local with appropriate marketplace 
protections; and assist your constituents in reconnecting to their 
local stations by requiring satellite companies use their ill-gotten 
gains to buy antennae for these affected satellite customers.
    As the debate moves forward, we pledge to work with you and the 
members of this subcommittee, toward these meaningful solutions.

    Mr. Tauzin. Thank you, Mr. Fisher.
    We are now pleased to welcome Mr. Jack Perry, President and 
CEO of Decisionmark, Cedar Rapids, Iowa.

                     STATEMENT OF JACK PERRY

    Mr. Perry. Thank you, Mr. Chairman, distinguished members 
of the committee.
    I am here today on behalf of 38 pioneers at Decisionmark 
who have dedicated time, energy, and considerable resources to 
solving many of the problems related to the Satellite Home 
Viewer Act. What I have discovered in the last 2 years is the 
crucial need for a conduit between satellite providers and 
broadcasters and consumers.
    First, we are a technology and data company. Most germane 
to today's discussion is how our technology and data answers 
the question of consumer eligibility.
    Second, and I think most importantly, we are a company that 
has developed the technology that will let the consumer 
prevail. If the consumer prevails, so do the broadcasters and 
so do the satellite providers.
    One year ago I came to Washington to introduce to the world 
our Geneva technology. For the first time ever, technology 
existed to solve the question of eligibility at the point of 
sale. Primetime 24 and all but one of their distributors are 
today deploying our Geneva technology. Geneva is accurate, 
cost-effective, and flexible enough to be installed at any DBS 
company in one business day.
    While, admittedly, we are initially focused on answering 
the question of eligibility, sometimes appearing to be to the 
benefit of the broadcasters, we are today focused on consumer-
centric solutions. These solutions, used proactively by all 
parties, can only promote needed competition with cable.
    By starting from the basis of eligibility, we have 
developed the following solutions: GETAWAIVER.COM. This 
Internet site went live several weeks ago and has already 
facilitated over 67,000 waiver requests. In fact, yesterday it 
did 10,933 requests for waivers. The most important feature of 
our GETAWAIVER.COM website is it requires waivers from the 
appropriate broadcaster on behalf of the consumer.
    Our WAIVERTV.COM website allows broadcasters to process 
waiver requests in a timely, pro-consumer fashion. Today it is 
used by more than 82 percent of the broadcasters to proactively 
address waivers. Without a tool like WAIVERTV, the 65,000 
waiver requests to date might have cost the broadcasters over a 
million dollars in time to assess them at 20 minutes per 
waiver.
    The same technology that is used to determine eligibility 
and process waivers today forms the basis of our antenna 
selector technology. By doing the equivalent of looking up in 
the sky at each household and saying, what stations are 
received at this household, we can tell that household the 
optimal off-air antenna they would need. From where I sit, this 
is the best way to promote free over-the-air television.
    Today the committee is faced with the challenge of crafting 
legislation that will impact more than 90 million households. 
Technology is available to give consumers choices. Our 
technology, put to use by the broadcasters and the satellite 
companies, can only help the consumer prevail.
    Thank you, and I will be happy to answer any questions.
    [The prepared statement of Jack Perry follows:]
Prepared Statement of Jack Perry, President and CEO, Decisionmark Corp.
    Good afternoon and thank you for inviting Decisionmark to testify 
in today's hearing. Decisionmark is an Iowa-based computer software 
company. Our company has expertise in mapping and data mining and has 
created various software tools to assist the broadcast and satellite 
industries, as well as consumers, with the vexed issues surrounding the 
Satellite Home Viewer Act (``SHVA'' or ``Act''). Decisionmark's 
homepage on the World Wide Web is located at www.decisionmark.com.
    Decisionmark has developed computer software and data to facilitate 
the use of a Individual Location Longley-Rice methodology as a 
predictive aid in determining which households are likely to receive an 
over-the-air signal of Grade--B intensity. In addition, Decisionmark 
has developed an algorithm for recommending an appropriate off-air 
antenna for any household in the United States. Decisionmark's services 
are available to assist the broadcast and satellite industries and the 
public in implementing the Act in quick, simple, and cost-efficient 
ways. Furthermore, Decisionmark can go beyond simple enforcement of the 
Act to provide a complete solution that ensures consumers' enjoyment of 
the network programming that is so important to them. Decisionmark's 
solution is market-based, and above all, neutral. The tripartite 
Decisionmark solution consists of accurate point-of-sale eligibility 
screening, appropriate selection of off-air antennas and efficient 
processing of SHVA waivers.
                 i. decisionmark history and background
    In August 1996, a local ABC affiliate contacted Decisionmark. It 
was having problems evaluating the eligibility of satellite subscribers 
within its local viewing area who were receiving distant network 
service. The affiliate was using paper maps to identify, manually, the 
location of satellite subscribers in the station's service area. After 
a subscriber was located, the affiliate would then determine whether 
the subscriber was likely to receive a signal of Grade B intensity from 
the affiliate. Not surprisingly, this process was slow, cumbersome, and 
expensive. My company, at that time, had already developed a desktop 
mapping program, Proximity', that it then customized to 
identify and locate subscribers for the affiliate more easily and 
accurately. The affiliate was pleased with the results, and, 
consequently, Decisionmark began to market this new software, 
Proximity'TV, to other affiliates. Soon, three of the four 
broadcast networks, ABC, CBS, and Fox, came to rely upon ProximityTV as 
a method of identifying households that are predicted to receive Grade 
B service from a local affiliate. ProximityTV remains widely used today 
by major network affiliates, including several NBC affiliates, for SHVA 
compliance monitoring. Using a proprietary procedure, Decisionmark's 
software displays each subscriber's resident address as a specific 
point on a map. Once the location of a subscriber's satellite dish is 
known in relation to an affiliate's predicted Grade B signal, the 
affiliate can decide whether to challenge the subscriber's eligibility.
    Decisionmark was subsequently selected by the broadcast and 
satellite industries to perform the data processing for the ``Red 
Light/Green Light'' settlement between the National Association of 
Broadcasters (``NAB''), Primestar, and Netlink. The ``Red Light/Green 
Light'' agreement relies on ``presumptions'' of eligibility within a 
local station's Designated Market Area (``DMA'') DMA-plus counties, 
based on the Longley-Rice model. The presumptions may be rebutted with 
an actual signal measurement test. Under the agreement, the predicted 
signal strength across each ZIP Code is analyzed. A ``Red Light'' 
status is assigned to those ZIP Codes within a local station's DMA that 
are predicted to receive a signal of at least Grade B intensity. 
Households located within these ZIP Codes are presumed to be ``served'' 
by one or more local stations affiliated with that network and will not 
be sold distant network service unless the presumption of ineligibility 
is rebutted and overcome by an actual signal strength measurement test. 
A ``Green Light'' status is assigned to those ZIP Codes within a local 
station's DMA that are predicted to be unable to receive a signal of at 
least Grade B intensity. Households located within these ZIP Codes are 
presumed eligible to receive a distant network signal unless, again, 
the presumption of eligibility is overcome by an actual test. 
Decisionmark provided technical support for negotiations between the 
representatives of the NAB and the two satellite providers.
    Under the broadcast industry/Primestar-Netlink agreement, the 
parties agreed that the relevant geographic area for each station is 
its DMA, as noted above. Obviously, predicted Grade B signal 
intensities are not aligned with ZIP Code boundaries. The ``Red Light'' 
or ``Green Light'' classification of a ZIP Code area is resolved on a 
population percentage basis, i.e., if 50+% of the population in a given 
ZIP Code is predicted to be able to receive a signal of at least Grade 
B intensity, then the entire ZIP Code is given ``Red Light'' status. 
Consequently, within certain areas, some consumers may be presumptively 
classified as ``served'' when they cannot receive an actual signal of 
Grade B intensity from their local affiliate(s). These consumers can 
request waivers from their local network affiliate(s). Conversely, some 
viewers are presumptively classified as eligible to receive distant 
network service when, in fact, they receive a signal of Grade B 
intensity from their local affiliate(s); in these cases, the 
affiliate(s) can rebut the presumption with an actual measurement. The 
``Red Light/Green Light'' agreement, as implemented through 
Decisionmark's technology, provides both broadcast stations and 
participating satellite providers a quick determination of presumptive 
eligibility for each household requesting distant network service. 
Although the Red Light/Green Light agreement provides a workable 
compromise, it is imperfect. Its limitations are what drove 
Decisionmark to develop other technological solutions, most notably 
WaiverTV and getawaiver.com, both of which are discussed below.
                       ii. decisionmark technology
 The Geneva Technology
    In the course of the development of the software used in the 
broadcast industry/Primestar-Netlink agreement, it became clear to me 
that a ``household-based'' point-of-sale solution was needed. It was 
then that I set Decisionmark on a course to create what we now refer to 
as the ``Geneva'' technology, which is based on the Longley-Rice 
model.1 Essentially, the Geneva technology combines 
household-level geocoding, Decisionmark's proprietary television 
transmitter database (Coronado), Federal Communications Commission 
(``FCC'') terrain data and point-to-point Longley-Rice calculations to 
produce extremely accurate predictions of signal strength.
---------------------------------------------------------------------------
    \1\ The name Geneva was chosen because it universally connotes 
neutrality. Decisionmark has filed for a patent on the Geneva 
technology.
---------------------------------------------------------------------------
    Using Geneva, the address of a particular household may be entered 
and a list of all stations that are predicted to provide the household 
with Grade B service or better can be instantly displayed. Geneva 
yields ``address specific'' data while the ``ZIP Code'' methodology 
yields data aggregated over the area of an entire given ZIP Code. There 
are inaccuracies inherent with any aggregated grid systems that make 
such systems unfair to consumers. Consumers living within an area 
aggregated as ineligible may in fact be unable to receive a Grade B 
signal. The Geneva system, therefore, is more precise and more accurate 
for each household. The speed, accuracy, and ease of use of this system 
are unmatched, and the technology can be easily integrated into 
existing business systems for high volume usage.2 In 
addition, although Geneva, as currently implemented, provides results 
for predicted Grade B service, it is readily adaptable to any service 
standards adopted by Congress, the FCC, or negotiated industry 
agreements.
---------------------------------------------------------------------------
    \2\ See .
---------------------------------------------------------------------------
The Coronado Data Warehouse
    An important component of the Decisionmark technology is 
Decisionmark's comprehensive data warehouse, Coronado. Coronado 
contains broadcasting-related data on television viewers, satellite 
consumers and broadcasters. The cornerstone of Coronado is 
Decisionmark's proprietary television engineering database. This 
database is widely viewed in the industry as a standard for signal area 
data, and Decisionmark is committed to maintaining its accuracy. 
Coronado began with the FCC's public domain information as its 
baseline, but it has been updated extensively. In fact, Decisionmark 
has invested close to one million dollars in the development of 
Coronado.
    Coronado includes affiliate-based information about which stations 
have satellite stations and translators, how many they have, and the 
call letters for each. The public domain FCC databases provide no 
correlation between main stations, satellite stations, and translators. 
Not only does Decisionmark maintain the link between the main stations 
and their satellites and translators, but it also makes corrections to 
any detailed information in the database, such as tower height, 
effective radiated power (``ERP''), and latitude and longitude. This is 
possible because Decisionmark is in continuing contact with broadcast 
affiliates. Decisionmark's team of experts has spent more than 15,000 
hours in maintaining contact with affiliates and updating the database. 
The result is a highly accurate, widely relied upon signal area 
database.
Decisionmark's Proprietary Individual Location Longley-Rice (ILLR) 
        Software
    Decisionmark has implemented a proprietary version of the ILLR that 
has been highly optimized for performance on readily available 
platforms. It uses the ILLR method as outlined in the FCC's Report and 
Order of February 2, 1999. The technology incorporates interfaces that 
allow our software to be integrated into mainframe-based call center 
software, client-server systems and browser-based systems. Because the 
rules and regulations of signal strength prediction pursuant to the 
SHVA have been fluid, we have designed the software tool to be both 
flexible yet highly efficient. In fact, we are confident that if any 
new methodology were mandated or agreed upon, we could have our clients 
in compliance within days.
 Antenna Selector Technology
    Decisionmark has developed antenna selector technology to predict 
the performance of an individual antenna at an individual location when 
receiving broadcast television signals. This technology utilizes the 
same ILLR signal strength prediction methodology described above. It 
also accounts for factors such as the number of televisions fed by the 
antenna, line loss, the signal gain associated with a given antenna, 
the orientation of the antenna relative to the position of the 
transmitting tower and so on. These factors are then used to predict, 
with a high degree of accuracy, the quality of a television picture at 
a specific household using a specific antenna. Decisionmark's antenna 
selector technology can be incorporated into e-commerce sites to 
provide antenna recommendations for purchase online either on a 
standalone website or as part of a DBS provider's site.
                       iii. decisionmark solutions
    Decisionmark's technology has made it possible for us to develop 
solutions that go beyond simple enforcement of the Act to provide 
genuine resolution for the problems of consumers who want to view 
network programming. At the same time, these solutions help promote 
competition in the multi-channel video programming distribution market. 
Decisionmark's solutions are market-based, and above all, neutral. 
Decisionmark's solutions deal with accurate point-of-sale eligibility 
screening, appropriate selection of off-air antennas and efficient 
processing of SHVA waivers. Perhaps most importantly, our solutions can 
be combined to provide a complete system that will guarantee compliance 
with the law but will also serve consumer's interests.
 Eligibility Solutions
    Decisionmark's Geneva technology has been implemented to provide 
eligibility screening in a number of different ways. Our implementation 
of ILLR is optimized for SHVA eligibility determinations at individual 
households. To the best of our knowledge, no other company offers or 
has developed an interactive method for SHVA compliance that uses 
household-level geocoding and point-to-point Longley-Rice predictions 
of signal strength and potential interference, both of which were 
called for in the recent FCC Report and Order. Decisionmark has also 
developed versions of the ILLR optimized for bulk processing of 
subscriber lists and for signal area mapping and demographic 
calculations.
    For example, the satellite carrier Primetime24 has implemented the 
Geneva subscriber-base analysis and point-of-authorization eligibility 
screening for all but one of its distributors. The subscriber-base 
analysis determines which current subscribers are predicted to be 
eligible to receive a distant network package under the SHVA. The 
analysis is superior to any other system now in use.
    Primetime24's distributors now have the ability to enter a 
potential subscriber's address and, within seconds, determine if that 
address is likely to receive from a local affiliate a signal of at 
least Grade B intensity. Some distributors have implemented the 
technology into their call center software. The satellite provider can 
then make a decision whether to conduct a site measurement. The Geneva 
technology permits Primetime24 to comply, in a quick, cost-efficient 
way, with the terms of the court injunction issued in CBS, Inc. v. 
Primetime24 Joint Venture, No. 96-3650-CIV-NESBITT (S.D. Fla. July 10, 
1998). That injunction prohibits Primetime24 from supplying CBS or Fox 
distant network programming to any consumer within an area shown on 
Longley-Rice propagation maps as receiving a signal of at least Grade B 
intensity of a CBS or Fox primary network station, unless written 
consent is obtained or an actual test is conducted at a consumer's home 
showing the household is ``unserved'' within the meaning of the SHVA.
    Another eligibility screening solution provided by Decisionmark is 
our Internet-based product www.getnetworktv.com TM. 
Getnetworktv.com is a subscription website for satellite retailers. It 
is a point-of-sale tool to determine a customer's eligibility for a 
distant network package. If a customer is deemed ineligible, he or she 
can request the necessary waivers from the appropriate local affiliates 
at the point of sale. In addition, if it seems unlikely that the 
customer would receive waivers, the retailer can direct him or her to 
one of Decisionmark's antenna selector technology solutions. To view 
screen shots of www.getnetworktv.com, see our attached supplemental 
materials.
Antenna Solutions Using Decisionmark's Antenna Selector Technology
    www.iwantmyfreetv.com TM--Our antenna selector 
technology is currently being implemented in two web-based products. In 
partnership with the Winegard Company, a leading manufacturer of 
television receiving antennas, Decisionmark is launching 
iwantmyfreetv.com. This website recommends an antenna that is optimized 
for the consumer's choice of over-the-air broadcast television stations 
and allows him or her to purchase the antenna online. To the best of 
our knowledge, no other company has deployed an equivalent consumer-
oriented system.
    www.AntennaSelector.com TM--In addition, in February 
1999, Decisionmark will introduce www.antennaselector.com, an online 
educational antenna resource. This site will be available to both 
consumers and retailers. The consumer portion will be informational and 
list which stations' signals can be received at a particular consumer's 
household location and display a list of local antenna retailers. The 
retailers' portion of the site will assist them in making the 
appropriate antenna recommendation at the point of sale. To view screen 
shots of www.antennaselector.com, see the attached supplemental 
materials. All of these tools are designed specifically to assist the 
consumer in receiving broadcast network television service.
Waiver Solutions
    WaiverTV TM--Last fall, Decisionmark incorporated the 
Geneva technology into its waiver products, WaiverTV and getawaiver.com 
TM. WaiverTV is a waiver-processing tool designed for 
network broadcast affiliates. It is an Internet-based application, free 
to all broadcasters, that streamlines review by network affiliates of 
consumer requests for a waiver to receive satellite delivery of a 
distant network station. WaiverTV was launched in October 1998, and 
this tool is now being used by over 80% of the network affiliates. 
Decisionmark's WaiverTV website is located at www.waivertv.com. For 
screen shots of what WaiverTV looks like on the Web, see our attached 
supplemental materials.
    The court's injunction in the Miami case underscores the need for 
WaiverTV. Network affiliates have needed and will continue to need 
assistance in the coming months in dealing with subscribers whose 
distant network satellite service must be terminated by February 28, 
1999. Some of these subscribers may not be able to receive a signal of 
Grade B intensity from a local affiliate. This technology enables local 
affiliates to identify and locate each subscriber and will assist 
affiliates in determining whether an actual signal measurement is 
warranted. An important feature of WaiverTV is its ability to 
electronically queue waiver requests submitted from individual 
subscribers online, which simplifies the waiver request review process 
and helps assure that viewer communications with a station do not go 
unanswered.
     Getawaiver.com for Consumers--Getawaiver.com is an Internet-based 
service offered free to consumers. The service streamlines and 
simplifies the waiver requesting process for consumers. In the past, 
when subscribers were told by their satellite carriers that they needed 
a waiver from one or more local network-affiliated stations, 
subscribers frequently had to make numerous telephone calls to 
determine which stations should be contacted. For example, some 
households in Lake Geneva, Wisconsin, would have to request 15 
waivers--three from different ABC affiliates, four from different CBS 
affiliates, four from different Fox affiliates, and four from different 
NBC affiliates. With getawaiver.com, a consumer needs only to access 
the getawaiver.com website and enter his or her address. After an 
address has been entered, getawaiver.com then determines from which 
network affiliate(s) a waiver is required, the consumer enters 
comments, and it automatically sends the requests to the appropriate 
affiliate(s). We have included 100 random consumer comments in our 
supplemental materials. For screen shots of what getawaiver.com looks 
like on the Web, see our attached supplemental materials.
    Where an affiliate does not participate in WaiverTV, getawaiver.com 
provides that station's address and phone number so that the consumer 
can contact the affiliate directly. Although not automated in such 
circumstances, getawaiver.com is still a time saver for consumers. It 
provides the consumer information instantly on which non-WaiverTV 
participating stations need to be contacted and how to do so.
    Getawaiver.com and WaiverTV work together and complement each 
other. A consumer's getawaiver.com's waiver requests are automatically 
fed into the electronic queue with the affiliates' customized WaiverTV 
implementation. The entire process is, therefore, automated. In 
addition to this double streamlining for broadcasters and consumers, 
satellite operators also benefit, for now they have a place to which 
they can direct customers who think they may qualify for a waiver.
    Getnetworktv.com is also integrated into Decisionmark's waiver-
streamlining process. As mentioned above, getnetworktv.com is an 
Internet-based tool for satellite retailers. The waiver requests that 
are generated on behalf of consumers through getnetworktv.com are 
queued in WaiverTV.
                             iv. conclusion
    Decisionmark is a neutral provider of market-based solutions. 
Because Decisionmark has been working with all interested parties for 
the past two years, we are in a unique position. As a neutral 
technology solution provider, we stand ready today to serve the 
interests of both the satellite and broadcast industries. More 
importantly, we can protect and serve the interests of consumers while 
promoting competition in the multi-channel video programming 
distribution market.
    No other company in the industry can deliver the technology and 
data as accurately and timely as Decisionmark. What I have discovered 
is a crucial need for a conduit through which satellite providers, 
broadcasters, and consumers could go in dealing with SHVA compliance 
issues and the overwhelming consumer interest in network programming. I 
believe that, above all, such a neutral conduit--utilizing one agreed-
upon or mandated methodology and one agreed-upon or mandated database--
is needed so the consumer doesn't suffer needlessly.
    In addition to being in a position to provide assistance and 
solutions for all sides of the SHVA issues, Decisionmark has 
demonstrated the capacity to implement any ``predictive'' signal 
strength standard that may be proposed by the FCC, Congress, or the 
affected industries.

    Mr. Tauzin. Thank you, Mr. Perry.
    Now we are pleased to welcome Ms. Sophia--you helped me 
with this before--``Sophia,'' right?

                   STATEMENT OF SOPHIA COLLIER

    Ms. Collier. ``Sophia.''
    Mr. Tauzin. Sophia Collier, President and CEO of Northpoint 
Technology. Sophia.
    Ms. Collier. Mr. Chairman, Mr. Markey, and other members of 
the subcommittee, it is a pleasure to appear before you today. 
My name is Sophia Collier, and I am the President and CEO of 
Northpoint Technology. I am here today to tell you about an 
exciting new technology that can provide a complete solution to 
this vexing local-into-local problem and launch us as a 
formidable new competitor to cable.
    Northpoint Technology is a tested and proven broadband 
digital system which reuses the very same spectrum used by DBS 
satellites. We have a large capacity, and therefore, can 
provide all local stations to all 211 television markets. We 
will comply with full must-carry and retransmission consent in 
the very same manner as the cable companies do. Our low-cost 
service can be provided wholesale to direct broadcasters, as 
well as directly to consumers, as a standalone service.
    But in order to launch our service, we need the go-ahead 
from the FCC. We already have 68 local affiliates in Broadwave 
USA, whose applications are pending before the FCC. Together, 
we will serve all television markets with our high-capacity 
system. We can begin service in some markets in just 6 months, 
and then have all 211 markets covered within 2 years. We, 
therefore, will enter markets that have no near-term prospect 
of cable competition.
    Let me briefly describe how our technology works. 
Northpoint brings satellite frequency sharing principles down 
to Earth. Right now DBS satellites are spaced 9 degrees apart 
from one another. This amount of separation allows them to 
reuse the very same frequencies that one another use. This 
spectrum can be reused again for terrestrial transmissions.
    DBS satellites orbit around the equator, and therefore, all 
DBS antennas in the United States are pointed to the south. We 
reuse this very same spectrum by transmitting from the north; 
hence, our name, Northpoint Technology.
    Our system will be deployed in local markets as a series of 
low-cost cascading cells. This little device here is actually 
our transmit antenna. This weighs just three pounds. So you 
compare this to a big, over-the-air television antenna. This 
little antenna can cover 100 square miles of area. It can be 
easily located on existing towers and buildings. It can be 
tucked here and there in a very site-specific manner that will 
cover those parts of the community that are flat, but also 
those parts that are in a valley or on a hill or in a 
mountainous region. In fact, our customers will have at least 
three places to point to receive our service, maximizing the 
reception strength.
    We have operated successfully under two experimental 
licenses issued by the FCC since 1977. We have made detailed 
technical reports about the success of our work. This is our 
latest report from our latest test.
    In December we are operated our system in downtown Austin, 
where there are several thousand DBS customers. We established 
a hotline to Direct TV's national call center to see if there 
were any disruptions from our operations. We ran our system day 
and night. We ran it rain and shine. We ran it in every type of 
weather condition, and there was not one call on that hotline 
from harmful interference to a direct broadcaster.
    Our system works, and I would like to tell you about our 
plans. We seek to compete head-to-head with cable. We can 
provide a high-quality digital service to customers at under 
$20 a month, approximately half the price of basic cable. Our 
reception equipment is also low cost because we use the same 
consumer equipment as DBS providers, where it is on the 
experience curve and available in consumer electronic stores.
    We can solve the local signal problem in two ways. We can 
offer our customers local signals and other programmings 
directly through our affiliates or our affiliates can make our 
local signals available to DBS providers on a wholesale basis. 
In either case, Northpoint Technology provides a solution to 
the local signal problem, combining local television signals 
and satellite signals with the single click of a remote 
control. Northpoint has an Internet option and will be able to 
have a high-capacity broadband service.
    The Commission is now seeking comments on our proposals and 
has the information needed to move forward. We ask your support 
in urging them to take a serious look and expeditious look at 
our system. Thank you very much.
    [The prepared statement of Sophia Collier follows:]
  Prepared Statement of Sophia Collier, President and CEO, Northpoint 
                            Technology, Inc.
    Chairman Tauzin, Ranking Member Markey, and other members of the 
Telecommunications Subcommittee: Thank you for providing me the 
opportunity to testify.
    While a lot of our discussion today will focus on regulatory 
aspects of the Satellite Home Viewer Act and its impact on cable 
competition, I am here to present a technology-based solution to both 
the local signal problem and the need to provide real competition to 
cable.
    Northpoint Technology is an advanced, broadband, digital wireless 
system that has the capacity to offer all local television signals, 
analog and digital, with a full must carry obligation. The Northpoint 
service would operate in the 12 GHz band, reusing spectrum used by DBS 
operators. Our service can be provided on a wholesale basis to DBS 
carriers, and it can be offered directly to customers as a stand-alone 
service. In addition to carrying local stations, we will offer other 
multi-channel video programming and Internet service.
    We already have a network of 68 locally-based affiliates, operating 
under the name BroadwaveUSA, with license applications, currently 
pending before the FCC, for all 211 local television markets. In order 
to deploy our service, the FCC must also act upon a rulemaking (ET 
Docket No. 98-206). Once regulatory approval is achieved, our service 
can be deployed in the first markets in as little as six months, with 
nationwide coverage within two years.
    Northpoint and our affiliates stand ready to solve the local to 
local signal problem once and for all, with full must carry and 
retransmission consent obligations. We are also eager to launch 
ourselves as an effective new competitor to cable. Let me emphasize 
that Northpoint and its affiliates are prepared to enter markets that 
have no near term prospects of a real competitor to cable.
An Exciting New Technology
    The strength of Northpoint's technology is that it is very low 
cost. By reusing existing spectrum, we can make use of existing off-
the-shelf equipment that is already tested, proven and available at low 
cost.
    Let me tell you how it works:
    Northpoint takes proven and efficient satellite frequency-sharing 
principles and applies them to terrestrial earth-based broadcasting. 
For many years satellite carriers have been able to share frequencies 
with one another by spacing their satellites a sufficient distance 
apart. This ``sharing geometry'' is well known and understood, and it 
is the basis of all FCC satellite allocations. For example, DBS 
satellites are designed to share spectrum with one another when they 
are at least 9-degrees apart. Satellites in other bands are able to 
share when they are as little as 2-degrees apart.The reason this works 
is that satellites broadcast directionally from space to earth into 
reception dishes that are designed to see only a small part of the sky. 
Once these dishes are pointed at their chosen satellite, they cannot 
see the other satellites that are transmitting on the exact same 
frequencies.
    Northpoint's technology extends this frequency-sharing principle to 
terrestrial transmissions. By staying at least 9-degrees away from the 
beam of any DBS satellite, we will share the 12.2-12.7 GHz band with 
the DBS satellites, just as they share with one another.
    All DBS satellites orbit around the equator, and thus all North 
American DBS dishes point to the south. To receive our service, our 
customers will point their 12 GHz dish antennas to the north, hence our 
name, ``Northpoint.''
    Each of our local systems operate with a single headend where we 
will pick up and encode all of the local over-the-air signals, as well 
as other multi-channel video programming. We will then retransmit this 
programming to our customers on the 12 GHz band through a series of 
low-cost cascading cells, each with a transmitter serving just over a 
100 square mile area. These cells will be strategically located in a 
terrain specific manner to include service to those parts of a 
community that are in a valley or over a hill. In the Northpoint 
system, most customers will have at least 3 directions to point their 
dish to pick up our service. These multiple line-of-sight options will 
enable better delivery of local broadcast stations signals.
Low Cost to Deploy/Low Cost to Consumers
    The Northpoint system can be deployed at low cost, made possible in 
part by the very small size of the Northpoint transmit antenna. 
Northpoint transmit antennas are only 10 inches tall, weigh less than 
3-lbs and can be easily located on buildings and existing towers.
    This low cost deployment will enable Northpoint services to be 
available to consumers at low costs, and bring about market pressure to 
reduce the prices charged by our competitors. We anticipate that our 
basic package might be priced at under $20.00 per month, approximately 
half the price of basic cable. We will also offer customers flexible 
programming options.
    Because we will operate in the 12 GHz band, Northpoint service can 
use existing DBS customer equipment. Over 10 million antennas and set-
top boxes are in the marketplace, having already reached an economy of 
scale that has fine-tuned the products and lowered the cost for 
purchase by consumers.
The Northpoint System Works
    We have tested Northpoint under experimental licenses since 1997 
and demonstrated that can co-exist without harmful interference to 
existing DBS services, in both a rural and an urban area. We have filed 
detailed reports with the FCC on these tests that were conducted with 
the certification of outside engineers.
    For the month of December 1998 we operated our system in a single 
100-square mile cell centered in downtown Austin, Texas. DirecTV 
advised us that they had several thousand subscribers in the area, so 
we established a hot line to DirecTV's national call center and our 
transmission facility to address any interference issues. The customers 
could call DirecTV if they experienced a disruption in service, and we 
would turn off our transmitter to see if it solved the customer's 
outage. During the entire month we did not receive a single call on 
this hotline that was attributable to interference caused by our 
system. We continue operating under our experimental license in Austin 
today and still have not had any reports of interference.
    This testing proved not only that we don't interfere with DBS, but 
it also demonstrated that our system is viable. We operated the system 
day and night, under a variety of weather conditions, including heavy 
rain, freezing rain and dense fog, with excellent results. Sites at 
almost 14 miles received a usable signal, and our signals also 
penetrated through foliage.
Local-to-Local Solution
    A key focus of the Satellite Home Viewer Act policy discussion has 
been to ensure that satellite customers have access to local signals. 
Northpoint's locally-based, terrestrially-delivered transmission system 
can be expeditiously rolled out at reasonable cost, in all markets. 
Northpoint's capacity is sufficient to carry all stations, and for that 
reason we will be able to comply with a full must-carry requirement. In 
fact, transmission of all local stations, analog and digital, is a key 
element of Northpoint's business plan. The Northpoint-type technology 
will help preserve and expand the audience for local signals, and the 
NAB has recently endorsed this new approach.
    DBS customers could receive local signals via Northpoint by direct 
subscription to the local BroadwaveUSA affiliate. In this case, the 
subscriber would be able to switch from terrestrial Northpoint 
programming to satellite DBS programming with a single click of the 
remote control.
    The BroadwaveUSA affiliate network has also offered to make local 
signals available on a wholesale basis to DBS providers. Under this 
option, DBS providers would be able to have all local signals, in full 
compliance with all must carry requirements, available encoded in their 
own formats and integrated in their own program guides. To effect this 
solution, the DBS consumer will need a Northpoint antenna and a simple 
network interface device attached to the back of their existing DBS set 
top box. These upgrades are anticipated to cost $50-$100. In either 
case, Northpoint Technology provides a solution to the local signal 
problem.
Promotes Transition to HDTV
    An aspect of the local signal issue is the capacity of satellite 
services to carry local-into-local HDTV programming, which will be even 
more bandwidth intensive than carriage of the 1,500 plus local over-
the-air analog stations. Northpoint systems will be able to carry HDTV 
programming without compression because the locally-based systems will 
have adequate bandwidth to accomplish this job.
    Interestingly, Northpoint may actually be one of the first to 
provide HDTV transmissions into many markets, thus helping to 
facilitate a rapid transition from analog to digital technology.
A Vibrant Competitor to Cable
    In addition to addressing the local-to-local problem by providing 
local signals to satellite carriers, our intention is also to be a 
stand-alone competitor to cable. We have enough capacity to carry at 
least 96 channels, and we expect to offer programming packages that 
offer our customers dozens of cable-like channels in addition to their 
local stations.
    This competition will bring reduced prices prices to the consumer. 
Simply by rolling back last year's average 7.8% cable price hike, $1.6 
billion could have stayed in the pockets of consumers. Moreover, 
because our programming will be digital, cable systems will have an 
incentive, not only to rein in prices, but also to upgrade their 
systems digitally.
    We look forward to competing head to head with the cable industry 
on price, quality and service, the traditional dimensions of 
excellence. I think now, with the end of rate regulation before us, it 
is essential that new entrants such as Northpoint and its BroadwaveUSA 
affiliate network have the chance to offer services to consumers.
Puts Rural Customers on Par with Urban/Suburban Counterparts
    While Northpoint is a good solution in an urban and suburban area, 
it has particular relevance in rural areas. Because it is a simple and 
inexpensive technology, it is economically feasible for it to be 
deployed in rural areas, where laying cable or fiber to sparse 
populations can be cost-prohibitive. Northpoint may be the first chance 
for rural consumers to gain access to low cost digital services. 
Because a Northpoint system is wireless and uses low cost repeaters to 
propagate its signal, its services can reach areas where cable has 
never served.
Access to the Internet
    The Northpoint system can offer consumers more than simply multi-
channel video programming. It is also ideally suited for the delivery 
of high-speed Internet services. The technology is easily capable of 
burst transmission rates of 1.5 megabits per second or more. And 
because our systems are locally-based, communities will be able to use 
our Internet gateway for locally-geared uses, such as interactive 
distance learning, or the ability of parents to monitor children in day 
care. The possibilities of these broadband services are vast and very 
promising.
    At the present time, Internet services offered through Northpoint 
Technology would have a telephone return channel, however, in the 
future Northpoint could also install a simple transceiver (that is, a 
combination transmitter/receiver) in the customer's home and provide an 
all-wireless Internet service, as well as potentially telephone service 
via a wireless local loop solution.
Opportunities for Small Business Competitors
    Another aspect of the Northpoint system, related to its low cost, 
is its potential to bring new entrants into the telecommunications 
field. Northpoint's 68 BroadwaveUSA affiliates are led by capable local 
business and community leaders. The involvement of such people will 
bring greater local participation and diversity to the media 
marketplace.
The FCC Role
    Let me briefly review our status before the FCC. In 1994 we first 
presented the Northpoint concept to the FCC. We received an 
experimental license in 1997 to operate in Kingsville, Texas, in a 
rural setting, and last year we received a second experimental license 
in Austin. On January 8, 1999, Northpoint and our 68 affiliates filed 
license applications to serve all U.S. television markets.
    In order to operate in the 12.2-12.7 GHz band, we need the FCC to 
make a few rule changes. Accordingly, a year ago we ago we petitioned 
the FCC to operate a point-to-multi-point video and data terrestrial 
service in the 12 GHz band. Our petition is currently the subject of a 
Notice of Proposed Rulemaking (ET Docket No. 98-206), with comments due 
March 2nd and reply comments due March 29th.
    As part of the rulemaking, we seek co-primary status with any other 
new entrants into this band. While we are willing to be secondary to 
existing DBS services, we must be co-primary with the low earth 
orbiting satellites now under consideration, and we are fully confident 
this can be done with properly designed low earth orbiting satellites. 
In fact, two of the LEO applicants are proposing systems which appear 
compatible with terrestrial sharing. Moreover, co-primary status would 
be consistent with applicable ITU regulations.
Conclusion
    Given the need to address the local-to-local and cable competition 
issues, we hope that Congress, specifically this committee, will 
encourage the FCC to act expeditiously on the rulemaking and 
applications.
    Mr. Chairman, thank you, again, for providing us the opportunity to 
speak before your subcommittee today. I welcome any questions you might 
have.

    Mr. Tauzin. Thank you, Ms. Collier.
    We are now pleased to welcome Mr. Al DeVaney, President of 
Newsweb Broadcasting of Chicago, Illinois. Mr. DeVaney.

                     STATEMENT OF AL DEVANEY

    Mr. DeVaney. Thank you, Mr. Tauzin and committee members, 
and thank you for the opportunity to testify this afternoon.
    The company that I represent owns two television stations, 
WPWR in the Chicago market and KTBD. Both of these stations are 
UHF stations and both are affiliates of the UPN network.
    I also serve on the board of directors for the Association 
of Local Television Stations, otherwise known as ALTV. I appear 
today on their behalf.
    ALTV represents the interests of hundreds of local 
television stations in this country which are not affiliates of 
ABC, CBS, or NBC. Most of our member stations are either Fox 
affiliates, UPN, WB, or PAXTV.
    We have two primary concerns today. First, we wish to 
search for a resolution to the must-carry issue with respect to 
satellite carries. And, second, we wish to urge you to 
establish rules preserving the program exclusivity rights of 
local television stations.
    To that end, I want to emphasize the essence of local 
television, and that is that every minute of every programming 
on our stations is selected, whether it is public affairs, 
entertainment, news, or sports, selected because we believe it 
appeals to our local community. This is not simply about 
network programming.
    For example, we know that some syndicated programming will 
work in Denver, but not Chicago, and vice versa. Therefore, 
even nationally produced programs are specifically selected by 
our stations for their local market appeal. The point is we are 
still a hometown television station and a big part of our 
community.
    UPN currently programs 15 hours a week of network time. We 
program the remaining 153 hours. Our news web stations are, if 
I may, excellent examples of local television and why it is 
important to ensure the continued survival and growth of all 
local television stations, particularly those affiliated with 
emerging networks.
    WPWR in Chicago is the most recent general market station 
to sign on in that television market. We were losing money as 
recently as 1987. By 1992, our performance had improved, and we 
chose to give back to our community by forming the WPWR TV 
Channel 50 Foundation. Now, a short 7 years after the formation 
of that foundation, it is one of the 25 largest foundations in 
the State of Illinois.
    In Denver we purchased KTVD in a bankruptcy auction in 
1994. Today, 5 years later, it is a viable property with a 
substantial community-giving program that funds many Denver 
area nonprofit organizations. These giving programs are, of 
course, in addition to an ever-growing schedule of local public 
affairs programming and public affairs announcement.
    The point is this: Stations like those that ALTV represents 
are extraordinarily important to our U.S. broadcasting system, 
and as we grow, our communities benefit in many ways, both on 
the air and off the air. Remember, the Fox Network began in 
1987 amid predictions of failure by many experts. By creating a 
distribution system using mostly ALTV member stations at the 
time, that network has matured to rival the original three and 
has added another choice for U.S. viewers and strength to those 
local television stations.
    In the past 4 years, UPN and the WB have emerged, and have 
begun to gain a toehold in their markets, with a distribution 
system made up largely of our member stations. Now with the 
local station lineup, PAXTV has added yet another broadcast 
voice to the landscape.
    But the current EchoStar marketing plan, and probably the 
plans of the future for other DBS providers, will not include 
these emerging network affiliates unless you properly step in. 
Even a must-carry solution 3 years down the road is 
problematic. How much revenue loss should these stations 
suffer? How much of their ability to provide the best 
practicable service to the public should be diminished? How 
much loss should broadcasters absorb to enrich satellite 
carriers in the hopes of stimulating competition to cable?
    Capacity is not just a technical issue. It involves 
business decisions. Should a carrier which has known for 3 
years that it would have a must-carry obligation get a waiver 
at the end of those 3 years if it has done nothing to increase 
its capacity in order to comply with must-carry?
    Before you answer all of those questions, though, please 
consider the following: DBS providers have absolutely no 
obligation to provide programming which addresses the concerns 
of local communities. We do. DBS providers charge subscription 
fees for their program service. We do not. The vast majority of 
excluded stations are significantly more popular than the vast 
majority of cable networks which they carry on their satellite 
services.
    Why are the affiliates of entrenched networks already doing 
quite well on their own essentially granted preferential 
treatment, while the stations which have brought an 
unprecedented level of competition and diversity to 
broadcasting once again are saddled with a competitive 
disadvantage? Why are viewers who rely exclusively on local 
broadcasting being asked to bear a part of this burden? You, 
the Congress, made a judgment to assure the viability and 
vitality of local television in the face of noncarriage by 
cable systems. What sense does it now make to undermine that 
decision by letting satellite carriers impart the very same 
injury you sought to prevent in the cable industry through the 
must-carry rules?
    But we are faced with that same situation today. Some 
stations will be carried; others will be excluded, including 
the likes of Una Vision, Telemundo, and local PBS stations, 
along with the aforementioned local affiliates of emerging 
networks.
    Ironically, these are the stations least able to withstand 
the effects of not carriage. No one would deny that cutting off 
a portion of our market will cause us financial harm. In 
broadcasting, audience is revenue; it is our only source of 
revenue, and it is that simple.
    Consequently, we are now placed at a competitive 
disadvantage. As independents and affiliates of newer broadcast 
networks, ALTV's members have done more to enhance competition 
than anyone would have imagined 10 or 15 years ago. We, 
frankly, find it inconceivable that Congress would contemplate 
dulling that competition in today's highly competitive video 
marketplace.
    Thank you very much.
    [The prepared statement of Al DeVaney follows:]
 Prepared Statement of Al DeVaney, President, Newsweb Broadcasting on 
      Behalf of the Association of Local Television Stations, Inc.
    We are very grateful for the opportunity to testify this afternoon. 
Indeed, Mr. Chairman, at ALTV's recent convention in New Orleans, you 
initiated a dialogue with us and our fellow broadcasters on satellite 
use of broadcast signals and other issues. This is our first 
opportunity to respond formally, and we look forward to continuing our 
discussions with you and the subcommittee.
    I am president of Newsweb Broadcasting (``Newsweb''). Newsweb is 
licensee of two local television stations: WPWR-TV in the Chicago 
market and KTVD-TV in Denver. Both our stations are affiliates of the 
UPN network. Both operate on UHF frequencies.1
---------------------------------------------------------------------------
    \1\ KTVD-TV operates on channel 20; WPWR-TV operates on channel 50.
---------------------------------------------------------------------------
    I also serve on the Board of Directors of The Association of Local 
Television Stations, Inc. (``ALTV''), and appear on behalf of ALTV 
today. ALTV represents the interests of the hundreds of local 
television stations in this country which are not affiliates of the big 
three networks--ABC, CBS, and NBC.2 Most ALTV member 
stations are affiliates of the Fox, UPN, WB, or PaxTV networks. Some 
remain traditional ``independent'' stations, which continue to offer 
innovative programming specifically tailored to their 
communities.3 All of us define ourselves first as local 
television stations. All of our programming decisions reflect our 
efforts to serve our particular local communities. Every minute of 
programming on our stations, be it public affairs, entertainment, or 
news or sports, appears on our schedules because we consider it most 
responsive to the needs, interests, tastes, and concerns of our local 
communities. Our ability to reach and engage our local audiences is the 
key to our success.4
---------------------------------------------------------------------------
    \2\ ALTV's membership includes stations from every region of the 
country. Their ownership spans the continuum from local single station 
owners to large media conglomerates. Their interests range from those 
of nationally distributed ``superstations'' to those of small local 
``mom and pop'' stations. More than any of the popular cable networks, 
these stations have stimulated competition and enhanced program 
diversity for all viewers in local markets throughout our country.
    \3\ Such program formats include foreign language programming, 
religious programming, and other program genres of interest to 
particular segments of the local community.
    \4\ At our stations we are especially proud of our local 
programming and community involvement. Examples of our programming and 
outreach efforts are described in an attachment to my statement.
---------------------------------------------------------------------------
    The point is we are still a home town station. We are their local 
source. Our studio is up the street. Our antenna is down the road. We 
share the same concerns about government, about schools, about local 
teams, about the weather. As much as every local station serves its 
community, it is a part of that community, as well.
    Local programming and outreach are very much a part of the Newsweb 
stations. We are particularly proud of the following contributions to 
our communities:

 The WPWR Chicago 50 Foundation, which was formed in 1992 and 
        is now one of the top 25 foundations in Illinois. It funds many 
        non-profit community programs, which include children's 
        education, the arts, and arts education.
 A local children's education and information show called UP'N 
        Running, which plays at 8 a.m. on Sundays and has grown to a 
        nine share of audience in the first two weeks of February.
 A show called Concerning Chicago with 45 original productions 
        per year.
 A Chicago public affairs show called Talking with Aaron 
        Freeman, with 50 original productions a year.
 Dimensions Northwest Indiana with 52 original productions a 
        year.
 Four prime time specials per year entitled Power to Make a 
        Difference.
In Denver, Newsweb purchased KTVD in a bankruptcy auction in 1994 and 
now, five years later, the station is a viable property with a 
substantial community giving program that funds many Denver area non-
profit organizations. In Denver we also broadcast 35 original 
productions a year of Colorado Profiles, a public affairs show, and 32 
original productions of Focus Colorado, another public affairs show.
    Indeed, this is just what Congress intended over 50 years ago when 
it enacted the Communications Act of 1934. It sought to engender a 
system of local broadcasting, where as many communities as possible had 
their own station or stations. Consequently, the Federal Communications 
Commission (``FCC'') has allotted television channels in such a way 
that provides larger communities with more stations, but also assures 
that many smaller communities have their own station or stations, as 
well.5 Thus, for example, while Denver and Chicago have 
multiple stations, many smaller communities still have at least one or 
two channels assigned to them.
---------------------------------------------------------------------------
    \5\ Sixth Report and Order, 41 FCC 148 (1952). The Commission 
essentially reaffirmed this system by allocating digital channels in 
precisely the same manner that the current analog or NTSC channels were 
allocated. Sixth Report and Order, 12 FCC Rcd 14588 (1997).
---------------------------------------------------------------------------
    Over 30 years ago, when the FCC allotted channels to hundreds of 
communities across the country, it had a dream and hope that each and 
every channel someday would host a vibrant local television station. 
Today, we can safely say that that dream has come true. Only a handful 
of channels remain vacant, primarily in sparsely-populated 
areas.6 Hand-in-hand with the increase in the number of 
local television stations has been concomitant growth in the number of 
broadcast networks. Last year saw the emergence of PaxTV, the seventh 
national broadcast television network. Meanwhile UPN and WB have 
emerged and gained a toehold in the market, and Fox has become 
established as a fourth major network. Each of these new networks has 
developed despite heavily UHF affiliate bases.7
---------------------------------------------------------------------------
    \6\ However, with the adoption of a new table of digital or DTV 
channel allotments, many of these channels no longer are available for 
analog stations.
    \7\ UHF stations continue to suffer from inferior coverage, due to 
the propagation characteristics of UHF television signals. Whereas 
cable television carriage has offset this disadvantage to a certain 
extent, UHF stations continue to operate at a disadvantage vis-a-vis 
their VHF competitors.
---------------------------------------------------------------------------
    As the decade of the nineties began, few would have predicted the 
existence of seven broadcast television networks in 1999. Many stations 
were running headlong into an impenetrable barrier to survival and 
success--the refusal of many cable systems to carry their signals. 
Although the FCC as early as 1966 had adopted rules requiring cable 
systems to carry all local television stations' signals, cable 
interests had persuaded the courts that such rules were an unnecessary 
infringement of cable operators' editorial discretion and, therefore, 
violated the first amendment. Most stations were carried by most cable 
systems. Some stations might be suffering some injury, but most 
stations were surviving if not thriving. No blood. No foul.8
---------------------------------------------------------------------------
    \8\ In the gap between 1986 and 1992, when no must carry rules were 
in effect, many television stations, in fact, lived on the margin, 
flirting daily with bankruptcy and providing only the most limited 
service to their communities. Many stations were rescued from the brink 
of financial ruin in 1992, when the current cable must carry rules were 
enacted. See Turner Broadcasting System, Inc., v. FCC, 1997 U.S. LEXIS 
2078, 42 et seq. (1997) [hereinafter cited as Turner II].
---------------------------------------------------------------------------
    Congress found this reasoning repugnant! It had not directed the 
FCC to allocate television channels in an equitable fashion just to 
watch many channels lie fallow or many stations limp along, cut off 
from the audiences they were licensed to serve. It insisted that all 
channels allocated for television stations present the opportunity for 
success. It insisted that every station have the opportunity to serve 
its local community. It insisted that all stations be carried by cable 
systems in their local communities.9 This time the Court 
understood. It understood that Congress long ago had contemplated a 
nationwide system of television stations, licensed to and serving local 
communities.10 It understood the value of such a locally-
oriented broadcast television system, particularly to viewers who 
depend exclusively on broadcast television service.11 It 
also understood that a station deprived of access to its audience would 
suffer, its service would deteriorate, its viability would be in 
jeopardy.12 It, therefore, upheld the cable television must 
carry rules which Congress had enacted in the 1992 Cable Act.
---------------------------------------------------------------------------
    \9\ 47 U.S.C. Sec. 534.
    \10\ Turner II, 1997 U.S. LEXIS 2078, 24 (1997) (``We have noted 
that `it has long been a basic tenet of national communications policy 
that `the widest possible dissemination of information from diverse and 
antagonistic sources is essential to the welfare of the public.' '' 
Turner, 512 U.S., at 663-664 (quoting United States v. Midwest Video 
Corp., 406 U.S. 649, 668, n. 27 (1972) (plurality opinion) (quoting 
Associated Press v. United States, 326 U.S. 1, 20 (1945)); see also FCC 
v. WNCN Listeners Guild, 450 U.S. 582, 594 (1981). ``Increasing the 
number of outlets for community self-expression'' represents a ``long-
established regulatory goal in the field of television broadcasting.'' 
United States v. Midwest Video Corp., supra, at 667-668 (plurality 
opinion).'').
    \11\ Id., 1997 U.S. LEXIS 2078 at 19-20. (``We have been most 
explicit in holding that ``protecting noncable households from loss of 
regular television broadcasting service due to competition from cable 
systems' is an important federal interest.'' Id., at 663 (quoting 
Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714 (1984). Forty 
percent of American households continue to rely on over-the-air signals 
for television programming. Despite the growing importance of cable 
television and alternative technologies, ``broadcasting is demonstrably 
a principal source of information and entertainment for a great part of 
the Nation's population.'' Turner, supra, at 663 (quoting United States 
v. Southwestern Cable Co., 392 U.S. 157, 177 (1968)'').
    \12\ Id., 1997 U.S. LEXIS 2078 at 50-52.(``The harm Congress feared 
was that stations dropped or denied carriage would be at a ``serious 
risk of financial difficulty,'' 512 U.S., at 667, and would 
``deteriorate to a substantial degree or fail altogether.'' Id., at 
666. Congress had before it substantial evidence to support its 
conclusion. Congress was advised the viability of a broadcast station 
depends to a material extent on its ability to secure cable carriage. 
JSCR PP597-617, 667-670, 673 (App. 1544-1553, 1580-1581, 1582-1583). 
One broadcast industry executive explained it this way: ``Simply put, a 
television station's audience size directly translates into revenue--
large audiences attract larger revenues, through the sale of 
advertising time. If a station is not carried on cable, and thereby 
loses a substantial portion of its audience, it will lose revenue. With 
less revenue,the station can not serve its community as well. The 
station will have less money to invest in equipment and programming. 
The attractiveness of its programming will lessen, as will its 
audience. Revenues will continue to decline, and the cycle will 
repeat.'' Hearing on Competitive Issues, at 526-527 (statement of Gary 
Chapman) (App. 1600). See also JSCR PP589-591 (App. 1542-1543); id., 
P625-633, 636, 638-640 (App. 1555-1563) (repositioning). Empirical 
research in the record before Congress confirmed the ``direct 
correlation [between] size in audience and station [advertising] 
revenues,'' id., P591 (App. 1543)), and that viewership was in turn 
heavily dependent on cable carriage. See id., PP589-596 (App. 1542-
1544).'').
---------------------------------------------------------------------------
    The history of the television industry in the wake of the 1992 
Cable Act and the Supreme Court's decision upholding the must carry 
rules stands as testament to the wisdom of those rules. With renewed 
vigor, many stumbling stations found new lives as affiliates of the 
emerging networks.13 The viewing public in community after 
community enjoys better programming from more stations, stronger 
stations, and additional broadcast networks. Never would this have been 
possible if cable systems had been permitted to slough off carriage of 
weaker stations.
---------------------------------------------------------------------------
    \13\ Notably, many stations were able to abandon home shopping 
formats which helped them remain marginally viable despite lack of 
cable carriage in favor of more conventional formats. The home shopping 
format on broadcast stations largely was a product of the lack of must 
carry rules prior to the 1992 Cable Act. Many new and marginal stations 
which were refused carriage by local cable systems turned to home 
shopping as a means of survival. Since the new must carry rules for 
cable became effective, many of these stations have gained sufficient 
economic strength to discontinue their home shopping formats. Of these, 
many have become affiliates of the emerging UPN and WB networks. In 
short, they have gained a foothold and begun to provide an increased 
diversity of informative and entertaining programming to their 
communities.
---------------------------------------------------------------------------
    Now Congress appears to us poised to take a step backwards, 
although it will be under the guise of a giant leap forward. Some 
satellite companies are urging you to permit them to retransmit the 
signals of local television stations to subscribers in the stations' 
home markets. This so-called ``local-into-local'' service would allow 
satellite companies to provide a complement of local signals just like 
cable operators do. They say, and conventional wisdom has agreed, that 
the ability to provide local signals will make them a true competitor 
to cable television. Fostering such competition to cable television is 
seen as a good thing. Therefore, permitting satellite carriers to 
provide local stations' signals to their subscribers will be a positive 
step, or so they say.14
---------------------------------------------------------------------------
    \14\ The availability of a few local signals in a very limited 
number of markets may fall well short of expectations as a means of 
attracting new customers to DBS (and away from cable). Substantial up 
front costs, which include not only a dish and receiver (or more if the 
consumer wishes to connect all sets in a multi-set household), but also 
installation costs and often advance payment of program service fees, 
are a considerable price to pay for an incomplete line-up of local 
signals. How many cable subscribers would trade even a high monthly 
cable bill for a lesser service (in terms of local signals) with 
substantial upfront costs?
---------------------------------------------------------------------------
    As true as this may be, it must not obscure the dangerous setback 
it portends. Whatever the benefits of local-into-local satellite 
carriage may be, the ability to carry local signals under a compulsory 
license unaccompanied by rules prohibiting discrimination among local 
stations also would impose costs. In our view, these costs are 
unacceptable--and avoidable. Thus, ALTV has favored amendment of the 
compulsory license to permit local-into-local signal carriage, but only 
if satellite carriers also are required to carry all local signals in 
any market where they elect to provide local-into-local 
service.15 Such a provision assures that local market 
competition will not be skewed in favor of some stations and to the 
detriment of others.
---------------------------------------------------------------------------
    \15\ ALTV does not propose that satellite carriers be forced to 
carry local signals in every market (as is required of cable systems). 
However, if a satellite carrier retransmits the signal of one local 
television station in a market to subscribers in that market, then it 
should be required to carry all local stations in that market or at 
least provides a satellite subscriber with the same local signals a 
comparably situated cable subscriber would have available from its 
cable system. This would maintain parity between competing media by 
assuring that the satellite carrier were subject to no more rigorous 
obligations than a directly competitive cable system.
---------------------------------------------------------------------------
    This concern is no less genuine than it was in the case of cable 
television. We know that many stations stand to be excluded from 
EchoStar's complement of local signals in their home markets. As was 
the case with cable, satellite carriers like EchoStar are poised to 
provide a local-into-local service which includes only the big network 
affiliates in the markets it serves. Whereas EchoStar boldly advertises 
carriage of the ABC, CBS, NBC, and Fox affiliates in markets where it 
is providing local signals, carriage of the local UPN, WB, or PaxTV 
affiliates and any independents is doubtful. Indeed, in testimony 
before the Senate Antitrust and Business Rights Subcommittee last 
month, EchoStar CEO Charles Ergen testified that, ``[W]e offer the four 
network stations, and in some cities a couple of independents as 
well.'' 16 A visit to EchoStar's Dish Network website 
confirms that ``the four network stations'' are the only commercial 
stations carried in their local-into-local markets.17 As for 
the local UPN, WB, and PaxTV affiliates, little or no carriage is 
contemplated. Therefore, we are faced with the same situation which 
confronted Congress in 1992 with respect to cable carriage. Some 
stations will be carried; others will be excluded, including the likes 
of Univision, Telemundo, and local PBS stations.
---------------------------------------------------------------------------
    \16\ Testimony of Charlie Ergen, before the Antitrust and Business 
Rights Subcommittee of the Senate Committee on the Judiciary (January 
27, 1999) at 6. [Hereinafter cited as ``Ergen Testimony''].
    \17\ See, e.g., www.dishnetwork.com/programming/local/dc.htm.
---------------------------------------------------------------------------
    More to the point, the excluded stations will be the same stations 
which owe their vitality, if not their very viability to the cable must 
carry rules. Ironically, these are the stations least able to withstand 
the effects of noncarriage. No one would deny that a station cut off 
from a portion of its audience will suffer financial harm. In 
broadcasting audience is revenue, our only source of 
revenue.18 It is that simple. Consequently, literally having 
been rescued by the cable must carry rules and having struggled to 
establish a beachhead in their assault on the three entrenched 
network's dominance in their markets, these independents and emerging 
network affiliates again find the sand eroding beneath them as they are 
placed by EchoStar at a distinct competitive disadvantage in their 
local markets.
---------------------------------------------------------------------------
    \18\ Turner II, 1997 U.S. LEXIS 2078 at 50-52.
---------------------------------------------------------------------------
    Some might respond cavalierly that broadcasters are making enough 
money anyway. Some are. Others are not. As illustrated in Table One, 
below, at least one quarter of the nation's stations operate at or 
below the fringe of profitability. Thus, not all Fox affiliates in the 
lower 25th percentile operated at a profit in 1997; none of the 
affiliates of UPN and WB and none of the independents in the lower 25th 
percent operated profitably. These, of course, are the stations for 
which must carry remains essential.
    Others might respond that whereas cable systems have enormous 
market power, serving over 60 per cent of television households, 
satellite carriers serve less than 10 per cent of the nation's 
television households. Therefore, if a local station is excluded from 
carriage on a DBS service, the impact would be negligible. Wait, they 
say, until we are really a factor, like cable.

                                Table One
                    Lower 25%ile--1997--All Stations
------------------------------------------------------------------------
              Affiliation                  Net Revenue   Pre-Tax Profits
------------------------------------------------------------------------
ABC....................................   $5,782,003.00      $80,911.00
CBS....................................   $5,850,992.00      $42,180.00
Fox....................................   $4,306,143.00      $27,907.00
NBC....................................   $5,870,325.00     $393,136.00
UPN....................................   $2,543,646.00    ($424,570.00)
WB.....................................   $3,085,436.00  ($1,331,907.00)
Independent............................   $2,451,508.00    ($228,336.00)
------------------------------------------------------------------------
Source: 1998 NAB/BCFM Television Financial Report

     That is easy to say when it is someone else's money. That is even 
easier to say when that someone else is something of a competitor. 
Injury is injury, and we will feel it, whether it be a trickle of blood 
from a minor scratch to a gushing artery from a slash to the bone. Even 
where revenue reductions are less than fatal, they still affect a 
station's ability to provide the best practicable service to the 
public.19 At best, a local station which a satellite carrier 
refuses to carry would be placed at a demonstrable disadvantage vis-a-
vis competing broadcast television stations which are 
carried.20
---------------------------------------------------------------------------
    \19\ See Memorandum Opinion and Order, 8 FCC Rcd 8270, 8294, n.64 
(1993), affirmed sub nom. Capital Cities/ABC, Inc., v. FCC, No. 93-3458 
et al. (7th. Cir.,decided July 12, 1994) [citations omitted](``[W]e 
believe that . . . enhancing the financial well-being of independent 
stations . . . inevitably helps to support local programming efforts . 
. . [S]uch efforts further enhance program diversity.'')
    \20\ See also Turner II, 1997 U.S. LEXIS 2078, *51-*55.
---------------------------------------------------------------------------
     Furthermore, is anyone in the DBS business to stagnate? The whole 
point of this effort to gain use of local signals is to enhance the 
competitive appeal of DBS service. If, indeed, it does, we must assume 
that the number of DBS subscribers will increase. Is this not the 
vision of Congress, the FCC, and, certainly, every DBS provider? They 
hope to attract not only noncable households in remote areas, but also 
cable subscribers in core market areas. Indeed, they would hope to 
supplant cable as the home's multichannel video provider. One easily 
may anticipate the day when nearly all television households are served 
by a multichannel video provider, most likely cable or DBS. Together, 
they will serve the vast majority of television households, and each 
will have a sufficient market share, such that if either of them failed 
to carry some local stations, the stations' viability would be 
threatened.21
---------------------------------------------------------------------------
    \21\ At the very least passed over stations would be placed at a 
meaningful competitive disadvantage not only against their local 
broadcast competitors, but also against the competing multichannel 
video providers.
---------------------------------------------------------------------------
    Let me put it another way. How much revenue loss should my stations 
suffer, how much of their ability to provide the best practicable 
service to the public should be diminished, how much loss should 
broadcasters absorb to enrich satellite carriers in the hope of 
stimulating competition to cable?
    Before you answer, consider the following:

 DBS providers have no obligation to provide programming which 
        addresses the issues of concern in Chicago or Denver or any 
        local community. We do.22
---------------------------------------------------------------------------
    \22\ Competitive injury to broadcast stations raises serious public 
interest issues absent in the case of exhibition of nonbroadcast 
programming by multichannel video providers. Unlike other video 
providers, local television stations are licensed by the federal 
government to operate in the public interest. They must provide 
programming dealing with issues of local concern in their communities. 
Their political programming is subject to strict requirements to assure 
equitable treatment of opposing candidates. Programming responsive to 
the educational and informational needs of children must be broadcast 
in specific amounts during specified portions of the day. Indecent 
material is confined to late night hours.
---------------------------------------------------------------------------
 DBS providers charge subscription fees for their program 
        service. We don't.
 The vast majority of excluded stations are more popular than 
        the vast majority of cable networks carried by satellite 
        carriers.23
---------------------------------------------------------------------------
    \23\ As the Court repeatedly and consistently has observed, 
``[B]roadcasting is demonstrably a principal source of information and 
entertainment for a great part of the nation's population.'' Turner II, 
1997 U.S. LEXIS 2078, 19, 23, 46. (``Even aside from that, the evidence 
overlooks that the broadcasters added by must-carry had ratings greater 
than or equal to the cable programs they replaced. Second Meek 
Declaration P23 (App. 1863) (ratings of broadcasters added by must-
carry ``are generally higher than that achieved . . . by their 
equivalent cable counterparts''); Meek Declaration P21, at 11-12 
(Record, DAE, Vol. II.A., Exh. 2); see also Hearings on Cable 
Television Regulation, at 880 (statement of James Hedlund) (``in 
virtually every instance, the local [broadcast] stations shifted are 
more popular . . . than the cable program services that replace 
them''); JSCR PP 497-510 (App. 1505-1509) (stations dropped before 
must-carry generally more popular than cable services that replaced 
them).'')
---------------------------------------------------------------------------
 Satellite carriers, like cable systems, will enjoy a 
        compulsory license which insulates them from a highly 
        competitive programming marketplace with respect to their 
        carriage of local television station signals.24
---------------------------------------------------------------------------
    \24\ We do not begrudge them the compulsory license, but we do 
oppose that compulsory license's becoming a vehicle for upsetting the 
balance of competition in local television markets. Historically--and 
rightly--the cable and satellite compulsory licenses have carried with 
them the complementary obligation to use broadcast signals in a manner 
consistent with preserving the many benefits of free broadcast 
television service. Notably, Congress determined to adopt a compulsory 
license for cable only in conjunction with FCC rules which defined the 
scope and prerequisites of the license. Cable Television Report and 
Order, 36 FCC 2d 143 (1972). Thus, the adoption of FCC rules in 1972 
preceded the establishment of the compulsory license in the 1976 
Copyright Act. See Letter from The Honorable John L. McClellan, 
Chairman, Subcommittee on Patents, Trade-Marks, and Copyrights, United 
States Senate, to the Honorable Dean Burch, Chairman, Federal 
Communications Commission (January 31, 1972), reprinted at Appendix E, 
Cable Television Report and Order, supra, 36 FCC 2d at 287 (``[I]t is 
the intention of the subcommittee to immediately resume active 
consideration of the copyright legislation upon the implementation of 
the Commission's new cable rules.''). Had the compulsory license 
preceded the adoption of the FCC's signal carriage rules, then the 
rampant unregulated use of broadcast station signals by cable systems 
would have become impossible to harness. Even in 1972, the FCC 
grandfathered all existing signal carriage so as to avoid depriving 
consumers of signals to which they had become accustomed. Cable 
Television Report and Order, supra, 36 FCC 2d at 185.
---------------------------------------------------------------------------
 Why are the interests of viewers who rely exclusively on local 
        broadcasting asked to bear a diminution in service?
 Why are affiliates of the entrenched networks like ABC, CBS, 
        and NBC essentially granted preferential treatment, while the 
        stations which have brought an unprecedented level of 
        competition to broadcast television once again are saddled with 
        a competitive disadvantage?
 You, Congress, made a judgment to assure the viability and 
        vitality of local television stations in the face of 
        noncarriage by cable systems. What sense does it make to 
        undermine that decision by letting satellite carriers impart 
        the very same injury you sought to prevent in the cable must 
        carry rules?
    As independents and affiliates of, first, the fledgling Fox 
network, which now has become a powerhouse, and emerging networks, 
which also will grow, like UPN, WB, and PaxTV, ALTV's members have done 
more to enhance competition than anyone would have imagined. We frankly 
find it inconceivable that Congress would contemplate dulling that 
competitive edge of competition in the video marketplace.
    You also may hear, as Charlie Ergen is fond of saying, that injury 
to us UHF stations will be insignificant because UHF stations have such 
small coverage areas anyway. Thus, he would say, most of his 
subscribers reside in areas which we could never hope to serve anyway. 
What he ignores is the fact that many UHF stations enjoy cable carriage 
throughout their markets. Indeed, if the DBS providers are seeking to 
compete with cable, they will be targeting cable customers. Every time 
a cable subscriber in my market drops his cable service (which is 
required to carry my signal) in favor of DBS service (which is not 
required to carry my signal), my station will lose access to that 
viewer.
    In a similar vein, we find demonstrably inadequate the concept of 
providing local signals via an off-air antenna sold and installed in 
conjunction with a DBS dish. Off-air viewers will enjoy none of the 
benefits of digital picture quality, none of the benefits of inclusion 
in the DBS on-screen program guide, and none of the benefits of 
seamless surfing. We hardly are saying that anything is wrong with off-
air reception. The true issue, though, is whether my competitor, an 
entrenched affiliate of a big network will have advantages in access to 
consumers that are denied my station.25
---------------------------------------------------------------------------
    \25\ As Congress recognized in the channel positioning requirements 
in the must carry law, access alone often is insufficient. Many 
stations were carried, but on channels far removed from the major 
network affiliates, where consumers had trouble locating them.
---------------------------------------------------------------------------
    You also will be told that viewers will lose nothing because the 
DBS provider will offer them the signal of a UPN, WB, or PaxTV 
affiliate from another market. Suggestions that availability of 
national feeds of emerging network signals is an adequate substitute 
for carriage of the local affiliate are specious. First, from the 
viewer's perspective, critical elements of local service would be 
lacking. A national feed or the signal of a distant affiliate of the 
network offers no local programming, whether public affairs or 
entertainment programming, news, information, or weather, all selected 
because it responds and appeals to local needs, tastes and interests. 
Indeed, on most emerging network stations, the majority of programming 
is non-network programming. Second, the damage to the local affiliate 
is compounded. Instead of making any effort to watch the local 
affiliate, viewers searching for network programming likely will take 
the path of least resistance and watch the readily available satellite-
fed station or national network feed. Third, networks thrive on the 
strength of their affiliates. Strong affiliates attract larger 
audiences for the network. A national network feed or a distant 
affiliate offers the network none of the boost provided by a popular 
local and locally-attuned affiliate station. Nothing could strike more 
cruelly at the heart of our nation's system of local 
broadcasting.26 Again, it is the local station which serves 
and programs to the local community. Not only is it obligated to do so, 
it thrives on doing so. From a consumer perspective, how will a viewer 
watching Dilbert on a station from a thousand miles away be alerted to 
a tornado blocks from his home? My station, the local station, would be 
broadcasting a warning. The substitute station will not. Neither would 
the DBS provider. Indeed, viewers might well fail to realize that their 
network programming is coming from a distant station and, therefore, 
expect to receive local weather warnings. Charlie Ergen has labelled 
this concern ``a little bit of hysteria.'' 27 No hysterics 
are at work here. Distant network stations are no substitute for local 
affiliates. The lack of local weather information is just the tip of 
the iceberg.28
---------------------------------------------------------------------------
    \26\ Indeed, this reflects the concern of the major network 
affiliates with respect to the availability of distant affiliate 
signals in other than unserved households.
    \27\ Hearing before the Subcommittee on Telecommunications, Trade, 
and Consumer Protection of the Committee on Commerce, House of 
Representatives, on H.R. 2921 and H.R. 3210, No. 105-80 (April 1, 1998) 
at 130 [hereinafter cited ``1998 Hearing''].
    \28\ Notably, the tip of the iceberg sank the Titanic. See also 
Letter of July 8, 1998, to Chairman Tauzin from James J. Popham, Vice 
President, General Counsel, ALTV, referring to Electronic Media (July 
6, 1998).
---------------------------------------------------------------------------
    We are well aware that Congress is sympathetic to the need to 
assure carriage of all local stations--and we are, indeed, deeply 
appreciative that you understand our concerns. Our anxiety, as you also 
well know, arises from proposals to defer the effective date of a must 
carry regime for several years. We made plain our objections to 
deferred must carry in hearings before this subcommittee in the last 
Congress.29 While we are reticent to belabor those 
objections, they are real, they are sound, and we hardly may ignore 
them.
---------------------------------------------------------------------------
    \29\ See 1998 Hearings at 91-101.
---------------------------------------------------------------------------
    Delayed must carry handicaps my stations and any station not 
carried in a tremendously competitive marketplace. The big three or 
four network stations are carried, while UPN, WB, and PaxTV affiliates, 
to say nothing of numerous independent stations are not. This 
disadvantage will increase with every new satellite subscriber. Even if 
a transition to full must carry is completed as scheduled, many ALTV 
member stations will have suffered a setback in their efforts to 
establish a truly competitive position against their entrenched 
competitors in their markets.30
---------------------------------------------------------------------------
    \30\ In addition, the impact will be felt at a time when local 
stations are spending millions of dollars to convert to digital 
transmission, pursuant to FCC imposed deadlines.
---------------------------------------------------------------------------
    Moreover, we remain deeply concerned that must carry deferred is 
must carry denied. Such deadlines can slip and often do. For example, 
when Congress enacted the original satellite Home Viewer Act in 1988, 
it contemplated termination of the satellite compulsory license in 
1995. However, once the public began to receive broadcast television 
station signals on their satellite systems, Congress essentially 
forfeited the ability to eliminate the compulsory license. It was 
extended in 1994, and no one seriously expects Congress to let it 
expire at the end of this year. The public simply would not stand for 
being deprived of signals they have received for years under the 
compulsory license.31 The same result is predictable under 
deferred must carry. If (we dare say ``when'') satellite carriers 
protest that compliance with must carry requirements would be 
impossible and threaten to withdraw all broadcast signals from their 
services to sidestep the must carry requirements, Congress will find 
itself in the same untenable position.32 We are dubious of 
the satellite industry's willingness and ability to comply with must 
carry rules within the near future.33 Therefore, we look for 
some assurance from them that they will be able to comply with must 
carry rules and will comply, that they will not come rushing back to 
Congress in two or three years claiming that they just have not had 
long enough to come into compliance. We humbly ask some assurance from 
Congress that it will stand by any deferred must carry law it passes.
---------------------------------------------------------------------------
    \31\ We distinguish here between the equities in favor of satellite 
subscribers who have long enjoyed superstation and network signals on 
their satellite systems in a manner consistent with the law and those 
that have taken advantage of satellite distributors' willingness to 
blink the restrictions on providing network signals in other than 
unserved areas.
    \32\ Section 337(b) of the bill (page 7, lines 9-10) subjects only 
``satellite carriers retransmitting television broadcast signals'' to 
the must carry requirement. Thus, a satellite carrier could escape the 
must carry rule by carrying no broadcast signals.
    \33\ Indeed, the testimony of EchoStar CEO Charles W. Ergen at the 
hearing last week confirms that EchoStar ``will not have the space'' to 
carry all local stations in each market. In the face of readily 
predictable public outrage at the threatened reduction in their 
satellite program options, Congress, rather than adhere to the 
deadline, would have no choice, but to extend it. Ergen Testimony at 6.
---------------------------------------------------------------------------
    Let me emphasize that unlike Nikita Kruschev at the United Nations, 
we are not here to pound our shoes on the table and leave in a tantrum. 
We heard the Chairman's call for dialogue and we heed that call. We 
want a solution that is sound and realistic. So, to move the dialogue 
along, I am posing some alternatives for discussion.
    At the outset, ALTV continues to believe that a ``carry-one, carry-
all'' requirement, effective immediately, but on a market-by-market 
basis, would provide the best short and long-term solution. The 
practical effect of imposing such a requirement on satellite providers 
would be marginal. As EchoStar's conduct illustrates, satellite 
carriers would be likely to carry some local stations voluntarily. 
Therefore, such a requirement typically might require a satellite 
carrier to provide only a few additional local signals, such as those 
affiliated with newer networks like UPN, WB, and PaxTV. At worst, under 
current technological limits on capacity, compliance might require a 
satellite carrier to forego local signal carriage in a few markets in 
order to accommodate all local signals in other markets.
    EchoStar's behavior confirms this. EchoStar continues to add 
national networks and pay services to its array of available 
services.34 While invoking a self-imposed limit on capacity 
devoted to carriage of local signals, it continues to use its system 
increasingly as it was designed to be used-- to provide programming of 
nationwide interest on a nationwide basis.35 EchoStar's 
alleged capacity shortage also is a function of EchoStar's decisions 
with respect to the aggregate number of channels devoted to local 
carriage and the allocation of those channels among markets. EchoStar 
has made a decision to use a finite portion of its overall capacity to 
provide a few signals to a substantial proportion of the nation's 
households. Alternatively, EchoStar might have provided all signals, 
but in fewer markets initially. Again, this is much more a function of 
EchoStar's business plan than any shortcoming in satellite distribution 
technology.36 In sum, attempts to provide local signals on 
satellite systems designed to provide national services on a nationwide 
basis, rather than inherent technological limitations on satellite 
capacity, create an appealing, but ultimately specious basis for 
satellite carriers' alleged lack of capacity to carry all local 
signals.
---------------------------------------------------------------------------
    \34\ See copy of a recent Dish Network promotional flyer, attached 
hereto.
    \35\ Purported technological limits on satellite channel capacity 
result from poor planning rather than inherent limitations on satellite 
distribution technology. Nothing stopped EchoStar from designing its 
system to accommodate local signals. Satellite systems may be 
configured to provide for carriage of all local signals. The Capital 
Broadcasting plan erases any doubt in that regard.Capacity becomes an 
issue, however, when satellite systems have been designed with limited 
capacity for local signals. EchoStar, currently employing only CONUS 
and half-CONUS footprints for local-into-local, is a prime example. In 
contrast, Capital Broadcasting system will be configured to provide 
local carriage via use of spot beams. Spot beams, of course, provide 
signals to geographically isolated areas and, thus, permit re-use of 
frequencies in multiple areas. Such systems permit efficient use of 
spectrum, which expands capacity to the extent that full carriage of 
local signals in all served markets can be accomplished.EchoStar's 
system never was designed to operate with comparable efficiency. Even 
when local signals are carried by EchoStar, they are transmitted all 
over the country. This is an enormous waste of spectrum. A system 
designed to provide nationwide and regional services necessarily will 
claim capacity shortfalls in the context of providing local services. 
In reality, however, this really boils down to a matter of system 
design rather than inherent technological constraints on satellite 
system capacity.
    \36\ EchoStar now apparently wants an ex post facto Congressional 
imprimatur on its limited local service, a few signals in a few 
markets, which appears more an afterthought and epitomizes poor 
planning and consummately wasteful use of satellite frequencies. 
However, no reason exists to mold a federal statute to accommodate the 
business plan of a single satellite carrier.
---------------------------------------------------------------------------
    In the context of a deferred must carry requirement, our concerns 
would be eased considerably if satellite carriers were permitted to 
offer local signals in a market only upon a showing to the FCC that 
they would be capable of complying with the must carry requirement when 
it became effective. This showing also would have to include a 
certification that the satellite carrier would comply with the must 
carry rule on the effective date. Furthermore, the failure to comply 
with the rule in full on the effective date would result in automatic 
termination of the ability to carry any local or distant signals in the 
noncompliant market, as well as suspension of the compulsory copyright 
license in that market.
    Another provision, something of a safety valve, also would allay 
our fears and limit our susceptibility to harm. Under the provision we 
propose, the must carry rules would become effective immediately 
(regardless of the deferred effective date) in any market where the 
satellite carrier provided any local signal and served a specified 
percentage of households in the market. Mr. Ergen has said that ``must-
carry, if imposed at all, should be pegged to a penetration test in 
each market.'' 37 We may joust over what that percentage 
should be. Indeed, we may never agree, but the shared embrace of the 
concept does suggest the need to explore this proposal as a solution to 
our concerns and establishment of an effective must carry regime.
---------------------------------------------------------------------------
    \37\ Ergen Testimony, supra, at 6.
---------------------------------------------------------------------------
    I also want to mention another problem which may arise in 
connection with satellite carriage of local signals. Satellite 
carriers' access to local signals under the compulsory license also 
must come only with the assurance that sound technologies exist to 
prevent out-of-market access to such signals. Under some plans to 
provide local signals (e.g., EchoStar), most (if not all) local signals 
will be available throughout the nationwide footprint of the satellite 
retransmitting the signals. The potential for mischief is great--as 
evidenced by the contretemps which has erupted over provision of 
network signals outside unserved areas. Adequate legal sanctions must 
exist to penalize and deter effectively unauthorized out-of-market 
access to the signals of retransmitted broadcast signals.
    The satellite compulsory license also must be accompanied by 
provisions preserving local stations' exclusive rights to their network 
and syndicated programming.38 Presently, cable television 
systems are subject to FCC rules which protect the exclusive rights of 
local stations to exhibit network and syndicated programming in their 
markets. These rules generally prohibit a cable system from 
retransmitting a program broadcast by a station carried by the system 
if a local station has exclusive rights to the program in the 
geographic area served by the cable system.39 This rule now 
ought be applied to satellite carriers as well.40 No reason 
exists to provide stations the ability to secure exclusive rights in 
one portion of the copyright law, but negate that right in another. 
Indeed, in an ever more competitive marketplace, any video provider's 
ability to maintain its exclusive rights becomes even more valuable and 
critical to its ability to offer a distinctive, competitive program 
schedule.
---------------------------------------------------------------------------
    \38\ ALTV in like vein urges retention of the current prohibitions 
on commercial substitution, which appear in both the cable and 
satellite compulsory licenses. 17 U.S.C. Sec. Sec. 111(c)(3) and 
119(a)(4), respectively. Commercial substitution involves far more than 
a mere secondary retransmission and is inimical to the interests of the 
station carried, local stations, and copyright owners. As such, this 
limitation on the compulsory license should remain beyond controversy.
    \39\ Thus, for example, a cable system in Washington, D.C. must 
delete a broadcast of Home Improvement from a distant signal if a 
Washington, D.C., station has an exclusive right to exhibit the program 
in Washington. (N.B. Under Sec. 73.658(m) of the FCC rules, a station 
may secure in its program license agreement geographic exclusivity 
within a 35-mile radius of its community of license.).
    \40\ This need is recognized implicitly in the Satellite Home 
Viewer Act of 1994, which imposed a higher fee for satellite 
retransmission of superstation signals which otherwise would be subject 
to program deletions under the FCC's syndex rules. See 17 U.S.C. 
119(b)(1)(B)(I). This is a poor substitute for the ability of a station 
to preserve the exclusive rights it bargained and paid for in acquiring 
local exhibition rights to a syndicated program.
---------------------------------------------------------------------------
    Congress initially directed the FCC to adopt exclusivity rules for 
satellite carriers in 1988. However, the FCC found application of a 
``syndex'' rule technically unfeasible in 1989. Now question of 
feasibility deserves another look.41 Technology has advanced 
on numerous fronts. Satellite carriers already protect local sports 
blackout requirements. Provision of syndicated program exclusivity 
would add only bulk, but no additional complexity to the 
process.42
---------------------------------------------------------------------------
    \41\ The need for similar network exclusivity or nonduplication 
protection is equally compelling, depending on the ultimate scope of 
the satellite compulsory license. Under the current satellite 
compulsory license, network affiliates may be retransmitted only to 
subscribers without terrestrial access to the network's programming via 
a local affiliate of the network. Thus, infringement of a local 
affiliate's exclusive rights to its network programming is unlikely. A 
network exclusivity or nonduplication rule has no purpose in the 
context of the current ``white area'' limitation. Similarly, if 
satellite carriers may secure a compulsory license to retransmit the 
signals of network affiliates only in their home markets, then such 
rules would be unnecessary. Again, with the emergence and development 
of Fox, UPN, WB, and, now, Pax Net, more stations ultimately may fall 
under the definition of network affiliate for purposes of the satellite 
compulsory license.
    \42\ Compliance burdens also would be reduced by the fact that some 
superstations are, indeed, ``syndex-proof'' (i.e., their national 
satellite feed contain no programming which would infringe the 
exclusive rights of local stations).
---------------------------------------------------------------------------
    Moreover, we are in a far different world in 1999. In 1988, 
satellite carriers were C-band services transmitting signals to large 
dishes in rural areas. Now tiny DBS dishes are very much in evidence in 
populous urban areas as well as the countryside. Millions of dish 
owners now receive not only distant network stations, but also 
superstations. As much as the public will wish to keep their 
superstations, the local stations deserve the right to protect the 
exclusive program rights they have bought and paid for in a free, 
marketplace negotiation. Thus, syndicated, network, and sports 
exclusivity rules ought be adopted now.
    Finally, we must express our full support for the NAB position on 
the controversial issues surrounding service to unserved households 
under the Satellite Home Viewer Act. The utter disdain for the law 
exhibited by some satellite carriers is intolerable and ought not be 
rewarded. Furthermore, the FCC has reached a sound decision in its 
consideration of this matter. It offers the opportunity for a solution 
to the issue which will be fair to all.
    Again, we reiterate our desire to join and accelerate the dialogue 
Chairman Tauzin offered at ALTV's convention last month. When all is 
said and done, we know that our stations provide an invaluable service 
to the public--a service that never ought be sacrificed injudiciously. 
When all is said and done, we know that our stations provide 
unprecedented competition to cable--and to entrenched networks. When 
all is said and done, we know that Congress has stepped in to assure 
that cable systems not rob local television stations of the opportunity 
to compete in their local markets. When all is said and done, we ask no 
more than that today.

    Mr. Tauzin. Thank you very much, sir.
    We are now pleased to welcome Mr. John Hutchinson, 
Executive Vice President of Local TV on Satellite of Riley, 
North Carolina.

                  STATEMENT OF JOHN HUTCHINSON

    Mr. Hutchinson. Thank you, Mr. Chairman, distinguished 
members. I am really excited about bringing the good news of 
another great solution to this dilemma we find ourselves in.
    I am John Hutchinson from Local Television on Satellite, 
known as LTVS, with our headquarters in Raleigh and our 
technical team in Los Angeles. We were founded by Capital 
Broadcasting Company and its subsidiary, Microspace. Now 
Microspace is the largest provider of transponder capacity for 
data and audio services around the world. So we have been in 
both businesses.
    Our mission is to address the No. 1 obstacle that limits 
direct broadcast satellites from offering consumers a truly 
competitive alternative to cable, the lack of the local TV 
stations. LTVS has innovated a means of using the new KA band 
satellites with market-specific spot beams to effectively 
multiple our capacity 20-fold. Now that means that, for the 
first time, most U.S. satellite homes can get all of their own 
local stations on the same dish.
    We have integrated this new technology with a business plan 
to deliver the entire signal of all full-service local stations 
in each market served upon the initial launch. That should 
address 75 percent of the U.S. households just as soon as 
possible, therefore, alleviating many of the Satellite Home 
Viewer Act problems. The distant signals will not be needed for 
most subscribers.
    Now by entire signal, we mean the new full digital 
bandwidth that delivers the highest-definition television 
standard and multicasting that is the future of American 
television.
    Two bidding satellite builders have our designs ready to 
begin construction on July 1 of this year. However, we cannot 
practically move forward on this 30-month construction project 
until Congress passes the enabling legislation. So my primary 
purpose today is to seek passage of that legislation, to make 
local-to-local TV on satellite a reality.
    In order to move the LTVS plan, or, for that matter, a 
similar plan by any other entity, we first need a compulsory 
copyright license. Cable presently has such a compulsory 
license like we need. The legislation we seek would match cable 
by being subject to retransmission consent and must-carry. Such 
parity provisions mean broadcasters maintain control of their 
signals and no qualifying stations are denied access to their 
viewers. The broadcast economics that support free over-the-air 
television and localism are preserved.
    Last month Representative Richard Burr introduced the 
Satellite Access to Local Stations Act, H.R. 89, which already 
has more than 50 sponsors. LTVS supports the Burr bill either 
as part of a comprehensive bill or as a standalone bill.
    Now as for this must-carry issue, any legislation that 
would permit transitional must-carry until the year 2002, as 
some have suggested, must explicitly provide for all stations 
in the market being mandatory by the end of that transition 
period. To assure timely compliance, DBS providers who choose 
to carry local stations must file a report with the Federal 
Communications Commission on January 2001, a year ahead, 
demonstrating that they will be in compliance by 2002, a date 
certain for must-carry.
    Our business plan is aggressive, but it is realistic if 
passage occurs now or by early in the second quarter. That 
timetable will allow local service to be available by January 
2002.
    Turning briefing to the technical plan, two high-powered 
satellites are to be launched in the fall of 2001. They will be 
co-located in the same orbital arc as the present Direct 
Broadcast Satellites use, the Direct TVs and the EchoStars. 
What that means is a single dish at the subscriber's home would 
see both the national DBS channels and all that market's local 
stations, including their broadcast networks.
    Our higher digital standard does require about five times 
the transponder capacity of the analog television we have known 
in the past, but our high-definition, full-digital design is 
going to be required because of the 15-year life of these 
satellites. Otherwise, the system would quickly become 
obsolete. Hence, the evolution of our plan to stretch to 75 
percent of America at a standard that will survive.
    While we do have a technical plan for phase 2 to address 
the remaining 25 percent and more satellites, we invite your 
ideas for a viable business plan to support its very different 
economics. Yet, without timely passage of the enabling 
legislation, neither LTVS nor any other company can begin to 
develop local-to-local satellite solutions. This is a giant 
first step, but we need the lead time.
    Finally, from a public policy perspective, LTVS is good for 
the consumer, good for the DBS industry, good for broadcasters. 
The plan furthers the goal of making DBS more competitive with 
cable, with the bonus of facilitating the rollout of digital 
high-definition television across America.
    With your enactment of the legislation, LTVS can level the 
playing field as basic cable in the sky. One dish, one box, one 
bill--the long-term solution for subscribers who want choice.
    Thank you for giving me this opportunity to talk about it.
    [The prepared statement of John Hutchinson follows:]
  Prepared Statement of John Hutchinson, Executive Vice President and 
          Chief Operating Officer, Local TV on Satellite, LLC
    Good morning, and thank you for inviting me to appear at today's 
hearing. I am John Hutchinson, Executive Vice President and Chief 
Operating Officer of Local TV on Satellite, LLC (``LTVS''). I have been 
a broadcaster for almost thirty years and have served in almost that 
number of different roles, ranging from creative production to business 
management. Immediately prior to joining LTVS this past summer, I 
served as television group head for Jefferson-Pilot's stations in the 
Southeast. In addition to myself, the full-time officers of LTVS 
include Jeff McIntyre, Vice President of Broadcasting, Jerry Parker, 
Vice President of DBS Distribution, and Teresa Artis, General Counsel 
and Vice President of Business Affairs. LTVS is a Delaware limited 
liability company founded in 1997 by Capitol Broadcasting Co., Inc., 
its subsidiary, Microspace Communications Corporation (``Microspace''), 
and certain shareholders. Microspace is the largest provider of 
transponder capacity for broadcast data and audio satellite services in 
the world.
    LTVS was founded to develop a basic local television station 
satellite delivery service, like basic cable, that will deliver via 
Direct Broadcast Satellite (``DBS'') all local television stations in a 
given market. I am pleased to inform you that LTVS has developed a 
local-to-local solution for DBS. LTVS has developed a business plan and 
the technology to distribute via satellite all over-the-air, full 
power, commercial and noncommercial television stations within a given 
station's television market, known as Nielsen's Designated Market Areas 
(``DMA''). LTVS will provide service to all stations in approximately 
the top 70 markets in the United States and reach approximately 75% of 
the U.S. television households. Our intent is to deliver individual 
local station packages to all DBS providers, who will then retail these 
packages to their subscribers. We are very excited about our ALL 
STATIONS IN A MARKET plan that will enable consumers to receive their 
local broadcast programming through their DBS provider. This assumes 
satellite parity with existing cable must carry.
    MY PRIMARY PURPOSE TODAY, HOWEVER, IS TO SEEK PASSAGE OF THE 
LEGISLATION NECESSARY TO MAKE LOCAL-TO-LOCAL A REALITY. IN ORDER TO 
MOVE THE LTVS PLAN OR A SIMLAR PLAN BY ANY OTHER ENTITY FORWARD, WE 
NEED A COMPULSORY COPYRIGHT LICENSE FOR LOCAL-TO-LOCAL.
     That is, in order for LTVS to become a reality we need legislation 
that would grant a compulsory copyright license to satellite carriers 
for the retransmission of local television signals in their DMAs 
subject to retransmission consent. Satellite carriers whose 
retransmissions are subject to the compulsory license would have to 
offer to carry all full-service television stations in any local market 
served. Satellite carriers would have to obtain retransmission consent 
from local stations prior to retransmitting their signals. In addition, 
LTVS supports legislation to require satellite carriers to comply with 
limitations on sports broadcasts, network nonduplication, and 
syndicated exclusivity, similar to cable's rules.
    Last month, Representative Richard Burr (R-NC) introduced the 
Satellite Access to Local Stations Act (SALSA - H.R. 89), which already 
has over 50 co-sponsors. The Burr bill would amend the Copyright Act of 
1976 to provide a statutory license, not subject to any royalty fees, 
since the stations' signals are not extended beyond their present 
coverage area, for the retransmission of television stations into a 
given station's local market by satellite carriers. The legislation 
would enable consumers to receive via satellite all over-the-air, 
commercial and noncommercial television stations within a given 
station's local market. LTVS supports the passage of the Burr bill 
either as part of a comprehensive satellite bill or as a stand-alone 
bill.
    As to the must carry issue, any legislation that would permit 
interim or transitional must carry until the year 2002 must explicitly 
provide that the full must carry requirement will be mandatory at the 
end of the transition period. To assure such compliance, a satellite 
carrier must file a report with the Federal Communications Commission 
(``FCC'') on January 2, 2001 demonstrating that it will be in 
compliance in 2002. After the transition period, a reporting 
requirement, such as the one included in the Burr bill, should be 
sufficient to monitor compliance with the carriage obligations.
     In addition to the passage of the necessary legislation, LTVS also 
needs changes at the FCC. Earlier, I mentioned that LTVS would cover 
approximately 70 markets. LTVS is seeking several changes in proposed 
FCC rules that may increase the number of markets we can serve. 
Briefly, the FCC's proposed rules limit the number of transponders to 
420 with a corresponding limitation on the number of markets covered. 
Under the FCC's proposed rules, LTVS will be able to provide a maximum 
of 420 transponders, which limits the number of markets served. The 
FCC's proposed rules regarding the possible sharing of 250 MHz in the 
18 GHz band and maximum operating power impose coverage limitations.
    Now, I would like to turn to the specifics of our business plan. 
Under our ALL STATIONS IN A MARKET plan, LTVS will deliver individual 
local station packages to all DBS providers, who will then retail a 
local station package to their subscribers. The DBS industry has long 
recognized that the lack of local stations in their program offerings 
is a primary reason that consumers who consider DBS do not buy. LTVS's 
local station product will overcome that competitive barrier.
    LTVS's goal is to become the unified platform that allows DBS as an 
industry to compete more effectively with cable television and other 
competitors in the multichannel video programming market. Further, 
viewing of local stations in satellite homes is lower than in cable 
homes and the LTVS plan will assist in protecting local stations' 
economics and, in turn, service. Our business plan is aggressive in 
that, with the passage of the necessary legislation by the second 
quarter of this year, we intend to have the receivers in the stores by 
December 2001 and begin LTVS service in 2002. To date, in addition to 
having developed the technical plan for our project, which I will 
describe in greater detail momentarily, we have (1) shared our plan 
with the DBS and broadcast industries in order to confirm the need for 
our project and to assess their interest, (2) retained Babcock & Brown, 
an international investment firm with particular financing expertise in 
the satellite and DBS industries, (3) obtained a design for the 
satellites from two satellite manufacturers, and (4) fostered the 
introduction of the necessary legislation.
    Our priority now is to obtain passage of the necessary legislation. 
It will take approximately 30 months to build and launch the satellites 
needed for the LTVS service. Therefore, if LTVS is to begin service in 
2002, the necessary legislation must be passed now so that the order 
for the satellites can be placed. Once this is accomplished, we will 
enter into formal negotiations with DBS providers for the delivery of 
the local station packages and with local television stations for 
retransmission consent. I will turn now to the technology behind our 
plan.
    In the past, one of the obstacles to DBS providing local television 
signals was the lack of an efficient technology. That technology is now 
available with spot beams. We plan to operate two satellites in the Ka-
band at an orbital slot between 101 deg. and 119 deg., which would 
provide coverage to the continental United States. Consumers will be 
able to receive the current high power DBS signals and the local 
television signals from one dish and with one receiver box containing 
the encoders for both DBS and the local signal service. Also, consumers 
will receive only one bill for both the DBS service and the local 
television service.
    Last year, LTVS reported that it intended to carry all stations in 
all markets. That plan was based on the satellites' carriage of analog 
signals at 4 megabits (Mbps) per station. Our intention now is to carry 
the entire signal of a station. In other words, every station can be 
carried in full HDTV at 19.4 Mbps. Because these digital signals 
require much more bandwidth than analog signals, the two LTVS 
satellites will be unable to carry all stations in all markets. 
Nevertheless, we think this is a better plan. As mentioned earlier, the 
satellites will take more than two years to build and will last 
approximately 15 years. Thus, they must be designed for the future 
digital environment. LTVS will be able to accommodate the DTV/HDTV 
rollout as well as multiplexing which is the future of television. 
Also, it would be impractical to build satellites to carry analog 
signals now and then be unable to efficiently modify the satellites to 
carry HDTV signals in the future. Further, the ability to carry digital 
signals will enable DBS to be competitive with cable in the future. 
Currently, cable operators are equipping their systems to carry digital 
signals. In fact, it has been reported that CBS and Time Warner have 
reached an agreement for Time Warner to carry all of the CBS-owned 
stations' full digital signals on their respective systems in those 
markets served by Time Warner.
     As I mentioned earlier, our two Ka-band spot beam satellites will 
have the capacity to carry the entire signal (full HDTV) of all 
stations in approximately the top 70 markets. The satellites have been 
designed and LTVS is in a position to move forward with the satellite 
manufacturers to begin building the satellites as soon as the necessary 
legislation is passed. While LTVS has also developed a technical plan 
that would require another orbital location and two additional 
satellites for carriage of stations in smaller markets, LTVS has been 
unable to develop a viable economic plan. However, without timely 
passage of enabling legislation, neither LTVS nor any other company can 
provide this service.
     The stations carried will be uplinked from regional uplink sites. 
In early April 1998, we invited vendors to respond to a Request for 
Proposal (``RFP'') for the equipment and services needed for the 
uplinks, as well as receivers, dishes and master control center. These 
vendors were selected from those responding to our original Request for 
Quotations (``RFQs'') issued in mid-1997. Worldwide Satellite 
Broadcasting, Doctor Design and several other manufacturers are 
assisting in the continued development of our receiver design.
     Finally, from a public policy standpoint, LTVS is good for 
consumers, DBS providers, and broadcasters, and our plan furthers 
Congress' and the FCC's common goal of making DBS more competitive with 
cable on a nationwide basis.
    LTVS provides consumers with a one stop shopping alternative to 
higher priced cable television. LTVS responds directly to consumers who 
want more choice in the multichannel video programming market, but also 
want their local television stations delivered in the same medium and 
quality in which they receive other channels. Our plan provides 
consumers with the convenience of receiving their DBS signals and local 
television signals with ONE-DISH-ONE BOX-ONE-BILL.
    For DBS providers, LTVS is the long-awaited and much needed 
solution to their prior inability to deliver local television signals 
to their subscribers. LTVS will make a significant contribution to 
leveling the playing field by enabling DBS to offer a basic satellite 
service like basic cable. Our ALL STATIONS IN A MARKET plan should spur 
the development of the DBS industry and increase DBS competition with 
cable. For DBS providers, LTVS provides a convenient and seamless local 
solution for 75% of the U.S. television households. That's 3 out of 4 
Americans served from day one. DBS providers will be able to attract 
new subscribers by offering a one stop shopping entertainment package 
including all local broadcast stations in a given market.
    Broadcasters too will benefit from our plan because LTVS will 
enable distribution of local television stations within their DMAs. 
Under our plan, every full power station in the covered markets will 
have the opportunity to be carried because we propose to carry all 
local stations that consent to be carried. Local stations will continue 
to control the distribution of their signals. The LTVS plan should help 
stop the television ratings erosion in DBS homes. Finally, LTVS should 
help facilitate and accelerate the HDTV rollout.
    The time has come for the DBS industry to take a giant leap forward 
in its development. The DBS industry served its first customer in 1994. 
Since that time, DBS has provided some competition for cable, but the 
lack of local television signals within the DBS programming package has 
placed DBS at a competitive disadvantage and stifled its growth rate. 
Today, more than 67.4% of U.S. television households subscribe to cable 
compared to only 7.9% for DBS. Indeed, market research shows that the 
primary obstacle for DBS in competition with cable is the lack of local 
television signals. LTVS solves this problem by providing DBS with the 
local station packages in the full 19.4 Mbps that they need to compete 
long term with cable. Furthermore, our plan will enable DBS subscribers 
to receive local originated programming such as local weather, local 
news, local sporting and charity events, and public affairs 
programming, all of which serve the public interests
    I thank you for having given me the opportunity to tell you about 
Local TV on Satellite and I would be pleased to answer any questions.

    Mr. Tauzin. Thank you very much, Mr. Hutchinson.
    Finally, David Moskowitz, the Senior Vice President and 
General Counsel of EchoStar. Mr. Moskowitz.

                 STATEMENT OF DAVID K. MOSKOWITZ

    Mr. Moskowitz. Mr. Chairman and distinguished members of 
the committee, thank you for inviting me to testify. I am David 
Moskowitz, and I am the Senior Vice President and General 
Counsel for the DBS company based in Denver, EchoStar. We serve 
over 2 million customers today.
    Ever since EchoStar launched its DBS business 3 years ago, 
we have had a single focus: to compete aggressively against 
cable's poor customer service and constantly increasing rates. 
But DBS still faces many obstacles. Most importantly, DBS needs 
the full statutory right to provide local channels by 
satellite. Consumers cite the lack of local channels as the No. 
1 reason why they don't switch from cable to DBS.
    EchoStar offers local channels by satellite today, but it 
requires two dishes. Believe me, that is a tough sell. With FCC 
approval of our recently announced deal to acquire additional 
DBS spectrum, EchoStar will launch two additional satellites 
this year and be better positioned to provide consumers that 
added ingredient, local channels, in addition to the popular 
cable TV programming they desire, on one dish. With this 
additional capacity, we will be able to provide popular local 
stations to nearly 50 percent of the U.S. population.
    But this will only be possible with congressional action to 
allow efficient and comprehensive local-to-local service 
without the burdensome limitations such full must-carry. Put 
simply, if must-carry is imposed on satellite today, the number 
of consumers to whom we will be able to offer true choice will 
be significantly diminished.
    Right now satellite cannot bear the cost of full must-carry 
compliance. Give us a chance to get off the ground as an 
industry. Cable had 20 years to develop before must-carry was 
imposed. When satellite realizes significant market share, then 
we could economically launch additional satellites with the 
capacity necessary to comply.
    Today EchoStar is the only company committing its capital 
to local programming by satellite, and may be the only company 
ever to do so. Today must-carry would only serve to stifle the 
creation of competition.
    Broadcasters have announced record profits in 1998 and have 
made billions over the years from the spectrum they receive 
from the government for free. This industry does just fine and 
doesn't need the protection of a satellite must-carry today.
    EchoStar's failure to carry a local station would do no 
harm because we lack market power. We urge you not to impose 
must-carry on satellite in any DMA until our market penetration 
reaches at least 15 percent in that market.
    This lack of market power compared to the leverage of cable 
also has us concerned that broadcasters will have no incentive 
to give us their signals on reasonable terms or perhaps at all. 
Exclusive contracts between broadcasters and cable or higher 
prices for satellite to obtain retrans will hurt the consumer. 
With the notable exception of Fox, our efforts to reach retrans 
agreements with the major networks and their affiliates to date 
have been disappointing. If we are to get off to a sound start, 
it is imperative that your legislation allow local-to-local 
with a grace period to obtain retrans and include language that 
will prevent discrimination against satellite providers.
    Further, for 3 years anti-competitive provisions of the 
SHVA have handcuffed our ability to vigorously compete. Current 
law requires consumers to disconnect from cable for 3 months in 
order to get network channels by satellite. Current law 
specifically entitles cable to deliver network channels to 
restaurants and apartment buildings while satellite typically 
cannot. Current law requires DBS to pay a copyright fee that is 
many times more than cable pays. These disparities must be 
eliminated.
    Lower prices and better quality for consumer will result 
where EchoStar provides local channels by satellite. However, 
consumers to whom we cannot provide local channels today will 
still need to rely on a combination of off-air antennas and 
distant satellite signals for the network programming so 
crucial to competition.
    EchoStar implemented a predictive model that complies with 
the FCC recommendations when it commenced providing distant 
network signals about a year ago. But, as the FCC has noted, 
current law is unfriendly to consumers, unrealistic, and denies 
network channels to tens of millions of customers who receive a 
poor off-air signal as a result of ghosting and other 
impediments.
    Continued use of the antiquated Grade B standard developed 
during the 1950's, when any signal was a good signal, is 
especially incongruous, given the push for HDTV. Absent a 
change in law, many consumers will not consider satellite as a 
good alternative to cable. We urge Congress to direct the FCC 
to eliminate standards left over from the 1950's and establish 
guidelines that take into account the expectations of viewers 
today. No one should be denied access to clear network 
programming.
    With the help of Congress, EchoStar is ready to offer 
American consumers full competition to cable from a single 18-
inch dish this year. Please, with cable deregulation imminent, 
consider our request and help us give consumers real choice. 
Thank you. I look forward to answering your questions.
    [The prepared statement of David K. Moskowitz follows:]
  Prepared Statement of David K. Moskowitz, Senior Vice President and 
                General Counsel, EchoStar Communications
    Mr. Chairman and distinguished members of this Committee, thank you 
for inviting me to testify before you today as you consider reform of 
the Satellite Home Viewer Act. My name is David K. Moskowitz, I am the 
Senior Vice President and General Counsel, Secretary and Director of 
EchoStar Communications Corporation, a Direct Broadcast Satellite (DBS) 
company based in Littleton, Colorado. EchoStar was started in 1980 as a 
manufacturer and distributor of C-band dishes that grew by the mid-
1980's into the largest supplier of C-band dishes worldwide. EchoStar's 
founder and Chief Executive Officer Charlie Ergen had a vision of a 
dish in every home, school and business in the United States and of 
providing true, effective competition to cable. That vision could not 
be realized with large dishes. Consequently, in 1987 EchoStar applied 
for a DBS permit with the Federal Communications Commission (FCC). The 
FCC granted EchoStar its first DBS spectrum assignments in 1992. Since 
then, EchoStar has launched four DBS satellites and has invested over 
$2 billion in satellite television technology, working to give 
consumers a true alternative to cable.
    EchoStar was the first DBS company to drop the price of a dish to 
below $200 when the competition was charging $800 for its product. 
EchoStar was the first to allow subscribers to pay a low monthly fee as 
they do with cable. EchoStar was the first to allow consumers to choose 
the 10 channels they watch the most, then pay for those ``a la carte'' 
without having to buy an entire package of programming they do not 
want. EchoStar was also the first company to guarantee it will not 
raise prices until the next millennium. These are just some of the 
measures our company has taken to compete vigorously in the marketplace 
and make satellite technology affordable and accessible for all 
Americans.
    In trying to compete against cable television, EchoStar soon 
realized that the most significant handicap hampering satellite service 
is the lack of local signals. Most of the consumers walking out of the 
store without a satellite dish cite the unavailability of local signals 
(which they can receive from cable) as the reason. As I will detail 
below, EchoStar has started providing limited ``local-into-local'' 
service in an effort to alleviate that handicap. That effort, however, 
is hindered by (a) spectrum constraints and (b) the Satellite Home 
Viewer Act, at least as read by some parties. EchoStar is working to 
overcome the first of these impediments, principally with the MCI/News 
Corp. transaction that I will briefly describe. We will need your help, 
and that of your colleagues on the Judiciary Committee, to overcome the 
second.
    In December 1998, EchoStar announced its intention to acquire from 
MCI/Worldcom and News Corp. an FCC authorization to use 28 frequencies 
at the 110 deg. West Longitude orbital location that can serve the 
entire continental United States, or ``full-CONUS.'' EchoStar also 
intends to acquire two satellites to be launched in 1999 and an uplink 
center located in Gilbert, Arizona, which will provide back up 
capabilities to our existing uplink facility in Cheyenne, Wyoming. In 
turn, EchoStar will give the two companies non-controlling equity 
stakes in EchoStar.
    The spectrum at the 110 deg. W.L. slot, combined with EchoStar's 
existing full-CONUS spectrum at 119 deg. W.L. (21 frequencies) as well 
as the half-CONUS locations at 61.5 deg. W.L. (11 frequencies) and at 
148 deg. W.L. (24 frequencies) will alleviate the capacity handicap 
that currently hampers EchoStar, helping us to compete more vigorously 
against cable. While the transaction is necessary to introduce more 
competition into the subscription video marketplace, it is not enough. 
Action by this Committee and others in Congress is key to our ability 
to provide American consumers a true alternative to the ever increasing 
prices and poor customer service of cable companies.
                 reform the satellite home viewer act.
    We need reform of the Satellite Home Viewer Act to give DBS the 
unambiguous copyright license to retransmit local signals back into 
local cities. In areas where off-air network signals are not available, 
or where spectrum/capacity constraints inhibit DBS providers from re-
transmitting local signals, Congress needs to define realistically who 
can and cannot receive distant network signals from the DBS provider. 
The law does not provide for either of these pro-competitive conditions 
today and, in fact, provisions of the SHVA as it exists today are 
clearly anti-competitive.
    DBS cannot fully compete as an industry against cable when the law 
says customers must wait until 90 days after disconnecting from cable 
before our service can turn on their network signals. DBS cannot 
effectively compete as an industry when the law says our signals may 
only be received in a private home and not at commercial 
establishments. DBS cannot compete as an industry when it must pay 
several times more than cable companies in copyright fees for access to 
distant network signals. And DBS certainly cannot compete when it must 
conduct burdensome and prohibitively expensive tests to determine 
whether a viewer receives an off-air broadcast signal.
    The legislation proposed by Rep. Howard Coble is a terrific first 
step in the effort to reform the Act, and we applaud the work he and 
his staff have done to help our industry. We encourage you to work 
closely with Chairman Coble as this committee works through the tough 
issues that will be involved with transforming this bill into law.
                    echostar's local into local plan
    We believe EchoStar can finally offer a breakthrough in what has 
been the single greatest obstacle for consumers when deciding whether 
to choose DBS over cable or whether to switch from cable to DBS. 
EchoStar is planning to offer consumers a digital local-into-local 
service, on a single dish solution, to nearly 50% of the U.S. 
population, while at the same time overcoming the challenges in 
offering interactive television, Internet solutions, and High 
Definition Television (``HDTV'').
    Currently, EchoStar offers limited local-into-local service in 13 
markets. The local service we offer, even if we could make it available 
to all subscribers, is not perfect. It is tough to sell because it 
requires customers to install a second dish on their roofs. With the 
new orbital location at 110 deg., consumers in 20 major metropolitan 
cities would receive local programming using one dish while consumers 
in many smaller markets, who are currently unserved with local signals, 
will be offered a two-dish solution for local channels by satellite.
    Independent studies and our many years of experience as a satellite 
TV company match the conclusions of the FCC: most people who walk into 
a satellite dealer's showroom turn around and walk out because they 
can't get their local TV channels through DBS.1 Surveys show 
that viewers watch their local channels 70 percent of the time.
---------------------------------------------------------------------------
    \1\ See Annual Assessment of the Status of Competition in the 
Markets for the Delivery of Video Programming, FCC 98-355 (rel. Dec. 
23, 1998) at para. 63 n.274. See also Annual Assessment of the Status 
of Competition in the Markets for the Delivery of Video Programming, 13 
FCC Rcd. 1034, 1072 n.201 (1998).
---------------------------------------------------------------------------
    In 1998, EchoStar began offering satellite-delivered local network 
stations to qualified consumers in the Washington, D.C., New York, 
Atlanta, Dallas, Boston, Chicago, Los Angeles, San Francisco, Phoenix, 
Salt Lake City, Denver, Miami, and Pittsburgh markets. With the 
additional spectrum at 110 deg. W.L. and the two new satellites to be 
launched in 1999, EchoStar plans to expand its local channels service 
to Sacramento, Portland, Seattle, Las Vegas, St. Louis, Minneapolis, 
and San Diego, as well as offer local-to-local service in Alaska and 
Hawaii. In each of these markets we offer the four most popular network 
TV stations, and in some cities we offer highly-demanded independent TV 
stations as well. We strongly believe the resources and money EchoStar 
has devoted to providing Americans news, sports and weather from their 
local stations will best serve the public interest; our plans offer for 
the first time to many consumers in those markets a true choice between 
satellite television and cable. But without your help in reforming the 
Satellite Home Viewer Act, American viewers will continue to have 
little choice from the monopolies of cable.
    There have been some, outside the DBS industry, who have proposed 
``solutions'' purporting to give DBS the ability to carry local signals 
into the local market. These proposals, however, are inadequate on 
their face.
    Northpoint Technology (Northpoint) seeks to use the 12.2-12.7 GHz 
band for a point-to-multipoint terrestrial system that would, among 
other things, deliver local signals to DBS customers and compete in the 
MVPD market. However, EchoStar does not believe that Northpoint would 
offer an attractive local-into-local complement to satellite services, 
primarily because consumers find the combination of a satellite dish 
and a terrestrial off-air antenna cumbersome. Furthermore, all DBS 
operators have serious concerns that use of the same band for a 
different service could cause harmful interference for DBS services now 
enjoyed by more than 10 million subscribers. When the FCC allocated 
this band for use by DBS companies, it relocated terrestrial services 
because of the high-power, ubiquitous nature of DBS. While EchoStar 
welcomes competition from all sources, the first and fundamental rule 
that should be observed to promote effective competition to cable is 
``first, do no harm.'' The FCC should not consider allocating the DBS 
spectrum to another terrestrial service if it risks compromising the 
reliability and quality that makes DBS so competitive.
    EchoStar also strongly believes that the FCC should not allocate 
DBS spectrum to a terrestrial wireless provider in an attempt to 
establish competition to cable. The FCC has already set aside spectrum 
for ubiquitous or high-density terrestrial services such as 
Northpoint's and has licensed Multichannel Multipoint Distribution 
Service providers. In 1998, the Commission also auctioned broadband 
terrestrial spectrum for Local Multipoint Distribution Services, which 
could be used to compete in the MVPD market if such use proves viable. 
But because wireless cable in other bands has not proven to be a viable 
alternative to cable thus far, it would be inappropriate for the FCC to 
allocate DBS spectrum for yet another wireless cable solution and 
endanger the integrity of DBS, the only service that has proven a 
viable alternative to cable.
    Capital Broadcasting--a coalition of broadcasters--has proposed a 
plan that would make its service available to DBS providers in about 67 
markets nationwide. Unfortunately, that plan is four to five years away 
and is technologically speculative. Capital has not even begun 
construction of its satellite system. The system would use very high 
frequencies--the Ka band--which experience signal attenuation and rain 
fade problems. The technology for using these frequencies has yet to be 
implemented commercially--let alone for the purpose of direct-to-home 
video. The FCC requires satellites using the Ka band spectrum to be 
positioned very close to one another, necessitating larger dishes. In 
fact, the permissible size of the dish using Ka band satellites is 
still unknown. The integration of such an offering with the current DBS 
services, which use different spectrum, conditional access, and digital 
transport standards, may also be problematic.
 must-carry is inappropriate at this point because satellite carriers 
                           lack market power
    While the additional spectrum we intend to acquire at the 110 deg. 
W.L. orbital slot will allow us to serve many more markets, this will 
not be possible if DBS distributors were to become subject to 
unreasonable, and probably unconstitutional, must-carry obligations. 
EchoStar believes it would be inappropriate for Congress to impose a 
must-carry requirement on satellite carriers at this point. The main 
reason why Congress imposed must-carry provisions on cable operators, 
and why the courts found it constitutional, was due to the bottleneck 
characteristics inherit in cable systems. Satellite carriers in 
general, and EchoStar in particular, lack that characteristic. Indeed, 
it was only when cable operators indisputably gained real bottleneck 
power in the early 1990s that Congress imposed must-carry rules and the 
Supreme Court, after careful review, upheld them.
    Specifically, in enacting the 1992 Cable Competition Act, Congress 
found that: 2
---------------------------------------------------------------------------
    \2\  See Turner Broadcasting System, Inc. v. FCC, 117 S.Ct. 1174, 
1190-96 (1997) (Turner II).

 Cable operators had considerable and growing market power over 
        local video programming markets.
 Cable served at least 60% of American households in 1992 and 
        evidence indicated cable market penetration was projected to 
        grow beyond 70%.
 Cable operators posses a local monopoly over cable households, 
        with only 1% of communities served by more than one cable 
        system.
 ``Cable operators thus exercise control over most (if not all) 
        of the television programming that is channeled into the 
        subscriber's home . . . (and) can thus silence the voice of 
        competing speakers with a flick of the switch.''
 ``The structure of the cable industry would give cable 
        operators increasing ability and incentive to drop local 
        broadcast stations from their systems, or reposition them to a 
        less viewed channel.''
 ``Horizontal concentration was increasing as a small number of 
        multiple system operators (MSOs) acquired large numbers of 
        cable systems nationwide.'' In 1992, the 10 largest MSOs served 
        almost 54% of all cable subscribers compared to less than 42% 
        in 1989. By 1994, the 10 largest MSOs controlled 63% of the 
        cable systems, a figure projected to rise to 85% by 1996.
 ``Vertical integration in the industry was also increasing.'' 
        In 1984, cable operators had equity interests in 38% of cable 
        programming networks. In the late 1980s, 64% of new cable 
        programmers were held in vertical ownership.
 ``Cable systems would have incentives to drop local 
        broadcasters in favor of other programmers less likely to 
        compete with them for audience and advertisers.'' As the Court 
        explained, ``Independent local broadcasters tend to be the 
        closest substitutes for cable programs, because their 
        programming tends to be similar, and because both primarily 
        target the same type of advertiser: those interested in cheaper 
        (and more frequent) ad spots than are typically available on 
        network affiliates.''
 Cable carriage greatly increases the ability of broadcast 
        stations to compete for advertising, which substantially 
        increases viewership.
 ``Cable has little interest in assisting, through carriage, a 
        competing medium of communication.''
 Significant numbers of broadcasters had already been dropped 
        and a substantial percentage of independent stations were not 
        carried.
 In parallel with clustering, cable systems were looking 
        increasingly to advertising, especially local advertising, for 
        revenue.
 Stations that are dropped or denied carriage would be at 
        ``serious risk of financial difficulty.''
    On the basis of this evidence, the Supreme Court found that ``it 
was more than a theoretical possibility in 1992 that cable operators 
would take actions adverse to local broadcasters.'' 3 A 
majority of the Court accepted that cable's bottleneck power 
represented a sufficient enough threat to the broadcasting system to 
justify an important government interest in the promulgation of must-
carry rules.
---------------------------------------------------------------------------
    \3\ Turner II, 117 S.Ct. at 1192.
---------------------------------------------------------------------------
    Cable wasn't always such a behemoth. Like DBS, cable was once a 
fledgling technology and Congress, recognizing this, took a series of 
actions to help it grow.
    In fact, the history of cable television can easily be 
characterized as one of special favors from the Federal Government, 
allowing cable to compete against the monopolies of earlier eras. Back 
when broadcast television and telephone companies occupied the monopoly 
positions that the cable industry occupies today, cable regularly went 
to the government looking for help that would enable it to compete. As 
Rep. Edward Markey, ranking member of the House Commerce Subcommittee 
on Telecommunications, Trade and Consumer Protection, said in a recent 
hearing:
          ``What we've done . . . over the years, is we've said, to 
        industries, to the cable industries, tell you what, we'll give 
        you access to every television station for free, in the 1970's. 
        We'll give you access to every telephone pole or electric pole 
        in America, because we don't want you to have to build your own 
        poles. Now, that's not perfect, but it gets you in the game.'' 
        4
---------------------------------------------------------------------------
    \4\ Video Competition: Multichannel Programming: Hearings Before 
the House Subcommittee on Telecommunications, Trade and Consumer 
Protection of the Committee on Commerce (Apr. 1, 1998) (Remarks of Rep. 
Markey).
---------------------------------------------------------------------------
    More specifically:

 When cable was in its infancy, broadcasters tried to subject 
        cable to common carrier regulation, arguing that cable's growth 
        threatened them. The FCC, at cable's request, refused. Indeed, 
        the FCC put a ``heavy burden'' on broadcasters who claimed 
        economic injury from cable systems.
 At the same time, broadcasters did not want to allow cable 
        systems to retransmit their signals without permission. The 
        cable industry fought against such a so-called ``consent'' 
        requirement. In 1959, Congress sided with the infant cable 
        industry, refusing to adopt a consent requirement for 
        retransmission of local broadcast signals. Eventually, in 
        Fortnightly Corp. v. United Artists Television, Inc., the 
        Supreme Court held that cable systems did not have to obtain 
        consent of the copyright holder or pay royalties to retransmit 
        copyrighted material on distant television signals. Congress 
        left this decision unchanged until 1976. With the 1976 Act, 
        Congress gave cable operators a broad compulsory license to 
        retransmit broadcast signals.
 In the 1960s and 1970s, local telephone companies refused to 
        allow cable operators access to utility poles, utility ducts, 
        and conduits, effectively preventing some operators from 
        reaching their customers. Again, the cable industry looked to 
        the government to step in, and Congress in 1979 enacted the 
        Federal Pole Attachment Act in order to prevent telephone 
        companies and other utilities from charging unreasonable rates 
        for the attachment of cable television equipment to poles, 
        ducts, conduits, and rights-of-way.
 Not many years later, Congress, at the request of the cable 
        industry, enacted the Federal Cable Act of 1984, allowing state 
        and municipal governments to grant cable operators exclusive 
        franchises (which were prohibited only in 1992). That same 1984 
        Act granted cable operators the right to use easements or 
        rights-of-way dedicated for electric, gas, telephone, or other 
        such utility transmission--rendering unenforceable private 
        arrangements which seek to restrict a cable system's use of 
        such easements or rights-of-way. Indeed, the 1984 Act 
        introduced vast deregulation of the cable industry. Congress 
        re-regulated cable only in 1992, when its market power had 
        become too formidable and the abuse of that power had become 
        too blatant to ignore.
    EchoStar is not asking for government favors like those that cable 
operators secured so many times. At the same time, it is simply 
inappropriate to saddle EchoStar with must-carry obligations that were 
imposed on cable operators only after (and because) they had amassed so 
much monopoly power. Further, we believe any reform of SHVA you 
consider in conjunction with the House Judiciary Committee should allow 
DBS to offer local stations without having to carry all of the stations 
in a given market until the DBS industry has some level of market 
penetration.
          fair retransmission consent agreements are essential
    Accompanying local signal carriage should be the ability for DBS 
providers to get retransmission consent agreements with broadcasters 
under the same terms broadcasters give to cable. Our hope is that when 
we unequivocally win the full-fledged right to provide local stations 
to local markets, the TV stations we seek to carry in each of these 
markets will give us retransmission consent agreements to the extent 
required. Since EchoStar launched its DISH Network service in 1996, we 
have been seeking those agreements with broadcasters nationwide. We 
believe the broadcaster has, to the extent required, the right to 
control its own signal, but our lack of market power as an industry and 
as a company gives broadcasters no incentives to offer us fair terms. 
Conversely, the cable industry's market power translates into great 
leverage over whether the broadcasters deal with us enthusiastically or 
not. In seeking agreements with the broadcasters, we have had numerous 
executives tell us that they would be willing to give us agreements, 
but they have declined because they fear angering the cable companies 
they deal with. We urge you to make sure there are provisions, in any 
legislation passed, that will ensure that DBS is able to get 
retransmission agreements from broadcasters on terms that are 
comparable to those enjoyed by cable operators--terms that are fair and 
equitable.
                        distant network signals
    This Committee's decision concerning the retransmission of distant 
network signals to households that cannot get truly adequate network 
signals is as important to EchoStar as the decision concerning local-
into-local retransmission. It is important to distinguish between 
retransmission of local signals from distant signals.
    Retransmission of local signals does not threaten the network 
affiliate relationship, which the ``unserved households'' restriction 
was intended to protect. The signal being retransmitted by satellite is 
the local network signal, not that of another affiliate of the same 
network. For that reason, EchoStar believes that local-into-local 
retransmissions are within the scope of the current copyright license, 
although legislation is still necessary to confirm this.
    With respect to distant signals, EchoStar acknowledges that 
retransmission of a distant signal where a local signal is truly 
available would compromise the network-affiliate relationship. We 
recognize the legitimate concerns of the broadcasters and we are not 
requesting that such retransmissions be permitted. On the other hand, 
the consumers' interests are paramount for this Committee and for 
EchoStar, and it is important for all of us to work to ensure that each 
and every consumer without an adequate network signal has access to a 
distant network signal by satellite. In its recent Grade B 
Order,5 the FCC made several decisions in connection with 
the definition of ``Grade B intensity.'' While the FCC's actions were 
well intentioned, they also highlight the need for congressional action 
to clarify when a household can receive distant network service by 
satellite.
---------------------------------------------------------------------------
    \5\ Satellite Delivery of Network Signals to Unserved Households 
for Purposes of the Satellite Home Viewer Act, FCC 99-14 (rel. Feb. 2, 
1999) (Grade B Order).
---------------------------------------------------------------------------
    The FCC found, first, that it has no authority to adopt a higher 
value for Grade B intensity, corresponding to modern consumer 
acceptance standards, specifically for SHVA purposes. Second, it 
adopted a methodology for measuring television signal intensity at 
individual households. However, several aspects of that methodology, 
including the need to re-orient the test antennas to each and every 
station and make several measurements at different locations after each 
re-orientation, make it cumbersome and expensive, and thus a non-viable 
solution for testing at millions of households. Third, the FCC endorsed 
the so-called ``Individual Location Longley-Rice'' (ILLR) model for 
predicting whether or not individual households can receive signals of 
Grade B intensity. While this method is an improvement over the one 
used by the broadcasters in the Miami litigation, it still penalizes 
consumers who can only receive a strong signal with 50% confidence. 
Finally, the FCC identified several options for improving the SHVA and 
the Communications Act to better serve customers, including the 
following: confirming that copyright law allows satellite companies to 
provide local television stations to local markets; finding a ``better, 
but still objective, standard'' for determining which households are 
``unserved;'' repealing the 90-day waiting period for former cable 
customers; and providing for a ``clear statutory acceptance'' of 
predictive models and loser-pays mechanisms.
    We join with the rest of the industry in urging you to reform SHVA 
so that the law gives the FCC the authority to set a signal reception 
standard that ensures, with a high degree of probability, that the 
signal can be received in the home at the television set.
                               conclusion
    DBS as an industry has to be able to say to potential subscribers, 
as we have in one of our most recent advertising campaigns: ``dump 
cable--we can give you what they can give you.'' We are asking you and 
your colleagues in the Senate to reform the Satellite Home Viewer Act 
so that it ultimately lets the consumer decide whether we have a 
product that competes. We think our product will compete more 
vigorously if placed on a more equal footing. Reform the law so that 
DBS can retransmit local programming without having to bear the burden 
of must-carry until the DBS industry can become a more vigorous 
competitor to cable. And finally, we ask that you encourage the FCC to 
develop a realistic method for predicting who is eligible to receive 
broadcast signals and for measuring signal strength.
    If you take action now, you will help the Direct Broadcast 
Satellite industry fulfill the promise made by Congress to the American 
people when Congress signed into law the Telecommunications Act of 
1996. The promise was for effective and uninhibited competition. That 
is what consumers want and they should not have to wait.

    Mr. Tauzin. Thank you very much, Mr. Moskowitz.
    The Chair himself for a round of questions, and we will try 
to quickly and carefully limit everyone, including myself, to 5 
minutes, so we can get through. If we have time, we will try to 
do a second round, if anybody wants any further questions.
    Let me start by asking Mr. Perry, using your technology and 
assuming that the FCC would implement its new predictive model, 
how many of the viewers who are going to be cutoff this weekend 
would not have to be cut off?
    Mr. Perry. Approximately 10 percent.
    Mr. Tauzin. How many households is that?
    Mr. Perry. There are 744,000 scheduled to be disconnected. 
So 75,000.
    Mr. Tauzin. Seventy-five thousand households would not have 
to be disconnected. And of the 2.2 million households 
eventually affected by the order, would that number still be 
about 10 percent?
    Mr. Perry. It should hold true, yes.
    Mr. Tauzin. So we are talking about over 220,000 households 
might not have to get disconnected, right?
    Mr. Perry. That is correct.
    Mr. Tauzin. Let me turn to you, Mr. Fisher. I understand 
that Direct TV has said that they intend to requalify of all 
Primetime 24 subscribers. Using the FCC's new predictive model, 
if those 220,000 citizens who would be entitled to receive the 
long-distance network signal would not have to be disconnected, 
why cannot you and the satellite industry go to court and 
voluntarily ask for a delay in time to let this happen, so 
that, instead of disconnecting these people and reconnecting 
them later, we can have an orderly process of this matter?
    Mr. Fisher. Mr. Chairman, to the best of my knowledge, of 
the 70,000 that Mr. Perry has just referred to, overwhelmingly 
they are in fact receiving the authorizations; they are 
receiving the waivers. The crisis does not exist, sir.
    Mr. Tauzin. Mr. Hewitt, you had showed us some picture 
indicating a satellite consumer who was going to get cutoff. I 
don't know if you dispute whether that citizen is going to get 
cutoff or not, but, Mr. Fisher, having looked at that, would 
you agree that that person ought not get cutoff of a satellite 
signal?
    Mr. Fisher. If that is the signal that results from a 
conventional rooftop antenna that is properly aimed, clearly, 
that person should not be cut off. I would only say that, when 
the satellite industry brought tape after tape to Federal court 
and we went back to those same locations in place after place, 
wonderful Grade B signals were visible.
    Mr. Tauzin. Well, again, if there is a process underway 
whereby the 220,000 subscribers who are not supposed to get cut 
off are not going to get cut off, that is one thing. But if 
those folks, or a goodly number of them, are not going to get 
cut off and have to be reconnected, it seems to me that some 
agreement to--what is it going to hurt to allow some time for 
the new FCC predictive model to be implemented, then for these 
citizens to be legally qualified, rather than waivered or 
anything else, to get the network signals over their 
satellites?
    Mr. Fisher. Mr. Chairman, I don't believe there is any 
reason that people in the white areas should be cut off at the 
end of February. And I believe our industry is working very 
hard to assure that is the case.
    Mr. Tauzin. But the concern is, obviously, for those 
citizens who will be cut off, nevertheless, and who under the 
new predictive model would not necessarily have to be cut off, 
and you are telling me that is not going to happen. And I am 
hearing from an awful lot of people that it is going to happen.
    Mr. Fisher. Mr. Chairman, I appreciate that, and I know the 
noise level on this has been extremely high. We have called 
upon Decisionmark to, as rapidly as possible, use the FCC 
suggestions. And I can only tell you that our industry believes 
in the most fervent way that we are, in fact, providing those 
waivers to everyone who is qualified under the newest 
interpretation of the FCC regulations.
    Mr. Tauzin. How many waivers have been allowed so far?
    Mr. Fisher. I believe it is in the tens of thousands, sir.
    Mr. Tauzin. How many? Twenty thousand, 30,000?
    Mr. Fisher. We let 3,000 go in Seattle ourselves.
    Mr. Tauzin. Well, you are up to 75,000, because that is the 
number that is going to cutoff this weekend, absent the 
implementation of the FCC's new predictive model.
    Mr. Perry. As of last night at midnight, 67,000 individuals 
had requested waivers on their own.
    Mr. Tauzin. And how many have been granted?
    Mr. Perry. Approximately 37 percent.
    Mr. Tauzin. Thirty-seven percent of the 60,000?
    Mr. Perry. Yes.
    Mr. Tauzin. So we are talking about a considerably smaller 
number than the 75,000 who should be qualified under the new 
FCC predictive model to receive the signal.
    Mr. Perry. We are running in parallel here. We have the 
customers who come in through our GETAWAIVER.COM website, and 
then we have the process whereby we are requesting waivers on 
behalf of the NAB for CBS and FOX, and that number is very 
different than the GETAWAIVER.COM site.
    Mr. Fisher. Mr. Chairman, can I add a note, because it is a 
little confusing? There are two systems simultaneously. There 
are people who are cognizant that they need to request a 
waiver. Mr. Perry has just explained the rate of waiver 
production in there. At the same time, our industry is 
proactively going forward to try to find the people who have 
not requested waivers, but we know should get them.
    Mr. Tauzin. But you are talking about nationwide, and not 
necessarily those subject to the injunction, too. The numbers 
are awfully fuzzy here. All I am saying and all I am asking is 
that, before the Congress has to leap into the breach with the 
moratorium, which we are going to do if we have to, it seems to 
me that the parties going to court and asking for a brief time 
to let the new FCC model be operative would be a wise course of 
action. And I will leave you with that thought.
    I yield to my friend, Mr. Markey, for a round of questions.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    It is an interesting dilemma that we have because we all 
know that the largest percentage of the people we are talking 
about who are going to be affected are middle and upper middle-
class people who in no way are affected by buying because they 
are going to get a lower price from satellite than they are 
going to get from cable. It is not in any way affecting cable 
rights that we can identify in the country.
    We also know that a lot of these people like to pick up the 
New York City news or the Chicago news when they are at home 
because it is part of a mobile upper middle-class group of 
people as well. So they are not as closely tied to the local 
community. They don't have the attachment to it.
    So that is kind of a countervailing consideration here, 
too, because we do create this disconnect to the local 
community, the people we get into this era without a solution 
to the local-to-local issue, because, clearly, you have got a 
problem which doesn't affect ordinary consumers. It is 
affecting a very special slice of consumers that advertisers 
are targeting. This is the special little group of people with 
money in their pockets in the above-average income groups that 
people market Oldsmobiles to and market these products that 
clearly fuel a lot of the local news and public interest 
programming on local television stations. I mean, that is the 
bottom line on this. I am not getting any calls from blue 
collar or poor people about this issue. We all know who is 
calling in. So it is an interesting set of issues.
    What I would like to ask you, Ms. Collier, if I could, I 
understand that your service, which brings in local TV 
stations, can help consumers get a more comparable service to 
what cable offers. But what will your service cost and how soon 
will it be running?
    Ms. Collier. Our service will compete head-to-head with 
cable television and will compete primarily on price and 
quality. It will be a digital service. I understand digital 
television here in the District is $80. Our intention is to 
sell our service for around $17.95 for a comparable service.
    Mr. Markey. And when can you do that?
    Ms. Collier. And we can begin selling this service after we 
are authorized and licensed within 6 months in 10 of the top 30 
markets, identifying those that have the least amount of 
competition, and then on a nationwide basis within 2 years.
    Mr. Markey. How long does the FCC tell you that it will 
take in order to get this process completed?
    Ms. Collier. They haven't given us an indication.
    Mr. Markey. How long will it take, Ms. Lathen?
    Ms. Lathen. As I understand it, the applications are 
currently pending before the Wireless and International 
Bureaus, and I can't speak on behalf of the Wireless or 
International Bureau, but I understand that they are going to 
be looked at this summer.
    Mr. Markey. Yes, well, clearly, we need to integrate this 
process. If the solution is in one bureau and the problem is in 
another, we have to have some way of bringing together the 
various bureaus.
    Ms. Lathen. Can I correct that? I have someone here from 
engineering who could speak more specifically to that, if you 
like.
    Mr. Markey. On the timing?
    Ms. Lathen. Yes.
    Mr. Markey. Okay, yes, quickly, please.
    Mr. Franca. Deborah was quite correct in that this is 
related to another proceeding. There are competing parties that 
also want to use the DBS spectrum for----
    Mr. Markey. Would you get in closer, please?
    Mr. Franca. They want to use the same spectrum that 
Northpoint is suggesting to use for other purposes, and the 
Commission is going to have to address and make a decision on 
which of these competing uses is most appropriate. So we will 
be addressing that in this summer, and then after that we can 
address the----
    Mr. Markey. Does that mean you have to auction or do you 
have another way of dealing with it?
    Mr. Franca. Well, Northpoint is suggesting that its 
operations would be secondary to the DBS operations. So I think 
that gives us some flexibility on whether or not we have to 
auction for this particular service.
    Mr. Markey. Okay, thank you.
    Mr. Tauzin. Before you leave, would you identify yourself 
for the record?
    Mr. Franca. My name is Bruce Franca. That is F-R-A-N-C-A. 
I'm Deputy Chief of the Office of Engineering and Technology.
    Mr. Tauzin. Thank you.
    Mr. Markey?
    Mr. Markey. If I may, obviously, when we passed this law 
originally, it was to deal with people who live in Mr. 
Boucher's district. That was why we passed it.
    Ten years later, you have the 18-dish satellite with people 
in my district who have purchased them, and they are well 
within the Grade B, and that is where it gets complicated, 
because it is moving over into my territory and my 
constituents. I am trying to weigh--well, in Massachusetts, you 
know, we have a--anyway, it becomes more of an urban and 
suburban issue as you move to the 18-inch dish. We have to 
weigh the equities under these local TV stations.
    Mr. Kimmelman, obviously, from a consumer perspective, we 
are in dire need of more effective competitors to incumbent 
cable operators. Do you believe that the FCC should explore the 
possibility of competition from terrestrial wireless 
technologies such as Northpoint?
    Mr. Kimmelman. I think the FCC should move very quickly to 
explore that possibility.
    Mr. Markey. On an expedited basis?
    Mr. Kimmelman. Absolutely. We have a problem here of 
competing competitors who are about to knock each other out 
before they ever get in the ring. There is a claim of--multiple 
claims for use of a spectrum. I think we need very quick 
regulatory action, and I hope also reinforced by the Congress 
because we haven't gotten the competition.
    Mr. Markey. And, yes or no, do you believe that the 
committee should look at inside wiring problems in multiple 
dwelling units and apartments that cable competitors are 
encountering?
    Mr. Kimmelman. As I said, I think we should get away from 
the business of balancing interests here. We should go single-
mindedly toward competition. I think everyone should have 
access to the wires out there. Everyone should have access to 
the spectrum who wants to compete in a fair manner, and phase 
in other obligations like must-carry, so that we get more 
competition faster.
    Mr. Markey. Ruthless Darwinian, Adam Smith competition?
    Mr. Kimmelman. Absolutely.
    Mr. Markey. I am with you, Mr. Kimmelman. I just say, take 
off the gloves and let them go at it.
    Thank you.
    Mr. Tauzin. Thank you, Mr. Markey.
    Just for the committee's purposes, let me tell you that at 
a meeting with the chairman this morning it was agreed that we 
will sometime this year hold hearings, hopefully very soon, on 
the question of inside wiring and competition for multi-family 
dwellings, as well as multi-commercial tenant buildings. There 
are some heavy issues of competing legal systems there that we 
are going to need to discuss at that hearing.
    The Chair is pleased to recognize Mr. Cox for a round of 
questions.
    Mr. Cox. Thank you.
    I would like to ask Mr. Moskowitz to expand on his point 
that must-carry--and address that specifically; you also 
mentioned retransmission consent--would be a burden and an 
impediment to your expansion. You are only serving 2 million 
people right now nationally. Tell me, for example, in the 
context of Los Angeles, where, according to your written 
testimony, you are providing Fox, ABC, CBS, and NBC, and I take 
it nothing else of local programming or----
    Mr. Moskowitz. No, we actually provide KTLA as well.
    Mr. Cox. And KTLA?
    Mr. Moskowitz. Yes.
    Mr. Cox. Tell me what kind of burdens you are seeking to 
avoid, using that example?
    Mr. Moskowitz. Well, I guess probably the easiest way to 
explain it is that, for every five additional signals that we 
have to carry as a result of a must-carry in a particular 
city--and L.A. is a good example because it has got probably 
five more stations which we would be obligated to carry as a 
result of must-carry. For every five additional we have to 
carry, that is one less city that we can provide local channels 
to. So if we have to comply with a must-carry in Los Angeles, 
it means that we probably have to take Salt Lake City or 
Phoenix, or one of the second-tier, not top 10, cities off of 
our service until such time as compression increases and we can 
put more channels on per transponder or the market tells us 
that our idea is right, and Wall Street will be willing to 
finance the construction of spot-beam satellites, which all the 
re-use of the beams.
    Mr. Cox. And if I were an EchoStar subscriber in Los 
Angeles and must-carry were imposed, what would I be getting, 
in addition to Fox and CBS and NBC and ABC and KTLA--and did 
you say PBS, also?
    Mr. Moskowitz. We do not have the PBS from L.A., but, of 
course, PBS has applied to do a national feed to supply it 
there.
    Mr. Cox. What would be the half dozen other things that you 
would add?
    Mr. Moskowitz. There would be----
    Mr. Cox. It may not be a fair question. You may not know 
off the top of your head.
    Mr. Moskowitz. No, it is a fair question. I believe I can 
answer it.
    Certainly, there would be a PAXNET channel, but we already 
have a national agreement with PAXNET that they are going to 
provide us a national feed, and not going to ask us to carry 
the local feed in every community. There would be a UPN and a 
WB, but we certainly carry a UPN and WB today. There would be a 
Home Shopping Channel that has no local content, and a number 
of other services that have absolutely no local content to Los 
Angeles, but which we would be required to carry and which we 
already carry on a national basis.
    Mr. Cox. You already Una Vision in L.A.?
    Mr. Moskowitz. I am sorry?
    Mr. Cox. Una Vision, do you have that on your L.A. system.
    Mr. Moskowitz. We have asked to carry Una Vision in L.A., 
and Una Vision has asked us to carry a national signal instead. 
We probably--I believe, actually, we already carry their 
national signal.
    Mr. Cox. And would a must-carry requirement impact that?
    Mr. Moskowitz. It is unclear. It depends on how the law was 
structured. Certainly we have reached agreement with Una Vision 
about whether we should or should not. We wanted to carry Una 
Vision, Los Angeles, because it has a wide market share. They 
did not want us to do so.
    Mr. Cox. It looks like I have a moment remaining for 
perhaps an additional question. Ms. Collier, you stated in your 
testimony that there ought not to be any interference from your 
use of the same bandwidth that is being used for other 
purposes. Do you want to expand perhaps technically on that?
    Ms. Collier. We intend to operate as a second basis to DBS. 
So we wanted to prove that we do not have interference and 
prove that, on an actual demonstrated basis, it is certainly 
reasonable for people to have a concern about interference, but 
there has to be actual interference for it actually to be a 
problem. So that has been the focus of our testing work for the 
last 2\1/2\ years.
    In our most recent report, which I show here, we did a 
very, very comprehensive test with the participation of both 
USSB and Direct TV in our work, and we operated our hotline and 
we tested many, many different sites. We show that there was 
not interference to the system through the DBS customers. We 
tested the EchoStar customers also. Even though they weren't 
present, we tested those customers also.
    So we showed that we didn't have interference. The reason 
that we don't have interference is we used the exact same 
principles to share spectrum that satellites share spectrum 
today. The EchoStar and Direct TV today use the very same 
spectrum as one another. We use that same principle to share 
spectrum on the ground.
    Mr. Cox. Thank you. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Cox. The gentleman from 
Virginia, Mr. Boucher, is recognized.
    Mr. Boucher. Thank you very much, Mr. Chairman.
    Let me pick up on the question that my friend from 
California was just asking concerning the use of the DBS 
spectrum by Northpoint in order to offer a competing service. 
Mr. Hewitt, do you have any concerns about the potential for 
interference with the DBS signal if that spectrum is used by 
other providers?
    Mr. Hewitt. Congressman Boucher, we are very, very 
concerned about the interference issue that could occur. We 
would embrace the Northpoint proposal should they use a 
different spectrum than DBS. Engineers from Direct TV, 
EchoStar, and USSB have all indicated to us that it is not 
really possible in a consumer environment to coordinate the 
signals, both in a transmit and receive area.
    The consumers place their dishes all over--rooftops, the 
ground, and on patios. Reflections of the signal off buildings 
and other things will cause interference. The FCC has just 
cleared out the DBS spectrum in order for us to compete. We are 
now competing, and we believe very strongly that this is a 
high-risk thing to cause the jeopardy of existing consumers and 
the future consumers of DBS.
    Mr. Boucher. I trust you have made those views known to the 
FCC in the proceeding that is underway there?
    Mr. Hewitt. I believe we have, yes.
    Mr. Boucher. If you haven't, I would suggest you do.
    I have a question for our friends from Raleigh, North 
Carolina about local-to-local. My district is quite rural. We 
have smaller television markets in my district, but we are just 
as anxious for the local-to-local service to arrive for us as I 
am sure many viewers in the cities are.
    I was given some confidence that we would get that service 
quickly, when last year Mr. Goodman from your company was 
indicating at that time an intention to uplink and then spot-
beam down into the market of origination all 2,000 local 
broadcast stations across the United States--in essence, 
serving all of the 211 television markets in the Nation. Is 
that your business plan today?
    Mr. Hutchinson. Two things have changed since last year.
    Mr. Boucher. I was afraid of that.
    Mr. Hutchinson. One is that the digital standard is now 
known, and we have better projections of how fast it is going 
to be upon us. I think one of the most telling events recently 
has been the announcement by the CBS television network and 
Time-Warner Cable that the cable system will carry on the CBS-
owned and -operated stations the full high-definition digital 
signal. And other cable systems, digital cable, are sure to 
follow.
    So if we are unable to offer it at a digital standard, even 
though it takes more spectrum, then we cannot make DBS truly 
competitive with digital cable, not long-term. We might have a 
3- or 4-year business, but certainly not a 15-year business, 
the life of these satellites.
    Mr. Boucher. So how many markets do you intend to serve?
    Mr. Hutchinson. Our current projections with the current 
frequencies that we know we have are somewhere on the order of 
about 68 markets, chosen based on where the most people were. 
How do we serve the most Americans?
    Now we started out with a sincere concern for all of the 
markets, as you know. That was the goal. We would be very 
willing to share the technical plan with any entity that felt 
they could build that out. It is really an economic problem. It 
has been suggested, for example, that we might want to use a 
model from the rural co-ops. Perhaps there is a way to look at 
this more creatively financially and extend it.
    Additionally, we have been to the FCC and asked for some 
special consideration on an additional mid-band of 250 
megahertz, that if we could use those signals, those 
frequencies that aren't being used, we could extend the markets 
farther right now.
    We also recognize that, with digital compression in the 
future, we may very well be able to use what we have to extend 
out, but we don't want to overpromise today beyond what we know 
we can deliver.
    Mr. Boucher. Well, that is a thorough answer. I am 
disappointed in the result, but I appreciate the specificity 
with which you announced it.
    Let me just ask one additional technical question of you, 
and then I have a question of Mr. Fisher. I was interested in 
what I have understood your statement to be concerning the 
ability of the subscribers of both EchoStar and Direct TV to 
have access to your local-to-local service without having to 
buy a second dish. Did I understand you correctly, and is that, 
in fact, the situation?
    Mr. Hutchinson. That is correct, in that we propose a 
uniform, unified platform that is in the same arc as both of 
them, so that a single dish can see both. We are proposing that 
we put our KA encoder chip in each of their boxes, that we 
cooperate on that, and that the single dish bring in both.
    Mr. Boucher. Mr. Chairman, with your indulgence, I do have 
one question for Mr. Fisher, and it is very much in pursuit of 
the line of inquiry that you announced earlier.
    Mr. Fisher, we heard from Mr. Hewitt earlier that he is 
very interested, his industry is very interested, in having the 
Commission be given the opportunity to develop a specific 
standard for determining who is eligible and who is not to 
receive a network signal delivered by satellite. That would be 
more far more reliable than the standard that was put into 
effect by the U.S. District Court in Florida, which is 
essentially the Grade B, or the standard that is based on 
Longley-Rice.
    Now Mr. Hewitt has recommended TIREM. The Commission on its 
own recently, in a very short period of time, came up with a 
standard that is better than Longley-Rice and offers a greater 
degree of predictability. I would assume that the organization 
for which you speak today would have no objection to the 
Commission having an opportunity to develop that special 
standard, so that all of our interests are better served by a 
higher degree of predictability in the future as to who and who 
cannot get signals from local stations. Would I be correct in 
making that assumption?
    Mr. Fisher. Mr. Boucher, if the current standard turns out 
to not effectively predict, which so far it has, clearly, 
anything that helps to improve that standard is worthwhile. I 
am tempted to say that each time the facts have been asked for 
it keeps emerging that the Longley-Rice formula, now with 
additional amendments, seems to do a heck of a good job. I fear 
that, no matter how good a job it does, those who just don't 
like the predictions to come out will keep saying, let's change 
the standard.
    Let me pass along one piece of information which to me was 
pretty illustrative. You are known widely as both thoughtful 
and expert in this area, and I have struggled with the 
realities that you have noted that many people in your 
district, notwithstanding that the old standards seem to 
suggest they should get a signal, you felt convinced they 
really couldn't.
    I was handed information today that in, in fact, the 
Longley-Rice model, as refined most recently by the FCC, that 
one of the stations whose statistics were handed to me a couple 
of hours ago, the CBS affiliate from Tri-Cities, would in fact 
have its service area cut in half. In other words, your 
suggestion over the years that many people in your area simply 
couldn't see a Grade B signal now are justified by the Longley-
Rice formula itself.
    Again, my summary to you is, if standards don't predict, we 
want them to predict. Remember, we are willing to go with loser 
pays. So the last thing we want are standards that don't 
predict. But every information we keep coming up with is that 
the standards, in fact, do predict.
    Mr. Tauzin. I can say with certainty that the gentleman's 
time has expired. Thank you.
    The Chair will yield to the gentleman from Georgia, Mr. 
Deal.
    Mr. Deal. Thank you, Mr. Chairman.
    In my rural north Georgia area, we have some cable systems, 
and somebody who has a cable running to their home doesn't have 
to ask the question of whether or not they meet the Longley-
Rice formula or anything else. So I am one of those that wants 
to cut to the chase and ask, why can't we just solve the 
problem, instead of spending a lot of time and money deciding 
whose formula is right or whether you have an adequate Grade A 
or Grade B signal. Why don't we just get to solving the issue 
of local-to-local?
    In talking and asking that question, most people agree that 
is really the first issue we ought to deal with. So if we all 
are pretty much in agreement that the local-to-local is an 
issue we ought to solve, then I think this committee 
understands that we can begin that process, hopefully.
    Let me ask a couple of other questions. I understand that, 
Mr. Fisher, a local affiliate would prefer that they have the 
opportunity to provide that broadcast signal because they are 
local and they sell advertising. But, for example, if you miss 
the CBS news on the eastern time schedule, what is so wrong 
with having the opportunity to pick it up 2 hours later on the 
western broadcaster? I am not particularly concerned about 
going down to Pete's Hardware in San Diego, California. Their 
advertisers are not a threat to your advertisers from an 
Atlanta affiliate. What is the problem with that?
    Mr. Fisher. Well, there are a couple of problems. The first 
thing is that we would love to think that somebody could, after 
all these years, have a VCR that would allow them to just punch 
it and watch that CBS news when they wished with their local 
advertis-

ers and their local weather warning and their local public 
safety announcements and their local channel announcements 
right in there.
    But the difficulty is that we have negotiated and paid 
dearly for program exclusivity, for the right to occupy the air 
time with programs that we purchase and fill it with 
advertisements. When the CBS Evening News is run several hours 
later from the West Coast, those folks are now looking at a 
program source that was ours exclusively--that is, the 
provision of the CBS news at a specific time of day with our 
advertisers in there--and now suddenly they are looking at it 
with somebody else's advertisers. It is a real economic problem 
to us.
    All we have is advertising. When the revenues are trimmed 
or dried up or unable to serve all those other folks--I might 
point out a third of the country isn't wired. They have chosen 
not to and in some cases will never be able to afford to be 
wired, and they need to have stations with strong economics.
    Mr. Deal. Okay, I am not sure that I buy totally into that 
solution, but let me ask another one because you are familiar 
with my area. Mine is one of those where it is not common, 
since the FCC's broadcast areas do not go by State lines, in 
the northwestern corner up there, as you know, Chattanooga is 
the dominant area. Those people in northwest Georgia are in the 
primary signal from Chattanooga. But they don't particularly 
want the Chattanooga local news from that national affiliate. 
They would much prefer to have yours. How do we solve that 
problem with satellites?
    Mr. Fisher. That has been a tough discussion internal in 
the business, and it is one of the compromises we all made. 
Many smaller television communities were very concerned that 
larger stations would bleed in if satellite technology existed. 
For folks in smaller communities I consider that to be a 
realistic concern, that regional superstations would sprout up. 
So those of us with larger stations agreed that we would only 
allow our signals--and we would be comfortable with a system 
that only allowed our signals--to be transmitted in our local 
market area.
    The good news is that, as digital television unfolds, we 
think that those signals may, in fact, get out there much more 
cleanly than they do. In fact, there are a fair number of 
rooftop antennas of the new kind that are available that may, 
in fact, bring WSB television signal out to northwest Georgia.
    But it is a problem. It is the nature of the television 
business. I would be loathe to tell the Chattanooga market that 
they ought to simply allow WBS television to come on into their 
area.
    Mr. Deal. But how do we eliminate the discrimination 
between the fellow who has the cable in his home and the fellow 
who has to rely on a satellite transmission?
    Mr. Fisher. Well, now----
    Mr. Deal. The cable fellow has yours and Chattanooga as the 
affiliates.
    Mr. Fisher. There are a small number of areas in which that 
is the case, and those are grandfathered from the beginning of 
the system. Today, in general, you must rely on a television 
station from the market in which you are located.
    Mr. Deal. I don't think long term that is a good solution 
because you still put the satellite subscriber at a 
disadvantage with this cable competitor over here. For those 
who don't even have cable access, I don't think that is quite 
fair.
    I would ask the industry to start looking at a solution for 
that, because in my district it is not only Chattanooga on the 
northwest; it is Greenville, Spartanberg coming in on the east.
    Mr. Fisher. That is a good question. That is worth looking 
at.
    Mr. Tauzin. Thank you, Mr. Deal. The Chair is pleased to 
recognize the gentlelady from California, Ms. Eshoo, for a 
round of questions.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to 
everyone that has testified. I have two questions. The first I 
would like to direct to Mr. Hewitt, and the other to Ms. 
Collier.
    My question to Mr. Hewitt is the following: Yesterday a Mr. 
Hartenstein from Direct TV told a Senate hearing that he would 
donate subscriber fees to charity if illegal customers were 
grandfathered under Senator McCain's bill. Today Direct TV says 
that they will continue providing service to illegal 
subscribers using a company other than Prime 24 to avoid the 
court order.
    So my question is I think pretty obvious. Is the offer to 
commit or donate the revenues to charity still on the table? I 
just want to add that, in any event, I mean, since the Miami 
court issued the injunction based on the notion of irreparable 
harm to broadcast stations, don't you think they deserve the 
money to replace the lost viewers and the ad revenue?
    Mr. Hewitt. Well, those are two separate issues.
    Ms. Eshoo. Are you dividing them or----
    Mr. Hewitt. They are truly divided. I don't think they are 
directly related. I think what Mr. Hartenstein said that Direct 
TV is willing to do is take future profits from Fox and CBS and 
provide them to a charity, so long as Fox and CBS would 
grandfather those existing consumers in the marketplace.
    What also took place, which is a relationship between 
themselves and Primetime 24, which I am not privy to those 
contractual agreements, but what they have announced is, which 
is different than what I think the perception is, what they are 
going to do is, now that they are uplinking from other sites, 
they are going to go and put in the FCC new ILLR, which is the 
new predictive model, and go back through and requalify all 
these consumers. They will terminate consumers who do not 
qualify under the FCC's new rule. So they are proceeding to 
abide by the FCC rule and are going to implement the FCC rule.
    Ms. Eshoo. We live in interesting times.
    I am not going to pursue that. I think that it is important 
to place these issues on the table. My interpretation of what 
was said over in the Senate yesterday is a little different 
than yours, but that is fair enough.
    Mr. Tauzin. Would the gentlelady yield?
    Ms. Eshoo. I would be glad to.
    Mr. Tauzin. Mr. Markey and I would like to suggest that you 
give the money to save social security first.
    Thank you.
    Mr. Blunt. Mr. Chairman, that would have to be 100 percent 
or 62 percent or 57.
    Mr. Tauzin. The gentlelady has the time.
    Ms. Eshoo. Thank you.
    Ms. Collier, thank you for your testimony. I think that you 
have not only heightened the committee's expectations of where 
your company is going and what its capacities and capabilities 
would be, but also I think piques our interest in the whole 
issue of multi-channels, video market, and what we can do to 
really realize competition.
    Can you tell us more about your Internet capabilities? What 
kind of broadband applications do you anticipate seeing for 
individuals, for community groups? Give us a taste of that.
    Ms. Collier. One of the most intriguing aspects of 
Northpoint is its ability to offer Internet services, and to do 
so at a low cost, to be not only highly competitive with cable/
modems, but perhaps bring these services to people's homes at 
lower cost. This will enable, because it will be locally based 
Internet service, it will enable new type of applications that 
might include distant learning, applications where persons can 
keep an eye on children in a daycare setting or nursing home 
contact. All different types of applications; it will be more 
community-based Internet applications. These, to me, are some 
of the most intriguing parts of the future of Northpoint as a 
local broadband system.
    Ms. Eshoo. Thank you. Mr. Chairman, I am going to do 
something unusual and yield back.
    Mr. Tauzin. That is. Thank you very much. The Chair is 
pleased now to recognize Ms. Barbara Cubin for a round of 
questions.
    Mrs. Cubin. Thank you, Mr. Chairman.
    I wanted to comment, when these members say they have rural 
areas, they need to see my district. I am from Wyoming. I 
represent 100,000 square miles with 480,000 people in the 
State. EchoStar has a big presence in our State, and we really 
appreciate it. We appreciate the expenditures that have been 
made.
    So I would like to refer to Mr. Markey's constituency, 
where middle-class and upper middle-class people are the 18-
inch satellite users. Well, in my district the poor people and 
the people who live in towns of 100--and there are many of 
those--that are 100 miles apart, those are the folks that are 
using the satellites. So they don't have to be wealthy. It is 
just a big difference.
    But, anyway, I would like to address some questions to Mr. 
Moskowitz. You said that you would like the policy to be that 
you should not have to comply with must-carry until you had 15 
percent of the market. How close are you to that now?
    Mr. Moskowitz. I wish we were closer, but we have a very 
small percentage of the market, less than 5 percent in every 
area, and in most cases less than 2 percent in any particular 
market.
    Ms. Eshoo. And have you been working on technology, or how 
close you are to have a program like North Star, or technology 
like North Star?
    Mr. Moskowitz. Well, Northpoint Technology is----
    Ms. Eshoo. Northpoint.
    Mr. Moskowitz. [continuing] a terrestrially based system. 
Obviously, we are a satellite-based system. There have been 
historically other systems that have tried to deliver video 
programming terrestrially. Wireless and MMDS obviously comes to 
mind. It is a system that didn't work. We certainly hope that 
Northpoint's technology is successful because we would prefer 
not to use our scarce bandwidth to deliver local programming by 
satellite. We have more valuable uses for it. We think we have 
to do this to compete with cable.
    We have some concerns with Northpoint in terms of 
interference issues, some significant concerns, but we 
certainly they are successful in it.
    Ms. Eshoo. Have you seen the studies that Northpoint has 
done, the tests, the results of the test? Have you seen those?
    Mr. Moskowitz. Yes, we have. Our engineers have evaluated 
those.
    Mrs. Cubin. And do you have any problems with the 
methodology or the models that are used?
    Mr. Moskowitz. Well, we have some problems with some of the 
results. Our indications are, at least preliminarily from our 
engineers, that particularly within a mile of the transmitter 
site, there is interfence with DBS services provided by 
satellite. Those interference issues may or may not be capable 
of being worked out, but certainly there are millions and 
millions of people who would live within a mile of the 
transmitter site in any particular Northpoint, and those things 
I think we would have to try to work out.
    Mrs. Cubin. Ms Collier, would you like to respond to that?
    Ms. Collier. Yes, I would. Actually, that Mr. Moskowitz is 
making is not accurate in the sense that the very first testing 
we did, we did in 1997 on the King Ranch, which is a very rural 
area. If you are speaking--the King Ranch is about the size of 
Rhode Island, and it was a complete piece of private property 
where we were able to test. Northpoint turned the power all the 
way up, turned it all the way down, pointed the dish here and 
there, and really put the system through its paces.
    It is true that at certain very high power levels we were 
able to turn off the EchoStar dish service at a mile at very 
high power levels. We would never operate at those power levels 
in an urban environment or in a real-world environment. So we 
were able, because we were on the King Ranch on private 
property, to test to failure.
    I think that the work that we did in an urban setting 
showed how we could operate. We have a number of techniques 
available to us that make the service area completely immune 
from interference to their services.
    Our report that we just filed in December, I hope you will 
have the opportunity to also evaluate more recent work that we 
did, and to take a look that we have done over a period of 
time.
    So I think that with any new technology, you want to learn 
what its envelope is, where it works and where it doesn't work, 
and, therefore, to focus it to where it does work. One place 
that we will work very well is actually in a rural area because 
our technology is very, very low cost. Therefore, it may 
actually be one of the first and best ways to bring advanced 
broadband systems to very rural areas.
    Mrs. Cubin. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Ms. Cubin.
    The Chair recognizes the gentleman from Illinois, Mr. 
Shimkus, for a round of questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    An interesting debate--free over-the-air broadcast has 
really been a hallmark of our society for a long time. Now, 
since we have the opportunity for profit through the selling of 
more signals, either direct satellite or to cable, we have more 
dilemmas.
    My district is also--actually, it is covered by four media 
markets--St. Louis, Quincy, Springfield, and some part of 
Paddukah, Kentucky. In that, there are many white areas in that 
I have two river systems, the Mississippi River and the 
Illinois River, which causes reception problems.
    But the basic premise of the local broadcast signal, and 
the importance of it, is critical not just for the local 
economy, but a local identity, and also, really health and 
safety concerns. We experienced in 1993 the Great Flood and 
levies breaking, especially on the Missouri side of the city of 
Quincy, in which lives were saved because of the coverage by 
the local affiliate on a 24-hour watch of the levy system.
    Also, during the spring and summer, we are in Tornado 
Alley, in which the technology is there by local broadcast 
standards to not only hear the sirens, but if you run down and 
turn on the TV, the local broadcast station--and I get mine 
through cable locally, so my wife can follow the C-SPAN 
activities--but they will now marry it down to the block. They 
will pinpoint. Not only if you hear the broadcast in the whole 
St. Louis metropolitan area, you can see if the tornado is 
heading toward Colinsville or Maryville or Edwardsville and be 
even more prepared.
    Sometimes we lose sight of----
    Mr. Tauzin. Would the gentleman yield?
    Mr. Shimkus. I will.
    Mr. Tauzin. Just to emphasize this point: We were in Peoria 
with the committee in the middle of one of those tornado 
alerts, and I will never forget how all the local broadcast 
stations, which were giving us block-by-block information as to 
where the tornado was coming, it was shut off the air so that 
the emergency broadcast signal could be turned on. All we heard 
on the emergency broadcast channel was that there were 
tornadoes in the area.
    The local systems were telling us block by block where it 
was, and that truly made the point for our committee members 
who were in Peoria at the time.
    Thank you, gentlemen, for letting me make the point.
    Mr. Shimkus. And, you know, the point that I am making is 
that, in this era of competition--and I really applaud the 
Direct Satellite Broadcast because we do need a competitor to 
cable--they have to carry the local signal for health and 
safety reasons, and, also, I think just the good government 
aspect of helping us keep our communities together and focused 
on even the good things, the public service announcements, the 
public service carrying of the Cancer Society and all those 
other activities. So I want to put that plug in.
    During my district work period, I was taken to a home at 
which time we, from that home, called to subscribe to a Direct 
Satellite Broadcast, which they said, okay, and you are in an 
area in which you can receive all the network signals. From 
that home, you could see the broadcast tower of the local 
affiliate. So there is a problem that has to be resolved, 
because we are talking about franchise and franchise rights 
that are important to keeping the local broadcast affiliate 
afloat. That was a pretty startling district work period, when 
you could make the call and then over the phone you hear you 
can get all these Chicago, New York affiliates, and then the 
tower is right there. Again, I think the point is made.
    I need to ask my two quick questions with that intro. Ms. 
Collier, the fact that I represent a rural area, I think in 
your testimony, in the questions that you answered, you think 
that you will have a great ability to serve a rural area with 
your technology, is that correct?
    Ms. Collier. Yes, it is. And as a matter of fact, we have 
affiliates, actually qualified, financially qualified business 
people who stand ready to offer this service in every 
television market in the country, and to offer it promptly and 
completely.
    Mr. Shimkus. And I need to ask a question to Ms. Lathen. 
The FCC recently revised its program access rules, but in doing 
so, declined to apply the rules to programming delivered 
terrestrially and to non-vertically integrated programming. 
Does the Commission believe it has the authority to send its 
rules to these two areas?
    Ms. Lathen. You are correct; we recently revised our rules. 
We did not believe that we had the authority to extend the 
rules to prpgramming delivered terrestrially. We believe that 
that was something that Congress could have done and did not 
specifically do that.
    Mr. Shimkus. Thank you.
    Mr. Moskowitz. Congressman, might I take a moment and 
address----
    Mr. Shimkus. The tower issue? Go ahead.
    Mr. Moskowitz. Permit me, Mr. Chairman?
    Mr. Tauzin. Yes, you may, please.
    Mr. Moskowitz. Thank you. I think it is important to keep 
in mind that we certainly agree that delivery of local news and 
weather alerts is very important. To the extent that a consumer 
living in a particular local area can receive his or her local 
programming with an off-air antenna, that consumer can and 
should do so, and can make the choice to do so, and would get 
those local alerts, whether they get DBS programming or not. To 
the extent the consumer lives so far from the tower that they 
can't get it with an off-air antenna, then certainly our 
providing distant network signal doesn't injure that consumers.
    But the other thing that came to mind is, even the consumer 
who lives in close proximity to the tower, can be in a position 
where they can't get a good signal. There are plenty who can 
get a good signal. But urban and suburban areas with tall 
building and other obstructions--the biggest problem we have 
today isn't really a signal that doesn't meet a Grade B 
standard; it is not strong enough. It is a problem with the 
ghosting that occurs that was okay in the 1950's because you 
couldn't expect anything better, but today people expect 
better. A signal that has 10 ghosts in it because it bounced 
off of 10 buildings around the consumer right around the tower 
isn't acceptable for consumers today.
    Mr. Shimkus. I will bring in my own show next time, but 
this was in a rural part of Illinois, farmland. The biggest 
building is the hog barn.
    I understand your point. The issue is there is a problem 
with the marketing of the ability for other network signals 
clearly within all of the parameters that we have to make a 
determination of, but I appreciate--we can solve this, though. 
We have got good competitors here and we are fighting and 
kicking and screaming, but we have got to fight for the 
consumer and for public safety concerns also.
    Mr. Moskowitz. I would say EchoStar, and I think others as 
well, have implemented systems that certainly would not allow 
that consumer close to the tower to get a signal without an 
actual test. That is how we operate.
    Mr. Shimkus. But you understand, if the consumer has to get 
two antennas and rely on two opportunities in two different 
ways, there is never going to be the competition that is need 
for cable. It is just not going to occur. It gets too 
confusing.
    Mr. Moskowitz. It is complicated and difficult.
    Mr. Shimkus. Thank you for your patience, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Shimkus. I want to point out he 
has big hogs in his district. He could have a log of bounced 
signals among those hogs.
    I want to recognize the gentlelady, Ms. Heather Wilson, for 
a round of questions.
    Mrs. Wilson. Thank you, Mr. Chairman. I think, like Mrs. 
Cubin, my constituents as elite and cosmopolitan as Mr. 
Markey's in that we have the fifth largest State in the Nation 
geographically with some of the fewest people in New Mexico. 
Indeed, in our State we have 40 percent of the Navajo Nation, 
which is the size of the State of West Virginia, that does not 
even have telephone service yet. So the idea that cable will be 
coming out to Windowrock is something that may be waiting until 
the 22nd century.
    In New Mexico, between 11 and 15 percent of people are 
already served by satellite dishes, not because they are the 
high end of the market, but because that is the only way they 
can get get a signal. In reality, in New Mexico we have a 
system where we have 298 translators from our stations, mostly 
based in Albuquerque, in order to cover all of New Mexico. So 
we are in a place where we are talking not people per square 
mile, but square mile per person.
    That is a different situation than most of my colleagues on 
this committee with few exceptions.
    Mr. Fisher, one of the concerns that I have--and has been 
expressed and explored by some others--has to do with the 
effect on a change for allowing Wild West, shall I say, 
competition and eroding the local broadcast market on what will 
happen to local broadcasters and local news. I would guess in 
that in most areas the first people to get satellites are not 
like my rural constituents, but those that are the high end of 
the economic scale, who are probably who your advertisers are 
looking to attract.
    From your business models, and the business models of the 
people that you represent, what percent of the market share 
lost would result in elimination or scaling-back of local 
television news?
    Mr. Fisher. I'm sorry, could you repeat the question, 
ma'am? I had a little trouble hearing it.
    Mrs. Wilson. Let me try.
    Mr. Fisher. Just the last part is where I lost you.
    Mrs. Wilson. What percent of the market share of your 
market do you need to lose in order for local broadcast 
television to no longer be a viable business?
    Mr. Fisher. I understand. Losses are losses. The television 
industry has engaged in substantial layoffs in the last 4 to 5 
years. Competition has intensified. That is the way of the open 
marketplace. So it is really simply a function of more pain 
will mean more layoffs.
    The economic crunch has already visited our industry. We 
have been through a couple, and we are ongoing now. The 
headlines are full of discussions about network cutbacks. So I 
can only tell you that this is a real issue for us. As the ad 
revenues dry up, it is harder and harder for us to provide the 
local programming, which is the basis of our service.
    Mrs. Wilson. Mr. Hutchinson, I have a question for you. You 
talked about 68 markets that you are planning on serving. This 
may be a technological question. When you talk about which 
markets or prioritize those markets, does your technology look 
at customers available or is it a concentration of people in a 
particular area?
    Mr. Hutchinson. No, it is not concentration of people. It 
is simply based on how to reach the most Americans with the 
capacity that we have.
    Mrs. Wilson. I guess what I am trying to get at here is, 
are rural areas going to be disadvantaged by this? Are you 
likely going to be concentrating where there are more people in 
the East, or is local-to-local by your system is not viable in 
a State like New Mexico?
    Mr. Hutchinson. Because the way the population is 
distributed, the logical way is to go down through market rank, 
largest market to second largest to third largest, and so on, 
and we were able to the 68th largest market before we ran out 
of capacity. That is with the first two satellites.
    When I reference the phase two, the other two satellites 
that we would like to put up, we could do the rest of the 
country. There are 800 television stations that can be served 
on two satellites. On another two, we could hit the other 800, 
for a total of 1,600. We could hit the whole country.
    Mrs. Wilson. So the fact that in Albuquerque, for example, 
and all of New Mexico, we have ABC, CBS, NBC, Una Vision, Fox, 
and PBS--we are the 49th largest market, but we have 289 
translators to cover that area; that is not a factor?
    Mr. Hutchinson. No, it is not. If you are the 49th largest 
market, you would be included.
    Mrs. Wilson. Mr. Moskowitz, I have a question for you. 
Despite our best efforts to keep America reading, 95 percent of 
Americans are principally relying on television to get their 
news. Where do your customers get their local news, 
particularly your customers--and you have some--in downtown 
Albuquerque that are calling me to complaint that they are 
getting turned off, even though our signal comes from the 
mountaintop outside of town? Where do they get their local 
news?
    Mr. Moskowitz. Well, a satellite customer may get local 
news, to the extent we are doing local-to-local, obviously, 
from television; obviously, they can get it from print, 
newspapers, as well. To the extent, obviously, that we are 
delivering a distant signal, they can't get that local channel 
by satellite, except that EchoStar is at the forefront of 
delivering data services by satellite as well. Our interactive 
data services do allow you to click on a button--and those are 
introduced this year with a Web TV problem, with an open TV 
product, and if you are connected by twisted pair, you will be 
able to get your local weather, your local news, if you want 
it.
    Mrs. Wilson. From the television or from an Internet site 
or----
    Mr. Moskowitz. From Internet sites. Some of it we will 
actually do by satellite as well. A lot of the data we will 
download by satellite. We are looking at a service that we 
would add later this year that would actually provide your 
local weather for all 211 DMAs on data bases by satellite. So 
if you clicked on a button, if you had the right product and 
you clicked on a button, you would be able to get that. You 
wouldn't be able to get your local weather man showing you the 
whole map, but you could get a stream of data that told you 
about your local weather.
    Mrs. Wilson. If I may ask one final question, Mr. 
Chairman--yesterday afternoon we had a wildfire outside of 
Moriority, New Mexico that was moving three directions at the 
same time over 2,000 acres. Where would your customers learn 
about that if they couldn't get the broadcast local news?
    Mr. Moskowitz. If they couldn't get it with an off-air 
antenna?
    Mrs. Wilson. I am a techno-peasant.
    I don't know whether they can get that or even if they are 
set up to get that if they have your system.
    Mr. Moskowitz. To the extent they could get it--oh, our 
system actually integrates off-air antennas. So we have a slot 
in the back of every one of our receivers where you can plug in 
an off-air antenna and switch seamlessly between off-air 
channels and satellite-delivered program. So to the extent that 
customer can receive a decent off-air signal, we can respond in 
that manner as well.
    Mr. Tauzin. When I was demonstrating outmoded and old 
technologies, I would have done smoke signals, too, but they 
wouldn't let me make a fire in this room.
    But, obviously, that continues to be a problem out West, 
where the local-into-local is still not available in many 
communities.
    Mr. Pickering from Mississippi for a round of questions.
    Mr. Pickering. Mr. Chairman, thank you, and I want to 
commend you for having this hearing. This is very important in 
my State, as you can imagine, similar to Louisiana. The 
percentage of people who have satellite dishes, as well as the 
importance of the local-to-local in the local community 
responsibility is carried by the local broadcasters, trying to 
find a way to address our objectives here resolving this.
    Mr. Moskowitz, you have been very aggressive in trying to 
crack down and enforce copyright law on those individuals who 
pirate satellite signals. Because of that, I would assume that 
you believe it is very legitimate for those who also want to 
enforce the law in the case of the Satellite Home Viewer Act. I 
guess the first question is establishing the premise that we 
should enforce and comply with the law whether it is pirating 
of satellite signal or whether it is in violation of the 
Satellite Home Viewer Act. I just wanted to see if you agree 
with that.
    Mr. Moskowitz. I absolutely agree that we should comply 
with all of the laws, and EchoStar believes that it does so.
    Mr. Pickering. As a result, we are where we are today, 
trying to see if we can get to local-to-local as quickly as 
possible. For my district my question is: For a place like 
Meridian, Mississippi, or Columbus, where there are 20,000, 
30,000 people, rural areas, can you do local-to-local from a 
technological point of view within 2 years?
    Mr. Moskowitz. I am sorry, but the simple answer is we 
cannot. You have to crawl before you can walk. If Congress had 
dictated that no one could drive on an interstate highway until 
the system served all 211 of the largest cities in the country, 
we would never have built an interstate highway system. It is 
the same with satellite; we have to do it a little bit at a 
time. We are risking huge dollars of our capital and our money 
to try to prove that local-to-local does work, and we can 
create effective competition and people will take it. If we are 
successful, then we will be able to do more cities, and Wall 
Street will finance spot-beam satellites for us, and we will be 
able to carry more cities. But, today, the only thing I can 
tell you is that we do have receivers with inputs for off-air 
antennas that a consumer can get an off-air signal with 
antenna. They can hook it up to our system and watch it 
seamlessly.
    Mr. Pickering. How long do you think it will take, both 
from an economic market perspective and technological 
perspective, to get to the towns that I mentioned in a place 
like Mississippi or other rural areas across the country?
    Mr. Moskowitz. I can't make a prediction. We have been in 
support of local-to-local and went out and spent our money to 
do it. Most people have called us crazy and said it is not an 
efficient use of our resources. We think we are right. We are 
betting we are right. We will have to wait and see what the 
market dictates.
    Mr. Pickering. Now some of the legislative proposals 
mandate a 2-year transition or a 3-year transition local-to-
local. Can you meet that mandate?--I guess is my fundamental 
question.
    Mr. Moskowitz. Can we meet it? Could we meet a 2- or 3-year 
implementation of providing local-to-local for all 211 DMAs? 
The answer is no; we simply do not have--there is not enough 
spectrum in the sky to do that.
    Mr. Pickering. Mr. Chairman, if you could indulge me just a 
few more minutes?
    There have been some proposals at different points in this 
process trying to address the issue of lost revenue for the 
local affiliates. Have there been any projections, any 
estimates? I know some of us have asked you this question. What 
is the economic cost or consequence or displacement to the 
local affiliates in lost revenues? Is there any dollar figure 
that the broadcasters have projected?
    Mr. Fisher. There is no specific dollar figure that has 
been created, no, sir.
    Mr. Pickering. Would there be a way to determine the harm, 
the economic harm?
    Mr. Fisher. I doubt it. I can you give you a common-sense 
answer. You all buy advertising, and you see the headlines. A 
big ad cost, for example, for commercials in the Super Bowl or 
``Seinfeld''--those costs are not straight-lined. It is not 
like you have double the number of viewers, so that the 
commercial is double the cost.
    We are a reach medium, and there is a premium for reach. As 
you cut back that reach, it is not just a straight-line 
cutback. It is a complicated formula. I wish there was a 
formula. I mean, it is a complicated process. The bottom line 
is all to sell is reach. When you trim that reach, the law of 
unforeseen consequences is operating at a real high level.
    Mr. Pickering. Would there be any way to have a 
compensation system to compensate the local affiliates for the 
displacement during the transition period?
    Mr. Fisher. This has been asked to me, and it is kind of 
like, do we want farm support? To be honest with you, we are 
more happy in an unregulated, unsupported, ``let us just fight 
it out in our local community'' basis. Give the chance to serve 
the viewers, and we will go after it.
    Technology is moving pretty quick. We thought that by 
offering 2 or 3 years of transition, we were trying to go on 
with the program here. We really hope that that is the way it 
can be accomplished.
    Mr. Pickering. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman. The gentleman from Ohio, 
Mr. Oxley, for a round of questions.
    Mr. Oxley. Thank you.
    Mr. Fisher, there has been some discussion about the 
possibility of going into court and asking for a delay as 
opposed to passing legislation. Has that been considered? And 
wouldn't it seem it would be at least an indication that most 
people believe the FCC standards are perhaps more accurate than 
have been proposed before, and it would give the opportunity 
for everybody to take a deep breath and perhaps select, or at 
least get an idea about, who is underserved and who is not?
    Mr. Fisher. Mr. Oxley, I really want to say yes, but I 
can't. We delayed filing suit because folks asked us not to. It 
took a couple of years for those suits to be accomplished.
    When the first set of deadlines arrived, the industry 
agreed to compromise, much of that at the suggestion of Members 
of Congress. We worked very hard during that period to assure 
the Decisionmark system was up and running, and that we could 
process quickly.
    Someday this deadline has to come. We think we are moving 
very expeditiously to grant people those waivers under the 
newest of the FCC definitions. We just honestly and sincerely 
believe we have got to get by this hump, that most people are 
going to realize they have always been able to see TV; they are 
going to get it, and we are going to be past it.
    Mr. Oxley. Mr. Hewitt, what do you think about that?
    Mr. Hewitt. Well, we commend the broadcasters who have been 
forthright in providing waivers. We think that is very 
commendable. But it has been very, very sporadic. There are 
many affiliates that have provided no waivers, and it is not a 
kind of system that is assuring a consumer who does not have 
access to a signal the guarantee that they will get access to a 
network. That is why we have gone forward saying the FCC should 
establish a standard for reception under SHVA, and on top of it 
should mandate--mandate--a predictive model, methodology, so 
that we could know ahead of time--there is no question between 
ourselves, the broadcasters, and the consumer that they 
qualify.
    Now if you take a look at the number of waivers, some of 
waivers are granted, by the way, for other reasons than the 
fact they can't receive a signal, many of them for business 
reasons. Again, we certainly don't oppose that, but the fact 
is, if you look at all these black dots over here on the 
yellow, the broadcasters went to Miami asking for the yellow to 
be invoked. All those people, if the FCC hadn't ruled, would 
have been turned off. Now they may still be turned off, because 
it is my understanding the judge has not ruled on the motion by 
the broadcasters in conjunction with Primetime 24 or the 
implementation of the FCC order. We hope she does. We commend 
the broadcasters for joining us on that.
    So certainly there is more time needed for us to implement 
the FCC standard, even though we don't believe that predictive 
methodology is the best.
    Mr. Oxley. Mr. Fisher, is that correct, what he said?
    Mr. Fisher. I disagree with a great deal of it. Let me add 
one 15-second postscript. There is no change in the standard 
that will save 90 percent of these illegal customers. They are 
getting clear signals. We are talking about just at the margin. 
Mr. Chairman, I think you isolated that well when you got down 
to the 70,000 folks. Further delay doesn't get at the root 
problem. The root problem is that 90 percent of these people 
were misled, and what they ought to get is antennas from the 
satellite industry, which is exactly what they are giving to 
the new customers who sign up as of tomorrow.
    Mr. Oxley. Let me ask, Mr. Perry, how long would it take to 
run the new numbers?
    Mr. Perry. We could submit the new numbers tomorrow.
    Mr. Oxley. Tomorrow?
    Mr. Perry. Yes. We are ready. In fact, we serve over 82 
percent of the broadcasters, ABC, CBS, Fox, many of the NBC 
stations, the entire C-band industry, and we have yet to serve 
EchoStar and Direct TV.
    Mr. Oxley. An obvious question would be, what is another 
week, since the suit was filed in March of----
    Mr. Perry. Well, we will be ready. We are ready to run the 
names. It will take a period of about 4 hours to rerun the 
names according to the FCC guidelines. We stand ready to do it.
    Mr. Oxley. Thank you. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Oxley. We will do a second 
round, to the extent you would like to do one. I do want to 
recognize myself for a round. I want to try to get something 
understood.
    One of the concerns I have as we move past the immediate 
problem of the decision which is right upon us--is the reason 
why we are suggesting that perhaps you give some breathing room 
to us as we get this immediate problem, and into the question 
of, what do we do as a permanent solution to local-into-local, 
so that competition, Mr. Kimmelman, is real, not imagined in 
the communities of America?
    This question arises: What happens if, Ms. Collier, you get 
authorized to use this spectrum by the FCC? What happens if we 
pass the bill that authorizes EchoStar to move immediately 
under some limited time period for must-carry to be fully 
implemented? What happens if we do that?
    Mr. Hutchinson, does your system fall financially because 
there are alternatives now competing with it?
    What happens to satellites, Mr. Hewitt, if Ms. Collier's 
system can launch and offer to citizens, not a supplement to 
your service, not just the local signals to complement your 
satellite signals, but a full complement of cable programming 
together with local signals, more like the OMDS system in New 
Orleans or Atlanta that Bell South has launched? What happens? 
Are we going to see one system defeat the other and the 
financial plans of launching delayed? Do we have to consider 
that?
    Obviously, we shouldn't be the ones to pick the winners and 
losers, and I don't want to be. That is the last thing we as a 
committee of Congress or Congress ought to be doing.
    What I suppose I am getting to is, I want to make sure 
there are some competitors left standing at the end of the day. 
If we write the bill in such a way that you can't launch, 
because we have written it in such a way that the economics of 
your launching on these new systems is dramatically damaged by 
the language of our bill, then I have to be concerned.
    Obviously, the optimum solution would be if you could all 
launch. There could be a K-band launch and a Northpoint 
successful strategy, together with an EchoStar strategy, that 
would not knock satellites out of the sky as a competitor, nor 
defeat one of your other plans simultaneously.
    But is that a problem? Do we need to be concerned about 
that? Do any of you, in other words, make your decisions based 
upon whether or not these other systems go or don't go? Anyone 
want to handle that? Mr. Hewitt?
    Mr. Hewitt. Well, Mr. Chairman, the marketplace should 
decide who the winners and losers are. If Northpoint launches 
with any other spectrum but DBS, they are welcome to the fray, 
and certainly we will have no problem. MMDS and LMDS have been 
proven not to be very effective competitors in the marketplace, 
as we all know. We are very concerned about the interference 
with our signal. If there is no interference, if they use 
another spectrum from then BBS, then power to them. The more in 
the marketplace, the better for consumers.
    Mr. Tauzin. Let me ask, Ms. Collier, how are you different 
from an LMDS system?
    Ms. Collier. I think, in particular, the LMDS area, LMDS, 
of course, is in a much higher frequency, and the reach of 
those cells is much, much smaller. LMDS I don't think is a 
viable frequency for broadcasting. It is really more for local 
loop solutions, telephone solutions. So LMDS I don't think will 
ever be a viable thing for broadcasting. Listening to some of 
the members in the rural areas, LMDS is simply not going to be 
effective in working even in suburban areas; it is certainly 
not going to be a rural application.
    Mr. Tauzin. But, to get back to this, assuming the 
interference problem can be resolved--Mr. Moskowitz has pointed 
out that his engineers spotted it; you challenged the 
conclusion, and you are concerned about it. Assuming that can 
be solved, and Ms. Collier's system is launched as a full-blown 
competitor to cable and to satellite, using the same frequency 
that satellite is launched on, but, nevertheless, not 
interfering with you, if that is achievable, can you live with 
that?
    Mr. Hewitt. Absolutely. We will beat them.
    Mr. Tauzin. All right. Can you live with the fact, Mr. 
Hutchinson, that Ms. Collier is out there competing with a new 
terrestrial system and EchoStar has been given a grace period 
in which to upgrade its system to full must-carry?
    Mr. Hutchinson. Yes, we are prepared to take that risk. I 
want to emphasize that the bill we seek is not a Capital 
Broadcasting bill. It is a bill to enable local-to-local. That 
is our primary mission. Now we think we have the best idea. We 
think we can win in the marketplace. We have confidence in 
that.
    What we do know is, if we don't get compulsory copyright, 
retransmission consent, and must-carry, we don't have a chance 
of solving it----
    Mr. Tauzin. But my point is it is not essential to your 
build-out plans for us to deny EchoStar the right to move 
forward under some local-into-local that at least gives a grace 
period for full must-carry?
    Mr. Hutchinson. No, it is not. In fact, we accept 
transitional must-carry.
    Mr. Kimmelman. Mr. Chairman, may I interject something?
    Mr. Tauzin. Yes, Mr. Kimmelman.
    Mr. Kimmelman. Not at all speaking from the business side, 
but as an observer of how this has unfolded in the areas you 
have tried to interject competition, these people are all very 
civilized at the table, but I think you should expect lawsuits 
and challenges. It may not be from the people sitting before 
you, but from those around the industry. I think there will 
always be problems. I think you should expect mergers, as we 
have seen in the past.
    Some people have a lot of investment already ineffectively 
in the ground, in the sky, and they have got to do something 
with it. I think you should expect a lot of market activity 
that is not obvious at this point in time.
    Mr. Tauzin. That is probably always correct. But let me get 
to one of those competitive features.
    Ms. Collier, if you are applying for use of this spectrum 
simply to complement the DBS signal with local channels, that 
may be one thing in terms of your not having to pay for that 
spectrum. But if you are going to use the DBS spectrum to fully 
compete against DBS, who has to pay for their spectrum, should 
not be required to also bid in that spectrum or pay for it at 
the same rate as DBS?
    Ms. Collier. Well, I think that there are--I don't believe 
that the original DBS applicants were subjected to an auction 
proceeding. So that wouldn't be completely----
    Mr. Tauzin. News Corps was, I think, right?
    Ms. Collier. But I believe that Direct TV----
    Mr. Moskowitz. Last I checked, we paid about $700 million.
    Mr. Tauzin. Yes, there are some big checks paid out there. 
What I am asking is, if you become a full-blown competitor 
rather than a tie-in to the DBS competitor, is it fair for the 
FCC to allow you to use that spectrum without any charge? Is 
that fair competition?
    Ms. Collier. As a member of the private sector, of course, 
I am against auctions.
    So I think in the case of our particular situation, we 
applied for licenses subject to a cutoff. We applied in a 
satellite proceeding where a number of other applicants came in 
there. As the FCC person referenced, there are several 
applicants in there, and we are the only terrestrial applicant 
who stood up to do this work. So we are here. We are ready to 
go, and we are the only one here.
    Mr. Tauzin. Well, I think you got my drift. We are 
concerned not only that we have competition, but that we have 
as much fair competition, so that all of you can compete for 
service and prices and terms on an equal basis for consumers' 
dollars.
    You have taught me a lot today. Thank you. I was concerned 
that one or the other of you might not move if the other moved, 
but I think I have gotten some good signals here today.
    The Chair will recognize Mr. Markey, if he has a round.
    Mr. Markey. That is funny because I got a fuzzy signal 
today.
    Mr. Tauzin. You did?
    Mr. Markey. Yes. I have got a Grade B seat over here.
    I always try to apply, what would Tip O'Neil think about 
the issue? How would he deal with it? I think what he would say 
here is that all satellite politics is local-into-local.
    If we can figure that out, then it is a done deal; we've 
got the whole thing solved.
    So I guess the way I view it is the same way I view the 
telephone, the cable, the terrestrial issue, the wireline 
issue. Clearly, we didn't want every single company to have to 
put their own telephone poles going down the street. We had to 
find out some way could use the common telephone pole if we 
wanted competition--and cable, and electric, and telephone. 
People didn't like it at the time, but we had a higher public 
interest agenda that we were trying to advance.
    Clearly, when we were trying to introduce competition into 
the long distance marketplace, AT&T didn't like the way in 
which we were forcing them to let MCI and Sprint and others at 
that nascent stage of competition to gain access to stuff, but 
we had a higher public policy interest that we were seeking to 
achieve.
    It seems to me here that we have to find some way of 
ensuring that the new players here that weren't anticipated 4 
and 5 years ago are able to get in, because we are only going 
to get the real consumer benefits if you have this ongoing 
technological challenge to the incumbents that forces everyone 
to make the new investment and to reconfigure the way in which 
they serve consumers.
    So, Ms. Collier here and Mr. Moskowitz and Mr. Hutchinson, 
along with the incumbents, both terrestrial and spectrum-based, 
each has kind of an understandable stake in the position that 
they are holding today.
    But this committee historically has looked at the issues 
from the perspective not of the incumbents, but the perspective 
of the consumer. What is the best way in which we can achieve 
the goal of having more and rapid deployment of technologies. 
Over the years we have been the biggest fans of the cable 
industry, in the 1970's and early 1980's; I am the biggest fan 
of the satellite industry, and we continue as each succeeding 
generation comes along to try to find ways of accommodating 
them.
    So I guess what I would say is that you are probably right, 
Mr. Kimmelman, that whatever we try to do here is going to be 
in court; that is also part of the tradition here, although we 
are undefeated.
    We win every time, but it just delays it by an extra couple 
of years, which in corporate parlance is a pretty good 
strategy, if you can get that extra couple of years of market 
share at the highest possible percentage.
    But, nonetheless, I think what you are finding up here on 
the committee is a consensus that we are going to have to move 
forward on this set of issues. Local-into-local is going to 
have to get solved. It is going to have to get solved really 
fast, and we are going to have to ask for the cooperation of 
everyone in achieving that goal.
    Again, it is not toward the goal of undermining any 
incumbent. It is toward the goal of advancing the historical 
tradition and philosophy of the committee. Otherwise, we might 
as well not exist.
    But I thank each of you for your testimony.
    You, Ms. Lathen, you have got to be happy that you came to 
a hearing on an issue like this and you weren't the focus of 
anybody's attention.
    I mean, this is an historic--the FCC just sits over here on 
the sidelines. But you can help us, I think, to think through 
on an expedited basis what the best way is of resolving some of 
these technical issues, and then leave to us the formidable 
political choices that we have to make. But I think we should 
make them.
    I think actually the crisis being created by the imminent 
cutoffs is the best thing that has ever happened to us because 
it is going to focus us on the solutions that we are going to 
have to create for the long term. It might turn out to be a 
real blessing for the committee that we are going to have this 
short-term crisis. We will respond to it; we will try to create 
a moratorium, but not to make it permanent, only to give us the 
time to--we want to find a permanent solution, not a permanent 
moratorium defining the solution. I think today's hearing is 
going to advance that goal mightily.
    I thank you, Mr. Chairman, for this hearing.
    Mr. Tauzin. Thank you, Mr. Markey.
    Ms. Lathen, let me also point out that the committee went 
extremely light on the FCC today. In fact, you have tried to 
help, and we want to thank you for that. But you also helped 
make my case for FCC reform when you pointed out that this was 
a cross-bureau problem in terms of getting as simple a thing as 
a new solution invented for this problem. So, again, I want to 
thank you for the effort, not only your staff has made in 
trying to find a solution, but, hopefully, to suggest to the 
parties again that they use some time to implement your new 
suggestion in a way that at least minimizes this crisis and 
gives us some time to work it out, instead of having to work it 
out in the heat of emotion, as we so often have to do, when 
every Member on the floor who does not sit through these 
hearings, and does not understand many of the very delicate 
balances we have to make, as Mr. Kimmelman pointed out, between 
all of your very personal, special interests in what you want 
to accomplish for your business purposes, and doesn't 
understand the value perhaps of some of the localisms that are 
at stake here. All those Members just receive phone calls from 
people saying, ``The lights are being turned off on my 
television. What are you people doing about it?''
    You understand, if you can just give us some time, and 
perhaps come to some agreement to utilize the new information 
provided by the FCC to minimize the problems, then we would 
deeply, again, appreciate it and suggest it again.
    Let me also mention something that Mr. Markey alluded to 
that I want to draw all your attentions to: It will do us 
little good for us to solve the local-into-local issue if we 
are faced with a whole cadre of Americans who live in multi-
family dwellings, in some cases who own their own dwelling in a 
condominium-type setting----
    Mr. Markey. Anyone we're thinking of?
    Mr. Tauzin. [continuing] Yes, someone real close to me--who 
are not entitled to receive services from any competitor 
because they are tied into a single provider.
    The issue of wiring in buildings is a very important one. I 
know building owners have a great stake in that issue, and we 
want to hear from them, and we will. But if the building 
becomes a bottleneck or the development project or the 
commercial building is a bottleneck to tenants and co-owners 
receiving the benefits of competition in the delivery of all 
these services, we have left out an awful lot of Americans from 
the new competitive systems that all of you are planning to 
deploy. I can't put up a DBS on my townhouse. Because we have 
an exclusive agreement with cable, I am being deprived of the 
benefits of that competition. People like me are complaining 
already, and we are hearing more and more from them.
    We will hold a hearing on the issue of access from the 
building site at some point, and try to resolve some of these 
very thorny issues of property rights and contract law and 
communication access competition.
    Again, I want to thank you very much. This has been, 
indeed, an illuminating session--while the picture may be so 
fuzzy we may need a waiver to understand it.
    Before too very long we will be drafting. If you have 
anything that you want to add to this record, we will keep the 
record open for 2 weeks. If you wish to make a submittal, by 
unanimous consent, the record will stay open for 2 weeks for 
either additional testimony or documents or other extraneous 
matter you wish to submit to us. If you have suggestions for 
the language of the legislation we are drafting, now would be a 
good time to put your legal minds to work and suggest them and 
bring them to us.
    Again, my thanks for a long afternoon, but a very 
productive one.
    The committee stands adjourned.
    [Whereupon, at 5:40 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Hon. Porter J. Goss, a Representative in Congress 
                       from the State of Florida
    I am very pleased to present my views to the subcommittee regarding 
recent problems associated with receiving network signals via 
satellite. I commend Chairman Tauzin and Ranking Member Markey for 
their leadership on this issue and for taking the initiative to look 
into this matter. This is a problem that is ripe for action and well 
deserving of Congressional oversight and attention.
    During the past several months, I have heard from well over a 
thousand of my constituents who are angry because they will soon lose 
some of their network signals, which were previously provided via 
satellite. In fact, this is currently the single biggest issue in my 
mailbag. Through this correspondence, I quickly became aware that the 
Satellite Home Viewer Act prohibits a person from receiving network 
signals, such as CBS and FOX, through a satellite dish unless the 
person lives in an ``unserved'' area.
    The current law, which is now being enforced, states that a person 
must be unable to receive a ``Grade B'' signal and must not have 
subscribed to cable within the past 90 days in order to be eligible to 
receive network signals via satellite. The problem in my district--and 
in most places, I assume--is that just because a person can be defined 
as being in a Grade B area, does not necessarily mean that they can 
actually receive a signal. What we are left with is a situation where 
people simply do not have access to some of the larger network stations 
at all, unless they opt to pay twice and order cable as well. This 
problem is particularly prevalent in the rural and island areas in 
Southwest Florida.
    While I understand that the Federal Communications Commission has 
completed a rulemaking to redefine the Grade B contour, thus providing 
a partial solution, there are some larger issues still at stake which 
will need to be addressed. It concerns me that the millions of people 
who thought they were purchasing a certain product--with no intention 
of violating the law--are now being denied a major component of the 
product. However, I also recognize that importing distant signals into 
local markets could potentially be damaging to the local network 
affiliates, and we should certainly keep this in mind in trying to 
solve the problem within everyone's best interest. What we need is an 
appropriate balance that provides flexibility for satellite consumers 
without offending the legitimate rights of our local affiliates.
    I do not claim to have expertise in the area of telecommunications 
copyright laws, but I would like to assist in developing a legislative 
solution. In particular, I would like to offer my assistance at the 
Rules Committee stage, to ensure that your Committee's work product may 
be expeditiously moved to the House floor for consideration.
                                 ______
                                 
    Prepared Statement of Hon. Bernard Sanders, a Representative in 
                   Congress from the State of Vermont
    Mr. Chairman, I support changes to the Satellite Home Viewer Act 
which will prevent the disconnection of distant network programming for 
customers who cannot receive over-the-air signals from their local 
broadcasters--including many of the 65,000 satellite subscribers in 
Vermont.
    The Satellite Home Viewer Act (SHVA) established criteria for 
satellite companies to provide distant signal network stations to 
people in ``unserved'' areas--those who are unable to receive over-the-
air broadcasts of their local network affiliates. Last summer, I co-
signed a letter asking the FCC to redefine the measurements used to 
determine if a waiver may be granted for a subscriber to receive 
distant network service via satellite. Although the FCC adjusted the 
requirements for waiver eligibility at the beginning of this month, 
only legislative changes to the SHVA will allow satellite companies to 
deliver network signals to all of their customers.
    The ``Grade B'' contour must be redefined, in consumer friendly 
terms, as an area in which 100 percent of the population, using readily 
available, affordable equipment, receive over-the-air coverage by 
network affiliates 100 percent of the time with 100 percent 
reliability. With that definition, only those consumers who in fact 
receive local network signals over-the-air would be prevented from 
receiving network signals by satellite. The constituents most strongly 
effected by the ``Grade B'' definition are in rural, mountainous 
areas--like Vermont.
    These service terminations also raise serious concerns about 
competition. In the last year we have seen cable rates rise more than 
four times the rate of inflation. Unless direct broadcast satellite 
service is allowed to be a viable option for multichannel video 
service, cable rates will continue to soar.
                                 ______
                                 
                          Federal Communications Commission
                                                     March 17, 1999
The Honorable W.J. ``Billy'' Tauzin, Chairman
Subcommitee on Telecommunications, Trade and Consumer Protection
U.S. House of Representatives, Committee on Commerce
2125 Rayburn House Office Building
Washington, D.C. 20515
    Dear Mr. Chairman: I am enclosing my responses to the follow-up 
questions from Congressman Gillmore, to the February 24, 1999 hearing 
on Reauthorization of the Satellite Home Viewer Act. Please let me know 
if there is any additional information I can provide to the 
Subcommittee, or if I can be of any further assistance.
            Sincerely,
                                          Deborah A. Lathen
                                       Chief, Cable Services Bureau
                Responses to Questions from Rep. Gillmor
    Question: Do you agree that wireline cable systems are the dominant 
providers of multichannel video programming today and in the near 
future?
    Response: Yes. As the Commission reported to Congress in its Fifth 
Annual Report on the status of competition in markets for the delivery 
of video programming, we find that competitive alternatives and 
consumer choices in the multichannel video programming distribution 
(MVPD) market are still developing. Cable television continues to be 
the primary delivery technology for the distribution of multichannel 
video programming and continues to occupy a dominant position in the 
multichannel video programming distribution marketplace. As of June 
1998, 85% of all MVPD subscribers received video programming service 
from local franchised cable operators compared to 87% a year earlier.
    It is also important to note that the cable industry has continued 
to grow in several areas such as subscriber penetration, channel 
capacity, the number of programming services available, revenues, 
audience ratings, and expenditures on programming. In terms of 
subscribership, for example, the number of cable television subscribers 
had increased to 65.4 million as of June 1998, a 2% increase from June 
1997.
    Question: Does the FCC believe that DBS providers are the entities 
most likely to mount a significant competitive challenge to wireline 
cable operators in the near future?
    Response: Yes. In the Fifth Annual Competition Report, the 
Commission found that there has been an increase in the total number of 
subscribers to noncable multichannel video programming distributors. 
Much of this increase is attributable to the continued growth of direct 
broadcast satellite (DBS) service, which is attracting former cable 
subscribers and consumers not previously subscribing to an MVPD.
    DBS continues to represent the single largest competitor to cable 
television operators and DBS subscribership continues to show strong 
growth. As of June 1998, the four DBS providers supplied programming to 
more than 7.2 million subscribers. This is an increase of more than 2.2 
million subscribers since June 1997, or an increase of nearly 43%. DBS 
subscribers now represent 9.40% of all MVPD subscribers compared to 
6.85% a year earlier. In addition, industry reports indicate that 2.2 
million of the 3.6 million new MVPD subscribers in 1998, or almost two-
thirds, are choosing DBS. It is projected that DBS subscribership will 
grow to 20 million by 2003, with its share of the multichannel video 
market growing to 25%.
    Finally, it is likely that, over time, the differences between 
cable and DBS will continue to diminish. Currently, it appears that DBS 
represents a substitute for some consumers, especially for those with 
access to local broadcast stations. As DBS equipment prices continue to 
decline and if DBS operators are authorized to offer local broadcast 
signals, DBS could become a closer substitute to cable for an 
increasing number of consumers.
