[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



         OVERSIGHT OF THE SATELLITE HOME VIEWER IMPROVEMENT ACT

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

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 10, 2004

                               __________

                           Serial No. 108-75

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                               __________

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                            WASHINGTON : 2003
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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas                   Ranking Member
MICHAEL BILIRAKIS, Florida           HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania     FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California          SHERROD BROWN, Ohio
NATHAN DEAL, Georgia                 BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi, Vice Chairman           TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma

                      Bud Albright, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                 Ranking Member
  Vice Chairman                      ALBERT R. WYNN, Maryland
PAUL E. GILLMOR, Ohio                KAREN McCARTHY, Missouri
CHRISTOPHER COX, California          MICHAEL F. DOYLE, Pennsylvania
NATHAN DEAL, Georgia                 JIM DAVIS, Florida
ED WHITFIELD, Kentucky               CHARLES A. GONZALEZ, Texas
BARBARA CUBIN, Wyoming               RICK BOUCHER, Virginia
JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
HEATHER WILSON, New Mexico           BART GORDON, Tennessee
CHARLES W. ``CHIP'' PICKERING,       PETER DEUTSCH, Florida
Mississippi                          BOBBY L. RUSH, Illinois
VITO FOSSELLA, New York              ANNA G. ESHOO, California
STEVE BUYER, Indiana                 BART STUPAK, Michigan
CHARLES F. BASS, New Hampshire       ELIOT L. ENGEL, New York
MARY BONO, California                JOHN D. DINGELL, Michigan,
GREG WALDEN, Oregon                    (Ex Officio)
LEE TERRY, Nebraska
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Franks, Martin D., Executive Vice President, CBS Television..    94
    Hartenstein, Eddy W., Vice Chairman, Hughes Electronics 
      Corporation................................................    99
    Kimmelman, Gene, Senior Director, Public Policy and Advocacy, 
      Consumers Union............................................    46
    Lee, Robert G., President and General Manager, WDBJ-TV.......    18
    Moskowitz, David K., Senior Vice President and General 
      Counsel, Echostar Communications Corporation...............    12
    Polka, Matthew M., President, American Cable Association.....    42
Material submitted for the record by:
    Association of Public Television Stations, prepared statement 
      of.........................................................   121

                                 (iii)

  

 
         OVERSIGHT OF THE SATELLITE HOME VIEWER IMPROVEMENT ACT

                              ----------                              


                       WEDNESDAY, MARCH 10, 2004

              House of Representatives,    
              Committee on Energy and Commerce,    
                     Subcommittee on Telecommunications    
                                          and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2123, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Gillmor, Deal, 
Cubin, Shimkus, Wilson, Buyer, Bass, Markey, Wynn, McCarthy, 
Doyle, Boucher, Towns, Engel, and Dingell (ex officio).
    Staff present: Howard Waltzman, majority counsel; Kelly 
Zerzan, majority counsel; Neil Fried, majority counsel; Jaylyn 
Jensen, majority professional staff; William Carty, legislative 
clerk; Gregg Rothschild, minority counsel; and Peter Filon, 
minority counsel.
    Mr. Upton. Good morning, a second time. Today, we're here 
to discuss the Satellite Home Viewer Improvement Act, also 
commonly known as SHVIA. My wife Amy says it's okay. The 
satellite industry has grown tremendously since Congress first 
became involved in 1988 and passed the SHVIA Act. All one has 
to do nowadays is to take a drive down the street, doesn't 
matter if you live in the country or the city, to view 
firsthand the growth of the satellite industry. Satellite 
dishes are now an everyday part of the landscape.
    Satellite Home Viewer Act was a piece of equal opportunity 
legislation, so to speak, for those folks who lived in parts of 
the country where broadcast signals were either weak or 
nonexistent. Legislation was designed for consumers who lived 
in rural areas far from a local affiliate or who lived in areas 
that were blocked by surrounding terrain causing them trouble 
to receive broadcasts over the air.
    To help remedy that situation, the Satellite Home Viewer 
Act of 1988 allowed satellite operators to deliver distant 
signals to consumers in such white areas. Anyone who has been 
to my District in Southwest Michigan knows that it is a prime 
example for the need of such legislation.
    To facilitate that regime, SHVIA created a statutory 
copyright license for the retransmission of such distant 
signals and set a royalty rate rather than require the 
satellite operator to negotiate retransmission consent with the 
distant broadcaster. Consequently, the statutory license is set 
to expire December 31 of this year. That's just one of the 
issues before us today.
    In 1999, Congress adopted SHVIA to extend the Satellite 
Home Viewer Act which was due to expire as well as to expand 
it. But simply SHVIA was designed to promote competition among 
multi-channel video program distributors such as satellite 
companies and cable TV operators, while at the same time 
increasing the programming choices available to consumers.
    In SHVIA, Congress granted satellite operators for the 
first time a statutory copyright license to carry local 
stations into the stations' own markets and set the license fee 
at zero. The satellite operator chooses to carry a local 
station in that market. It generally must carry all of the 
local stations within that market, unlike with distant signals, 
satellite operators can provide local signals to consumers, 
regardless whether the consumers can receive those signals over 
the area and the statutory license has no sunset date.
    As we've often seen in the world of telecommunications, it 
has been difficult for legislation to keep up with 
technological progress. Here we are today 5 years since the 
passage of SHVIA with several portions of it set to expire 
December 31. The purpose of this hearing is to consider whether 
to extend SHVIA and determine if Congress should make any other 
changes in the regime governing satellite delivery of broadcast 
TV.
    Many issues that we have to take into account:
    What should the satellite industry's role be in the 
transition to digital?
    How should State subscribers and grandfathered subscribers 
be addressed?
    What are the ramifications of distribution using two 
dishes?
    Those are all important issues that will have extensive 
effects on satellite providers, local broadcasters and 
consumers. Today is the first step in reviewing the process of 
SHVIA. I hope that we will have a thought-provoking, 
constructive discussion on how to proceed with the important 
issues at hand. I recognize that March Madness is upon us. 
EchoStar and Viacom are currently involved in negotiations. I 
look forward to having a productive hearing on this issue and 
what steps should be taken next that are in the best interests 
of providers, broadcasters and the American public.
    I yield to my friend, the ranking member of the 
subcommittee, the gentleman from Massachusetts, Mr. Markey.
    Mr. Markey. I thank the Chairman very much and I thank you 
for this very, very important and it turns out timely hearing. 
I remember many years ago there was a football player at Notre 
Dame whose name was Joe Theisman and he was a very promising 
freshman. People felt that he could actually be the National 
Player of the Year and the Public Affairs Department approached 
him and said if you'd be willing to change your name from 
Theisman to Theisman we can rhyme it with Heisman and make a 
whole national campaign about Theisman for the Heisman. And so 
this law which started off as SHVIA has undergone a name 
pronunciation, it's spelled the same and now it wants to be 
called SHVIA. Same spelling.
    So it's hard to know whether or not you're still talking 
about the old home town SHVIA or are you talking about this big 
new town SHVIA, but nonetheless, it's the same law. And in 
1999, in the aftermath of a series of service shutoffs and 
court decisions, we acted to fulfill one of the cornerstones of 
telecommunications policy, 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 to 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. Instead, in many respects, we enhance 
localism in that act. During subcommittee consideration of the 
bill back in 1999, I offered the so-called local to local 
amendment which for the first time granted to satellite 
operators the right to see carriage of local broadcast stations 
in local markets. And the reason I did that was certainly to 
enhance localism, but also to make it possible for my father 
and for Bill Tauzin's father at that time to be able to get 
their local television stations on a satellite system. As my 
father said, ``it would be a pain to have to continue to get up 
and continue to flick some switch to go over to local 
broadcast.'' And so that's why we did it. There's nothing more 
local than your father asking you to change a law.
    Yet, another key reason why I offered the local to local 
amendment was to enhance competition to cable. My father said 
it would make it possible for him to disconnect his 
relationship with his cable company. Testimony that we were 
receiving at the time was that the chief reason that consumes 
were giving retailers for not switching from cable to satellite 
service was the lack of a local broadcast station as part of a 
seamless satellite service package.
    Now I am proud of the dramatic rise in satellite consumers 
due to the advent of local to local service in many of the 
largest across the country. It has helped satellite providers 
offer a more comparable service to cable operators and more 
effectively compete in the marketplace to the point where 
EchoStar and DirecTV combined now garner 20 percent of the 
market.
    However, it is important to recognize that it will not be 
possible for satellite providers to bring every local channel 
to all local markets in the near future. It is also important 
to concede that while the local to local amendment succeeded in 
enhancing the ability of millions of consumers to have a choice 
alternative in the marketplace, satellite service has not 
proven to be an effective check or constraint on rising prices 
in the cable marketplace. Even as satellite providers utilize 
local to local service to make inroads against cable in the 
marketplace, cable rates continue to soar much faster than the 
rate of inflation.
    It remains true even today that the only type of competitor 
with the ability to constrain lower prices is a second cable 
system in town, another system going down the same streets. The 
problem is that such cable competitors are few and far between. 
For this reason, I think we need to look at oversight of SHVIA 
with an eye toward competition in the marketplace and do our 
best to foster that competition because if we're not going to 
regulate cable rates to protect consumers, then it is incumbent 
upon us to do everything we can from a telecommunications 
policy standpoint to foster more competition to cables so 
consumers have effective alternatives, not only for choice and 
quality, but also for price.
    I am also examining how satellite operators can deliver 
digital programming to consumers, including digital local 
television signals and high definition TV programming from 
broadcasters and how satellite operators can assist us in 
spurring on the digital TV transition.
    With respect to so-called unserved consumers, we are to 
address how FCC will determine if a consumer is unserved in the 
digital TV context as well. That's because an unserved analog 
consumer, an unserved digital consumer may not be the same 
consumer and we need a plan to address that as well. I also 
note, if I may, Mr. Chairman, very briefly, that yesterday 9 
million satellite consumers in many major markets including 
Boston lost a number of channels including a major television 
network. That dispute highlights many of the issues that go to 
the heart of our examination of the satellite home viewer 
issues before us today, the relationship between retransmission 
consent and must carry, concentration in programming 
marketplace, universal service issues, localism issues and what 
this dispute may portend for how the subcommittee approaches 
digital must carry and digital carriage issues on satellite.
    To the two parties who are in contention on this issue that 
involves CBS as well, I want to know that Boston College is 
likely to have an NCAA men's basketball team next week and so I 
urge EchoStar and Viacom to keep that in mind as they're 
negotiating over the next week. It will be a shame for Boston 
College fans to miss the opportunity to see that game.
    Thank you, Mr. Chairman.
    Mr. Upton. Ms. Wilson.
    Ms. Wilson. I'll waive my opening statement, Mr. Chairman.
    Mr. Bass. Thank you, Mr. Chairman. It's a great hearing. 
SHVIA has been a very good law or act and it's been 
particularly important for those of us who represent districts 
that don't have ready cable access, aren't close enough either 
by terrain or some other reason to receive over-the-air 
broadcasting and on the whole, the act has worked pretty well. 
We have, however, encountered some issues that I hope will be 
resolved as a result of this reauthorization process.
    One that is of particular interest to me has to do with the 
issue of out of State subscribers. Now my home State of New 
Hampshire has a unique condition in that it is covered by three 
designated market areas from other States: Boston, Ed Markey's 
area; Burlington, Vermont and Portland, Maine. In addition, in 
New Hampshire there is only one network affiliate, ABC, WMUR, 
and as a result of the rebroadcast rules, satellite subscribers 
who live in New Hampshire's most rural areas are precluded by 
law from the possibility of recovering the State's one network 
station over their satellite systems. Cable subscribers who 
live in these areas have access, but many households are not 
served by cable, including mine, actually, and they certainly 
are not in the range of an adequate over-the-air signal.
    I understand that under retransmission and market 
protection rules, the people in the three northern counties in 
my State may fall within either Maine or Vermont's Nielsen's 
set DMA, but I assure you that these people are actually more 
interested in what's going on in New Hampshire than they are 
what's going on in Vermont. I'm absolutely sure of that. And 
they need to know about emergency issues, weather, sports and 
so forth that are of more interest to them. I think this is a 
great time for this hearing, it's timely and I hope that this 
issue which may affect frankly as much as 50 percent of the 
markets in this country is resolved through this 
reauthorization process and I yield back to the Chairman.
    Mr. Upton. Mr. Boucher.
    Mr. Boucher. Thank you very much, Mr. Chairman. I 
appreciate your scheduling today's hearing on the expiring 
provisions of the Satellite Home Viewer Improvement Act and I 
want to join with you in welcoming this very distinguished 
panel of witnesses.
    I'll say a particular word of welcome to Mr. Bob Lee, who 
is the General Manager of WDBJ Television in Roanoke, Virginia. 
He's testifying this morning on behalf of the National 
Association of Broadcasters. I would note that Mr. Lee's 
station is the leading provider of local news and commentary in 
the central and western portions of the State of Virginia and 
from that perspective he certainly has well informed views on 
the matters that this committee and the House Judiciary 
Committee will consider as we undertake the upcoming 
reauthorization legislation.
    My primary interests are focused on four key issues. I'll 
mention these matters briefly and I would very much welcome the 
comments of our witnesses concerning these matters. First, 
echoing the eloquent statement of Mr. Bass, I perceive a need 
to resolve the irritating requirements of current law that 
relegate satellite viewers of one State to the reception of 
local television stations emanating from another State that 
have no focus on the local news occurring in the State in which 
the viewer resides. I have one county that is in that 
circumstance and numerous constituents have contacted me urging 
a change in the law to enable them to receive in-state stations 
that focus on their community, a very understandable concern.
    I join with Mr. Bass and others who have this problem and 
urge that we work together and find an appropriate solution.
    It appears to me that applying to satellite carriage the 
significantly viewed rules now applicable to cable carriage 
would solve the problem with respect to some in-state stations 
and adopting the cable rule allowing the Federal Communications 
Commission to modify the market on application of an in-state 
station would potentially resolve the issue with respect to 
other in-state stations and I hope that we can make this needed 
change, Mr. Chairman.
    Second, I'm interested in exploring the possibility of 
achieving a little ground on the hotly debated question of 
creating a new digital white area license. On the one hand, I 
think the immediate availability of digital network signals by 
satellite would speed the digital transition, encouraging rural 
residents to purchase digital television sets. And it would 
provide a useful service to rural viewers who are beyond the 
reach of digital terrestrial broadcasts at the present time.
    On the other hand, I think it's extremely important that we 
not act in such a manner as to discourage broadcasters from 
powering up their digital transmitters in the effort to serve 
these same rural viewers and so a workable means needs to be 
found that would ensure satellite delivery of digital signals 
for a given viewer and then when that viewer has reliable 
access to a digital signal broadcast locally, there ought to be 
an enforceable means of assuring that a satellite transmission 
of that same signal would at that point terminate.
    Third, on the analog side, I question why distant network 
signals should be imported under the Section 119 license when a 
given viewer has subscribed to a local into local service and 
is receiving local stations originating in his market. Perhaps 
a narrow restriction of the Section 119 license to accommodate 
that circumstance where a particular viewer is subscribing to a 
local into local service and getting the stations that 
originate within his market would also be appropriate.
    Finally, progress is being made in providing local into 
local service to now more than 100 of our Nation's 210 local 
television markets. I would welcome suggestions from the 
witnesses with respect to steps that we might consider taking 
here in the Congress that would accelerate the provision of 
local into local service to the remaining 100 markets and any 
suggestion that could be made with regard to the schedule for 
deployment of local into local entities market should Congress 
do nothing would also be, I think, interesting and informative 
for us.
    Mr. Chairman, I thank you for scheduling this very timely 
hearing and I look forward to hearing from our witnesses.
    Mr. Upton. Mr. Terry.
    Mr. Terry. Pass.
    Mr. Upton. Ms. Cubin.
    Ms. Cubin. Thank you, Mr. Chairman. I am pleased to have 
such a distinguished panel before us here today, representing a 
broad cross section of all the stakeholders who are concerned 
about reauthorization of this bill and I hope that we can 
tackle the issue that is here before us without reopening some 
of the old wounds that we have suffered in years past. I hope 
all of the parties assembled here today will not only consider 
their own well-being, but the well-being of our Nation's 
consumers. Representing the least populated State that is about 
100,000 square miles, I have to think that my constituents 
might be affected disproportionately and I want you to know 
that I don't get any more communications about any other 
subject than what we're here talking about today. And so I am 
very, very serious about it. And I know that you are too.
    There are a lot of benefits to living in Wyoming and I 
won't go into those because we don't want a lot of people 
moving in there, but unfortunately, because of the small 
markets, we do lag behind others in some programming and that 
is strange to me because rural America was actually an early 
adopter of satellite television. It's not clear what happened 
between then and now, but I can share with you, as I have, that 
my constituents want to get ABC, NBC, CBS and Fox. And not only 
do we not get our local affiliates over satellites, but even 
many of those unserved households can't even get a distant 
network signal because of some regulatory arbitrage that 
governs the situation.
    I would like to work with all of the parties here to craft 
some common sense solutions that will empower my constituents 
and your customers to have a choice in their programming and in 
the clarity which is another thing I hear about all the time, 
and what their rights are and what your obligations are.
    It seems pretty simple to me. What's good for the consumer 
is good for the economy and that's good for you. So let's find 
a solution to this. Let's all work together and find a solution 
for your customers and my constituents.
    Thank you.
    Mr. Upton. Mr. Dingell.
    Mr. Dingell. Thank you. And I thank you for calling this 
hearing today. Before we discuss the business at hand, I would 
like to note the existence of a serious business dispute 
between Viacom and EchoStar. This dispute is hurting consumers 
in my District and across the United States. I am making no 
judgments as to who is right or wrong. I hold no grief for 
either of the parties. I simply urge both of the companies to 
return to the negotiating table as quickly as possible to 
settle this dispute.
    As the committee looks to authorize the Satellite Home 
Viewer Improvement Act it must pursue equally important and 
potentially conflicting policy goals. First, the committee must 
work to strengthen the ability of the satellite companies to 
compete with the cable industry which is deeply entrenched now 
in the video marketplace.
    Second, it must empower consumers to receive the 
programming of their choice. And finally, in taking such 
actions, the committee must not unduly weaken Americans' local 
broadcasters nor disrupt their core revenue stream because 
after all, this legislation and the business of this committee 
is about seeing to it that the interests of the broad listening 
public is protected in matters of this kind.
    Certainly, the Congress should use this opportunity to 
strengthen competition in the marketplace for video services. 
Although DBS satellite has a growing presence nationally, the 
cable industry still holds a commanding position in each local 
market. To their credit, the cable industry and its companies 
continue to roll popular new services such as Video on Demand 
and VOIP telephone service. Unlike satellite systems, the cable 
plant is capable of offering this bundle of digital services 
and the industry has smartly utilized its unique abilities to 
gain a commanding lead in the emerging digital marketplace.
    As the only video distributors with a national platform, 
satellite may possess its own unique abilities to differentiate 
itself and/or attract consumers. For example, satellite may be 
able to spur the transition to digital by offering consumers a 
high definition network signal in instances where a consumer is 
unable to receive such a signal from a local broadcaster. In 
other instances, satellite may be able, for example, to provide 
a distant signal that would allow my friend Ed Markey to watch 
Red Sox games from his home in Maryland.
    Clearly, both of these proposals may please consumers and 
also make satellite a more vibrant competitor to cable. That is 
important. At the same time, however, both of these proposals 
may have the effect of hurting local broadcasters. That should 
be a serious concern to this committee. The committee must 
closely examine such effects to ensure that local broadcasters 
are not unduly weakened by the potential legislation. 
Ultimately, the committee must carefully balance these 
competing equities in a way which protects the local 
broadcaster and more important still protects the viewer who is 
dependent upon free, over-the-air communications.
    I thank you, Mr. Chairman.
    Mr. Upton. Mr. Buyer.
    Mr. Buyer. Pass.
    Mr. Upton. Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman. I would simply briefly 
echo the concerns that Mr. Bass and others have indicated with 
regard to areas that are served across State lines. My District 
is the northern district of Georgia and as you know, the city 
of Chattanooga and Tennessee is actually right up to the border 
of our State. I have the unusual situation that many of my 
constituents in that northwestern corner of the State would 
prefer the broadcasts from Atlanta local stations. Others, 
however, because they work in Chattanooga and simply live in 
the State of Georgia would prefer that they get their news from 
the Chattanooga stations. So mine is a diverse situation and I 
realize that doesn't fit any particular pattern, but it is an 
issue that I would at some point like to hear discussed if at 
all possible.
    Thank you, Mr. Chairman.
    Mr. Upton. Mr. Doyle?
    Mr. Doyle. Mr. Chairman, I want to thank you for convening 
this hearing today so that we can begin to examine the 
reauthorization of this important legislation. I'm looking 
forward to hearing from the witnesses and hope they can help 
the committee reach a better understanding of the issues 
involved and how we should proceed.
    While it seems that it's been a much shorter time, it's 
actually been nearly 5 years since the last reauthorization of 
SHVIA which was completed in 1999. And while I didn't serve on 
the committee at that time, I do recall it being quite a 
battle, even from my perspective. Frankly, that's 
understandable when you consider the multiple interests and the 
millions of dollars involved.
    In cases like this, I think it's often best to give great 
weight to consumers, our constituents, and to strive to create 
the best deal for them. And it seems to me that consumers were 
the big winners in what came out of the last reauthorization, 
so we must not have done all that badly. I say that because 
those of you who know me well are aware I tend to favor 
increasing competition in all aspects of the media and 
telecommunication business and I think that the SHVIA in 1999 
achieved that by helping the satellite industry grow which, in 
turn, increased competition.
    It is this competition which in the long run benefits 
consumers and allowed the last reauthorization to be a success. 
I know that many of my constituents were happy that they were 
finally able to get their local broadcast stations from their 
DBS providers. At the same time, I think our local broadcasters 
were pleased in that more consumers once again had easy access 
to their signals. As I understand it, satellite providers are 
currently offering local to local services in 112 television 
markets nationwide which represents 87 percent of television 
households in the country, meaning that the transition went 
even faster than expected.
    I'm hopeful that this committee, and eventually the 
Congress as a whole, will be able to work out a reauthorization 
that is fair, continues to encourage competition and allows all 
parties, including satellite, cable and broadcast interests to 
operate from a reasonably level playing field. I think it's 
important that we have begun our work in this committee since I 
have heard that the Judiciary Committee has already held a 
hearing and begun to work on their version and clearly, Mr. 
Chairman, our jurisdiction is something we need to exercise 
before they get too far out in front.
    So I welcome the hearing today, and I look forward to 
working with other members of the committee as we move forward. 
Satellite service has grown a great deal and progressed a long 
way since the days of the huge C-band dishes when Congress 
wrote the first Satellite Viewers Act. These days, the DBS 
industry has eclipsed C-band by going far further than they 
ever did in terms of numbers of subscribers. It's an industry 
that has certainly matured and it seems that it might be worth 
considering making their compulsory license permanent in a 
manner similar to cable compulsory license.
    I also want to mention today that I'm pleased to have a 
constituent of mine testifying before the committee. Matt 
Polka, who is head of the American Cable Association, hails 
from North Versailles, which I'm happy to report managed to 
remain in my District through the recent Pennsylvania 
redistricting. I've known Matt for many years and he's met 
regularly with our staff. He does a great job for ACA and I 
want to welcome him to the committee today and thank him for 
making the trip down.
    And finally, Mr. Chairman, I'd like to echo what Mr. Markey 
and Mr. Dingell said. Coming from Pittsburgh where we have a 
basketball team that should be a No. 1 seed and is poised to 
win the national championship, many subscribers in my area are 
going to be very upset. March Madness is going to turn into 
March Anger if EchoStar and Viacom don't sit down at the 
bargaining table and get this worked out. So I'd encourage them 
both to do that.
    Thank you.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. I'll pass, Mr. Chairman.
    Mr. Upton. Mr. Engel.
    Mr. Engel. Thank you. Thank you, Mr. Chairman. When the 
Yankees and CableVision got into a fight over carriage of the 
Yes Network, quite frankly it felt pretty lonely up here in 
those days. But now there's a similar fight between Viacom and 
EchoStar. I now feel a certain sense of shared pain.
    I welcome all my colleagues to this club. I hope you have 
your staff prepared to deal with angry constituents.
    I'm pleased that we're now moving forward with the 
Satellite Home Viewer Improvement Act. Most of this process 
should be fairly painless for all who are involved, but I do 
want to highlight an important issue to my constituents as was 
mentioned by my colleagues.
    It's the use of a second dish by EchoStar. Now I'm not 
against them using a second dish to provide more channels to 
their customers, that's fine. If EchoStar put all local 
channels on a second dish, I think we'd have no problem. But 
I'm concerned about two issues. First of all, most of their 
customers are paying for channels they're not receiving and 
second, there seems to be a preference by EchoStar to put PBS 
and Spanish language stations on the second dish. For example, 
in New York, to receive WLIW, a PBS station on Long Island, a 
person needs to get a second dish. I have a copy of a New York 
local channels taken from the dish TV website and it does note 
that to receive these broadcast channels, a customer does need 
to have a second dish. But I find it rather strange that only 
independent, religious, Spanish and PBS stations are in this 
category. In fact, a person is charged $5.99 per month for all 
the local channels, yet 8 of the 15 local channels require the 
second dish. So I am led to believe that a large number of my 
constituents are paying $5.99 for only 7 channels. I don't 
believe this is fair at all.
    I'm concerned about the future of free over-the-air 
broadcast television. In order for the 15 to 20 percent of 
Americans that don't have cable or satellite to be able to 
continue to have broadcast television, they must be mindful of 
what happens on cable and satellite. In the case of New York, 
the Telemundo station broadcast channel 47 needs to attract 
advertisers, just like any other broadcaster. But when 
computing the number of households the Telemundo signal 
actually reaches, advertisers may want to discount the number 
because of EchoStar's second dish requirement. If Telemundo 
can't garner the advertising dollars, an important source of 
news and entertainment for the Spanish speaking population of 
New York disappears, whether that person has cable, satellite 
or just plain rabbit ears. I'm very troubled by what on the 
fact looks like apparent discrimination between broadcasters.
    Let me end by saying that I do want to be fair. I'm more 
than willing to work with the satellite industry on piracy 
issues, but I think the bottom line for all of us is what kind 
of products our constituents are getting. I look forward to the 
hearing today. These are very, very important issues and I 
thank you, Mr. Chairman, for calling this very important 
hearing and I yield back.
    Mr. Upton. Thank you. Mr. Wynn.
    Mr. Wynn. I'll waive.
    Mr. Upton. That concludes the opening statements.
    [Additional statements submitted for the record follow:]

 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce

    Congress passed the Satellite Home Viewer Improvement Act (SHVIA) 
in 1999, giving satellite operators for the first time a statutory 
license to carry local broadcast television signals into local markets, 
and extending their license to provide distant signals to unserved 
consumers. Now, half a decade later, it is time to review the impact of 
SHVIA, and to determine whether we should alter the statutory regime in 
light of marketplace and regulatory developments. Indeed, we 
anticipated such review, explicitly providing for various provisions of 
SHVIA to expire December 31, 2004, unless we renewed them.
    Satellite has enjoyed considerable growth. The FCC's tenth annual 
video competition report reveals that while cable's share of the 
multichannel video programming market dropped from 76.5 percent to 74.9 
percent, direct broadcast satellite's (DBS's) share rose from 20.3 
percent to 21.6 percent. In fact, the DBS growth rate has exceeded the 
cable growth rate by double digits every year except for last, when its 
11.6 percent growth rate exceeded cable's 2.5 percent by approximately 
9 percentage points. Many attribute much of that to the introduction of 
local-into-local service.
    The digital television transition is also progressing. We have seen 
significant Federal Communications Commission action on a DTV tuner 
mandate, DTV plug-and-play compatibility, and the broadcast flag. 
Additional decisions are pending, including FCC proceedings on dual and 
multicast must-carry, as well as the periodic DTV review. We are still 
a ways from reaching our December 31, 2006, goal, however, for return 
of the analog spectrum, which is contingent upon meeting an 85-percent, 
market-by-market DTV penetration test.
    Against this backdrop we must decide whether to extend satellite 
operators' compulsory license to provide distant analog broadcast 
television signals to unserved consumers, as well as the satellite 
operators' exemption from obtaining retransmission consent, both of 
which expire at the end of this year. Satellite operators are also 
asking to allow them to begin providing distant digital signals to 
consumers whose local broadcasters are not yet providing digital 
broadcasts of sufficient power to reach those consumers. The satellite 
operators argue that this will promote the DTV transition and expedite 
the return of the analog spectrum.
    Local broadcasters respond that it is too early to allow satellite 
providers to provide distant digital signals. They point out that the 
FCC is still working out some of the details of the DTV transition, 
that broadcasters are spending billions of dollars to roll out digital 
television, and that they are making good progress. They argue that 
allowing satellite carriage of distant digital signals would erode the 
advertising revenue that broadcasters rely on to finance local news, 
sports, and community programming, especially in smaller markets. They 
also contend that if satellite providers truly want to promote the DTV 
transition, they should provide consumers in a market with the local 
digital signals of broadcasters in that market, not the signals of 
broadcasters in other markets.
    These are not the only issues before us. Broadcasters also argue 
that two-dish mechanisms for the delivery of local broadcast signals 
are discriminatory. Many also wonder whether there is anything we can 
do to help consumers who--because of the vagaries of market boundaries, 
geographic topography, or cumbersome waiver procedures and signal 
strength tests--cannot receive programming they truly consider to be 
local, either over the air or via satellite.
    The purpose of this hearing is to help us answer key questions. Is 
there a way to allow satellite operators to provide distant digital 
broadcasts that does not lessen their incentive to carry local digital 
broadcasts in smaller markets, and that does not threaten the 
advertising revenue that broadcasters rely on to fund local news, 
sports, and community programming? Should satellite be prohibited from 
carrying smaller stations on a second dish? Are there ways to help 
subscribers assigned to markets outside their states to receive truly 
``local'' programming; to provide a full complement of network 
programming to subscribers in markets with ``missing'' affiliates; and 
to improve the waiver and signal-strength testing process? Should 
satellite operators be required to stop offering distant signals once 
they begin carrying local signals in a market? Should the distant-
signal license be extended for another five years, or permanently? 
Should Congress extend the distant-signal retransmission consent 
exemption?
    I go into this process with an open mind, and hope that we, along 
with industry and consumer representatives, can find answers to these 
formidable questions that benefit all concerned.

                                 ______
                                 
Prepared Statement ofHon. Edolphus Towns, a Representative in Congress 
                       from the State of New York

    Let me begin by thanking you Mr. Chairman for holding this 
important hearing on reauthorizing the Satellite Home Viewer 
Improvement Act, known as SHVIA.
    SHVIA by all accounts has been a great success. As the General 
Accounting Office noted, competition from direct broadcast satellite 
(DBS) operators, which did not exist a decade ago, has emerged and 
grown rapidly in recent years. With roughly 22 million customers, DBS 
providers serve nearly 25 percent of the total multi-video channel 
market. In fact, DBS accounts for two of the five largest providers.
    A great deal of this success has been fueled by provisions in the 
1999 reauthorization bill which permitted satellite companies to 
provide local broadcast stations into consumers' local markets. 
Satellite providers are now offering local-into-local service in 112 
television markets nationwide, representing 87% of U.S. television 
households.
    Consumers are happy to get their broadcast stations from their 
satellite providers. Local broadcasters are pleased that more 
households in their viewing area can receive their signal. And 
satellite providers are of course happy to offer existing and 
potentially new customers additional services. As such, policies that 
reinforce local-into-local service create a win-win situation for all 
parties, and thus should be our focus as well.
    While the local-into-local license was made permanent by the last 
reauthorization, other provisions are set to expire. As we consider 
those expiring provisions, I think it is important to consider any 
possible changes through the lens that I just described. Competition is 
growing and as a result, consumers are beginning to reap the benefits 
through increased services and choice in the multi-video market. In 
this context, the committee should carefully consider proposals where 
we can strengthen competition by further leveling the playing field 
among competitors. However, we should be careful not to upset the 
current competitive balance that now exists.
    I look forward to hearing from today's witnesses on how they 
believe SHVIA has worked and how a reauthorization bill can be best 
developed to serve consumers. Thank you Mr. Chairman, and I yield back 
the balance of my time.

    Mr. Upton. We are joined today by a very impressive panel. 
We will start with Mr. David Moskowitz, Senior V.P. and General 
Counsel for EchoStar; Mr. Robert Lee, President and General 
Manager of WDBJ in Roanoke on behalf of the National 
Association of Broadcasters; Mr. Matt Polka, President of the 
American Cable Association from Pittsburgh; Mr. Gene Kimmelman, 
Senior Director of Public Policy and Advocacy of the Consumers 
Union; Mr. Martin Franks, Executive VP of CBS; and Mr. Eddy 
Hartenstein, Vice Chairman of Hughes Electronics in California.
    We appreciate very much that all of you sent your testimony 
in advance. I would note that as I looked through it last 
night, it is way more than the 5 minutes. We would be here 
until 2 or 3 o'clock, I think if we went through all of it. If 
you could limit your remarks to 5 minutes, knowing that your 
statements are made part of the record in its entirety that 
would be terrific.
    Mr. Moskowitz, we'll start with you.

  STATEMENTS OF DAVID K. MOSKOWITZ, SENIOR VICE PRESIDENT AND 
GENERAL COUNSEL, ECHOSTAR COMMUNICATIONS CORPORATION; ROBERT G. 
LEE, PRESIDENT AND GENERAL MANAGER, WDBJ-TV; MATTHEW M. POLKA, 
 PRESIDENT, AMERICAN CABLE ASSOCIATION; GENE KIMMELMAN, SENIOR 
 DIRECTOR, PUBLIC POLICY AND ADVOCACY, CONSUMERS UNION; MARTIN 
 D. FRANKS, EXECUTIVE VICE PRESIDENT, CBS TELEVISION; AND EDDY 
 W. HARTENSTEIN, VICE CHAIRMAN, HUGHES ELECTRONICS CORPORATION

    Mr. Moskowitz. Thank you, Chairman Upton, Ranking Member 
Markey and distinguished members of the subcommittee for 
inviting EchoStar to testify at this hearing. I'm David 
Moskowitz, the Senior Vice President and General Counsel of 
EchoStar.
    My remarks today will focus on the important issues 
surrounding reauthorization of SHVIA. I'm anxious also to clear 
the air of misconceptions concerning the competitive issues 
surrounding our unfortunate dispute with Viacom. Most 
importantly, let's get the channels back for consumers, 
including the Boston College and Pittsburgh games. But I'm 
aware there's an understanding that witnesses will focus on 
issues other than that dispute in their opening remarks. 
Consequently, I won't be addressing that issue, but welcome all 
of your questions on it.
    When consumers are left behind by local network stations 
whose off-air signals don't reach a household, Section 119 of 
the Copyright Act allows satellite to offer other network 
channels. I urge the committee to allow these millions of under 
served consumers, most of whom live in rural America, to 
continue receiving distant network channels and Super Stations 
through permanent extension of SHVIA.
    Cable enjoys a permanent statutory license. A permanent 
satellite license is a matter of fundamental consistency and 
would allow satellite to plan and compete more effectively.
    Consumers also rely on the congressionally provided 
grandfather clause of Section 119 to continue receiving the 
channels they have watched for over 5 years. It's been 
suggested that Congress take distant network channels away from 
grandfathered consumers. We urge continued protection of the 
rights of these consumers.
    Turning to technology innovation, of the 1600 broadcasters 
in the U.S. today, currently less than 600 have fully complied 
with their digital obligations. Tens of billions of dollars in 
deficit reduction will result when the analog spectrum is 
reclaimed by the government for e911 and other valuable uses. 
The DBS industry is uniquely positioned to be a catalyst to 
Congress' goal that digital television become available to all 
Americans. We ask that you allow consumers who cannot receive 
digital signals from their local station to receive them by 
satellite. Satellite can make HD programming immediately 
available to every household in America.
    A clear, unserved digital license would provide 
encouragement for these stations that the stations need to 
fulfill their promises to Congress and those are promises that 
are already 2 years late. Moreover, in Casper, Wyoming, for 
example, there is no Fox affiliate. Scores of other rural 
markets around the country don't have a local network affiliate 
for one or more of the big four networks. Those consumers will 
never watch HD networks that are missing in their communities 
unless Congress enacts a digital distant license.
    In a hearing 2 weeks ago, broadcasters touted that they are 
on-air and digital in 203 markets serving 99.42 percent of all 
U.S. households. We all know statistics can be confusing. But 
with the professed coverage how can broadcasters object that 
they will be harmed by the availability of digital distant 
signals only where households can't receive the local HD signal 
off-air. And because digital does not experience the same 
fading issues as analog, the process to determine eligibility 
would be simple.
    Addressing corrections to SHVIA, consumers are angry when 
told they can't purchase network channels by satellite if 
stations in neighboring markets are predicted by a computer to 
offer a channel off-air. We ask Congress to make clear that 
only stations in the consumer's home market can grant or deny a 
waiver.
    Additionally, consumers should only be permitted to request 
a signal test at their home if they're predicted to receive a 
weak signal. Consumers living near the local station's tower 
are uniformly frustrated when they request a test and find that 
they clearly don't meet the standard. The answer for these 
millions of consumers to get the choice that they do deserve 
can only be found in revisions to the antiquated Grade B 
standard to take into account changes in technology and 
consumer expectations over the past 50 years and to take into 
account ghosting which causes poor reception even in areas that 
get a strong off-air signal. Please direct the FCC to revise 
the standard to meet today's consumer expectations.
    Finally, some have criticized the two dish solution dish 
network uses to maximize the availability of local channels by 
satellite. While we continue to work toward providing all local 
channels on a single dish, we do not have enough satellite 
capacity today. With free hardware and free professional 
installation for everyone who wants it, we believe two dishes 
is the better alternative to terminating the availability of 
local channels in many markets around the U.S. Providing local 
channels and more effective competition to cable, in a maximum 
number of markets possible is a better solution.
    Mr. Chairman, EchoStar appreciates the efforts of Congress 
to ensure that DBS is a more effective competitor. thank you 
for allowing me to testify and I look forward to your 
questions.
    [The prepared statement of David K. Moskowitz follows:]

  Prepared Statement of David K. Moskowitz, Senior Vice President and 
          General Counsel, EchoStar Communications Corporation

    Thank you Chairman Upton, Representative Markey, and distinguished 
members of the Subcommittee, on behalf of EchoStar Communications 
Corporation, I want to thank you for inviting our company to discuss 
with you the Satellite Home Viewer Improvement Act. My name is David 
Moskowitz, and I am Senior Vice President and General Counsel of 
EchoStar Communications Corporation.
    Let me begin by acknowledging the vision that members of this 
Subcommittee had early of the potential for satellites to provide 
consumers with an alternative source for news, information and 
entertainment programming. The committee's support of program access 
rules in 1992, which was intended to provide satellite TV companies 
with more comparable access to the same programming available on cable, 
was instrumental to the growth of the Satellite TV industry. Thus in 
1996, when we launched our small dish satellite TV service called DISH 
Network, we were successfully able to provide competitive television 
services to consumers nationwide.
    Since offering service 8 years ago, DISH Network has grown to 
become the most technologically advanced television provider in the 
multichannel video market today. We offer a variety of high-definition 
television networks with state-of-the-art set top box receivers with 
built in digital video recorders, as well as dozens of interactive 
services. Today we have more than 9 million subscribers and expect that 
number to continue growing. We offer local broadcast service in over 
108 television markets nationwide, meaning that it is available to more 
than 85% of all households in the country. We credit our dedication to 
customer service and competitive pricing for our success as well as the 
availability of traditional cable channels and our ability to provide 
local service. We're proud to say that we have signed up more 
subscribers over the last three years than all other pay television 
providers combined. Indeed, twelve years ago it was thought that 
satellite TV could not compete with cable and it was wishful thinking 
to think that we could; today it's a reality.
    Reauthorization of the Satellite Home Viewer Improvement Act 
provides Congress with an excellent opportunity to further improve the 
environment for the broad-based availability of advanced services to 
the consuming public, in addition to continuing many of the established 
and proven provisions of the Act, which are essential to promoting 
competition in the multichannel video programming distributors 
(``MVPD'') market. In many critical respects, satellite carriers are 
saddled with regulatory provisions that are not imposed upon their 
competitors, and that makes satellite a less attractive option for many 
potential subscribers. One of EchoStar's principal objectives is to 
ensure that the satellite industry is able to compete more effectively 
with other MVPD providers.
    I urge the Committee to reauthorize the Satellite Home Viewer 
Improvement Act (SHVIA) and extend the satellite distant network signal 
and superstation license permanently. I would also like the Committee 
to consider allowing consumers that otherwise cannot get digital 
service from their local broadcaster to receive network digital 
television signals from a satellite TV provider. Lastly, I believe a 
handful of modifications to the SHVA are needed to ensure satellite 
television providers can continue to meet consumer expectations and 
compete effectively with other multichannel video programming 
distributors.
    Before I discuss the reauthorization of the Satellite Home Viewer 
Act, I would like to begin my remarks by expressing my disappointment 
with network broadcasters who continue to make a mockery of the 
retransmission consent provisions of the 1999 Act. In exchange for 
permission to carry network broadcast programming, the broadcasters are 
increasingly leveraging their monopoly over this programming to force 
pay TV providers to carry the cable networks they own. Often, consumers 
are not interested in this other programming, and do not want to pay 
the higher monthly fees that come from tying these programs to 
broadcast retransmission. We urge Congress to take a closer look at the 
way retransmission consent is being implemented, and act accordingly in 
the interest of consumers and market competition.

Reauthorization of Section 119
    Section 119 of the Copyright Act, which expires on December 31, 
2004, allows satellite carriers to make distant network programming 
available to viewers unable to receive the over-the-air signals of 
their local network affiliates. Although this provision does not have 
an affect on many households in urban areas, the service is of critical 
importance to consumers in rural areas. There are millions of such 
``unserved households'' throughout the nation and one of the reasons 
appears to be that the cost to the broadcasters of providing service to 
these additional households exceeds the advertising revenue that the 
broadcasters would hope to generate. Subsequently, the satellite TV 
industry sought to meet the consumer demand in the market-place and 
invested billions of dollars to build and launch satellites that could 
serve these rural households that broadcasters have long neglected. The 
broadcasters have still not made any significant investment to expand 
the reach of their over-the-air-signal. Therefore, satellite TV remains 
the only option for millions of rural subscribers to receive broadcast 
network programming. Without the distant network signal license, 
satellite TV providers could not continue making this service 
available, and these subscribers would lose their ability to watch 
broadcast network programming. We urge you to extend the license.
    The broadcasters have argued that the availability of distant 
network service should be limited to only those markets where local-
into-local service by satellite is now unavailable. We oppose this 
modification to the existing license based on basic market principle-- 
consumers deserve choices. In the same way that a consumer in 
Kalamazoo, Michigan can purchase either the Kalamazoo Gazette or the 
Los Angeles Times, we believe that consumers who do not have adequate 
access to an over-the-air signal and must pay for their television 
service should have the option of watching their local broadcaster or a 
distant broadcaster on their satellite platform. Besides, it would be 
odd to penalize satellite carriers for the large investment that they 
have made to introduce local into local service. Taking away the 
satellite carrier's distant network license in areas for which they 
have made such an investment would be precisely such an unjust penalty. 
Furthermore, the deletion of distant network signals in markets where 
satellite provides local service would also be costly to the consumer. 
Many satellite TV subscribers have legacy dishes and set top box 
receivers that would require upgrading in order to switch from distant 
network service to local service.
    The distant network signal provides a marketplace motivation for 
the broadcasters to continue improving their over-the-air reception and 
thereby making their signal available to as wide an audience as 
possible. Without the satellite carriers' ability to offer distant 
network signals, broadcasters would not have any incentive to make such 
improvements. The broadcasters realize that it is less costly to them 
for their signal to be delivered by satellite or cable TV rather than 
over the air. Simply put, broadcasters would save money on their power 
bills if they felt they did not need to bother about the quality of 
their over-the-air signal. The anxiety of vying for their audience with 
network signals would no longer exist. The result could be that the 
number of consumers who can receive over-the-air signals could diminish 
if the broadcasters lower their signal's strength and rely on satellite 
TV to deliver their signal. In conclusion, the proposal to limit the 
availability of distant network service to the markets unserved by 
local channels via satellite would create a disincentive for the 
broadcasters to continue offering free service of acceptable quality in 
rural areas, resulting in less choice for consumers and higher costs.
    Section 119 also permits satellite carriers to retransmit non-
network broadcast stations to satellite subscribers. These so-called 
``superstations,'' such as WGN, have been a staple of cable system 
lineups since cable first began making its service available to 
consumers in the 1970s, and helped drive the growth of the satellite 
television industry. They continue to be among the most popular program 
offerings. The statutory license ensures that satellite carriers have 
the same opportunity as cable to make this popular programming 
available to satellite subscribers.
    Section 119 also allows certain eligible households to continue 
receiving distant network signals if they subscribed to these signals 
prior to October 31, 1999. EchoStar strongly supports extension of the 
distant network ``grandfather'' clause. This group of satisfied, long-
term customers numbering in several hundreds of thousands has come to 
rely upon this service for at least the last five years, and in some 
cases much longer. It makes no sense from a public policy standpoint to 
disenfranchise consumers by telling them that they can no longer 
receive this programming.
    Finally, the current playing field is not level--as long as the 
cable industry continues to enjoy a permanent, statutorily granted 
license, the satellite industry remains at a competitive disadvantage. 
Therefore, in the interest of parity and Congress' role and oversight 
responsibilities in promoting competition in the MVPD marketplace, we 
urge the Committee to allow satellite carriers to avail themselves of a 
license under the same terms as cable.

Transition to Digital Television
    The reauthorization of SHVIA also offers Congress an opportunity to 
broaden the existing ``unserved household'' definition so consumers who 
cannot otherwise receive a digital television (DTV) signal from their 
local broadcaster, will have the ability to receive it from their 
satellite TV provider.
    Congress passed the Telecommunications Act of 1996 which gave the 
broadcasters for free $70 billion dollars worth of new spectrum for the 
broadcast of DTV signals beginning in 1998. In the ensuing 1997 
Balanced Budget Act, Congress set deadlines for consumers to receive 
these digital signals, and for the analog spectrum to be returned once 
the transition was complete. By law, the commercial broadcasters were 
to be offering digital service in all 210 designated television markets 
(DMA) by May 1, 2002. Non-commercial broadcasters were to be 
transmitting by May of the following year. The broadcasters were then 
required to return the analog spectrum by December 31, 2006.
    Despite the comprehensive transition framework created by Congress 
and the Federal Communication Commission's (FCC) many efforts to 
accelerate the transition, many broadcasters are still failing to 
provide digital service. Currently 1,057 TV stations out of 1,688, or 
nearly two-thirds, are not meeting Congress' expectations for available 
digital service in local markets according to the FCC. Of these 
stations, 303 are not broadcasting at all and 754 are broadcasting at a 
low power, serving an area smaller than their analog 
signal.1 On a market-by-market basis, consumers in only 17 
of 210 markets are able to receive a full complement of over-the-air 
network DTV service (NBC, ABC, CBS, FOX, and PBS) similar to analog 
service.
---------------------------------------------------------------------------
    \1\ FCC, ``Summary of DTV Applications Filed and DTV Build Out 
Status,'' February 25, 2004.
---------------------------------------------------------------------------
    The broadcasters would like for you to believe that their DTV 
signal is more widely available. In fact, during recent testimony in 
front of the House Judiciary Subcommittee on Courts, the Internet, and 
Intellectual Property, the National Association of Broadcasters claimed 
that broadcasters have built--and are on-air with--digital television 
(``DTV'') facilities in 203 markets that serve 99.42% of all U.S. TV 
households. If we are to believe these statistics, then it is hard to 
understand why broadcasters are so adamant about preventing the 
satellite TV industry from serving the remaining 0.58% of households 
who cannot now receive their service.
    The Balanced Budget Act of 1997 provided only a limited number of 
rationales for extending the December 31, 2006 deadline for 
broadcasters to return the analog spectrum. The most significant is the 
so-called ``15% rule.'' Under that rule, the FCC may grant an extension 
if at least 15% of households do not have a DTV set or a digital-to-
analog converter enabling them to receive the DTV signals of local 
broadcast stations. Today, less than three years from the 2006 
deadline, there is no evidence that the percentage of American homes 
with compliant sets exceeds even the single digits. The 15% loophole 
will ensure that broadcasters will squat on both the analog and digital 
spectrum for years, if not decades to come. New innovations that rely 
on the redeployment of the analog spectrum will be put on hold and 
taxpayers across the country will be denied the hundreds of billions of 
dollars that the auction of the analog spectrum would bring to the U.S. 
taxpayer.
    There is an immediate and practical solution to help ensure that 
the digital transition does not continue to proceed at today's snail's 
pace. By allowing satellite TV providers to offer DTV programming to 
households that are not served with a local over the air signal, 
Congress would facilitate a demand for digital television sets among 
satellite TV subscribers. Although these households would be receiving 
distant network DTV signals rather than local broadcast signals, these 
consumers would count toward the local broadcaster's 85% take rate 
because the satellite TV industry's HDTV set top box receivers include 
over-the-air digital tuners. The network availability of HD service via 
satellite will also motivate the broadcasters to make their digital 
signal available to more households sooner, which will accelerate the 
time in which 85% of the country can receive DTV. Congress will need to 
direct the FCC to develop a propagation model to predict over-the-air 
digital reception on a household-by-household basis. The Copyright 
Office, in its testimony before the House Judiciary Subcommittee on 
Courts, the Internet, and Intellectual Property on February 24 agreed 
by saying ``Congress will have to reexamine how to determine what is an 
un-served household'' in a digital world. This model should be based on 
an average consumer's reasonable expectation regarding the size and 
cost of an over-the-air digital antenna.
    Lastly, the satellite TV industry's offering of distant digital 
signals would have no real impact on the roll out of analog local-into-
local service to additional markets by DBS operators. Our industry 
continues to rollout of local markets. This proposal would simply 
afford consumers nationwide currently unavailable digital services.

Regulatory Parity
    As I mentioned earlier in my testimony, one of our principal 
objectives in the SHVIA reauthorization process this year is to ensure 
that we can continue to compete on a level playing field with our 
competitors, which means establishing some degree of regulatory parity 
with cable when it comes to regulations governing carriage of broadcast 
channels. From an objective point of view, the SHVIA imposes upon the 
satellite industry a number of affirmative obligations and prohibitions 
that make it difficult for DBS providers to offer programming 
comparable to that offered by cable. For example, while the cable 
industry enjoys much broader leeway in providing broadcast signals--
both network and non-network, and distant or local--to its subscribers, 
satellite providers face strict restrictions on the broadcast signals 
they can provide to subscribers. It is provisions such as these that 
must be reexamined to ensure that true competition is fostered and not 
inhibited by statutory barriers.

Carriage of Broadcast Signals
    The first issue that I would like to address in connection with 
carriage of broadcast signals involves DBS providers' ability to offer 
a full complement of broadcast station programming. As DBS providers 
continue to offer more and more local-into-local services in the 210 
DMAs, there are at least 50 markets that do not have a full complement 
of local affiliates of the major networks. Currently, the law does not 
allow DBS providers to make available to subscribers a broadcast 
station from a neighboring DMA in those circumstances to ensure that 
subscribers get the whole complement of broadcast stations. This is 
because the local-into-local license contained in Section 122 of the 
Copyright Act only allows DBS operators to retransmit local stations 
back into the DMA where they are broadcast. Cable, on the other hand, 
can fill in holes in local station affiliate offerings with neighboring 
stations and routinely adds network affiliates and other broadcast 
stations so that its subscribers have the full line-up of major network 
and other popular stations. The inability of DBS providers to offer 
subscribers a full complement of broadcast signals leaves them at a 
serious disadvantage vis-a-vis cable in competing for customers and is 
inconsistent with the FCC's policy objective of ensuring that consumers 
have access to all of the major broadcast networks.
    Similarly, DBS operators are not permitted to tailor their local 
channel offerings to respond to local community needs or interests. 
Cable, on the other hand, is permitted to include broadcast channels 
that do not originate in their local markets if those signals are 
``significantly viewed'' by the community. There is no such provision 
for DBS. As a result, DBS providers must adhere to DMA market 
designations that do not conform to a local community's viewing habits. 
For example, Comcast in New Haven, Connecticut, which is in the 
Hartford-New Haven DMA, offers CBS, NBC and FOX affiliates from both 
Hartford and New York City and ABC affiliates from both New Haven and 
New York City. By contrast, DBS providers cannot offer the New York 
City stations at all in New Haven, and are thus at a serious 
competitive disadvantage.

Analog Predictive Model
    With respect to distant analog signals, the consumers' interests 
are paramount for EchoStar and it is this Committee that speaks for 
those consumers. It is important for all of us to work to ensure that 
each and every consumer without an adequate over-the-air network signal 
has access to a distant network signal by satellite. We believe 
Congress should give the FCC the authority to adopt a higher value for 
Grade B intensity, corresponding to modern consumer acceptance 
standards, specifically for SHVA purposes.

Waiver and Signal Strength Testing Process
    We believe that SHVIA's current waiver and signal strength testing 
process for the receipt of distant network signals by those who are 
predicted to receive a Grade B over-the-air signal, but who nonetheless 
do not receive a clear picture, needs to be revisited. That process is 
not functioning as Congress envisioned. After five years of experience, 
we can testify that the process often leads to a bad customer 
experience. In some cases the law is unclear; in other cases consumers 
have unrealistic expectations; still, in other cases DBS providers and 
their customers are subject to the whims of broadcasters. We recommend 
narrowing the waiver process to only permit consumers receiving a weak 
Grade B signal to request a signal strength test. We also recommend a 
prohibition on broadcasters from revoking waivers once given as long as 
the subscriber receives continuous service from their DBS provider. 
Further, the rules should be clarified to eliminate consumer confusion 
when a subscriber is predicted to receive the same network signal from 
two local affiliates of different DMAs by requiring a waiver only from 
the network station in the subscriber's DMA. This will eliminate the 
need for customers to get multiple waivers from affiliates of the same 
network.

Conclusion
    Mr. Chairman, in closing I would like to reiterate that EchoStar 
appreciates the efforts of this subcommittee as well as the Congress to 
ensure that DBS is a true competitor in the MVPD marketplace. With a 
few exceptions, our experience under the SHVIA has been a positive one. 
While the DBS industry is growing, it is nowhere close to the size of 
cable operators. It is therefore essential for Congress to reauthorize 
the extension of the satellite statutory license, allow more regulatory 
parity with cable, which still enjoys preferential treatment under the 
copyright laws, and ensure that the DBS industry is able to compete on 
a level playing field. We at EchoStar look forward to working with 
members of this committee and this entire Congress to modernize SHIVA 
so that we are able to deliver the latest in technology to as many 
consumers, as quickly as possible.

    Mr. Upton. Mr. Lee.

                   STATEMENT OF ROBERT G. LEE

    Mr. Lee. Thank you, Mr. Chairman and distinguished members 
of the subcommittee. Having been in the television business for 
almost 40 years, I can tell you our business is built on 
serving local viewers with free, over-the-air local 
programming. As SHVIA affects how we reach many of our local 
viewers, I'm pleased to comment today on its reauthorization. 
SHVIA, as we've heard, contains two compulsory licenses. The 
first, the local-into-local license has been a success for 
broadcasters, for the satellite industry and most importantly, 
for television viewers, your constituents.
    Tens of millions of your constituents, in fact, now have an 
additional option they didn't have 5 years ago, receiving local 
television via satellite. And our hope is that soon local 
stations in all 210 markets will be delivered to local viewers 
by satellite. By year end, DirecTV has said it expects to serve 
130 markets covering 92 percent of U.S. households. EchoStar 
also services 107, but as we've heard in many markets, 
subscribers must use a second dish to receive all their local 
stations.
    Then the second compulsory license, the distant signal 
license has been plagued by satellite industry abuse. For 10 
years, DBS ignored the standard that determines eligibility of 
a subscriber for distant signals. Instead, it simply signed up 
anyone willing to say they were unhappy with their free over-
the-air picture. Well, when the courts correctly ordered this 
illegal service terminated, instead of complying the DBS 
industry raced to the FCC to argue that the existing standard 
we've heard about this morning was antiquated. And after 
reviewing those satellite industry claims, the FCC held that 
there's no basis for changing the standard.
    Well, when DBS finally began shutting off these ill-gotten 
subscribers, there was a fire storm of consumer outrage and 
much of it was unfairly directed at new members. And we didn't 
point them in your direction, the satellite industry did. Since 
that time, while DirecTV has complied with the law, EchoStar 
has continued to provide illegal service to hundreds of 
thousands of subscribers. A Federal District Court recently 
ruled that EchoStar broke a sworn promise to the Court by 
failing to disconnect those subscribers.
    My written testimony includes a list of violations of 
existing statutes and regulations, as well as abuses of process 
in which EchoStar has willfully engaged. And today, DBS asks 
you to confer upon them a new benefit. Having failed to live up 
to the obligations in the existing law, they now ask you to 
expand the distant signal license by creating this so-called 
digital white area. This proposal is an absolute recipe for 
mischief and the committee must reject it. A digital white area 
would undercut what would otherwise be a market-driven race 
between my friends at EchoStar and DirecTV and our friends in 
the cable business to deliver digital signals on a local-to-
local basis.
    DBS suggests a digital white area will stimulate the DTV 
transition and since we're so close to St. Patrick's Day, I'll 
say it, that's malarkey. Television broadcasters have spent 
billions of dollars bringing DTV to consumers. To date, 1,155 
digital stations are on the air and 92 percent of the 
households in this country with access to an over-the-air 
analog station also have access to local digital broadcast 
signals. In those instances where stations have not powered up, 
there are often tangible obstacles beyond their control. Many 
stations have not yet received FCC authorizations to go to full 
power. Some stations have experienced tower location delays. 
Many have not received their final channel assignment or their 
translator assignments and as stations increase power levels, 
we found that interference issues arrive and have to be 
resolved.
    In testimony 2 weeks ago, Mr. Moskowitz conceded that local 
stations are not to blame for these delays in the transition 
saying, and I quote him, ``I'm not saying broadcasters are at 
fault.'' Well, despite that statement, satellite would have you 
penalize those same viewers by siphoning off their local 
viewers.
    Two weeks ago, Mr. Moskowitz also said that DBS should 
never have to discontinue delivery of distant digital network 
signals if it gets the right to carry them. So no matter what 
the local station did, it could buildup to 150 percent of 
power, it would never be able to get back its lost viewers. 
This would do nothing to accelerate the DTV transition and if 
DBS ever did discontinue distant digital signal delivery, then 
we'd have that consumer war we had 5 years ago.
    In short, DBS proposes a huge loophole, big enough to drive 
a dish network installation truck through. At the end of the 
day Congress may elect to simply reauthorize SHVIA in its 
current form for another 5 years, but should you take a broad 
approach, we would urge two improvements to SHVIA. First, amend 
the definition of unserved households. If a household is in a 
market where the satellite companies offer local signals via 
satellite, there's no reason at all to bring in a distant 
signal. And second, outlaw EchoStar's two dish practice. I 
strongly urge Congress to reauthorize a SHVIA that preserves 
and advances localism in television and does not harm it.
    Thank you, Mr. Chair.
    [The prepared statement of Robert G. Lee follows:]

  Prepared Statement of Robert G. Lee, President and General Manager, 
     WDBJ-TV on Behalf of the National Association of Broadcasters

                        INTRODUCTION AND SUMMARY

    Ever since this Committee helped to craft the original Satellite 
Home Viewer Act of 1988 (``SHVA''), Congress has worked to ensure both 
(1) that free, over-the-air network broadcast television programming 
will be widely available to American television households, and (2) 
that satellite retransmission of television broadcast stations will not 
jeopardize the strong public interest in maintaining free, over-the-air 
local television broadcasting. Those two goals remain paramount today.
    There can be no doubt that delivery of local stations by satellite 
is the best way to meet these twin objectives. The first two times 
Congress considered the topic--in 1988 and 1994--delivery of local 
stations by satellite seemed far-fetched. Congress therefore resorted 
to a considerably less desirable solution: permitting importation of 
distant television stations, although only to households that could not 
receive their local network stations over the air.
    When Congress revisited this area in 1999, the world had changed: 
local-to-local satellite transmission had gone from pipe dream to 
technological reality. And in response, in the 1999 Satellite Home 
Viewer Improvement Act (``SHVIA''), Congress took an historic step, 
creating a new ``local-to-local'' compulsory license to encourage 
satellite carriers to deliver local television stations by satellite to 
their viewers. At the same time, Congress knew that allowing satellite 
carriers to use the new license to ``cherry-pick'' only certain 
stations would be very harmful to free, over-the-air broadcasting and 
to competition within local television markets. Congress therefore made 
the new ``local-to-local'' license available only to satellite carriers 
that deliver all qualified local stations.
    Congress' decision to create a carefully-designed local-to-local 
compulsory license has proven to be a smashing success. Despite gloomy 
predictions by satellite carriers before enactment of SHVIA that the 
``carry-one-carry-all'' principle would sharply limit their ability to 
offer local-to-local service, the nation's two major DBS companies, 
DirecTV and EchoStar, today deliver local stations by satellite to the 
overwhelming majority of American television households.
    Thanks to the wise decision by the FCC and the Department of 
Justice to block the proposed horizontal merger of DirecTV and 
EchoStar, the two DBS firms continue to compete vigorously against one 
another in expanding their delivery of local stations. While EchoStar 
predicted when it sought to acquire DirecTV that it would never be able 
to serve more than 70 markets without the merger, EchoStar now serves 
107 Designated Local Markets (``DMA's'') that collectively cover more 
than 83% of all U.S. TV households. Nor is there any sign that 
EchoStar's expansion of local-to-local service has stopped.
    The story with DirecTV is even more dramatic. With the launch of a 
new satellite this spring, DirecTV expects to serve 100 DMAs covering 
85% of all U.S. TV households. By the end of 2004, DirecTV has 
committed to providing local-to-local in an additional 30 markets, for 
a total of at least 130 DMAs covering 92% of all TV households. And as 
early as 2006 and no later than 2008, ``DirecTV will offer a seamless, 
integrated local channel package in all 210 DMAs.'' In Re General 
Motors Corporation and Hughes Electronics Corporation, Transferors and 
The News Corporation Limited, Transferee, for Authority to Transfer 
Control,  332, MB Docket No. 03-124 (released Jan. 14, 2004) (emphasis 
added).
    The local-to-local compulsory license is the right way--and the 
distant-signal compulsory license is the wrong way--to address delivery 
of over-the-air television stations to satellite subscribers. If 
Congress wishes to do anything other than briefly extend the expiration 
date of Section 119, it should--as a matter of simple logic--limit the 
distant-signal compulsory license to markets in which the satellite 
carrier does not offer local-to-local service. It makes no sense, for 
example, to treat a satellite subscriber as ``unserved'' by its local 
CBS station when the subscriber's DBS firm offers that station as part 
of its satellite-delivered package, with what the satellite industry 
describes as ``a 100 percent, crystal-clear digital audio and video 
signal.''
    Although the rapid rollout of DBS local-to-local service has 
vindicated the actions that Congress took in SHVIA in 1999, there is 
one major blemish on the success story: an outrageous form of 
discrimination that EchoStar has inflicted on some local stations. 
EchoStar's method of discrimination is simple, but devastating. While 
placing what it considers the most ``popular'' stations in a market on 
its main satellites, EchoStar relegates certain stations (particularly 
Hispanic and foreign-language stations) to a form of satellite 
Siberia--placing them on remote ``wing satellites'' far over the 
Atlantic or Pacific, which can be seen only if one obtains a second 
satellite dish. Very few subscribers actually do acquire a second dish, 
thereby rendering many local stations invisible to their own local 
viewers. As even DirecTV has acknowledged, this practice violates the 
``carry one, carry all'' principle of the SHVIA. The FCC has thus far 
tolerated this grossly improper practice, imposing only minor 
restrictions on this form of discrimination. If the Commission fails to 
take prompt and decisive steps to halt this misconduct, Congress will 
need to step in to do so.
    While the local-to-local compulsory license has (with the exception 
of EchoStar's two-dish abuse) generally worked well, the history of the 
distant-signal compulsory license (codified in Section 119 of the 
Copyright Act) has been just the opposite. For the first ten years 
after this law was enacted, satellite carriers systematically ignored 
the clear, objective definition of ``unserved household'' and instead 
delivered distant signals to anyone willing to say that they did not 
like their over-the-air picture quality. Only through costly 
litigation--culminating in a 1998 ruling against PrimeTime 24 and a 
1999 ruling against DirecTV--were broadcasters able to bring a halt to 
most of this lawlessness. Even after those rulings, however, EchoStar 
has continued to serve hundreds of thousands of illegal subscribers, 
forcing broadcasters to spend years chasing it through the courts to 
obtain relief. Last June, a United States District Court found (after a 
ten-day trial) that EchoStar willfully or repeatedly violated the 
distant-signal provisions of the Copyright Act and, in the process, 
broke a sworn promise to the court to turn off large numbers of illegal 
subscribers. This finding was only the latest in what has been a long 
string of instances in which courts and the FCC have found EchoStar to 
have violated statutes and rules--and abused legal processes--for its 
own private benefit.
    Startlingly, EchoStar, having engaged in this widespread pattern of 
misconduct, and having been content to violate the distant-signal 
license until ordered by a court to stop breaking the law, now urges 
Congress to radically expand the distant-signal compulsory license. In 
particular, the satellite industry now asks to be allowed to import 
ABC, CBS, Fox, and NBC programming from New York and Los Angeles 
stations to millions of households that can receive the same 
programming from their local stations over the air--and in most cases, 
can also get their local stations in superb quality, by satellite, from 
EchoStar and DirecTV as part of their local-to-local package. Although 
these homes are unquestionably ``served'' by their local stations, the 
DBS industry proposes to be allowed to deliver the same programming 
from New York or Los Angeles if the household is--in their view--
``digitally unserved.''
    The DBS industry proposal--by an industry with a long track record 
of lawlessness--is a recipe for mischief. As this Committee has 
repeatedly recognized, the distant-signal compulsory license is a 
departure from marketplace principles that is appropriate only as a 
``lifeline'' for households that otherwise cannot view network 
programming. It would make no sense to override normal copyright 
principles for households that can readily view their own local 
stations. It would give the DBS firms a government-provided crutch that 
would set back for years what would otherwise be a market-driven race 
between DirecTV and EchoStar--further spurred by competition with 
cable--to deliver digital signals on a local-to-local basis. And when 
local stations later sought to reclaim their own local viewers from the 
distant digital transmissions, there would be a consumer firestorm much 
like what occurred when two major satellite carriers were required to 
turn off (illegally-delivered) distant analog signals to millions of 
households in 1999.
    Finally, given the rapid pace of technological and economic change, 
Congress should again specify that Section 119 will sunset after a 
limited, five-year period, so that Congress can decide then if there is 
any reason to continue this government intervention in the free market 
for copyrighted television programming.

    I. THE PRINCIPLES OF LOCALISM AND OF RESPECT FOR LOCAL STATION 
  EXCLUSIVITY ARE FUNDAMENTAL TO AMERICA'S EXTRAORDINARILY SUCCESSFUL 
                       TELEVISION DELIVERY SYSTEM

    As this Committee has consistently stressed--going back to 1988, 
when it played a leading role in crafting the rules governing satellite 
importation of distant broadcast stations--the principles of localism 
and of local station exclusivity have been pivotal to the success of 
American television.

A. The Principle of Localism is Critical To America's Extraordinary 
        Television Broadcast System
    Unlike many other countries that offer only national television 
channels, the United States has succeeded in creating a rich and varied 
mix of local television outlets through which more than 200 
communities--including towns as small as Glendive, Montana, which has 
fewer than 4,000 television households--can have their own local 
voices. But over-the-air local TV stations--particularly those in 
smaller markets such as Glendive--can survive only if they can generate 
advertising revenue based on local viewership. If satellite carriers 
can override the copyright interests of local stations by offering the 
same programs on stations imported from other markets, the viability of 
local TV stations--and their ability to serve their communities with 
the highest-quality programming--is put at risk.
    The ``unserved household'' limitation is simply the latest way in 
which the Congress and the FCC have implemented the fundamental policy 
of localism, which has been embedded in federal law since the Radio Act 
of 1927.1 In particular, the ``unserved household'' 
limitation in the SHVA implements a longstanding communications policy 
of ensuring that local network affiliates--which provide free 
television and local news to virtually all Americans--do not face 
importation of duplicative network programming.
---------------------------------------------------------------------------
    \1\ First Report and Order, 14 FCC Rcd 2654,  11 (1999); see SHVA 
Notice of Proposed Rule Making,  3 (``The network station compulsory 
licenses created by the Satellite Home Viewer Act are limited because 
Congress recognized the importance that the network-affiliate 
relationship plays in delivering free, over-the-air broadcasts to 
American families, and because of the value of localism in 
broadcasting. Localism, a principle underlying the broadcast service 
since the Radio Act of 1927, serves the public interest by making 
available to local citizens information of interest to the local 
community (e.g., local news, information on local weather, and 
information on community events). Congress was concerned that without 
copyright protection, the economic viability of local stations, 
specifically those affiliated with national broadcast network[s], might 
be jeopardized, thus undermining one important source of local 
information.'')
---------------------------------------------------------------------------
    The objective of localism in the broadcast industry is ``to afford 
each community of appreciable size an over-the-air source of 
information and an outlet for exchange on matters of local concern.'' 
Turner Broadcasting Sys. v. FCC, 512 U.S. 622, 663 (1994) (Turner I); 
see United States v. Southwestern Cable Co., 392 U.S. 157, 174 & n.39 
(1968) (same). That policy has provided crucial public interest 
benefits. Just a few years ago, the Supreme Court declared that
        Broadcast television is an important source of information to 
        many Americans. Though it is but one of many means for 
        communication, by tradition and use for decades now it has been 
        an essential part of the national discourse on subjects across 
        the whole broad spectrum of speech, thought, and expression.
Turner Broadcasting Sys. v. FCC, 117 S. Ct. 1174, 1188 (1997).
    Thanks to the vigilance of Congress and the Commission over the 
past 50 years in protecting the rights of local stations, over-the-air 
television stations today serve more than 200 local markets across the 
United States, including markets as small as Presque Isle, Maine (with 
only 28,000 television households), North Platte, Nebraska (with fewer 
than 15,000 television households), and Glendive, Montana (with fewer 
than 5,000 television households).
    This success is largely the result of the partnership between 
broadcast networks and affiliated television stations in markets across 
the country. The programming offered by network-affiliated stations is, 
of course, available over-the-air for free to local viewers, unlike 
cable or satellite services, which require substantial payments by the 
viewer. See Turner I, 512 U.S. 622, 663; Satellite Broadcasting & 
Communications Ass'n v. FCC, 275 F.3d 337, 350 (4th Cir. 2001) (``SHVIA 
. . . was designed to preserve a rich mix of broadcast outlets for 
consumers who do not (or cannot) pay for subscription television 
services.''); Communications Act of 1934,  307(b), 48 Stat. 1083, 47 
U.S.C.  307(b). Although cable, satellite, and other technologies 
offer alternative ways to obtain television programming, tens of 
millions of Americans still rely on broadcast stations as their 
exclusive source of television programming, Turner I, 512 U.S. at 663, 
and broadcast stations continue to offer most of the top-rated 
programming on television.
    The network/affiliate system provides a service that is very 
different from nonbroadcast networks. Each network affiliated station 
offers a unique mix of national programming provided by its network, 
local programming produced by the station itself, and syndicated 
programs acquired by the station from third parties. As this Committee 
recognized in reporting out the original SHVA in 1988, ``historically 
and currently the network-affiliate partnership serves the broad public 
interest.'' H.R. Rep. 100-887, pt. 2, at 19-20 (1988). Unlike 
nonbroadcast networks such as Nickelodeon or USA Network, which 
telecast the same material to all viewers nationally, each network 
affiliate provides a customized blend of programming suited to its 
community--in the Supreme Court's words, a ``local voice.''
    The local voices of America's local television broadcast stations 
make an enormous contribution to their communities. In Appendix A, we 
list just a few examples of television broadcasters' commitment to 
localism in the form of help to local citizens--and local charities--in 
need. It is through local broadcasters that local citizens and 
charities raise awareness and educate members of the community.
    Community service programming--along with day-to-day local news, 
weather, and public affairs programs--is made possible, in substantial 
part, by the sale of local advertising time during and adjacent to 
network programs. These programs (such as ``Alias,'' ``CSI,'' 
``American Idol,'' and ``Friends'') often command large audiences, and 
the sale of local advertising slots during and adjacent to these 
programs is therefore a crucial revenue source for local stations.
    A variety of technologies have been developed or planned--including 
cable, satellite, open video systems, and the Internet--that, as a 
technological matter, enable third parties to retransmit distant 
network stations into the homes of local viewers. Whenever those 
technologies posed a risk to the network/affiliate system, Congress or 
the Commission (or both) have acted to ensure that the retransmission 
system does not import duplicative network programming from distant 
markets. A recent example is the threat of unauthorized Internet 
retransmissions of television stations, which was quickly halted by the 
courts (applying the Copyright Act) and condemned by Congress as 
outside the scope of any existing compulsory license.2
---------------------------------------------------------------------------
    \2\ See National Football League v. TVRadioNow Corp. (d/b/a 
iCraveTV), 53 U.S.P.Q.2d (BNA) 1831 (W.D. Pa. 2000); 145 Cong. Rec. 
S14990 (Nov. 19, 1999) (statements by Senators Leahy and Hatch that no 
compulsory license permits Internet retransmission of TV broadcast 
programming).
---------------------------------------------------------------------------
    In the case of cable television, for example, the FCC has since the 
mid-1960's imposed ``network nonduplication'' rules on cable systems. 
47 C.F.R.  76.92-76.97 (1996). As the Commission explained when it 
strengthened the network nonduplication rules in 1988:
        [I]mportation of duplicating network signals can have severe 
        adverse effects on a station's audience. In 1982, network non-
        duplication protection was temporarily withdrawn from station 
        KMIR-TV, Palm Springs. The local cable system imported another 
        network signal from a larger market, with the result that KMIR-
        TV lost about one-half of its sign-on to sign-off audience. 
        Loss of audience by affiliates undermines the value of network 
        programming both to the affiliate and to the network. Thus, an 
        effective non-duplication rule continues to be 
        necessary.3
---------------------------------------------------------------------------
    \3\ Report and Order, In Re Amendment of Parts 73 and 76 of the 
Commission's Rules Relating to Program Exclusivity in the Cable and 
Broadcast Industries, 3 FCC Rcd 5299, 5319 (1988), aff'd, 890 F.2d 1173 
(D.C. Cir. 1989); see also Southwestern Cable Co., 392 U.S. at 165; 
Wheeling Antenna Co. v. WTRF-TV, Inc., 391 F.2d 179, 183 (4th Cir. 
1968).
---------------------------------------------------------------------------
2. Protecting the Rights of Copyright Owners to License Their Works in 
        the Marketplace is Another Principle Supporting a Highly 
        Circumscribed Distant-Signal Compulsory License
    By definition, the Copyright Act is designed to limit unauthorized 
marketing of works as to which the owners enjoy exclusive rights. See 
U.S. Constitution, art. I,  8, cl. 8 (``The Congress shall have Power 
. . . To promote the Progress of Science and useful Arts, by securing 
for limited Times to Authors and Inventors the exclusive Right to their 
respective Writings and Discoveries''); Mazer v. Stein, 347 U.S. 201, 
219 (1954) (``The economic philosophy behind the clause empowering 
Congress to grant patents and copyrights is the conviction that 
encouragement of individual effort by personal gain is the best way to 
advance public welfare through the talents of authors and inventors in 
``Science and useful Arts.'').
    While Congress has determined that compulsory licenses are needed 
in certain circumstances, the courts have emphasized that such licenses 
must be construed narrowly, ``lest the exception destroy, rather than 
prove, the rule.'' Fame Publ'g Co. v. Alabama Custom Tape, Inc., 507 
F.2d 667, 670 (5th Cir. 1975); see also Cable Compulsory License; 
Definition of Cable Systems, 56 Fed. Reg. 31,580, 31,590 (1991) (same). 
The principle of narrow application and construction of compulsory 
licenses is particularly important as applied to the distant-signal 
compulsory license, because that license not only interferes with free 
market copyright transactions but also threatens localism.

3. In Enacting the SHVA and the SHVIA, Congress Reaffirmed the Central 
        Role of Localism and of Local Program Exclusivity
    When Congress crafted the original Satellite Home Viewer Act in 
1988, it emphasized that the legislation ``respects the network/
affiliate relationship and promotes localism.'' H.R. Rep. No. 100-887, 
pt. 1, at 20 (1988). And when Congress temporarily extended the 
distant-signal compulsory license in 1999, it reaffirmed the importance 
of localism as fundamental to the American television system. For 
example, the 1999 SHVIA Conference Report, which was signed by every 
House member of the Conference Committee (including every member of 
this Committee that served on the Conference) and all but one Senate 
member, says this:
        ``[T]he Conference Committee reasserts the importance of 
        protecting and fostering the system of television networks as 
        they relate to the concept of localism. . . . [T]elevision 
        broadcast stations provide valuable programming tailored to 
        local needs, such as news, weather, special announcements and 
        information related to local activities. To that end, the 
        Committee has structured the copyright licensing regime for 
        satellite to encourage and promote retransmissions by satellite 
        of local television broadcast stations to subscribers who 
        reside in the local markets of those stations.''
        SHVIA Conference Report, 145 Cong. Rec. H11792 (daily ed. Nov. 
        9, 1999) (emphasis added).
    The SHVIA Conferees also stressed the need to interfere only 
minimally with marketplace arrangements--premised on protection of 
copyrights--in the distribution of television programming:
        ``[T]he Conference Committee is aware that in creating 
        compulsory licenses . . . [it] needs to act as narrowly as 
        possible to minimize the effects of the government's intrusion 
        on the broader market in which the affected property rights and 
        industries operate. . . . [A]llowing the importation of distant 
        or out-of-market network stations in derogation of the local 
        stations' exclusive right--bought and paid for in market-
        negotiated arrangements--to show the works in question 
        undermines those market arrangements.''
    Id. The Conference Report also emphasized that ``the specific goal 
of the 119 license, which is to allow for a life-line network 
television service to those homes beyond the reach of their local 
television stations, must be met by only allowing distant network 
service to those homes which cannot receive the local network 
television stations. Hence, the ``unserved household'' limitation that 
has been in the license since its inception.'' Id. (emphasis added).
    Finally, the SHVIA Conferees highlighted ``the continued need to 
monitor the effects of distant signal importation by satellite,'' and 
made clear that Congress would need to re-evaluate after five years 
whether there is any ``continuing need'' for the distant signal 
license. Id. That time, of course, is now.

 II. PROPERLY IMPLEMENTED, THE LOCAL-TO-LOCAL COMPULSORY LICENSE IS A 
    WIN-WIN-WIN FOR CONSUMERS, BROADCASTERS, AND SATELLITE COMPANIES

    Unlike the importation of distant network stations, which can do 
grave damage to the network/affiliate relationship, delivery of local 
stations to the stations' own local viewers--e.g., San Antonio stations 
to viewers in the San Antonio area--is a win-win-win for consumers, 
local broadcasters, and DBS firms alike. As Congress explained in 1999 
when it created a new local-to-local compulsory license in Section 122 
of the Copyright Act, the new Act ``structures the copyright licensing 
regime for satellite to encourage and promote retransmissions by 
satellite of local television broadcast stations to subscribers who 
reside in the local markets of those stations.'' 145 Cong. Rec. H11792 
(daily ed. Nov. 9, 1999) (emphasis added).

A. Satellite Firms Have Enjoyed Extraordinary Growth, Thanks In Major 
        Part To the Local-to-Local Compulsory License
    As the FCC recognized in its January 2004 Annual Assessment of the 
Status of Competition in Markets for the Delivery of Video Programming, 
the Direct Broadcast Satellite (``DBS'') industry is thriving--and 
offering potent competition to cable. The DBS industry, which signed up 
its first customer only decade ago, grew to more than 20 million 
subscribers as of June 2003. Annual Assessment, MB Dkt. No. 03-172,  8 
(released Jan. 28, 2004). The growth rate for DBS ``exceeded the growth 
of cable by double digits'' in every year between 1994 and 2002, and in 
2003 exceeded the cable growth rate by 9.2%. Id. Just in the 12 months 
between June 2002 and June 2003, the DBS industry added 2.2 million net 
new subscribers, surging from 18.2 million to 20.4 million households. 
Id.
    DirecTV is currently the second-largest multichannel video 
programming distributor (``MVPD''), behind only Comcast, while EchoStar 
is the fourth-largest MVPD. Id.,  67. The DBS firms take many 
subscribers away from cable: ``according to [DirecTV] internal data, 
approximately 70% of its customers were cable subscribers at the time 
that they first subscribed to DirecTV.'' Id.,  65.
    The growth of the DBS industry has far outstripped even optimistic 
predictions made just a few years ago. In its January 2000 Annual 
Assessment, for example, the FCC quoted bullish industry analysts who 
predicted that ``DBS will have nearly 21 million subscribers by 2007.'' 
2000 Annual Assessment, 15 FCC Rcd. 978,  70. As the statistics quoted 
above show, DBS reached that level not in 2007, but in 2003--four years 
earlier than predicted.
    As the FCC has repeatedly pointed out, delivery of local stations 
by satellite has been a major spur to this explosive growth. E.g., 2004 
Annual Assessment,  8. In June 1999, just before the enactment of the 
new local-to-local compulsory license in the SHVIA, the DBS industry 
had 10.1 million subscribers. 2000 Annual Assessment,  8. Only four 
years later, the industry had more than doubled that figure to 20.4 
million subscribers. 2004 Annual Assessment,  8. That this growth has 
been spurred by the availability of local-to-local is beyond doubt: the 
DBS industry's own trade association, the Satellite Broadcasting & 
Communications Association, stressed just a few months ago that ``[t]he 
expansion of local-into-local service by DBS providers continues to be 
a principal reason that customers subscribe to DBS.'' SBCA Comments at 
4, Dkt. No. 03-172 (filed Sept. 11, 2003) (emphasis added).

B. Contrary to the DBS Industry's Pessimistic Predictions, Satellite 
        Local-to-Local Service is Now Available to the Overwhelming 
        Majority of American Television Households
    Over the past few years, EchoStar and DirecTV have repeatedly 
claimed that capacity constraints will severely limit their ability to 
offer local-to-local service to more than a small number of markets. 
The DBS firms used that argument--unsuccessfully--in 1999 in attempting 
to persuade Congress that it should permit DBS companies to use a new 
compulsory license to ``cherry-pick'' only the most heavily-watched 
stations in each market. They used it again in arguing--again 
unsuccessfully--in 2000 and 2001 that the courts should strike down 
SHVIA's ``carry one, carry all'' principle as somehow unconstitutional. 
And they trotted out the same claims as a justification for the 
proposed horizontal merger of the nation's only two major DBS firms, 
DirecTV and EchoStar. As recently as 2002, for example, the two DBS 
firms claimed that unless they were permitted to merge, neither firm 
could offer local-to-local in more than about 50 to 70 markets. 
EchoStar, DirecTV CEOs Testify On Benefits of Pending Merger Before 
U.S. Senate Antitrust Subcommittee, www.spacedaily.com/news/satellite-
biz-02p.html (``Without the merger, the most markets that each company 
would serve with local channels as a standalone provider, both for 
technical and economic reasons, would be about 50 to 70.'') (quoting 
DirecTV executive).
    Contrary to these pessimistic predictions, the two DBS firms 
already offer local-to-local programming to the overwhelming majority 
of U.S. television households. Although the DBS firms claimed they 
would never be able to serve more than 70 markets unless they merged, 
EchoStar already serves 107 Designated Local Markets (``DMA's''), which 
collectively cover more than 83% of all U.S. TV households.4 
Nor is there any sign that EchoStar's expansion of local-to-local 
service has stopped.
---------------------------------------------------------------------------
    \4\ EchoStar Press Release, www.dishnetwork.com, DISH Network 
Satellite Television Brings Local TV Channels to Tri-Cities, Tenn.-Va. 
(Feb. 19, 2004) (EchoStar now serving 107 DMAs); EchoStar Press 
Release, www.newstream.com/us/story_pub.shtml?story_id=11738 
&user_ip=208.197.234.126, DISH Network Celebrates Availability of Local 
Channels in 100 Markets (Dec. 2003) (EchoStar serving more than 83% of 
U.S. television households through service to 100 markets).
---------------------------------------------------------------------------
    DirecTV's plans are still more ambitious. As of November 2003, 
DirecTV offered local-to-local to 64 markets covering more than 72% of 
all U.S. television households. With the launch of a new satellite in 
the next few months, DirecTV expects to serve 100 DMAs covering 85% of 
all U.S. TV households. By the end of 2004, DirecTV has committed to 
providing local-to-local in an additional 30 markets, for a total of at 
least 130 DMAs that collectively include 92% of all U.S. TV 
households.5 And as early as 2006 and no later than 2008, 
``DirecTV will offer a seamless, integrated local channel package in 
all 210 DMAs.'' 6 In other words, DirecTV alone will soon 
offer local-to-local service to virtually all American television 
households--even though DirecTV told Congress and the FCC just two 
years ago that this result was unthinkable unless it merged with 
EchoStar.
---------------------------------------------------------------------------
    \5\ Press Release, DIRECTV Names 18 New Local Channel Markets to 
Launch in 2004 (Jan. 8, 2004), www.directv.com/DTVAPP/aboutus/
headline.dsp?id=01_08_2004B.
    \6\ In the Matter of General Motors Corporation and Hughes 
Electronics Corporation, Transferors and The News Corporation Limited, 
Transferee, for Authority to Transfer Control,  332, MB Docket No. 03-
124 (released Jan. 14, 2004) (emphasis added).
---------------------------------------------------------------------------
C. EchoStar And DirecTV Boast About The Excellent Technical Quality Of 
        Their Current Local-To-Local Service--Which Retransmits 
        ``Digitized'' Analog Signals
    As discussed below, the satellite industry now demands that 
Congress expand the distant-signal compulsory license--which EchoStar 
has systematically abused over the past eight years--by creating a new 
category of households that are ``digitally unserved.'' But any 
suggestion that EchoStar and DirecTV have difficulty attracting 
customers under the current law is belied by the following facts.
    First, both DirecTV and EchoStar can now--or will within a few 
months--each be able to deliver local television stations by satellite 
to nearly 90% of U.S. television households. Second, both DBS firms 
obtain excellent-quality analog signals from the stations, often 
working with the stations themselves to obtain a direct feed from the 
station's studios. Third, after receiving a high-quality analog signal, 
the DBS firms then ``digitize'' the signals and retransmit them in 
digital format to their customers. See www.dishnetwork.com/content/
programming/index.shtml (``DISH Network now has your digital local 
channels.'')  (emphasis added). While these 
signals do not equal the quality of a signal originating from a digital 
broadcast, or particularly of a high-definition broadcast, the result, 
according to the DBS industry's trade association, is that DBS ``always 
delivers a 100 percent, crystal-clear digital audio and video signal,'' 
even if the original source is an analog broadcast. SBCA Web site, 
www.sbca.com/mediaguide/faq.htm  (emphasis 
added).
    In other words, consumers who receive an excellent-quality 
``digitized'' analog signal from a local station from a DBS firm--as 
opposed to an imported digital station--are scarcely in a ``hardship'' 
position. Of course, it has never been the case that ``obtaining the 
best-quality signal'' would justify abandoning the principles of 
localism and free market competition. The principle behind the long-
standing ``Grade B intensity'' standard for determining which 
households are ``unserved'' is that Grade B intensity is an objective 
proxy for an acceptable signal, not for the optimal signal. If localism 
could be so easily sacrificed, Congress would not have adopted--and 
twice reaffirmed--the Grade B intensity standard.7
---------------------------------------------------------------------------
    \7\ In the SHVIA, Congress directed the FCC to prepare a report 
about whether Grade B intensity--or instead some other standard--should 
be used for determining whether households are ``unserved'' by their 
local stations. In its report, the FCC recommended retaining the Grade 
B intensity standard. See In Re Technical Standards for Determining 
Eligibility For Satellite-Delivered Network Signals Pursuant To the 
Satellite Home Viewer Improvement Act, ET Docket No. 00-90 (released 
Nov. 29, 2000).
---------------------------------------------------------------------------
    Finally, these local channel offerings have made DBS so attractive 
to consumers that it is gaining millions of new subscribers every year 
while the number of cable subscribers is actually shrinking. 2004 
Annual Assessment,  8 (``In the last several years . . . cable 
subscribership has declined such that as of June 2003, there were 
approximately the same number of cable subscribers as there were at 
year-end 1999.'') While delivery of local digital signals by DirecTV 
and EchoStar would be a highly desirable development, there is no basis 
for suggesting that DirecTV and EchoStar need to import distant digital 
signals to serve their customers.

D. DirecTV and EchoStar Have Many Options For Continuing To Expand 
        Their Ability To Deliver Local Signals, Including Local Digital 
        Signals
    As discussed above, DirecTV and EchoStar have brilliant engineers 
who constantly find ways to deliver more programming in the same 
spectrum. Nevertheless, in policy debates in Washington, the two firms 
regularly assure Congress (and the FCC) that no further technological 
improvement can be achieved. To mention one other example: even as 
DirecTV was doubling its ``compression ratio'' between 1998 and 2001--
enabling it to carry twice as many channels in the same amount of 
spectrum--it repeatedly told the FCC that it had hit a brick wall as 
far as any further progress in compression technology:

 July 31, 1998: ``DIRECTV has substantially reached current limits on 
        digital compression with respect to the capacity on its 
        existing satellites. Therefore, the addition of more channels 
        will necessitate expanding to additional satellites . . .''
 Aug. 6, 1999: ``DIRECTV has substantially reached current limits on 
        digital compression with respect to the capacity on its 
        existing satellites.''
 Sept. 8, 2000: ``DIRECTV has substantially reached current 
        technological limits on digital compression with respect to 
        capacity on its existing satellites. Although there are 
        potentially very small gains still possible through the use of 
        advanced algorithms, such technological developments can 
        neither be predicted nor relied upon as a means of increasing 
        system channel capacity.''
 Aug. 3, 2001: ``DIRECTV has offered digitally compressed signals from 
        its inception, and has substantially reached current 
        technological limits on digital compression with respect to 
        capacity on its existing satellites. Although there are 
        potentially very small gains still possible through the use of 
        advanced algorithms, such technological developments can 
        neither be predicted nor relied upon as a means of increasing 
        system channel capacity.'' 8
---------------------------------------------------------------------------
    \8\ See, e.g., Comments of DIRECTV, Inc., [1998] Annual Assessment 
of the Status of Competition in the Markets for the Delivery of Video 
Programming, CS Docket No. 98-102, at 5 (filed July 31, 1998); Comments 
of DIRECTV, Inc., [1999] Annual Assessment of the Status of Competition 
in the Markets for the Delivery of Video Programming, CS Docket No. 99-
230, at 9 (filed Aug. 6, 1999); Comments of DIRECTV, Inc. [2000] Annual 
Assessment of the Status of Competition in the Markets for the Delivery 
of Video Programming, CS Docket No. 00-132, at 16 (filed Sept. 8, 
2000); Comments of DIRECTV, Inc. [2001] Annual Assessment of the Status 
of Competition in the Markets for the Delivery of Video Programming, CS 
Docket No. 01-129, at 16 (filed Aug. 3, 2001) (emphasis added in all 
cases).
---------------------------------------------------------------------------
    This year, the Committee can expect to hear from the DBS firms yet 
again that they have no hope of significantly expanding their capacity. 
For example, we can expect to hear from DirecTV and EchoStar that they 
will never be able to carry the digital signals of local television 
stations, and that they should instead be given a crutch by Congress to 
help them compete with cable. In fact, the satellite firms have 
available to them a wide range of potential new techniques for 
massively expanding their capacity, including:

 spectrum-sharing between DirecTV and EchoStar;
 use of Ka-band as well as Ku-band spectrum;
 higher-order modulation and coding;
 closer spacing of Ku-band satellites;
 satellite dishes pointed at multiple orbital slots;
 use of a second dish to obtain all local stations; 9 and
---------------------------------------------------------------------------
    \9\ The SHVIA permits a satellite carrier to offer all local 
stations via a second dish, but not to split local channels into a 
``favored'' group (available with one dish) and a ``disfavored'' group 
(available only with a second dish).
---------------------------------------------------------------------------
 improved signal compression techniques.
    If Congress allows the power of American technical ingenuity to 
continue to move forward, we can expect to see DirecTV and EchoStar 
continue to make tremendous progress in doing more with the same 
resources. Just as today's desktop computers are unimaginably more 
powerful than those available just a few years ago, we can expect 
similar quantum improvements from America's satellite engineers--if 
Congress leaves the free market to do its magic, and leaves necessity 
to continue to be the mother of invention.

E. If The FCC Does Not Act, Congress Will Need To Step In To Correct A 
        Major Abuse Of Local-To-Local By Echostar
    In crafting the SHVIA, Congress was well aware that if a DBS firm 
were permitting to select only some--but not all--local stations for 
retransmission, the stations left off the service would have little 
chance of reaching viewers who obtain their TV service from the 
satellite company. In the same spirit as the requirement in the 1992 
Cable Act that cable systems carry all qualified local stations in each 
market in which they operate, the SHVIA specifies that if a satellite 
carrier chooses to use the local-to-local license to carry signals in a 
particular market, it must carry all qualified local stations. 47 
U.S.C.  338(a)(1). That requirement has been upheld against 
constitutional attack by EchoStar, DirecTV, and their trade 
association. Satellite Broadcasting and Communications Ass'n v. FCC, 
275 F.3d 337 (4th Cir. 2001). The purpose of the ``carry one, carry 
all'' principle is, of course, to ensure the continued availability of 
a wide variety of different over-the-air channels, and to prevent the 
local-to-local compulsory license from interfering with existing 
vigorous competition among all of the broadcast stations in each local 
market.
    Since late 2001, EchoStar has egregiously violated the requirement 
that it carry all stations in a nondiscriminatory manner: in many 
markets, EchoStar forces consumers to acquire a second satellite dish 
to receive some--but not all--local stations. Here in the Washington, 
D.C. area, for example, EchoStar enables its customers to see the ABC, 
CBS, Fox, and NBC stations (and a handful of other local stations) with 
a single satellite dish, pointed at EchoStar's main satellites. See 
EchoStar web site, www.dishnetwork.com/content/programming/ locals/
index.shtml. On the other hand, viewers wishing to see Channel 14 
(Univision), Channel 32 (WHUT--PBS), Channel 53 (WNVT--International), 
Channel 56 (WNVC--International), or WJAL (Channel 68--Independent) are 
forced to obtain a second satellite dish aimed at a satellite far over 
the Atlantic. Id. (In this and other markets, EchoStar targets public 
television, Hispanic, and other foreign-language stations for this 
discrimination.) Because few viewers will go to the time and trouble of 
obtaining a second dish--e.g., a long wait at home for an installer the 
net result is that only a tiny percentage of EchoStar subscribers can 
actually view all of their local stations. To date, the FCC has taken 
only ineffective steps to address this egregious form of 
discrimination,10 even though EchoStar's fellow DBS company, 
DirecTV, has told the FCC that EchoStar's two-dish ploy ``is 
inconsistent with the language of the Satellite Home Viewer Improvement 
Act. See Letter from Merrill S. Spiegel to Marlene H. Dortch, Dkt. No. 
00-196 (Jan. 16, 2003).
---------------------------------------------------------------------------
    \10\ Declaratory Ruling & Order, In re National Association of 
Broadcasters and Association of Local Television Stations Request for 
Modification or Clarification of Broadcast Carriage Rules for Satellite 
Carriers, Dkt. No. CSR-5865-Z (Media Bureau Apr. 4, 2002). The 
Commission has to date required only that EchoStar fully disclose its 
discriminatory treatment and that it pay for the installation of the 
second dish. Not surprisingly, these requirements have not solved the 
fundamental problem that acquiring a second dish requires a major 
expenditure of time and effort on the part of the subscriber, with the 
result that--just as EchoStar hopes--few viewers ever actually acquire 
a second dish. And, as discussed in Appendix B, EchoStar has grossly 
violated even the minimal restrictions currently imposed by the 
Commission.
---------------------------------------------------------------------------
    The Commission has recently indicated that it plans to take action 
soon to address EchoStar's two-dish practices,.11 but it 
remains uncertain when it will act on pending petitions for review. 
Should the Commission fail to take prompt action, Congress should step 
in to ensure that EchoStar can no longer thumb its nose at Congress' 
unmistakable directive that DBS firms that local-to-local means 
carriage of all local stations, without relegating many of the stations 
to an inaccessible electronic ghetto.
---------------------------------------------------------------------------
    \11\ See Separate Statement of Chairman Michael K. Powell, at 2 
n.3, In Re General Motors Corporation and Hughes Electronics 
Corporation, Transferors and The News Corporation Limited, Transferee, 
for Authority to Transfer Control, MB Docket No. 03-124 (released Jan. 
14, 2004).
---------------------------------------------------------------------------
III. THE DISTANT-SIGNAL COMPULSORY LICENSE HAS BEEN EGREGIOUSLY ABUSED 
BY SATELLITE CARRIERS, AND THE NEED FOR IT IS RAPIDLY DIMINISHING WITH 
                      THE GROWTH OF LOCAL-TO-LOCAL

    America's free, over-the-air television system is based on local 
stations providing programming to local viewers. When satellite 
carriers began delivering television programming in the 1980's, 
however, retransmission of local television stations by satellite was 
not yet technologically feasible. In 1988, Congress therefore fashioned 
a stopgap remedy: a compulsory license that allows satellite carriers 
to retransmit distant network stations, but only to ``unserved 
households.'' 17 U.S.C.  119. The heart of the definition of 
``unserved household'' is whether the residence can receive an over-
the-air signal of a certain objective strength, called ``Grade B 
intensity,'' from an affiliate of the relevant network. Id.,  
119(d)(10) (definition of ``unserved household''). In 1994, Congress 
extended the distant-signal license for another five years, although it 
expressly placed on satellite carriers the burden of proving that each 
of their customers is ``unserved.'' 17 U.S.C.  119(a)(5)(D).
    In 1999, Congress again extended the distant-signal license as part 
of the SHVIA, and statutorily mandated use of the FCC-endorsed computer 
model (called the ``Individual Location Longley-Rice'' model, or 
``ILLR'') for predicting which households are able to receive signals 
of Grade B intensity from local network stations. 17 U.S.C.  
119(a)(2)(B)(ii). In the SHVIA, Congress also classified certain very 
limited new categories of viewers as ``unserved,'' including (1) 
certain subscribers who had been illegally served by satellite carriers 
but whom Congress elected to ``grandfather'' temporarily, see 17 U.S.C. 
 119(e), and (2) qualified owners of recreational vehicles and 
commercial trucks, see id.,  119(a)(11).
    By its terms, grandfathering will expire at the end of 2004. 17 
U.S.C.  119(e). Unlike in 1999, when Congress saw grandfathering as a 
way to reduce consumer complaints by allowing certain ineligible 
subscribers to continue receiving distant signals, the end of 
grandfathering will have little impact in the marketplace. This special 
exception should therefore be allowed to expire routinely.12
---------------------------------------------------------------------------
    \12\ First, by the end of the year, DirecTV will offer local-to-
local in no fewer than 130 DMAs, which collectively cover more than 90% 
of U.S. television households. EchoStar already offers local-to-local 
in 107 DMAs, and that figure is constantly growing. All of the 
subscribers in these markets (including subscribers claimed to be 
grandfathered) will be able to receive their local channels by 
satellite, making the availability of distant signals irrelevant. 
Second, a federal judge found in 2003 that EchoStar forfeited the right 
to rely on grandfathering by defaulting at trial in proving that any of 
its subscribers actually satisfy the requirements for grandfathering. 
Third, because of ordinary subscriber churn and relocation, many 
grandfathered subscribers are no longer DBS customers or are no longer 
grandfathered. Fourth, for the small number of subscribers in non-
local-to-local markets that they might claim are currently 
grandfathered, DirecTV and EchoStar are free to seek (and may already 
have obtained) waivers from the affected stations. Finally, any 
grandfathered subscriber is (by definition) predicted to receive at 
least Grade B intensity signals over the air from their local network 
stations, and thus to be able to view their own stations even if they 
obtain no network stations by satellite.
---------------------------------------------------------------------------
A. Delivery Of Distant Signals Is A Poor Substitute For Delivery Of 
        Local Television Stations
    From a policy perspective, there is no benefit--and many 
drawbacks--to satellite delivery of distant, as opposed to local, 
network stations. Unlike local stations, distant stations do not 
provide viewers with their own local news, weather, emergency, and 
public service programming. Nor does viewership of distant stations 
provide any financial benefit to local stations to help fund their 
free, over-the-air service. To the contrary, distant signals, when 
delivered to any household that can receive local over-the-air 
stations, simply siphon off audiences and diminish the revenues that 
would otherwise go to support free, over-the-air programming.
    Members of Congress and other candidates for election are uniquely 
injured by distant signals: a viewer in Phoenix, for example, will 
never see political advertisements running on local Phoenix stations if 
he or she is watching New York or Los Angeles stations from EchoStar or 
DirecTV instead. Such viewers become virtually unreachable by political 
advertising, unless (for example) a candidate in Phoenix wishes to 
purchase advertising on stations in the costliest media markets in the 
United States--New York and Los Angeles.

B. Satellite Carriers Have Grievously Abused the Distant-Signal 
        Compulsory License
    Satellite carriers--most egregiously EchoStar--have systematically 
abused the distant-signal compulsory license since its creation. To the 
extent that satellite carriers have complied with the limitations 
placed by Congress on the distant-signal license, it is solely as a 
result of litigation that broadcasters were forced to undertake to halt 
satellite carrier lawbreaking.
    From 1988 until 1998, satellite carriers simply ignored the 
objective ``Grade B intensity'' standard and instead signed up anyone 
willing to say that they were dissatisfied with their over-the-air 
picture. Starting in the mid-1990s, when the large ``C-band'' dishes 
began to be replaced by the hot-selling 18-inch dishes offered by 
DirecTV and EchoStar, the carriers' distant-signal lawbreaking quickly 
became a crisis.
    When DirecTV went into business in 1994, and when EchoStar did so 
in 1996, they immediately began abusing the narrow distant-signal 
compulsory license to illegally deliver distant ABC, CBS, Fox, and NBC 
stations to ineligible subscribers. In essence, the DBS companies 
pretended that a narrow license that could legally be used only with 
remote rural viewers was in fact a blanket license to deliver distant 
network stations to viewers in cities and suburbs.13
---------------------------------------------------------------------------
    \13\ For the first few years, DirecTV and EchoStar hid behind a 
small, foreign-owned company called PrimeTime 24. See CBS Broadcasting 
Inc. v. PrimeTime 24, 48 F. Supp. 2d 1342, 1348 (S.D. Fla. 1998) 
(``PrimeTime 24 sells its service through distributors, such as DIRECTV 
and EchoStar . . . [M]ost of PrimeTime's growth is through customer 
sales to owners of small dishes who purchase programming from packagers 
such as DirecTV or EchoStar.''). Starting in 1998 (for EchoStar) and 
1999 (for DirecTV), the two companies fired PrimeTime 24 in an effort 
to dodge court orders to obey the Copyright Act.
---------------------------------------------------------------------------
    As a result of EchoStar's and DirecTV's lawbreaking, viewers in 
markets such as Meridian, Mississippi, Lafayette, Louisiana, Traverse 
City, Michigan, Santa Barbara, California, Springfield, Massachusetts, 
Peoria, Illinois, and Lima, Ohio were watching their favorite network 
shows not from their local stations but from stations in distant cities 
such as New York. Since local viewers are the lifeblood of local 
stations, EchoStar's and DirecTV's copyright infringements were a 
direct assault on free, over-the-air local television.
    When broadcasters complained about this flagrant lawbreaking, the 
satellite industry effectively said: if you want me to obey the law, 
you're going to have to sue me. Broadcasters were finally forced to do 
just that, starting in 1996, when they sued the distributor (PrimeTime 
24) that both DirecTV and EchoStar used as their supplier of distant 
signals. But even a lawsuit for copyright infringement was not enough 
to get the DBS firms to obey the law: both EchoStar and DirecTV decided 
that they would continue delivering distant stations illegally until 
the moment a court ordered them to stop.
    The courts recognized--and condemned--the satellite industry's 
lawbreaking. See, e.g., CBS Broadcasting Inc. v. PrimeTime 24, 9 F. 
Supp. 2d 1333 (S.D. Fla. 1998) (entering preliminary injunction against 
DirecTV's and EchoStar's distributor, PrimeTime 24); CBS Broadcasting 
Inc. v. PrimeTime 24 Joint Venture, 48 F. Supp. 2d 1342 (S.D. Fla. 
1998) (permanent injunction); CBS Broadcasting Inc. v. DIRECTV, Inc., 
No. 99-0565-CIV-NESBITT (S.D. Fla. Sept. 17, 1999) (permanent 
injunction after entry of contested preliminary injunction); ABC, Inc. 
v. PrimeTime 24, 184 F.3d 348 (4th Cir. 1999) (affirming issuance of 
permanent injunction).
    By the time the courts began putting a halt to this lawlessness, 
however, satellite carriers were delivering distant ABC, CBS, Fox, and 
NBC stations to millions and millions of subscribers, the vast majority 
of whom were ineligible urban and suburban households. See CBS 
Broadcasting, 9 F. Supp. 2d 1333.
    By getting so many subscribers accustomed to an illegal service, 
DirecTV and EchoStar put both the courts and Congress in a terrible 
box: putting a complete stop to the DBS firms' lawbreaking meant 
irritating millions of consumers. Any member of Congress who was around 
in 1999 will remember the storm of protest that DirecTV and EchoStar 
stirred up from the subscribers they had illegally signed up for 
distant network stations.
    Even when the courts ordered EchoStar and DirecTV to stop their 
massive violations of the Copyright Act, they took further evasive 
action to enable them to continue their lawbreaking. In particular, 
when their vendor (PrimeTime 24) was ordered to stop breaking the law, 
both DBS firms fired their supplier in an effort to continue their 
lawbreaking.
    When DirecTV tried this in February 1999, a United States District 
Judge found that DirecTV's claims were ``a little disingenuous'' and 
promptly squelched its scheme. CBS Broadcasting Inc. et al v. DirecTV, 
No. 99-565-CIV-Nesbitt (S.D. Fla. Feb. 25, 1999); see id. (S.D. Fla. 
Sept. 17, 1999) (stipulated permanent injunction).
    EchoStar has played the game of ``catch me if you can'' with 
greater success, thanks to a series of stalling tactics in court. But 
in 2003, a United States District Court judge for the Southern District 
of Florida held a 10-day trial in a copyright infringement case brought 
by broadcast television networks, and trade associations representing 
local network affiliates, originally filed against EchoStar in 
1998.14 In June 2003, the District Court issued a 
meticulously-documented 32-page final judgment, holding EchoStar liable 
for nationwide, willful or repeated copyright infringement by violating 
the distant-signal compulsory license. CBS Broad., Inc. v. EchoStar 
Communications Corp., 276 F. Supp. 2d 1237 (S.D. Fla. 2003).
---------------------------------------------------------------------------
    \14\ The trial was conducted by the Hon. William Dimitrouleas, who 
took over the case after the original District Court judge, the Hon. 
Lenore Nesbitt, passed away in 2002. While Judge Nesbitt also ruled 
that EchoStar was committing massive copyright infringements, EchoStar 
was able--by making false claims about its supposed compliance 
efforts--to obtain a delay in enforcement of that ruling.
    EchoStar's appeal of this decision is set to be argued before the 
11th Circuit in late February 2004.
---------------------------------------------------------------------------
    EchoStar had the burden of proving that each of its subscribers 
receiving distant ABC, CBS, Fox, and NBC stations is an ``unserved 
household.'' 17 U.S.C.  119(a)(5)(D). Yet the District Court found 
that EchoStar had failed to prove that any of its 1.2 million distant-
signal subscribers is in fact ``unserved.'' That is, EchoStar did not 
prove that any of its subscribers is unable to receive a Grade B 
signal, is grandfathered, or is eligible on any other basis. Id.,  82.
    Worst of all, the District Court found that EchoStar had 
deliberately sought to mislead the court about what it did with the 
vast pool of illegal subscribers it accumulated between 1996 and 1999. 
Most important, EchoStar made--and then deliberately broke--a sworn 
pledge (in a declaration by its CEO, Charles Ergen) to turn off the 
many ineligible subscribers it signed up using the unlawful do-you-
like-your-picture method. Id.,  46. Far from turning off its 
accumulated illegal subscribers, EchoStar knowingly continued 
delivering distant signals to many hundreds of thousands of customers 
that it knew--from a study EchoStar itself ordered to be ineligible. 
Id,  38-47.
    EchoStar's decision to continue its highly profitable lawbreaking 
was the height of cynicism: as the District Court found, ``EchoStar 
executives, including Ergen and [General Counsel] David Moskowitz, when 
confronted with the prospect of cutting off network programming to 
hundreds of thousands of subscribers, elected instead to break Mr. 
Ergen's promise to the Court.'' Id.,  46 (emphasis added).
    Nor is EchoStar's abuse of the distant-signal compulsory license 
the only example of its flouting of laws and regulations and misuse of 
legal processes. Appendix B is a list of other violations by EchoStar 
of substantive legal rules, and of instances in which EchoStar has 
abused judicial and administrative procedures.15 This is, of 
course, the same EchoStar that now asks Congress to expand the distant-
signal compulsory license--and to do so in ways that would allow 
EchoStar to offer highly profitable programming packages to millions of 
subscribers, at virtually no cost to EchoStar, but at great cost to 
broadcasters, program suppliers, and the principle of localism.
---------------------------------------------------------------------------
    \15\ In concluding that the proposed takeover of DirecTV by 
EchoStar was not in the public interest, the FCC stated: ``EchoStar's 
record with respect to compliance with SHVIA's must-carry provisions 
and our rules suggests a resistance to taking steps to serve the public 
interest that do not also serve the company's view of its own private 
economic interest.'' In Re Application of EchoStar Communications 
Corporation, CS Docket No. 01-348 (released Oct. 18, 2002).
---------------------------------------------------------------------------
C. With The Widespread Availability Of Local-To-Local Service, The 
        Number Of Truly ``Unserved'' Households Is Minimal
    Unlike the local-to-local compulsory license, the distant-signal 
compulsory license threatens localism and interferes with the free 
market copyright system. As a result, the only defensible justification 
for that compulsory license is as a ``hardship'' exception--to make 
network programming available to the small number of households that 
otherwise have no access to it. The 1999 SHVIA Conference Report states 
that principle eloquently: ``the specific goal of the 119 license . . . 
is to allow for a life-line network television service to those homes 
beyond the reach of their local television stations.'' 145 Cong. Rec. 
at H11792-793. (emphasis added).16
---------------------------------------------------------------------------
    \16\ See, e.g., Copyright Office Report at 104 (``The legislative 
history of the 1988 Satellite Home Viewer Act is replete with 
Congressional endorsements of the network-affiliate relationship and 
the need for nonduplication protection.'') (emphasis added); Satellite 
Home Viewer[] Act of 1988, H.R. Rep. No. 100-887, pt. 2 at 20 (1988) 
(``The Committee intends [by Section 119] to . . . bring[] network 
programming to unserved areas while preserving the exclusivity that is 
an integral part of today's network-affiliate relationship'') (emphasis 
added); id. at 26 (``The Committee is concerned that changes in 
technology, and accompanying changes in law and regulation, do not 
undermine the base of free local television service upon which the 
American people continue to rely'') (emphasis added); H.R. Rep. No. 
100-887, pt. 1, at 20 (1988) (``Moreover, the bill respects the 
network/affiliate relationship and promotes localism.'') (emphasis 
added).
---------------------------------------------------------------------------
    Today, more than 80% of all U.S. television viewers have the option 
of viewing their local network affiliates by satellite--and that number 
is growing all the time. Even satellite dish owners in local-to-local 
markets who cannot receive Grade B intensity signals over-the-air 
(e.g., a household in a remote part of the Washington, D.C. DMA) are 
obviously not ``unserved'' by their local stations: they can receive 
them, with excellent technical quality, directly from their satellite 
carrier, just by picking up the phone. And they can do so without any 
need to obtain a waiver, and without regard to what the ILLR model 
predicts about the over-the-air signal strength at their home.
    The widespread availability of local-to-local network affiliate 
retransmissions means that, as a real-world matter, there are no 
unserved viewers in areas in which local-to-local satellite 
transmissions of the relevant network are available, because it is no 
more difficult for viewers to obtain their local stations from their 
satellite carriers than to obtain distant stations. There is therefore 
no policy justification for treating satellite subscribers in local-to-
local markets as ``unserved'' and therefore eligible to receive distant 
network stations.
    The distant-signal compulsory license is not designed to permit 
satellite carriers to sabotage the network/affiliate relationship by 
delivering to viewers in served households--who can already watch their 
own local ABC, CBS, Fox, and NBC stations--network programming from 
another source. Yet satellite carriers have aggressively advertised the 
benefits to served households of obtaining distant signal programming, 
including most notably:

 time-shifting (e.g., Mountain and Pacific Time Zone viewers watching 
        network programming two or three hours earlier from East Coast 
        stations)
 out-of-town sports: because TV networks often show different sports 
        events (such as NFL games) in different cities, a subscription 
        to an out-of-town network station enables viewers to see sports 
        events that are not televised locally.
    These abuses of the compulsory license damage both the network/
affiliate system and the free market copyright regime. Consider, for 
example, a network affiliate in Sacramento, California, a DMA in which 
there are today no DBS subscribers who are genuinely ``unserved'' 
because both DIRECTV and EchoStar offer the local Sacramento ABC, CBS, 
Fox, and NBC stations by satellite. Nevertheless, for any Sacramento-
area viewer who is technically ``unserved'' under the Grade B intensity 
standard, DIRECTV and EchoStar can scoop the Sacramento stations with 
the stations' own programming by offering distant signals from East 
Coast stations. The Sacramento station--and every other station in the 
Mountain and Pacific Time Zones that has local-to-local service--
therefore loses badly needed local viewers, even though the viewers 
have zero need to obtain a distant signal to watch network programming.
    Similarly, the ability of satellite carriers to offer distant 
stations that carry attractive sports events is a needless infringement 
of the rights of copyright owners, who offer the same product--out-of-
town games--on a free market basis. For example, the NFL has for years 
offered satellite dish owners (at marketplace rates) a package called 
``NFL Sunday Ticket,'' which includes all of the regular season games 
played in the NFL. The distant-signal compulsory license creates a 
needless ``end-around'' this free-market arrangement by permitting 
satellite carriers to retransmit distant network stations for a 
pittance through the compulsory license.

D. For the Small Number of Markets in Which The DBS Firms Do Not Now 
        Offer Local-to-Local, The FCC Has Repeatedly and Recently 
        Reaffirmed that the Grade B Standard and the ILLR Model Are the 
        Best Tools for Determining Which Households are ``Unserved''
    For the ever-shrinking number of markets in which the DBS firms do 
not offer local-to-local (which will encompass no more than 8% of U.S. 
television households by the end of 2004 for DirecTV), the Grade B 
intensity standard, implemented via the FCC-endorsed Individual 
Location Longley-Rice (``ILLR'') model, continues to be the logical 
method for predicting which households are unable to receive local 
stations over the air.
    For years, the satellite industry simply ignored the objective 
signal intensity standard that Congress established in 1988, and 
instead used a meaningless subjective standard (``are you satisfied 
with your picture quality?'') that was effectively no standard at all. 
As discussed above, in 1998, the courts found that the satellite 
industry had broken the law by signing up millions of subscribers using 
this illegal method. Rather than coming into compliance, the satellite 
industry raced to the FCC to demand that the Commission alter (in the 
satellite industry's favor) what the DBS firms characterized as an 
``antiquated,'' ``1950's-era'' Grade B standard.
    The FCC carefully considered the engineering data and other 
evidence presented by the satellite industry, but concluded that, in 
fact, there was no basis for changing the Grade B standard. In Re 
Satellite Delivery of Network Signals to Unserved Households for 
Purposes of the Satellite Home Viewer Act,  32-43, Dkt. No. 98-201 
(released Feb. 2, 1999). Although the Grade B standard was originally 
established in the 1950's, the Commission pointed out that it had 
repeatedly re-evaluated the standard during the intervening decades and 
found it to be still sound. Id.,  42. As the Commission observed, many 
of the changes that have occurred since the 1950's have made it easier 
to obtain a picture of acceptable quality with the same strength 
signal: for example, the ``low cost noisy tubes and . . . components'' 
of the 1950s have been replaced by ``modern solid state components that 
produce lower set noise.'' Id.,  41. Overall, the FCC found that the 
``environmental and technical changes that have taken place'' since the 
Grade B standard was first established have moved ``in opposite 
directions and tend to cancel each other out.'' Id.,  42.
    Despite this exhaustive review by the Commission in 1998 and 1999, 
when Congress approved the SHVIA, it directed the Commission to conduct 
yet another proceeding to evaluate whether Grade B intensity is an 
appropriate standard. After carefully evaluating the submissions by all 
interested parties, including engineering data submitted by the 
satellite industry, the Commission recommended that the Grade B 
standard remain unchanged in virtually all respects. In Re Technical 
Standards for Determining Eligibility For Satellite-Delivered Network 
Signals Pursuant To the Satellite Home Viewer Improvement Act, ET Dkt. 
No. 00-90 (released Nov. 29, 2000).
    Similarly, the FCC's ILLR predictive model, first announced in 
1999, grew out of years of Commission experience with the Longley-Rice 
model in other contexts. In Re Satellite Delivery of Network Signals to 
Unserved Households for Purposes of the Satellite Home Viewer Act, at 
 61-88. In response to Congress' directive in the SHVIA, and after 
reviewing all of the satellite industry's submissions, the Commission 
made further refinements to the ILLR model in May 2000 and reaffirmed 
that ILLR is an accurate and reliable model. In Re Establishment of an 
Improved Model for Predicting the Broadcast Television Field Strength 
Received at Individual Locations, ET Docket No. 00-11 (released May 26, 
2000). In doing so, the Commission considered how ILLR predictions 
fared when compared to actual signal intensity measurements at the same 
location, and found that in many cases ILLR actually underpredicts the 
actual signal strength available at particular households--precisely 
the opposite of the satellite industry's claims. Id.

IV. THE DBS INDUSTRY'S PROPOSAL TO EXPAND THE DISTANT-SIGNAL COMPULSORY 
  LICENSE DEFIES LOGIC AND WOULD SET BACK LOCAL-TO-LOCAL CARRIAGE OF 
                       DIGITAL SIGNALS FOR YEARS

    Having elected to deliberately violate the limits that Congress 
imposed on the existing compulsory license unless and until ordered by 
a federal court to obey them, EchoStar and DirecTV now demand that 
Congress radically expand the distant-signal license they have abused. 
The Committee should reject this irresponsible proposal out of hand.
    In essence, the DBS firms ask the Committee to create a brand-new 
compulsory license to permit them to deliver the digital broadcasts of 
the New York and Los Angeles ABC, CBS, Fox, and NBC stations to 
millions of households nationwide, even though (a) the households can 
receive the same programming over the air from their local station's 
analog signal and (b) in the overwhelming majority of cases, EchoStar 
and DirecTV already deliver the same programming via what SBCA 
describes as ``a 100 percent, crystal-clear digital audio and video 
signal'' retransmitted from the local station's analog broadcasts.
    The simple greed behind this DBS industry proposal is clear, and 
the tactic is familiar. In the 1990s, the DBS industry sought to offer 
network broadcast programming ``on the cheap'' by delivering the analog 
broadcasts of New York and Los Angeles stations nationwide--completely 
bypassing the network/affiliate system that Congress and the FCC have 
worked so hard to foster. (Indeed, in the 1990's satellite companies 
urged Congress to eliminate the ``unserved household'' restriction 
entirely and to permit universal distribution of New York and Los 
Angeles stations in return for payment of a ``surcharge.'') This 
Committee, and Congress as a whole, blocked those maneuvers, instead 
insisting on localism and on marketplace solutions. By standing its 
ground against the ``quick fix'' urged by the DBS industry, Congress 
has fostered the win/win/win result described above: DirecTV and 
EchoStar (and their contractors) dug deep to find technical solutions 
to enable them to offer local-to-local broadcast programming to the 
overwhelming majority of U.S. television households--and soon to all of 
them. (They found these solutions, of course, only after repeatedly 
telling Congress and the FCC that the technical problems were 
unsolvable.)
    The DBS industry's current proposal is equally self-serving. 
EchoStar and DirecTV would enjoy a tremendous financial benefit from 
being able--again ``on the cheap'--to deliver the digital broadcasts of 
New York and Los Angeles ABC, CBS, Fox, and NBC stations to many 
millions of viewers nationwide. Instead of investing in delivering 
local digital broadcasts, as cable systems are gradually beginning to 
do, DirecTV and EchoStar could use a single, inexpensive national feed 
(e.g., of WCBS in New York) to deliver digital programming of a 
particular network around the country. Although this gambit would cost 
the DBS firms virtually nothing, they would gain enormously, both in 
additional customers (at $40, $50 or more per month) and in selling 
additional network packages (at $6 per month) to both old and new 
customers.
    While the ``distant digital'' proposal would be a tremendous 
windfall for DirecTV and EchoStar, it would be a disaster for Congress, 
the public, and broadcasters. As discussed in detail below, the 
supposed ``factual'' basis for this proposal--that the broadcast 
television industry has not been diligent in pushing the digital 
transition--is palpable nonsense. And as also described below, this 
gift to the DBS industry would come at a crippling cost in terms of 
Congress' public policy objectives.

A. The Broadcast Industry Has Spent Enormous Sums and Dedicated 
        Extraordinary Efforts to Implementing the Transition to Digital 
        Broadcasting--With Tremendous Success in Rolling Out Digital to 
        the Vast Majority of American TV Households
    Contrary to the satellite industry's ill-informed accusations, 
broadcasters have worked tirelessly to implement the transition to 
digital broadcasting. Thanks to the expenditure of billions of dollars 
and millions of person-hours, broadcasters have built--and are on-air 
with--digital television (``DTV'') facilities in 203 markets that serve 
99.42% of all U.S. TV households.17 Midway through the 
transition, almost three-quarters--73.7%--of U.S. television households 
have access to at least six free, over-the-air digital television 
signals.18 Nationwide, 1380 television stations in 203 
markets are delivering free, over-the-air digital signals 
today.19 More than 70 million households receive six or more 
DTV signals; 49 million households receive nine or more DTV signals; 
and a full 30 million households receive 12 or more DTV signals. More 
digital stations are resolving their obstacles and going on the air 
almost daily. The digital transition is working and moving ahead 
quickly, and the claims of the satellite industry to the contrary are 
empty rhetoric, not fact.
---------------------------------------------------------------------------
    \17\ National Association of Broadcasters, DTV Stations in 
Operation, http://www.nab.org/Newsroom/issues/digitaltv/DTVStations.asp 
(last checked Feb. 19, 2004).
    \18\ See Mark R. Fratrik, Ph.D, Reaching the Audience: An Analysis 
of Digital Broadcast Power and Coverage (BIA Financial Network, Oct. 
17, 2003) (prepared for the Association for Maximum Service Television, 
Inc.) (``MSTV Study'').
    \19\ See www.fcc.gov/mb/video/dtvstatus.html (``FCC statistics'').
---------------------------------------------------------------------------
    In the top ten markets, covering 30% of U.S. households, all top 
four network affiliates are on-air--38 with licensed full-power digital 
facilities and two New York city stations with Special Temporary 
Authority (``STA'') currently covering a significant chunk of their 
service areas and with plans to expand even more. In markets 11-30 
(representing another 24% of U.S. households), 77 of 79 top four 
affiliated stations are on-air--72 with full-power licensed digital 
facilities and five with STAs. Two other stations in that group have 
been stymied in their roll-out, but are reporting regularly to the 
Commission about their progress in overcoming the obstacles. Thus, 
virtually all ABC/CBS/Fox/NBC affiliates in the top 30 markets, 
representing 53.5% of all U.S. households, are on-air with DTV--110 
stations with full power licensed digital facilities and seven with 
STAs.20
---------------------------------------------------------------------------
    \20\ Id.
---------------------------------------------------------------------------
    Even as to smaller stations in these markets and stations in 
smaller markets--which have far fewer resources but equally high 
costs--1263 of 1569 stations are on air with digital,21 
having overcome enormous challenges and in many cases mortgaging their 
stations to do so, despite having no immediate prospect of revenues to 
offset these huge investments.
---------------------------------------------------------------------------
    \21\ Id.
---------------------------------------------------------------------------
    Those who do not understand the digital transition sometimes claim 
that DTV stations operating with STAs broadcast with very low power. 
That is simply wrong. Many stations, particularly those outside the 
largest stations in the largest markets, are ``DTV maximizers,'' i.e., 
are maximizing their power to greatly exceed their analog coverage. 
Many maximizers need only a fourth or less of their maximum (licensed) 
power to cover their entire analog service area. Maximizers operating 
at even much reduced power are still covering 70% or more of their 
analog service areas. Almost 19% of current DTV stations operating 
pursuant to STAs currently serve more than 100% of their analog service 
area with a digital signal.22 This number will expand 
exponentially as the transition continues. This high percentage is 
particularly striking given that there are still no FCC rules for 
digital translators or booster stations, which will further expand 
digital signals in rural areas (at still further cost to local 
broadcasters). Free, over-the-air broadcasters take seriously the 
potential for expanding their service area and diminishing the very 
small number of households nationwide that cannot receive local 
signals, and the digital transition will provide an opportunity to 
increase nationwide broadcast service.
---------------------------------------------------------------------------
    \22\ See MSTV Study, supra, at 16.
---------------------------------------------------------------------------
    An authoritative study from last fall shows that on-air DTV 
facilities are serving 92.7% of the population served by the 
corresponding analog stations.23 The small percentage of 
viewers who do not yet receive a fully replicated digital signal of 
their local television stations is shrinking by the day as broadcasters 
work hard, at great expense, to expand the coverage of their digital 
stations.
---------------------------------------------------------------------------
    \23\ MSTV Study, supra, at i.
---------------------------------------------------------------------------
    On the programming side, broadcasters, both networks and local 
stations, are providing an extraordinary amount of high-quality DTV and 
high-definition television (``HDTV'') programming to entice viewers to 
join the digital television transition and purchase DTV sets to display 
the glory of dazzling HDTV programs and the multiple offerings of the 
growing DTV multicasts. Three networks offer virtually all their prime 
time programming in HDTV, as well as high-profile specials and sporting 
events, such as

 The Academy Awards
 The Grammys
 11 National Hockey League playoff games
 The Kentucky Derby
 The Super Bowl
 The AFC Championship
 Masters' Golf
 US Open Tennis
 College football
 NCAA Tournament games
 The Stanley Cup
 The NBA Finals
 The primary NFL games of the week
 The entire schedule of Monday Night Football
    PBS is launching its HD Channel, in addition to its multicast 
channels of educational fare. WB is doubling its amount of HD 
programming this fall to account for more than half of its program 
schedule. PAX is multicasting on its digital channels, including prime 
time fare. And now many special effects, like the first-down marker and 
graphics, are also going high definition, to enhance the viewer 
experience and move the transition along faster and faster.
    While it is local stations that bring these national HDTV programs 
to the vast majority of viewers, these local stations also are doing 
more and more on the local level to supplement the network HDTV and 
multicast fare. Examples abound of local HDTV and multicast broadcasts 
(at an enormous cost for full local HD production facilities):

 WRAL-TV produces its local news in HDTV
 Post-Newsweek's Detroit station broadcast live America's Thanksgiving 
        Day Parade in HD
 WRAZ-TV in Durham NC broadcast 10 Carolina Hurricanes hockey games in 
        HD last winter
 KTLA in LA broadcast last January's Rose Parade in HD in a 
        commercial-free broadcast simulcast in Spanish and closed 
        captioned and repeated it throughout the day and distributed it 
        on many Tribune and other stations
 Last April, Belo's Seattle station KING-TV began producing its award-
        winning local programs Evening Magazine and Northwest Backroads 
        in HDTV. Evening Magazine is daily. These programs are 
        broadcast on Belo's other Seattle and Portland and Spokane 
        stations
 KTLA last March broadcast live LA Clippers and the Lakers in HD. It 
        was the third sports presentation by KTLA, which included two 
        Dodgers games
 Many public TV stations are providing adult and children's education, 
        foreign language programming and gavel-to-gavel coverage of 
        state legislatures
 NBC and its affiliates are planning a local weather/news multicast 
        service
 ABC is multicasting news/public affairs and weather channels at its 
        KFSN station in Fresno, Calif. It plans to replicate this model 
        at the nine other stations it owns.
 WKMG in Orlando plans to broadcast a Web-style screen with local 
        news, weather maps, headlines and rotating live traffic views.
    This ever-increasing variety of DTV and HDTV programming, being 
broadcast to the vast proportion of American households, will attract 
consumers to purchase DTV sets. Another major driver of the transition 
is the FCC's August 2002 Tuner Order, which requires all new television 
sets, on a phased-in basis and starting this summer with the half of 
the largest sets, to have a DTV tuner. As a result, DTV tuners will be 
available in an ever-increasing number of households, thereby further 
hastening the transition.
    In short, the suggestion that broadcasters have somehow failed 
America in the transition to digital broadcasting is demonstrably 
false. Indeed, EchoStar's General Counsel, David Moskowitz, admitted as 
much in testimony before the Judiciary Committee in February: ``I agree 
with you completely [that broadcasters can't be blamed for decisions by 
consumers not to invest in digital sets]. I'm not saying the NAB or the 
broadcasters are at fault.'' 24
---------------------------------------------------------------------------
    \24\ Testimony of David Moskowitz before the Subcommittee on 
Courts, the Internet, And Intellectual Property of the House Judiciary 
Committee (Feb. 24, 2004).
---------------------------------------------------------------------------
    Moreover, the notion that new compulsory license for ``digital 
white areas'' would improve matters is sheer fantasy. In fact, allowing 
satellite carriers to deliver distant digital (or HD) signals to so-
called ``digital white areas'' would set the stage for a consumer 
nightmare almost identical to what occurred in 1999, when hundreds of 
thousands of households had to switch from (illegally-delivered) 
distant signals to over-the-air reception of local stations.
    The reason is simple: as Congress painfully experienced from 
mountains of letters, emails, and phone messages in 1999, viewers who 
are accustomed to receiving all of their TV programming (including 
network stations) by satellite are often enraged when told that they 
must switch to a hybrid system in which they combine satellite 
reception with an off-air antenna or cable service. The import of the 
``distant digital'' proposal is therefore clear: after the DBS firms 
had ``grabbed'' customers with a distant digital signal, the costs to 
local broadcast stations of reclaiming those viewers would go sky-high, 
since stations would face not only the same financial costs they do now 
but also the high costs of confronting thousands of angry local viewers 
with the need to change their reception setup. The DBS firms know all 
of this, and they fully understand the implication: the ``distant 
digital'' plan would not encourage a smooth digital transition, and 
would not encourage stations to invest in the digital rollout, but 
would simply make it easy for EchoStar and DirecTV to hook customers on 
(distant) satellite-delivered digital signals and keep them 
forever.25
---------------------------------------------------------------------------
    \25\ In his oral testimony in February before a subcommittee of the 
House Judiciary Committee, SBCA spokesman (and EchoStar General 
Counsel) David Moskowitz said that once DBS firms begin delivering a 
distant digital signal to a household, they should never have to turn 
off that signal. Far from encouraging stations to expand their digital 
service areas, this naked ``land grab'' would have the opposite effect: 
no matter what they did, stations would have forever lost many of their 
local customers to a distant signal.
---------------------------------------------------------------------------
    If there were any doubt about the DBS firms' tenacity in retaining 
distant-signal customers once they begin serving them--regardless of 
the legality of doing so--EchoStar's behavior with regard to analog 
distant signals would eliminate it. As a District Court found last year 
after a 10-day trial, EchoStar was so determined to retain its illegal 
distant-signal customers that, ``when confronted with the prospect of 
cutting off network programming to hundreds of thousands of 
subscribers,'' the key ``EchoStar executives, including [CEO Charles] 
Ergen and [General Counsel] David Moskowitz,'' choose instead ``to 
break Mr. Ergen's promise to the Court'' that it would turn them off. 
CBS Broad., Inc. v. EchoStar Communications Corp., 276 F. Supp. 2d at 
1246,  46.

B. The Radical New Compulsory License Demanded by EchoStar and DirecTV 
        Is Unnecessary and Would Do Lasting Damage to Localism
    At all times since 1988, the purpose of the distant-signal license 
has been to make over-the-air broadcast programming available by 
satellite solely as a ``lifeline'' to satellite subscribers that had no 
other options for viewing network programming.26 The 
EchoStar/DirecTV proposal would do exactly the opposite: Congress would 
override normal copyright principles to permit DBS companies to 
transmit distant network stations to many millions of additional 
households, even though (1) the households get a strong signal from 
their local stations over the air and (2) in most cases, the DBS firm 
already offers the local analog broadcasts of the same programming, in 
crisp, digitized form, as part of a local-to-local package. The 
suggestion that Congress needs to step in to offer a ``lifeline'' under 
these circumstances is baffling.27
---------------------------------------------------------------------------
    \26\ E.g., SHVIA Conference Report, 145 Cong. Rec. H11792 (``the 
specific goal of the 119 license, which is to allow for a life-line 
network television service to those homes beyond the reach of their 
local television stations, must be met by only allowing distant network 
service to those homes which cannot receive the local network 
television stations. Hence, the `unserved household' limitation that 
has been in the license since its inception.'' Id. (emphasis added).
    \27\ The Committee should be aware that, in the guise of a letter 
seeking advice about how to fill out a Copyright Office form, EchoStar 
sought last year to obtain from the Copyright Office a statement that 
the Copyright Act as now in force already recognizes the ``distant 
digital'' concept. See Letter from David Goodfriend, EchoStar 
Communications Corp. to David O. Carson, General Counsel, Copyright 
Office (June 18, 2003). The Office swiftly, and properly, rebuffed that 
back-door effort. Letter from William J. Roberts to David Goodfriend 
(Aug. 19, 2003).
---------------------------------------------------------------------------
    The consequences of this radical proposal, if adopted, would be 
likely to be grave. According to EchoStar and DirecTV, for example, if 
a station (through no fault of its own, e.g., because of a local zoning 
obstacle) has been unable to go on-air with a digital signal, every 
household in that station's market would be considered ``unserved''--
and therefore eligible to receive a retransmitted signal from the New 
York or Los Angeles ABC, CBS, Fox, and NBC affiliates' digital 
broadcasts. In these markets, EchoStar and DirecTV would take us back 
to the dark days of the mid-1990s, when, before courts began to 
intervene, the DBS firms used national feeds to deliver ABC, CBS, Fox, 
and NBC network programming to any subscriber who asked for 
it.28 And they would do so even though, in most cases, the 
DBS firms are themselves already delivering the same programming by 
satellite from the local stations. With DBS penetration already at more 
than 20 million households nationwide, and with the highest levels of 
DBS penetration in smaller markets, the impact on the viability of 
local broadcasters could be devastating. 29 Worse yet, based 
on the misconduct of EchoStar in their retransmission of distant analog 
signals, once EchoStar has begun delivering distant digital stations, 
it will take enormous efforts (and years of struggle) to get them to 
ever stop doing so, even if they have ``promised'' to do so, and even 
if the law squarely requires them to do so.
---------------------------------------------------------------------------
    \28\ In other markets, while stations have gone on-air with their 
digital signals, their coverage area is temporarily reduced for reasons 
entirely beyond their control--such as the destruction by terrorists of 
the World Trade Center and its broadcasting facilities.
    \29\ Of course, the tiny number of genuinely unserved households 
(e.g., those unable to receive Grade B intensity analog signals over 
the air) can receive either an analog or a digital signal from a 
distant affiliate of the same network. See Letter from William J. 
Roberts, U.S. Copyright Office, to David Goodfriend (Aug. 19, 2003).
---------------------------------------------------------------------------
    Granting this enormous government subsidy to the DBS industry, at 
the expense of local broadcasters (and ultimately at the expense of 
local over-the-air audiences), would also have profoundly negative 
long-term consequences for the continued progress of the satellite 
industry. Over-the-air broadcasting is a local phenomenon, and the 
right way to deliver local stations is on a local-to-local basis. In 
their drive to compete with cable, and with each other, DirecTV and 
EchoStar are likely to devise ingenious technical solutions to enable 
them to carry digital broadcasts on a local-to-local basis, just as 
they have--despite their gloomy predictions--found a way to do so for 
analog broadcasts. But rewriting the laws to give EchoStar and DirecTV 
a cheap, short-term, government-mandated ``fix'' will take away much of 
the incentive that would otherwise exist to continue to find creative 
technological solutions. Congress wisely refused to abandon the bedrock 
principles of localism and free market competition in the 1990s, when 
the satellite industry made similar proposals, and Congress should do 
the same now.30
---------------------------------------------------------------------------
    \30\ When analog broadcasting ceases several years from now, there 
may--but may not--be a need for a distant-signal compulsory license. If 
the DBS firms are then providing local-to-local broadcasts of local TV 
stations in a digital (or HD) format, for example, there may be no need 
for a distant-signal license at all, or a need only for an extremely 
limited license.
---------------------------------------------------------------------------
    The DBS proposal would also sabotage another key objective of the 
SHVIA, namely minimizing unnecessary regulatory differences between 
cable and satellite. If DirecTV and EchoStar could deliver an out-of-
town digital broadcast to anyone who does not receive a digital 
broadcast over the air, they would have a huge (and wholly 
unjustifiable) leg up on their cable competitors, which are virtually 
always barred by the FCC's network non-duplication rules from any such 
conduct. See 47 C.F.R.  76.92-76.97 (1996).
    Finally, it would be particularly inappropriate to grant EchoStar 
and DirecTV a vastly expanded compulsory license when they have shown 
no respect for the rules of the road that Congress placed on the 
existing license. If Congress were to adopt this ill-conceived 
proposal, it can expect more years of controversy, litigation, and--
ultimately--millions of angry consumers complaining to Congress when 
their ``distant digital'' service is eventually terminated. This 
Committee should rebuff the invitation to participate in such a 
reckless folly.

                  V. WHAT CONGRESS SHOULD DO THIS YEAR

    As the Committee is aware, the local-to-local compulsory license is 
permanent, but Congress has wisely extended the distant-signal license 
(in Section 119 of the Copyright Act) only for five-year increments. 
Given the short legislative calendar and the press of other urgent 
business, Congress may wish simply to extend Section 119, as now in 
force, for another five years.
    If Congress wishes to do anything other than a simple extension of 
the existing distant-signal compulsory license, NAB urges:
     No distant signals where local-to-local is available. For the 
reasons discussed above, Congress should amend the definition of 
``unserved household'' to exclude any household whose satellite carrier 
offers the household's own network stations on a local-to-local basis. 
There is no logic to interfering with localism--and with basic 
copyright principles--under these circumstances. It makes no sense, for 
example, to give satellite carriers the right to ``scoop'' local 
stations on the West Coast (and in the mountain West) by delivering 8 
Simple Rules, Everybody Loves Raymond, 24, or The Tonight Show two or 
three hours early, or to permit EchoStar to evade normal copyright 
restrictions by delivering out-of-town NFL games to local-to-local 
households without ever negotiating for the rights to do so.
     No expansion of the distant-signal compulsory license. Congress 
should flatly reject any proposal to expand the distant-signal 
compulsory license, such as the irresponsible ``distant digital'' 
proposal discussed above. Since the compulsory license is intended only 
to address ``hardship'' situations in which viewers have no other means 
of viewing network programming, there is no policy basis for expanding 
the compulsory license to cover households that receive can view their 
local station's analog signals over the air. Still less would it make 
any sense to declare a household to be ``unserved'' when it already 
receives (or can receive with a phone call) a crisp, high-quality 
digitized retransmission of their local station's analog broadcasts 
from DirecTV or EchoStar.
    The Committee not take seriously the DBS firms' predictable claims 
that they lack the technological capacity over time to offer local 
digital signals, since--as discussed above--EchoStar and DirecTV are 
notorious for ``underpredicting'' their ability to solve technological 
challenges. Moreover, it would be wholly inappropriate to reward 
companies such as EchoStar, which have knowingly violated the existing 
law and broken sworn promises to courts about compliance, by broadening 
the compulsory license they have abused.
     Five-year sunset. Congress should again provide that Section 119 
will sunset after a five-year period, to permit it to evaluate at the 
end of that period whether there is any continuing need for a 
government ``override'' of this type in the free market for copyrighted 
television programming.
     Stopping the ``two-dish'' scam. As discussed above, Congress 
should--if the FCC does not do so first--bring a halt to EchoStar's 
two-dish gambit, which is thwarting Congress' intent to make all 
stations in each local-to-local market equally available to local 
viewers.

                               CONCLUSION

    With the perspective available after 16 years of experience with 
the Act, Congress should adhere to the same principles it has 
consistently applied: that localism and free-market competition are the 
bedrocks of sound policy concerning any proposal to limit the copyright 
protection enjoyed by free, over-the-air local broadcast stations.
    If Congress makes any change to the existing distant-signal 
license, it should amend the Act to specify that a household that can 
receive its own local stations by satellite from the satellite carrier 
is not ``unserved.'' The Committee should flatly reject reckless bids 
by companies like EchoStar--which have scoffed at the law for years--to 
expand the distant-signal license.
    Far from rewarding EchoStar for its indifference to congressional 
mandates, Congress should--if the FCC does not--make clear that 
EchoStar's flouting of ``carry one, carry all'' through its two-dish 
gambit must come to an end. And as it has done in the past, Congress 
should limit any extension of the distant-signal license to a five-year 
period, to enable a fresh review of the appropriateness of continuing 
this major governmental intervention in the free marketplace.

                               Appendix A

           RECENT EXAMPLES OF LOCAL TV STATION PUBLIC SERVICE

Helping People In Need
WXYZ ``Can Do'' Raises 500,000 Pounds of Food for Food Banks
    WXYZ-TV Detroit (E.W. Scripps-owned ABC affiliate) undertook its 
22nd annual ``Operation Can-Do'' campaign this winter, bringing in more 
than 500 thousand pounds of canned and non-perishable food to help feed 
families and individuals through soup kitchens and food banks in the 
tri-county area. Since it began the program, WXYZ has collected more 
than six million pounds of food, providing more than 20 million meals 
to the hungry of Metropolitan Detroit. (Jan/Feb 2004)
WHSV-TV Builds a Habitat House
    WHSV-TV Harrisonburg, VA (Gray Television-owned ABC affiliate) 
decided the best possible way to celebrate its October 2003 50th 
Anniversary would be to partner with Habitat for Humanity to raise $50 
thousand over the summer to build a house for a needy family. January 
2003 marked the first time that the Staunton-Augusta-Waynesboro Habitat 
affiliate partnered with a television station to build a house and show 
the public the Habitat miracle. WHSV had several fundraisers, including 
production and distribution of a Shenandoah Valley cookbook 
commemorating the station's 50 years of service and the Habitat 
chapter's 10 years of service. In August, WHSV hosted a special benefit 
screening of ``From Here to Eternity,'' which won the Academy Award in 
the same year WSVA-TV (now WHSV) sent out its first broadcast. 
Community members who supported the screening were driven by limousine 
to the theater and entered on a red carpet. WHSV sent out calls for and 
coordinated volunteers throughout the fundraising and building process. 
The station met its goal, the house was built and a grateful family of 
four moved in. (Jan/Feb 2004)

Children

WFAA-TV Collects 82,000 Toys in Four-Week Campaign
    WFAA-TV Dallas/Fort Worth (Belo-owned ABC affiliate) in 2003 ran 
its most successful Santa's Helpers campaign in the 34-year history of 
this program. WFAA was able to collect more than 82,000 toys over the 
course of the four-week campaign, allowing the station to help more 
than 50,000 children in the North Texas area. In 2002 the station 
collected 76,000 toys. Santa's Helpers is promoted on air through 
numerous promos and PSAs, and also by WFAA's chief weathercaster, Troy 
Dungan, who has served as Santa's Helpers spokesman for 28 years. Each 
year, the highlight of the campaign is a ``drive-thru'' event that is 
held in front of the station, where WFAA anchors and reporters greet 
viewers as they drop off toys. After all of the toys have been 
collected, they are distributed to needy children by more than 40 
nonprofit organizations in the Dallas/Fort Worth area. (Jan/Feb 2004)

Healthy Communities

KTTC-TV: 50 Years On-Air, 50 Years Fighting Cancer
    KTTC-TV Rochester, MN (QNI Broadcasting-owned, NBC) celebrated its 
50th anniversary in July and nearly 50 years of partnership with the 
local Eagles Lodge producing and airing a 20-hour telethon to raise 
money for cancer research. Fifty years ago young Rochester television 
sportscaster Bernie Lusk was searching for a way to use the powerful 
new medium of television to make a difference. At a time when the 
battle with polio garnered much attention, Bernie wanted to tackle 
another disease that claimed many lives--cancer. Bernie shared his idea 
with fellow Eagles Lodge members, and the now 50-year-old, totally 
local telethon was born.
    In its first year, the 1954 KTTC/Eagles Cancer Telethon raised 
$3,777. In 2003, $702,900 was raised for the Mayo Clinic, the 
University of Minnesota, and the Hormel Institute of Research. To date 
the telethon has raised more than $9 million dollars. (Nov/Dec 2003)
KLAS-TV Promotes Breast Cancer Awareness
    KLAS-TV Las Vegas (Landmark Broadcasting, CBS) runs the Buddy Check 
8 program asking viewers to call a buddy on the 8th day of the month to 
remind her to do a breast self-examination. KBLR-TV (Telemundo) also 
produces the same messages in Spanish. (September 2003)

Helping Animals

KEYE Raises $172,000 for Humane Society
    KEYE-TV Austin, TX (Viacom, CBS) hosted the Austin Humane Society's 
6th Annual Pet Telethon June 20 and 22, raising $172,000 and resulting 
in the adoption of 104 animals. The society runs a no-kill shelter, 
where animals accepted into the adoption program are kept for as long 
as it takes to find them a loving home. The society has saved 
approximately 2,700 animals in the past year alone. (July 2003)

Drug Prevention

Hawaii TV Stations Forego New Network Shows to Blanket Islands with 
        Drug Documentary
    Television stations in the Hawaiian Islands simultaneously aired an 
unprecedented, commercial-free drug documentary at 7 p.m. on September 
24, with network affiliates pre-empting the first hour of primetime 
during the networks' debut of their new fall shows. The stations were 
honoring their commitment to help battle Hawaii's biggest drug problem. 
``Ice: Hawaii's Crystal Meth Epidemic,'' produced by Edgy Lee's 
FilmWorks Pacific, details the epic proportions of crystal meth abuse, 
with grassroots reaction and views. Originally conceived as a 30-minute 
show, it was expanded to an hour because of the magnitude of the 
epidemic and originally was to air in August to avoid the fall network 
season. The commercial-free airing agreement did not come without a 
cost. It meant thousands of dollars in lost ad revenues for the 
stations and the canceling or delayed airing of the season premieres of 
``Ed,'' ``60 Minutes II,'' ``My Wife and Kids'' and ``Performing As.'' 
KITV-TV (Hearst Argyle, ABC) general manager Mike Rosenberg estimated 
the loss was as much as $10 thousand per station. Stations that 
simulcast the program included: Honolulu stations KITV-TV (Hearst 
Argyle, ABC), KBFD (Independent), Raycom Media stations KHNL (NBC) and 
KFVE (WB), KIKU (International Media Group, Independent), Emmis 
Communications stations KHON (Fox) and KGMB (CBS) and KWHE 
(Independent). Some stations even added additional ice programming to 
follow Lee's film. Among them were KHON, which showed an hour-long 
panel including Governor Linda Lingle and Lt. Governor James Aiona; and 
KFVE, which aired a half-hour program focusing on teen drug usage. 
(October 2003)

Broadcasters Without Borders

Roanoke Station's Viewers Come Through for Troops
    A six-day promotion at WDBJ-TV Roanoke, VA (Schurz Communications, 
CBS) to gather items such as toiletries and snack foods for American 
troops serving in the Iraq war resulted in more than two tons of 
welcome supplies. Viewers overwhelmed the station and collection points 
at several Roanoke area automobile dealerships with more than 4,000 
pounds of Packages from Home to be sent overseas. The American Red 
Cross local chapter helped get the goods to the Middle East. ``Thursday 
and Friday afternoons, the cars were bumper to bumper at our front 
door,'' said WDBJ President and General Manager Bob Lee. ``We filled up 
the lobby, and then the packages started to spill over into other areas 
of the building.'' Red Cross and station volunteers sorted the DOD-
approved personal items. Said Lee, ``Who would have thought we would 
end up with more than two tons of merchandise! We were beginning to 
think we'd need our own C-130 for the delivery.'' (April 2003)

Education

KTLA Student Scholarships
    KTLA-TV Los Angeles (Tribune-owned WB affiliate) is launching its 
sixth Annual Stan Chambers Journalism Awards competition--a partnership 
with area county departments of education and member school districts. 
The station has invited more than 300 high schools to have their 
seniors submit essays on ``What Matters Most,'' for the opportunity to 
receive scholarships to further their education. Five winners will 
receive $1,000 and a chance to experience work in the KTLA Newsroom. 
Winners will produce videos of their entries, with guidance from KTLA 
News writers, producers and reporters. The program honors KTLA's 
veteran reporter and journalist Stan Chambers for his contributions to 
the community. (Jan/Feb 2004)

KRON-TV's ``Beating the Odds''
    KRON-TV San Francisco's ``Beating the Odds'' is a series of news 
stories and specials reported by anchorwoman Wendy Tokuda and other 
KRON News reporters. Tokuda's ``Beating the Odds'' series features 
extraordinary high school students who are rising above tough 
circumstances. Some are growing up without parents, others are homeless 
and some are raising siblings. All of them want to go to college. The 
stories are tied to a scholarship fund established by KRON and the 
Peninsula Community Foundation to help low-income, high-risk Bay Area 
high school students pay for college. Following each ``Beating the 
Odds'' report, viewers are encouraged to donate to the fund. Since 
1997, the fund has raised more than $1.5 million for students profiled 
in the series. The Foundation waives all its fees, so 100% of the tax-
deductible donations go to the students. KRON is an independent station 
owned by Young Broadcasting. (March 2003)

Belo/Phoenix Launches Statewide Education Initiative
    Belo Broadcasting/Phoenix has launched a six-month, statewide 
initiative on education to address major issues affecting students and 
schools. Running through March, ``Educating Arizona's Families'' 
involves monthly topics ranging from early brain development and 
learning readiness to literacy, accountability, dropout, post-secondary 
education, the teaching profession and the economic impact of education 
on the state. The stations focus on each initiative for one month, 
producing two dozen stories per topic. Weekly public affairs 
programming is directed toward the specific issues being covered each 
month and guests on mid-day newscasts, three times weekly, offer 
insight to parents, caregivers and other viewers. KTVK-TV Phoenix 
(Independent) is driving the initiative through news and daily 
promotional announcements that also air in Tucson on Belo's KMSB-TV 
(Fox) and KTTU-TV (UPN). Promotion spots change monthly and individual 
30-second sponsor announcements address education interests of each 
sponsor. (Nov/Dec 2003)

Protecting the Environment/Endangered Species

Emmis Makes $90,000 Grant to Indianapolis Zoo For Endangered Species
    Radio and television station owner Emmis Communications will donate 
$90,000 to the Indianapolis Zoo for a multi-year conservation research 
project aimed at saving one of the planet's most endangered species, 
the ring-tailed lemur. A portion of the donation will be used to 
research potential problems that could occur from the re-introduction 
of the animals into the wild from zoos around the world, paving the way 
for future reintroduction of the species into their native range. 
(January 2002)

                               Appendix B

               RECENT EXAMPLES OF MISCONDUCT BY ECHOSTAR

    1. The owners of the ABC, CBS, Fox, and NBC television networks, 
along with the ABC, CBS, Fox, and NBC Affiliate Associations, sued 
EchoStar in 1998 in the Southern District of Florida for violations of 
the Copyright Act relating to delivery of distant network stations. The 
case was tried to the Hon. William Dimitrouleas for ten days in April 
2002. The Court's Findings of Fact and Conclusions of Law are reported 
at CBS Broadcasting Inc. v. EchoStar Communications Corporation, 276 F. 
Supp. 2d 1247 (S.D. Fla. 2003). The Court found that EchoStar had 
failed to meet its burden of proving that any of its 1.2 million 
subscribers to distant network stations met the statutory standard. Id. 
 82. Rejecting testimony provided by EchoStar CEO Charles Ergen, U.S. 
District Court William Dimitrouleas found that ``[n]o credible evidence 
was presented to the Court to support the contention that EchoStar 
turned off distant signals for compliance reasons . . . '' Id.  45.
    2. The Court also found that EchoStar had knowingly broken a sworn 
promise to the Court to turn off ineligible subscribers. The Court 
stated:
        It appears that EchoStar executives, including Mr. Ergen and 
        David Moskowitz, when confronted with the prospect of cutting 
        off network programming to hundreds of thousands of 
        subscribers, elected instead to break Mr. Ergen's promise to 
        the Court.

        Id.  46.
    The Court also found that ``when Mr. Moskowitz, an EchoStar 
executive who worked closely on SHVA compliance, was questioned during 
his deposition about the 1999 Decisionmark ILLR analysis, he paused for 
an unusually long period of time and then answered the questions 
concerning the ILLR analysis in a vague manner, unable or unwilling to 
give any details on the results of the analysis or EchoStar's actions 
following the analysis.'' Id.,  47.
    3. In a lawsuit filed by EchoStar claiming antitrust violations for 
alleged conspiracy and boycott by an insurance company, a United States 
District Judge imposed a $30,000 sanction on EchoStar under the Court's 
inherent authority to punish discovery misconduct. Order, EchoStar 
Satellite Corp. v. Brockbank Ins. Servs., Inc., No. 00-N-1513 (D. Colo. 
Feb. 5, 2004). The Court found that EchoStar's action ``rose to the 
level of conscious wrongdoing.'' Id. at 23. With respect to testimony 
by EchoStar's General Counsel, David Moskowitz, who was required to 
present knowledgeable testimony as EchoStar's designated spokesperson, 
the Court found that ``either Mr. Moskowitz was not knowledgeable or he 
was not candid.'' Id. at 22. The Court also found that Mr. Moskowitz' 
testimony was ``evasive[].'' Id. at 22 n.16.
    4. In a 2002 proceeding, the FCC's Media Bureau found that EchoStar 
had, in numerous respects, violated the SHVIA through its practices 
relating to delivery of certain local television stations in a manner 
requiring subscribers to obtain a second satellite dish. Declaratory 
Ruling & Order, In re National Ass'n of Broadcasters and Ass'n of Local 
Television Stations: Request for Modification or Clarification of 
Broadcast Carriage Rules for Satellite Carriers, Docket No. CSR-5865-Z, 
17 FCC Rcd 6065 (2002). See id.  12 (``EchoStar's ``two-dish'' plan, 
as implemented, violates both the Act and the Commission's rules.''); 
id.  25 (``EchoStar's ``two-dish'' plan violates the contiguous 
channel placement requirement of the statute . . .''); id.  34 (``We 
cannot consider or grant a waiver insofar as EchoStar's actions 
directly violate the statute.''); id.  35 (``Given our concerns about 
EchoStar's violations, and the severe impact they have on certain local 
stations and subscribers, EchoStar is required to submit a Compliance 
Report and Plan within 30 days after release of this Order.'')
    5. Since the Commission's 2002 ruling, EchoStar has, on many 
occasions, violated even the minimal requirements imposed by the FCC 
for carriage of some (but not all) local stations through use of a 
second dish. Among other things, EchoStar has discouraged subscribers 
from obtaining a second dish, falsely told subscribers they would have 
to pay for a second dish, and falsely stated that customers could not 
have a second dish installed at the time of their original 
installation. In re University Broadcasting, Inc. v. EchoStar 
Communications Corp., Mem. Op. & Order, Dkt. No CSR-6007-M (Feb. 20, 
2003); In Re Entravision Holdings, LLC, Mem. Order & Op., Dkt. No. CSC-
389 (April 15, 2002); In Re Tri-State Christian, Inc., Mem. Op. & 
Order, Dkt. No. CSR-5751 (Feb. 5, 2004).
    6. In its April 2002 Declaratory Ruling & Order, the FCC Media 
Bureau provided the following summary of earlier instances in which the 
Commission had sanctioned EchoStar for illegal or improper conduct:
        ``EchoStar has previously been fined by the Commission for rule 
        violations and admonished for its `disingenuous' behavior and 
        lack of candor. In June 1998, the Commission fined EchoStar, 
        and its subsidiary Directsat, the maximum forfeiture amount 
        permitted under the Commission's rules for operating satellites 
        from non-authorized locations. . . . The FCC justified the 
        forfeiture amount based on EchoStar's degree of misconduct, 
        lack of voluntary disclosure and continuing violation of the 
        Commission's rules. In November 1999, EchoStar tried to 
        disregard its public interest programming requirements by 
        placing all of its public interest programming on secondary 
        satellites in violation of the Commission's DBS rules. See 
        American Distance Education Consortium Request for an Expedited 
        Declaratory Ruling and Informal Complaint, Declaratory Ruling 
        and Order, 14 FCC Rcd 19976 (1999). In this instance, the 
        Commission assessed a forfeiture against EchoStar, finding that 
        it had willfully violated the Communications Act and the 
        Commission's rules, that it had been `disingenuous' in its 
        legal interpretations, and that none of the circumstances 
        EchoStar presented supported mitigation of the forfeiture. In 
        the Matter of EchoStar Satellite Corporation, Notice of 
        Apparent Liability for Forfeiture, 15 FCC Rcd 5557, 5558-59 (EB 
        2000). In August 2001, the Commission found that ``EchoStar 
        failed in its duty of candor'' by withholding information from 
        the Commission. See EchoStar Satellite Corporation v. Young 
        Broadcasting, Inc., Memorandum Opinion and Order, 16 FCC Rcd 
        15070, 15075 (CSB 2001).''

        Id.  37, n.116.
    7. In 2001, EchoStar Satellite Corporation filed a complaint at the 
FCC alleging that Young Broadcasting has ``breached its obligation to 
negotiate in good faith terms for EchoStar's local retransmission'' of 
Young's ABC and NBC affiliates. In a decision in that proceeding, the 
Commission found that:
        ``EchoStar failed in its duty of candor to the Commission. 
        EchoStar began publicly disclosing on March 19, 2001, portions 
        of the documents for which it sought confidentiality in their 
        entirety, yet failed to apprise the Commission of this fact for 
        23 days until it filed its request for modification.''

        EchoStar Satellite Corp. v. Young Broadcasting, Inc., 16 FCC 
        Rcd. 15070 (Cable Services Bureau 2001).
    The Commission also found that EchoStar's conduct ``constituted an 
abuse of the Commission's processes.'' Id.
    8. In March 1999, the United States District Court for the District 
of Colorado (Nottingham, J.) granted a request by broadcaster parties 
to transfer to Florida a lawsuit that EchoStar had filed in Colorado, 
finding that EchoStar had engaged in ``flagrant forum-shopping.'' 
Hearing Transcript, EchoStar Communications Corp. v. CBS Broadcasting 
Inc., No. 98-2285 at 21 (D. Colo. Mar. 24, 1999).

    Mr. Upton. Mr. Polka.

                  STATEMENT OF MATTHEW M. POLKA

    Mr. Polka. Thank you, Mr. Chairman. My name is Matt Polka 
and I am the President of the American Cable Association which 
represents more than 1,000 independent cable companies. 
Collectively, ACA members serve more than 8 million customers, 
mostly in smaller markets and rural areas. ACA's constituency 
is truly national. Our members serve customers in every State 
and in nearly every congressional district, particularly those 
of this committee.
    Each of the 1,000 small businesses in ACA competes daily 
for their livelihood. Who are their principal competitors? the 
two national DBS companies, EchoStar and DirecTV. But today, 
DBS interests are advocating changes to SHVIA. That concerns us 
and we think it should concern this committee. You see, ACA 
members are fundamentally different than the major media and 
communications companies you often hear from. ACA members do 
not rule vast media empires, rather, ACA members focus on 
serving modest customer bases in smaller markets.
    The average ACA company in your State serves 8,000 
customers. One half of all ACA members serve less than 1,000 
customers. These are truly, truly small businesses. But compare 
this to our main competitive, DirecTV with more than 12 million 
customers or EchoStar with about 10 million customers. This is 
why we are very concerned about SHVIA.
    When you hear that DBS needs changes to the law to better 
compete, you need to ask two questions. First, why does DBS 
need more competitive advantages in smaller markets? And 
second, what would the consequences truly be for competition 
and consumers?
    ACA and its members would not object to the reauthorization 
of SHVIA in its present form. Reauthorization would maintain 
the status quo and it would avoid skewing the law further in 
the direction of DBS. But if Congress considers changing SHVIA, 
we ask that you proceed with great care and include the 
adjustments to the statute we are suggesting today in our 
written and in our panel testimony.
    As I have stated, the average ACA member company in your 
State serves 8,000 customers. Compared to DirecTV with 12 
million subscribers and EchoStar with 10 million subscribers, 
it is self-evident that these companies benefit from far 
greater economies of scale, access to capital and bargaining 
power over programming and other suppliers. As a result, 
DirecTV and EchoStar cannot seriously maintain that they need 
the government to further help them compete.
    As the FCC has observed, multi-channel video competition is 
local. DBS and ACA members compete head to head in 
Bloomingdale, Michigan; Braintree, Massachusetts; Parkdale, 
Oregon; Ramsey, Illinois and many other towns represented by 
this committee. As a result, any changes to SHVIA here in 
Washington will have the potential of skewing that competition 
in smaller markets and all across the country.
    For these reasons, a simple SHVIA reauthorization will 
avoid unintended consequences and we have no objection to that. 
To us, DBS already enjoys a major competitive advantage through 
favored regulatory treatment. On the other hand, small cable 
businesses with far more limited resources bear a much greater 
regulatory load. Our written testimony contains a number of 
specifics in this regard. So before tinkering with SHVIA to 
help DBS compete, Congress should examine the existing 
regulatory disparity.
    As DBS continues to mature and gains even greater market 
share against cable, this regulatory disparity threatens to 
grow and threatens our members' ability to continue to provide 
high-speed data and other advanced services in their rural 
areas where their customers are relying on them. The 
consequences of competition for consumers in smaller markets 
should concern us all.
    However, if the committee decides that changes to SHVIA are 
appropriate, we have some suggestions that will advance 
competition and localism in smaller markets and let me briefly 
discuss two. First, access for rural cable systems to local-
into-local signals. Some rural cable systems cannot receive 
good quality broadcast signals off-air. In local-into-local 
markets, these systems can receive good quality signals from 
DBS and our members are willing to pay reasonable rates for 
this service. The DBS providers have refused. To ensure the 
widest possible distribution of good quality local broadcast 
television signals in rural markets, Congress should require 
DBS to provide smaller cable systems with local-into-local 
television signals on nondiscriminatory rates and terms and 
conditions.
    Second, retransmission can send good faith negotiation and 
exclusivity. SHVIA obligates broadcasters to negotiate 
retransmission consent in good faith and prohibits exclusive 
retransmission consent agreements. These provisions have helped 
smaller cable companies maintain access to local broadcast 
signals. These provisions are scheduled to sunset under SHVIA 
as of January 1, 2006. This will eliminate what little 
protections smaller cable businesses have in negotiating fair 
retransmission consent agreements. Congress should make these 
provisions permanent or at least extend them along with the 
reauthorization of SHVIA.
    In conclusion, SHVIA has provided a framework for DBS 
carriage of local broadcast signals. It is not perfect, but all 
of the players know the current rules. As a result, Congress 
should maintain the status quo with the straight 
reauthorization. However, if the law is changed, then the 
impact on consumers and competition, particularly in smaller 
markets and rural areas must be considered and balanced.
    Thank you.
    [The prepared statement of Matthew M. Polka follows:]

   Prepared Statement of Matthew M. Polka, President, American Cable 
                              Association

                            I. INTRODUCTION

    Thank you, Mr. Chairman. My name is Matt Polka, and I am president 
of the American Cable Association. ACA represents more than 1,000 
independent cable businesses. Collectively, ACA members serve more than 
8 million customers, mostly in smaller markets and rural areas. ACA's 
constituency is truly national; our members serve customers in every 
state and in nearly every congressional district, particularly those of 
this Committee.
    Our members are keenly interested in SHVIA. Each of the 1,000 small 
businesses in ACA competes daily for their livelihood. Their principal 
competitors: the two national DBS companies--EchoStar and DirecTV. DBS 
interests are advocating changes to SHVIA. That concerns us, and we 
think it should concern the Committee.
    ACA members are fundamentally different than the major media and 
communications companies you often hear from. Foremost, ACA members do 
not rule vast media empires, and do not aspire to. ACA members focus on 
serving modest customer bases in smaller markets. And our companies are 
doing a great job. ACA members are leading the industry in delivering 
advanced services like digital cable and broadband Internet access. Our 
members have launched DTV and HDTV programming, and they are doing 
their part to advance the DTV transition. ACA members are actively 
exploring VOD, VOIP and other advanced services. Because we live and 
work in these rural communities, we know how important it is to have 
advanced communications services available, and our members are working 
hard to deliver the promise of broadband to smaller markets.
    As a result, when the Committee is concerned about mergers, media 
consolidation, indecency and other important policy matters, ACA 
members are not part of the problem. When the Committee is concerned 
about localism, broadband deployment and the economic health of rural 
America, ACA members are an important part of the solution.
    These companies are great examples of what entrepreneurial spirit 
and hard work can accomplish.
    At the same time, our members increasingly compete in markets 
dominated by vastly larger players. The average ACA company in your 
state serves 8,000 customers. One-half of all ACA members serve less 
than 1,000 customers. These are truly small businesses. Compare this to 
our main competitor DirecTV, with more than 12 million customers. Or 
EchoStar, with about 10 million customers.
    This is why we are very concerned about SHVIA. When you hear that 
DBS needs changes to the law to better compete, you need to ask two 
questions: Why does DBS need more competitive advantages in smaller 
markets? And what would the consequences truly be for competition and 
consumers in smaller markets?
    I hope my testimony today will help you answer these questions.

          II. ACA DOES NOT OBJECT TO REAUTHORIZATION OF SHVIA.

    The Satellite Home Viewer Improvement Act granted the DBS industry 
in 1999 the right to retransmit local broadcast signals on carriage and 
copyright terms similar to those of cable operators.
    One purpose of the law was to promote localism--a key tenet of this 
country's communications policy. Localism ensures that customers in 
local markets receive local programming and messages from diverse 
voices. Historically, local broadcasters have been a key source of 
local programming. In our view, media consolidation has fundamentally 
changed this, but we will save that for another hearing.
    SHVIA also aimed to help a young DBS industry better compete 
against cable. For instance, concerning broadcast signal carriage SHVIA 
gave DBS substantial regulatory advantages over cable.
    Despite the regulatory advantages given to DBS, ACA and its members 
would not object to the reauthorization of SHVIA in its present form. 
Reauthorization would maintain the status quo and avoid skewing the law 
further in the direction of DBS.
    But if Congress considers changing SHVIA, we ask that you proceed 
with great care, especially considering the potential impact on 
competition and consumers in smaller markets.

  III. DBS SHOULD NOT BE ALLOWED TO LIGHTEN ITS REGULATORY LOAD UNDER 
                                 SHVIA.

    First, the Committee should be skeptical of those advocating 
reduced regulatory obligations for DBS. DBS has already achieved 
substantial market power, especially in smaller markets. The DBS 
industry has long outgrown the need for a legislated competitive boost.
    In five years since SHVIA was passed, the DBS industry has become a 
maturing, successful business and a powerful competitor to cable. This 
is especially true in smaller markets and rural areas where DBS has 
gained substantial market share. In some smaller markets, DBS has 
become the dominant provider. And when you consider competition at the 
local level, it is not hard to see why.
    The average ACA member company in your state serves 8,000 
customers. DirecTV serves almost 12 million more customers than the 
average ACA member. Similarly, EchoStar serves almost 10 million more 
subscribers than the average ACA member. It is self-evident that these 
companies benefit from far greater economies of scale, access to 
capital and bargaining power over programmers and other suppliers. As 
the FCC found, the acquisition of DirecTV by News Corp. enhances those 
competitive advantages. As a result, DirecTV and EchoStar cannot 
seriously maintain that they need the government to help them compete 
in smaller markets.
    As the FCC has observed, multichannel video competition is local. 
DBS and ACA members compete head-to-head in Bloomingdale, MI, 
Braintree, MA, Parkdale, OR, Ramsey, IL, and many other towns 
represented by this Committee. Compounding this challenge is the fact 
that for our members each new customer and mile of cable must be 
financed by a loan from the local bank signed by the local owner, while 
our mega-competitors are financed by Wall Street.
    As a result, any changes to SHVIA here in Washington will have the 
potential of skewing that competition in smaller markets all across 
America. For these reasons, a simple SHVIA reauthorization will avoid 
unintended consequences in smaller markets. We have no objection to 
that.

     IV. DBS ENJOYS SIGNIFICANT REGULATORY ADVANTAGES OVER CABLE, 
PARTICULARLY OVER INDEPENDENT CABLE IN SMALLER MARKETS AND RURAL AREAS.

    We become very concerned when DBS calls for changes to SHVIA. These 
changes are advocated to ``help DBS compete.'' For a smaller market 
cable company squaring off against DirecTV or EchoStar, to say the 
least, these claims are audacious. To us, DBS already enjoys a major 
competitive advantage through favored regulatory treatment. On the 
other hand, small cable businesses with far more limited resources bear 
a much greater regulatory load. Consider the following comparison:

                           REGULATORY BURDENS
------------------------------------------------------------------------


------------------------------------------------------------------------
 Mandatory Carriage of Broadcast on Basic  * Must-Carry in selected
                                             markets
 Must-Carry in all Markets                 * Limited Public Interest
                                             Obligations
 Full Public Interest Obligations          * Retransmission Consent
 Retransmission Consent..................
 Emergency Alert Requirements............
 Tier Buy-Through........................
 Franchise Fees..........................
 Local Taxes.............................
 Signal Leakage/CLI......................
 Rate Regulation.........................
 Privacy Obligations.....................
 Customer Service Obligations............
 Service Notice Provisions...............
 Closed Captioning.......................
 Billing Requirements....................
 Pole Attachment Fees....................
 Public File Requirements................
------------------------------------------------------------------------

    Before tinkering with SHVIA to help DBS compete, Congress should 
examine the existing regulatory disparity. With vibrant competition as 
the goal, why should the heavy hand of government weigh on smaller 
cable companies? To ensure that local communications businesses 
continue to deliver advanced services in smaller markets, Congress 
should consider reducing, or at least equalizing, the regulatory 
burdens on smaller cable.
    As DBS continues to mature and gains even greater market share 
against cable, this regulatory DIS-parity threatens to grow. The 
consequences for competition and consumers should concern us all.

 V. IF SHVIA IS REOPENED, THEN SIGNIFICANT MODIFICATIONS ARE NEEDED TO 
        ENSURE MEANINGFUL COMPETITION IN THE LOCAL MARKETPLACE.

    ACA and its members do not advocate the modification of SHVIA. We 
understand, however, that DBS interests are calling for changes to the 
statute. The Committee should dismiss these calls to protect consumers 
in smaller markets and rural areas and to preserve competition by 
independent cable businesses with the giant satellite duopoly.
    Still, if the Committee decides that changes to SHVIA are 
appropriate, we have some suggestions that will advance competition and 
localism in smaller markets.
     Access to Local-into-Local Signals--Some rural cable systems 
cannot receive good quality broadcast signals off-air. In local-into-
local markets, these systems can receive good quality signals from DBS, 
and our members are willing to pay reasonable rates for this service. 
The DBS providers have refused. To ensure the widest possible 
distribution of good quality local broadcast television signals in 
rural markets, Congress should require DBS to provide smaller cable 
systems with local-into-local television signals on non-discriminatory 
rates, terms and conditions.
     Broadcast Basic--To encourage wider carriage of local broadcast 
signals and achieve greater regulatory balance between DBS and CATV, 
particularly in smaller and rural areas, Congress should require DBS to 
provide a broadcast basic level of service to all customers where DBS 
provides local broadcast signals.
     Cable Standing--Grant cable operators standing to file notices or 
complaints against DBS for violations of SHVIA's broadcast carriage 
requirements.
     Good Faith Negotiation Rules--SHVIA contains the retransmission 
consent good faith negotiation requirement. This portion of the statute 
sunsets on January 1, 2006. To ensure fair retransmission consent 
agreements that benefit consumers and to encourage carriage of local 
broadcast signals, Congress should extend the good faith negotiation 
requirement.
     Retransmission Consent Exclusivity--SHVIA prohibits exclusive 
retransmission consent agreements. This provision sunsets on January 1, 
2006. To prevent the loss of important broadcast signals in local 
markets, Congress should make this provision permanent.

                             VI. CONCLUSION

    SHVIA has provided a framework for DBS carriage of local broadcast 
signals. It is not perfect, but all players know the current rules. 
Congress should maintain the status quo with a straight 
reauthorization. However, if the law is changed, then the impact on 
consumers and competition--particularly in smaller markets and rural 
areas--must be considered and balanced.
    The American Cable Association and its members are committed to 
working with the Committee to solve these important issues.
    I would like to sincerely thank the Committee again for allowing me 
to speak before you today.

    Mr. Upton. Mr. Kimmelman.

                   STATEMENT OF GENE KIMMELMAN

    Mr. Kimmelman. Thank you, Mr. Chairman. On behalf of 
Consumers Union, the print and on-line publisher of Consumer 
Reports, we appreciate the opportunity to present a consumer 
viewpoint on the satellite law. From our perspective, this law 
needs to be updated and extended and it's very simple. We need 
to make sure that there are no differentials, competitive 
advantages between cable and satellite in the price of 
programming, in the availability of programming, so that 
consumers everywhere have as much choice as possible at the 
lowest possible price. It's really that simple.
    We need to also ensure that special concerns across borders 
and local communities that cannot receive their local signals 
that Congress go out of its way as it did in creating universal 
telephone service to make sure that we have universality of 
local important media to serve citizens' needs.
    But we have a bigger problem as well when you look at the 
broad landscape of competition and localism. Your Federal 
agency responsible for promoting these worthy goals, I think, 
has been asleep at the switch. We're losing localism. We're 
losing our opportunities for competition because the Federal 
Communications Commission has really not been doing its job.
    We have in most communities one cable company, two 
satellite services available and yet cable rates are up 54 
percent since you passed the law allowing for deregulation of 
cable pricing. We have two satellite companies. They haven't 
been able to really get in and price compete. And with lax 
oversight and consolidation, we now have one of the satellite 
companies, DirecTV owned by a national television network with 
more than 20 regional sports channels under its ownership 
circle, cable channels, and the CEO of that company, after his 
deal was closed buying DirecTV stated he has no interest in 
pricing wars with his competitor, cable. No interest in pricing 
wars. What signal does that send to the consumer about what 
will happen to prices? And it's not just that company. We now 
have Comcast, the largest cable company wanting to buy Disney, 
an owner of ABC, Disney Channel, ESPN. In today's Wall Street 
Journal, Mr. Franks' company, how in the world are we going to 
get price competition in this environment? How are we going to 
get better choices and lower prices for consumers if a few 
companies keep buying up all the most popular channels and 
control the distribution to consumers?
    In the few communities, according to the General Accounting 
Office where there's real competition to cable companies, 
consumers are saving 15 to 41 percent on their bills. I suggest 
that the Congress think about how to get that for everyone.
    The other principle we care passionately about is localism. 
What is localism? I want to define it to you because it means 
so much to so many people. For me it means diversely owned 
media outlets, sources of information to reflect the whole 
panoply of views, tastes in a community to make the whole 
robust sense of community come out through media.
    Local broadcasters often play an enormous role in that. But 
in a world where the FCC has relaxed its oversight of ownership 
not every broadcaster reflects this vantage point of localism. 
We have companies like Tribune, Sinclair, Gannett, who talk 
about owning two, three local broadcast stations, multiple 
radio stations, the one local newspaper in town and being a 
dominant source of news and information. That doesn't get you 
diversity of local views and opinions, attitudes. There's no 
doubt a need to protect the ability to produce, gather, provide 
local news and information in a community, but it shouldn't be 
dominated by one or two companies.
    So I would suggest that as you review this law and look 
beyond it at ownership of media in this country that you 
consider whether it would be so bad to have a distant signal, a 
distant voice, another voice, if we're going to allow one or 
two companies to dominate a local media market. Maybe it 
wouldn't be so bad.
    In conclusion, equalizing treatments under the satellite 
law is important. Taking care of unique rural concerns is 
important, but most importantly, we urge you to go back, review 
all of the laws here and do one thing we've never done for 
consumers, make sure they have the right to choose any channel, 
every channel they want and pay for that particular channel, 
not a whole package, pay for what they want, pick what they can 
get and I think then we might start opening the market to 
better choices and lower prices for consumers.
    Thank you.
    [The prepared statement of Gene Kimmelman follows:]

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    Mr. Upton. Mr. Franks.

                  STATEMENT OF MARTIN D. FRANKS

    Mr. Franks. Thank you, Mr. Chairman. My name is Martin 
Franks. I am the Executive Vice President of CBS. I joined CBS 
in 1988 and one of my very first assignments was working on the 
initial Satellite Home Viewer Act with Mr. Boucher and in one 
way or the other, I have been involved in each renewal of the 
Act, as well as working on its impact upon the CBS television 
network, our own stations and our affiliates.
    Allow me a few brief observations, then I will be happy to 
answer any questions you may have.
    When the Act was first passed in 1988, it was sold to us as 
a lifeline service for residents of rural areas who had no 
access to broadcast network signals. At the time, we wondered 
how such a limited potential populace could possibly become a 
viable business. Unfortunately, upon enactment, Prime Time 24, 
the satellite company that was the driving force behind the 
Act, showed its real business plan by embarking on a decade-
long spree of signing up thousands and thousands of illegal 
subscribers. Now, 16 years and several reauthorizations later, 
broadcasters are still trying to shut off that explosion of 
signal piracy that began at conception and has continued for 
the life of the Act.
    While noble in purpose, the record of the distant signal 
provision of the Act is replete with gross and repeated 
violations and only now with our victory over EchoStar in the 
Miami case last year, are we close to getting the scofflaw 
behavior under control. Sixteen years and millions of dollars 
in legal fees is a long road to have to travel for one's day in 
Court.
    On the other hand, local-into-local has been a great 
success. The only down side has been that its benefits for 
consumers and broadcasters alike have still not reached the 
entire country despite greater progress than I once thought 
possible. Embedded into the local-into-local success story, 
however, is a paradox that never ceases to amaze me. On 
virtually every communications policy issue to come before this 
committee, a key yardstick is that issues impact on localism. 
Why then when local-into-local is activated in a market do you 
allow those distant signal lifelines to remain active? CBS owns 
the stations in New York and Los Angeles that provide the 
distant signal service. I am very proud of their performance as 
broadcasters in covering their markets' news and public 
affairs, but by definition, they do not even attempt to address 
local news and public affairs issues in Michigan or 
Massachusetts or Virginia. Why then allow them to continue to 
invade your home towns and undermine your local stations?
    Finally, a word about the proposals for the creation of 
digital white areas. CBS is the unquestioned leader in HD 
programming. We air more original HD programming each week than 
any other network, broadcast, cable or satellite. I negotiated 
our distant HD deals, distant signal HD deals with EchoStar and 
DirecTV. Nothing in those free market contractual arrangements 
should be construed as support for the current proposals for 
digital white areas. In fact, both agreements expressly defines 
subscriber eligibility in analog, not digital terms. We did so 
because while we know a great deal about analog signal 
propagation, the gaps in our knowledge of digital signal 
propagation are enormous. To try to define digital white areas 
any time soon would, I believe, seriously undermine the digital 
broadcast transition and reopen all of the mischief that is the 
unhappy Pandora's box history of distant signals piracy.
    Thank you, Mr. Chairman.
    [The prepared statement of Martin D. Franks follows:]

   Prepared Statement of Martin D. Franks, President, CBS Television

    CBS appreciates the invitation to present to the Subcommittee its 
views about the implementation of the Satellite Home Viewer Improvement 
Act and about possible amendments to that Act.

            LOCALISM AND THE NETWORK/AFFFILIATE RELATIONSHIP

    The United States boasts a large number of purely national program 
services, such as ESPN, USA Network, Fox News Channel, as well as the 
nonbroadcast channels offered by Viacom, including Nickelodeon, TV 
Land, BET, Showtime and others. But a vital part of our national 
television system is the presence, in 210 different communities across 
the United States, of free, over-the-air local television broadcast 
stations. Thanks to Congress' (and the FCC's) strong commitment to 
localism over the past 55 years, towns as small as Twin Falls, Idaho 
(with fewer than 59,000 television households) and Alpena, Michigan 
(with fewer than 20,000 television households) enjoy the benefits of a 
local television outlet offering local news, weather, public affairs, 
and emergency programming.
    The network/affiliate relationship has long played, and continues 
to play, a vital role in making the policy objective of localism work 
in markets both large (such as Detroit) and small (such as Mankato, 
Minnesota). The reason is simple: by serving as the local outlet for 
popular network programming (such as the primetime offerings of the CBS 
Television Network), local network affiliates are able to obtain 
advertising dollars that enable them to stay afloat--and to supplement 
the network offerings with local news and weather and with syndicated 
programs (such as Oprah Winfrey) obtained from third parties. As this 
Committee aptly observed when it reported out the original Satellite 
Home Viewer Act in 1988, ``historically and currently the network-
affiliate partnership serves the broad public interest.'' H.R. Rep. 
100-887, pt. 2, at 19-20 (1988).
    Both Congress and the FCC have consistently recognized that if 
cable systems and satellite carriers were allowed to import duplicative 
network programming from other markets, that importation would weaken, 
if not destroy, the economic underpinnings of local broadcasting. Since 
the 1960s, therefore, the Commission has imposed ``network 
nonduplication'' rules on cable systems that generally bar importation 
of distant network stations. The ``unserved household'' limitation in 
Section 119, which has been part of the Satellite Home Viewer Act since 
it was created in 1988, plays the same role with regard to satellite 
carriers.

            THE SORRY SAGA OF DISTANT SIGNAL RETRANSMISSION

    Back in 1988, when this Subcommittee first addressed the issue of 
retransmission of broadcast TV stations by satellite carriers, no one 
discussed ``local-to-local'' retransmissions because the technology to 
do so was so far away. Instead, the Subcommittee (and this Committee as 
a whole), working in cooperation with the Judiciary Committee, helped 
to craft--in the Satellite Home Viewer Act of 1988--a set of rules 
about retransmission of distant broadcast television stations. The same 
was true in 1994, when Congress extended the Satellite Home Viewer Act 
for five additional years.
    As this Subcommittee has consistently recognized, delivery of 
distant network stations, like salt in a soup, works well only if used 
in small amounts, and quickly spoils the broth if overused. Making 
distant ABC, CBS, Fox, and NBC stations available by satellite to the 
very small number of households that have no other method of receiving 
network programming, for example, is sound public policy. But when 
satellite carriers deliver distant network stations to households that 
can receive their own local network stations, without permission from 
the local affiliate(s) in the viewer's area, distant signals quickly 
become a destructive force, undermining localism and subverting the 
economics of local broadcasters
    Unfortunately, the experience with implementation of the distant-
signal compulsory license by satellite carriers has been a dismal one. 
For the first ten years after the compulsory license went into effect, 
satellite carriers treated the ``unserved household'' limitation as a 
joke: they illegally signed up anyone who was willing to answer ``no'' 
to the question ``are you satisfied with your over-the-air reception?'' 
The result was that satellite carriers signed up millions of urban and 
suburban customers who were ineligible to receive distant signals.
    Only by pursuing costly litigation have broadcasters, including 
CBS, been able to obtain any relief from this lawbreaking. Starting in 
1998, the courts have consistently condemned the satellite industry's 
misuse of the distant-signal license.1 EchoStar has been the 
most abusive of all: thanks to a variety of stalling tactics, EchoStar 
continues today to deliver distant stations (including CBS stations) 
illegally to large numbers of ineligible subscribers. As a federal 
District Court in Florida found after a 10-day trial last year, 
EchoStar has continuously broken the law since it started delivering 
distant network stations in 1998. CBS Broadcasting Inc. v. EchoStar 
Communications Corp., 276 F. Supp. 2d 1237 (S.D. Fla. 2003). Most 
shockingly of all, EchoStar's CEO made--and then broke--a solemn, sworn 
promise to the Court to turn off large numbers of EchoStar's illegal 
distant signal customers. As the Court found, ``EchoStar executives . . 
. when confronted with the prospect of cutting off network programming 
to hundreds of thousands of subscribers, elected instead to break 
[EchoStar's] promise to the Court.'' Id.,  46 (emphasis added).
---------------------------------------------------------------------------
    \1\ CBS Broadcasting Inc. v. PrimeTime 24, 9 F. Supp. 2d 1333 (S.D. 
Fla. 1998) (preliminary injunction against company that provided 
distant signals to DirecTV and EchoStar); CBS Broadcasting Inc. v. 
PrimeTime 24 Joint Venture, 48 F. Supp. 2d 1342 (S.D. Fla. 1998) 
(permanent injunction); CBS Broadcasting Inc. v. DIRECTV, Inc., No. 99-
0565-CIV-NESBITT (S.D. Fla. Sept. 17, 1999) (permanent injunction after 
entry of contested preliminary injunction); ABC, Inc. v. PrimeTime 24, 
184 F.3d 348 (4th Cir. 1999) (affirming issuance of permanent 
injunction).
---------------------------------------------------------------------------
            LOCAL-TO-LOCAL: A SUCCESS BEYOND ALL PREDICTIONS

    Unlike delivery of distant signals, delivery of local signals by 
satellite carriers has been a tremendous success story.
    In the 1999 Satellite Home Viewer Improvement Act, this 
Subcommittee helped craft a completely new compulsory license--for 
local, not distant retransmissions--along with a variety of new 
Communications Act provisions to govern those retransmissions. Unlike 
retransmission of distant signals, local-to-local retransmission has 
benefited everyone involved: satellite carriers, broadcasters, and most 
importantly, consumers.
    Consider, for example, how customers here in the Washington, D.C. 
area got CBS network programming a few years ago, and how they get it 
now. From 1994 through 1998, satellite carriers illegally offered 
distant CBS stations by satellite to large numbers of its customers in 
this area, thereby interfering with the ability of local stations, such 
as WUSA-TV in Washington (owned by Gannett), to reach their local 
viewers and to sell those viewers to advertisers. The distant stations 
imported by satellite carriers, of course, provided Washington-area 
subscribers with no local news, no local weather, no local public 
affairs programs, and no information about local emergencies such as 
hurricanes.
    Today, by contrast, thanks to Congress' leadership in crafting the 
SHVIA, local customers can receive their local CBS station (WUSA-TV)--
in excellent quality--by satellite. And what is happening here is 
happening all over the country. Thanks to vigorous competition between 
DirecTV and EchoStar--and between those firms and their cable rivals--
more than 85% of U.S. television households can today receive their 
local channels by satellite from DirecTV, EchoStar, or both. By the end 
of this year, that figure will be 92%. And in just a few years, it will 
be 100%.
    The race to offer local-to-local has far outstripped the DBS 
industry's pessimistic predictions. Less than two years ago, EchoStar 
predicted that it would never be able to serve more than 70 markets on 
its own. Yet today, EchoStar already serves 107 Designated Local 
Markets (``DMA's'') that collectively cover more than 85% of all U.S. 
TV households. And there is no indication that EchoStar has lost its 
appetite to continue this expansion, which makes EchoStar an even 
tougher competitor against local cable systems.
    DirecTV's plans are even more robust. With the launch of its D7S 
satellite this spring, DirecTV plans to serve 100 DMAs covering 85% of 
all U.S. TV households. By year's end, DirecTV has pledged that it will 
offer local-to-local in an additional 30 markets, for a total of at 
least 130 DMAs covering 92% of all TV households. And as soon as 2006 
and no later than 2008, DirecTV has committed to offering ``a seamless, 
integrated local channel package in all 210 DMAs.'' 2
---------------------------------------------------------------------------
    \2\ In Re General Motors Corporation and Hughes Electronics 
Corporation, Transferors and The News Corporation Limited, Transferee, 
for Authority to Transfer Control,  332, MB Docket No. 03-124 
(released Jan. 14, 2004) (emphasis added).
---------------------------------------------------------------------------
    Offering local-to-local to satellite subscribers is just good 
business. As the satellite industry admits, local-to-local has been 
critical to DBS' growth from 10 million subscribers in 1999 to more 
than 20 million subscribers today: ``[t]he expansion of local-into-
local service by DBS providers continues to be a principal reason that 
customers subscribe to DBS.'' 3
---------------------------------------------------------------------------
    \3\ Satellite Broadcasting & Communication Ass'n Comments at 4, 
Dkt. No. 03-172 (filed Sept. 11, 2003) (emphasis added).
---------------------------------------------------------------------------
    The retransmission consent provisions of the SHVIA have also worked 
well. As the FCC recently pointed out in connection with News 
Corporation's acquisition of an interest in DirecTV, there is a 
``balance of terror'' between broadcasters and MVPDs that has ensured 
that public spats over retransmission consent (such as the Disney/Time 
Warner and Fox/Cox disputes) are few and brief. Retransmission consent 
has also helped ensure that broadcasters can share at least some small 
portion of the enormous benefits that DBS firms enjoy from the ability 
to offer local-to-local service.
    As the Subcommittee is aware, Viacom and EchoStar are currently at 
odds over the terms of retransmission consent for CBS owned-and-
operated systems. History teaches us, however, that even if a 
broadcaster and an MVPD are briefly at an impasse, a deal eventually 
will be struck that will benefit all concerned, most importantly, 
American viewers. We have every hope that the same will occur here.

 SBCA'S OUTRAGEOUS PROPOSAL TO EXPAND THE DISTANT SIGNAL LICENSE THAT 
       ECHOSTAR AND OTHER SATELLITE FIRMS HAVE EGREGIOUSLY ABUSED

    Now that one of the DBS firms (DirecTV) has devised ways to deliver 
the signals of local analog stations in all 210 markets, there is 
little doubt that DirecTV and EchoStar will soon tackle the challenge 
of delivering digital, and high definition, signals on a local-to-local 
basis. The DBS firms have many potential tools for doing so, including 
sharing of spectrum between the two companies, satellite dishes that 
receive signals from multiple orbital spots, use of Ka-band (in 
addition to Ku-band) spectrum, improved compression techniques, more 
sophisticated methods of modulation and coding, and closer spacing of 
Ku-band satellites.)
    Ignoring all of this, the SBCA instead demands a massive new 
government intervention: that Congress should expand the distant-signal 
license to declare households to be ``digitally unserved'' by a network 
(such as CBS) if the household cannot receive a digital (or HD) signal 
over the air from a local station. In other words, the SBCA asks for an 
enormous, and wholly unnecessary, expansion of the very license that 
EchoStar and other satellite carriers have illegally abused for years.
    The Subcommittee should summarily reject the SBCA's demand. The 
reason that the SBCA makes this demand is simple enough: DBS firms like 
EchoStar could save a large amount of money if they could uplink a 
single digital or HD station and retransmit that station to many 
millions of subscribers across the country, rather than developing the 
capability to offer digital and HD signals on a local-to-local 
basis.4 But the public interest would be grievously 
disserved by this proposal. Consider these facts about the SBCA's 
proposal:

    \4\ CBS has made short-term deals with EchoStar and DirecTV in 
which the DBS firms may deliver a digital signal from a distant CBS 
station to certain subscribers in areas served by other CBS owned-and-
operated stations. CBS voluntarily made the decision to allow this 
importation as a way to encourage the digital transition, even though 
the importation is harmful to its owned stations whose subscribers 
switch to viewing distant signals. The deal is carefully structured to 
ensure that the rights of other CBS affiliates--which are owned by 
third parties--are fully protected. EchoStar's proposal to have the 
government override the rights of hundreds of stations nationwide by 
authorizing the importation of digital feeds of distant network 
stations bears no relationship to this modest, and entirely voluntary, 
undertaking of limited duration.
---------------------------------------------------------------------------
 The SBCA would treat a household as ``unserved'' by the CBS network 
        even though a satellite carrier itself delivers by satellite a 
        high-quality digitized signal from the local CBS station's 
        analog broadcasts, which contains all of the programming (such 
        as CSI, Survivor, and Everybody Loves Raymond) that EchoStar 
        proposes to import from a distant station that broadcasts in a 
        digital format.
 A CBS affiliate in a small market that--for reasons entirely beyond 
        its control--is not yet broadcasting in digital, would see its 
        entire coverage area treated as a ``white area'' that the DBS 
        firms could invade with a distant CBS station. Experience 
        teaches us that stations that lose substantial numbers of 
        viewers to the identical programming imported from out of town 
        face devastating economic consequences.5 But the 
        SBCA does not care, because DBS firms would make more money 
        even if it has to destroy local TV stations to do so.
---------------------------------------------------------------------------
    \5\ Report and Order, In Re Amendment of Parts 73 and 76 of the 
Commission's Rules Relating to Program Exclusivity in the Cable and 
Broadcast Industries, 3 FCC Rcd 5299, 5319 (1988) (``In 1982, network 
non-duplication protection was temporarily withdrawn from station KMIR-
TV, Palm Springs. The local cable system imported another network 
signal from a larger market, with the result that KMIR-TV lost about 
one-half of its sign-on to sign-off audience.''), aff'd, 890 F.2d 1173 
(D.C. Cir. 1989).
---------------------------------------------------------------------------
 If DBS firms began delivering a distant digital station into a so-
        called ``digitally unserved'' area, there would be only two 
        possible approaches--both of which would yield public policy 
        disasters--when a local station began delivering a digital 
        signal over the air to that area:
     Disastrous option # 1: DBS firms would be allowed to continue 
            delivering distant digital signals to the household 
            indefinitely. (This is what Mr. Moskowitz of EchoStar 
            testified last week is their preference.) Far from creating 
            any incentive for the station to expand its digital 
            coverage, the SBCA proposal would sabotage those incentives 
            by making it impossible for the station ever to reclaim the 
            ``lost'' local audiences. The station would suffer 
            crushing, permanent losses of viewers--and hence permanent, 
            large-scale financial losses--which would inevitably 
            translate into lower-quality programming for local viewers.
     Disastrous option # 2: The DBS firms would be required to turn 
            off their ``distant digital'' subscribers after the 
            subscribers had become accustomed to that service. Congress 
            has gone down precisely this road before--in 1999, when 
            Congress heard from hundreds of thousands of angry 
            consumers who had grown accustomed to receiving distant 
            signals (illegally) by satellite, and who were unhappy 
            about having to install an over-the-air antenna to view 
            their local stations instead. In other words, SBCA asks 
            Congress deliberately to spawn a massive consumer disaster 
            virtually identical to the chaos that arose (through no 
            fault of Congress) when the DBS industry was required by 
            the courts to turn off millions of illegal analog distant-
            signal customers.
    In other words, the SBCA's ``distant digital'' plan is a trap, pure 
and simple. This Subcommittee should squarely reject it.

 A HOUSEHOLD THAT CAN RECEIVE LOCAL SIGNALS FROM ITS SATELLITE COMPANY 
                          IS NOT ``UNSERVED''

    Instead of following the SBCA's advice and engaging in a radical--
and foolhardy--expansion of the distant-signal compulsory license, 
Congress should update the rules relating to delivery of distant 
signals to reflect the new realities of the DBS business.
    Current law provides that a household is ``unserved'' if it cannot 
receive a Grade B intensity signal over the air from a local affiliate 
of the relevant network. But that definition fails to reflect the 
reality that by the time Section 119 expires at the end of 2004, at 
least 85% of EchoStar's customers will be able to receive their local 
stations by satellite, and at least 92% of DirecTV customers will be 
able to do the same. It makes no sense to say that a satellite 
subscriber that can receive its own local CBS station from its own 
satellite carrier is somehow ``unserved'' by that station: a subscriber 
can obtain its local stations by satellite simply by picking up the 
phone. Section 119 should therefore be amended to provide that a 
household is not ``unserved'' with respect to a particular network if 
its satellite carrier offers an affiliate of that network on a local-
to-local basis.

                               CONCLUSION

    Viacom congratulates the Subcommittee on the tremendous success of 
local-to-local retransmission of television stations by satellite 
carriers, under the statutory scheme wisely devised by this 
Subcommittee and the rest of Congress in the SHVIA in 1999. Congress 
should encourage the continued expansion of local-to-local, and the 
future delivery of digital and HD signals on a local-to-local basis, by 
allowing competition and technological progress to do their magic. 
Congress should reject the SBCA's demand for a new government subsidy 
permitting it to deliver distant digital stations to areas that it 
deems ``unserved,'' a demand that would wreak havoc if granted by 
Congress. Instead, Congress should amend the Act to recognize that 
households to which local-to-local is available are, as a matter of 
common sense, ``served'' by their local stations. Finally, any 
extension of the distant-signal license should again be subject to a 
five-year sunset.
    Thank you.

    Mr. Upton. Mr. Hartenstein.

                STATEMENT OF EDDY W. HARTENSTEIN

    Mr. Hartenstein. Chairman Upton, Mr. Markey and members of 
the subcommittee. My name is Eddy Hartenstein and I'm the Vice 
Chairman of DirecTV's parent company, Hughes Electronics. It is 
my great honor and pleasure to be here today and I thank you 
for allowing me to testify on behalf of DirecTV regarding the 
reauthorization of the Satellite Home Viewer Improvement Act, 
SHVIA.
    The members of this subcommittee and the full committee 
deserve a great deal of credit for their role in the success of 
the DBS industry. SHVIA's creation of a local-into-local 
compulsory comprehens ive copyright license combined with 
improved DBS technology has allowed satellite operators to 
offer a complete programming service more comparable to that 
offered by cable. The results for the DBS industry and for 
competition in this subscription television market have been 
extraordinary. When SHVIA was enacted in 1999, the DBS industry 
collectively had 10 million subscribers. In the last 5 years, 
that number has more than doubled, reaching 22 million 
subscribers today which DirecTV serves 12 million. 
Consequently, DBS has been able to help limit somewhat cable 
price increases, and as far as cable companies to provide 
better service. And it will only get better.
    With the successful launch of our next spot beam satellite 
just weeks away, and with other applications pending approval 
before the FCC, we should be able to offer local broadcast 
channels in markets serving 92 percent of the American 
television households as early as this summer. In other words, 
we believe SHVIA has been an extraordinary success and we hope 
Congress will build on this success.
    First, Congress should reauthorize the core provisions of 
SHVIA that expire on December 31 of this year.
    Second, Congress should give DBS operators the ability to 
provide subscribers with the same complement of local broadcast 
stations offered by their cable operators.
    I'll discuss each of these matters in turn. The first 
provisions of SHVIA that need to be reauthorized are the 
Section 119 compulsory copyright licenses that permit DBS 
operators to provide distant network signals to unserved 
households and to retransmit so-called superstations. The 
distant signal compulsory license allows consumers who cannot 
receive over-the-air signals from local affiliates to enjoy 
broadcast network programming. While an ever smaller percentage 
of our customers subscribe to distant network signals, this 
service is still critical to many subscribers particularly 
those in rural areas.
    Each of these compulsory licenses for DBS operators lasts 
only 5 years. By contrast, cable operators have a permanent 
compulsory license for both distant network signals and 
superstations. As a matter of parity, we ask that when Congress 
reauthorizes the DBS compulsory license for distant network 
signals and superstations, it do so on a permanent basis.
    The second provision of SHVIA that needs to be reauthorized 
is a provision allowing the retransmission of distant network 
signals to satellite subscribers who as of October 31, 1999, 
could not receive a high-grade intensity A signal from a local 
network affiliate, even if they are otherwise not considered 
unserved and thus, otherwise ineligible for distant network 
signals. While the number of grandfathered subscribers is 
dwindling, these subscribers grandfathered status should be 
extended to preserve their network service, their preferences 
and their expectations. By and large, as I've indicated, 
SHVIA's local-into-local provisions have worked extraordinarily 
well. There are though some cases in which satellite television 
customers are unable to receive the same local broadcast 
signals as their neighbors who subscribe to cable. This, in 
part, is because SHVIA prohibits the retransmission of stations 
that most of us would think of as local to the so-called served 
households. Not 30 miles from here in Columbia, Maryland, for 
example, a Comcast subscriber can receive both Baltimore and 
Washington, D.C. network affiliates. This, in part,is because 
while Columbia is in the Baltimore DMA, the Washington stations 
are considered to be significantly viewed by Columbia's 
residents. But if that resident switches from Comcast to 
DirecTV, he or she can no longer receive the Washington 
stations. This is because even though that subscriber thinks of 
the Washington stations as local, SHVIA defines them otherwise. 
This is not fair to consumers and it provides cable with a 
significant advantage for no good reason.
    If a station is considered local by a particular community 
and especially if it's retransmitted by the local cable 
operator, satellite television operators should be allowed to 
retransmit as a local station as well. This would advance all 
of SHVIA's original goals. It would preserve local television 
service. It would fulfill consumer expectations and it would 
enhance competition in the MBPD market.
    In conclusion, Mr. Chairman, I would like to thank you all, 
this committee, this subcommittee for what Congress has done to 
nurture the satellite television industry as a vibrant 
competitor to cable and the MBPD market. With the 
reauthorization of the key provisions of SHVIA, along with the 
minor adjustments I've just discussed, we will continue to 
provide the highest quality, best priced competitive service to 
consumers. I thank you.
    [The prepared statement of Eddy W. Hartenstein follows:]

   Prepared Statement of Eddy W. Hartenstein, Vice Chairman, Hughes 
                        Electronics Corporation

    Chairman Upton, Mr. Markey and members of the Subcommittee, my name 
is Eddy Hartenstein and I am the Vice Chairman of Hughes Electronics 
Corporation. It is my great honor and pleasure to be here today and I 
thank you for allowing me to testify on behalf of DIRECTV regarding the 
reauthorization of the Satellite Home Viewer Improvement Act 
(``SHVIA'').
    This is a return visit for me, as I testified in front of the full 
Committee a few years ago. I am pleased to return to report on the 
progress that the Direct Broadcast Satellite (``DBS'') industry has 
made as a competitor to cable.
    The members of this Subcommittee and the full Committee deserve a 
great deal of credit for their role in the success of the DBS industry. 
SHVIA, which you played such an important role in enacting, extended a 
compulsory copyright license to the retransmission of local television 
signals within each station's local market (known as ``local-into-
local''). This, combined with improved technology such as high power 
DBS satellites, digital signal compression and small receive dishes, 
has allowed satellite operators to offer a programming service more 
comparable to that offered by cable, unleashing for the first time real 
competition in the Multichannel Video Programming Distribution 
(``MVPD'') market. SHVIA capped a string of Congressional actions that 
helped create and nurture the satellite television industry, including 
passage of the original Satellite Home Viewer Act in 1988 (before which 
our customers could not receive broadcast station signals at all), and 
the reauthorization of that Act in 1994.
    SHVIA identified several important objectives:

 Create robust competition to the cable industry;
 Establish a more level playing field for satellite operators by 
        removing some of the significant advantages that cable has as 
        the dominant MVPD; and
 Provide consumers with greater choices and the benefits of 
        competition.
    And it has largely succeeded in reaching these goals. When SHVIA 
was enacted in 1999, the DBS industry had 10 million subscribers. In 
the last five years, that number has more than doubled, reaching 22 
million subscribers, of which DIRECTV serves 12 million. The result is 
that, while cable still has about 66 million subscribers, DBS has 
played at least some small part in limiting cable price increases and 
forcing cable companies to provide better customer service, improved 
content, and digital services. We believe that none of this would have 
been possible without more robust DBS competition, and that DBS 
competition in turn would not have been possible without SHVIA.
    In other words, we believe that SHVIA has been an extraordinary 
success. And we hope Congress will build on its success:

 First, Congress should reauthorize the core provisions of SHVIA that 
        expire on December 31 of this year. These provisions include 
        the Section 119 compulsory copyright license for distant 
        network signals and superstations, which we believe should be 
        made permanent, and the so-called ``Grade B Grandfather.''
 Second, based on our experiences with SHVIA over the last five years, 
        we believe that Congress could improve the statute and promote 
        competition still further by giving DBS operators the ability 
        to provide subscribers with the same complement of local 
        broadcast stations offered by their cable operators.
    I will discuss each of these matters in turn. But first, I would 
like to talk briefly about what has worked particularly well--SHVIA's 
authorization of local-into-local service.

             LOCAL-INTO-LOCAL COMPULSORY COPYRIGHT LICENSE

    Again, the biggest success of SHVIA by far has been the 
authorization by Congress of local-into-local service and the provision 
of such service by DBS providers. As you know, SHVIA added a new 
Section 122 to the Copyright Act that provides a permanent, royalty-
free compulsory license for satellite retransmission of local broadcast 
signals within their Designated Market Areas (``DMAs''), or home 
markets.
    The ability to offer local-into-local service has been critical to 
DIRECTV's growth, because it has enabled us to offer a full slate of 
quality programming comparable to cable offerings. With the successful 
launch of our DIRECTV 7S spot beam satellite, which is scheduled for 
next month, we will provide local-into-local service in just over 100 
DMAs nationwide. We also have pending before the FCC other proposals 
that will give us the capacity to reach at least 30 additional DMAs by 
the end of this year--and maybe even as soon as this summer. At that 
time we will be offering local broadcast channels in markets serving 
92% of American television households. In coming years, we plan to 
continue rolling out local-into-local service in as many markets as we 
possibly can.

 REAUTHORIZATION OF DISTANT NETWORK SIGNAL AND SUPERSTATION COMPULSORY 
                           COPYRIGHT LICENSES

    The first provisions of SHVIA that need to be reauthorized are the 
Section 119 compulsory copyright licenses that permit DBS operators to 
provide distant network signals to ``unserved households'' and to 
retransmit so-called superstations.
    The retransmission of distant network signals to unserved 
households allows consumers who cannot receive an over-the-air signal 
from local affiliates to enjoy broadcast network programming. Of 
course, the percentage of our customer base subscribing to distant 
network signals has steadily decreased with the rollout of local-into-
local programming. But this service is still critical to many 
subscribers, particularly those in rural areas.
    Section 119 also permits satellite operators to retransmit certain 
non-network broadcast ``superstations'' for a statutorily determined 
copyright royalty. These stations, such as WPIX in New York, WGN in 
Chicago, and KTLA in Los Angeles, have been offered by cable systems 
around the country since the 1970s.
    Each of these compulsory licenses for DBS operators lasts only five 
years--indeed, it is because they expire in December that we are here 
today. By contrast, cable operators have a permanent compulsory license 
that allows them to provide both distant network signals and 
superstations to their subscribers. In order to promote parity between 
competitors in the MVPD market, we ask that, when Congress reauthorizes 
the DBS compulsory license for distant network signals and 
superstations, it do so on a permanent basis.

                 REAUTHORIZATION OF GRANDFATHER CLAUSE

    The second provision of SHVIA that needs to be reauthorized is a 
provision allowing the retransmission of distant network signals to 
satellite subscribers who, as of October 31, 1999, could not receive a 
high intensity Grade A signal from a local network affiliate, even if 
they are otherwise not considered ``unserved'' (and thus otherwise 
ineligible to receive distant network signals). In 1998, Congress 
decided to allow the ``grandfathered'' subscribers to receive distant 
network signals until the end of this year. While their numbers are 
dwindling, these subscribers' grandfathered status should be extended 
to preserve their network service, their preferences and their 
expectations.

                       NEIGHBORING LOCAL STATIONS

    By and large, as I have indicated, SHVIA's local-into-local 
provisions have worked extraordinarily well. There are, though, some 
cases in which satellite television customers are unable to receive the 
same local broadcast signals as their neighbors who subscribe to cable. 
This, in part, is because SHVIA prohibits the retransmission of 
stations that most of us would think of as ``local'' to so-called 
``served households.''
    You don't have to search far and wide for an example of this. Not 
thirty miles from here in Columbia, Maryland, for example, a Comcast 
subscriber can receive both Baltimore and Washington, DC network 
affiliates. This, in part, is because, while Columbia is in the 
Baltimore DMA, the Washington stations are considered to be 
``significantly viewed'' by Columbia's residents. But if that resident 
switches from Comcast to DIRECTV, he or she can no longer receive the 
Washington stations. This is because, even though that subscriber 
thinks of the Washington stations as ``local,'' SHVIA defines them 
otherwise. In Columbia, this means that the DBS customer (unlike the 
cable customer) gets only one set of network affiliates. Yet in some 
markets, SHVIA can operate such that a DBS customer (unlike a 
neighboring cable customer) cannot receive any signals from a 
particular network, because the DMA in which the customer resides does 
not have an affiliate of that network, but the customer is ineligible 
to receive a distant network signal. This is not fair to consumers. And 
it provides cable with a significant advantage for no good reason.
    If a station is considered ``local'' by a particular community, and 
particularly if it is retransmitted by the local cable operator, 
satellite television operators should be allowed to retransmit it as a 
local station, as well. This would advance all of SHVIA's original 
goals: It would preserve local television service, would fulfill 
consumer expectations, and would enhance competition in the MVPD 
market. We hope to work with this Committee in the coming weeks to help 
make this happen.

                               CONCLUSION

    In conclusion, Mr. Chairman, I would like to thank you for all that 
Congress has done to nurture the satellite television industry as a 
vibrant competitor in the MVPD market. With the reauthorization of the 
key provisions of SHVIA along with the minor adjustment I have 
discussed, we will continue to provide the highest quality, best-priced 
competitive service to consumers.
    I am happy to take your questions.

    Mr. Upton. Well, thank you all and at this point we will 
proceed with questions from the members that are here. I would 
also note for the record that any member that was not here when 
the gavel fell that their statement can be included as part of 
the record.
    Let me just cut to the chase here for a moment. As one who 
actually reads and signs all my legislative mail, I can 
remember a number of years ago my No. 1 issue for the year, in 
fact, was the issue of SHVIA and the reauthorization and 
particularly a number of the issues as it related to local 
broadcast, local-into-local and black and white areas that were 
there. And I'll put an offer on the table, particularly Mr. 
Franks and Mr. Moskowitz, that I'll provide a friendly setting, 
pizza, Pepsi, champagne for the end. I would also note that I 
have a balcony that would be a severe fall if anybody goes out 
the door and just down the hallway here. But let's cut to the 
chase and see if we can't see any agreement, particularly as we 
are going to hear from many of our satellite subscribers in our 
home districts, particularly as March Madness begins. We've all 
got our teams. I don't know whether the Wolverines are going to 
make it to the dance and I don't know how far they'll go, if 
they get in, but we've all got our favorite teams and we all 
are going to be watching very closely beginning Sunday night 
when those teams are picked, also the tournaments that are 
going on this weekend.
    Is it really a matter of the number of stations that 
EchoStar is being forced to put on their satellite or is it the 
cost and if so, how much is that cost? I'd like Mr. Moskowitz, 
perhaps, to go first and then Mr. Franks. What is the rub?
    Mr. Moskowitz. Thank you, Mr. Chairman. I think that really 
the fundamental rub here is that Viacom is a huge media empire 
and they have, as a result of the existing SHVIA legislation, 
enormous power to tie their CBS retransmission to the 
transmission of other stations that consumers don't want and to 
require exorbitant payments in exchange for----
    Mr. Upton. How much is exorbitant? As I look at the papers, 
I see such great sums as 6 cents. Is that right?
    Mr. Moskowitz. If Viacom is willing to agree our increase 
will be 6 cents a year, we'll sign up right now for as many 
years as Viacom wants to offer.
    Mr. Franks. The good news, Mr. Chairman, is I think that 
EchoStar is fairly close to signing on to that offer. We are 
making progress. We are talking. We have a great interest in 
March Madness occurring on its schedule date, not 10 days 
early. And I think I can give great assurance to the committee 
that we are making progress and I think we will have a 
resolution in a very timely fashion.
    Mr. Upton. So the quicker this hearing ends?
    Mr. Franks. One thought----
    Mr. Upton. I noticed you didn't take your full 5 minutes on 
your opening statement.
    Mr. Franks. I am anxious to be talking to David, once 
again, in a different setting.
    Mr. Upton. Okay. Let me ask this, Mr. Franks, I have great 
sympathy with your comment as part of your testimony with 
regard to local-into-local. If you get a local-into-local, I'll 
use my District, if I get Kalamazoo or South Bend or Chicago, 
all stations that I can get over-the-air, maybe Grand Rapids, 
and I have a satellite system that I don't need the L.A. 
Dodgers--apologies to Mr. Engel, and New York on there. I 
frankly think that that makes a lot of sense. And I have great 
sympathy for that and maybe Mr. Moskowitz, I'd like you to 
respond to that challenge.
    What's your sense?
    Mr. Moskowitz. Certainly, Mr. Chairman. I think there are 
really two points to be made there. The first is that consumers 
who receive distant network channels by satellite receive them 
because they can't get them off air and they therefore have to 
pay for them. If a consumer has to pay to get a network 
channel, we think he ought to have a choice as to what channel 
he gets to watch. Further, if we say that once it's available 
by satellite, then he can't get a distant channel, then we 
remove any incentive for the local broadcaster to continue to 
improve his plant and serve more customers in his market with 
free off-air programming. So I think there are a couple of 
reasons why it should still be available, even if we do locals 
by satellite.
    And third and finally, the satellite signal doesn't pay 
attention to DMA boundaries, so while we and DirecTV attempt to 
shape our beams to cover entire DMAs, there are instances where 
the local channel we provide by satellite can't reach every 
corner of the DMA, so distance would still be necessary there 
as well.
    Mr. Upton. My time has expired. I just note for the record 
I've got a markup with votes going on right now. I'm going to 
pass the gavel to Mr. Bass. And then we'll go to Mr. Boucher.
    Mr. Boucher. Thank you very much, Mr. Chairman. Mr. 
Moskowitz, let me begin with you and give you an opportunity to 
respond to the question that some have raised and I think Mr. 
Lee actually raised in his testimony concerning the two dish 
solution that EchoStar has with respect to the delivery of 
local-into-local in some markets, tell me why the second dish 
is necessary? My perception is that you could not serve as many 
local markets if you didn't have the ability to use that second 
dish. Is that correct?
    And then second, illuminate, if you would, any potential 
cost that might be imposed on the customer who has to have the 
second dish in order to get all of the local stations. Is there 
any cost to the customer? Is there any disadvantage to that 
particular customers as compared with the customer who only has 
one dish?
    Mr. Moskowitz. Thank you, Congressman Boucher. And the 
answer is that if we were required to provide all of the local 
channels in a particular market on a single dish, we could not 
provide local channels in the 108 markets we do today. It would 
be down by something, by a very significant number of markets. 
I don't know whether it would be 30 or 40, but it would be a 
lot fewer markets we could serve. And it's the characteristics 
of how the satellites are configured and we can go into more 
detail either at this hearing if people are interested or in 
private conversations with members.
    As to cost to the customer, I think it's very important to 
understand that we take care of the customer completely. We 
give them the equipment they need for the second dish for free. 
We provide the professional installation of the second dish for 
free and we make it seamless to the consumer so that when he 
calls up his programming guide, the channel on one dish is 
immediately adjacent to the channel on the second dish and he 
push the button and receive one or the other, completely 
transparent to him a second dish being there.
    So we've done everything we think we can and by the way, we 
also inform all the consumers in two-dish markets of the 
availability of that free equipment if they want it. So we 
thought the tradeoff was better to serve more markets and 
provide more choice for consumers in as many markets as 
possible.
    Mr. Boucher. Well, thank you very much. I think that's a 
perfectly satisfactory answer and from my perspective your 
practice should be applauded. I think by serving more markets, 
you're providing a broader service and helping more people get 
local signals than if you had to be restricted just to one 
dish.
    Let me ask you, Mr. Hartenstein, if you have any estimate 
of the number of subscribers who are taking advantage today of 
the grandfather that you referred to in your testimony? In 
other words, how many subscribers who are currently getting 
distant network signals would not be able to get those signals 
in the event that the grandfather provision is not renewed?
    Mr. Hartenstein. Mr. Boucher, in for DirecTV, there are in 
the approximate range of about 100,000 households, however many 
people in those households that are still for us, for DirecTV, 
in that category.
    Mr. Boucher. Mr. Moskowitz, is there a similar number for 
EchoStar?
    Mr. Moskowitz. The number is about 100,000 for EchoStar as 
well.
    Mr. Boucher. So in the event that the grandfather is not 
renewed, there are going to be 200,000 quite angry people 
across the United States writing to their Members of Congress 
and complaining. I think we all understand the implications of 
that.
    Let me turn now to another question and I would welcome the 
views, at least of Mr. Lee, Mr. Moskowitz, Mr. Hartenstein on 
this question. It occurs to me that two possible changes in the 
Section 119 license would be in the interest of viewers. One of 
these changes would advance a major goal of the television 
broadcasters. The other change would advance a goal announced 
by the satellite industry. Perhaps both of these changes could 
be considered together. And I would like to have the benefit of 
your views with regard to both of them.
    First of all, with regard to the Section 119 license, why 
should there be any continuation of eligibility to receive 
distant network signals at a time when a particular subscriber 
is in fact subscribing to local-into-local service from either 
of the satellite providers and is receiving local stations that 
emanate from the market in which he resides? I have difficulty 
perceiving any real need to bring in distant network signals in 
that circumstance where the viewer is already getting local 
stations delivered by a satellite. That's question No. 1.
    No. 2, why should we not allow a digital signal to be 
delivered by a satellite in those instances where the local 
broadcaster has not powered up his digital transmitter 
sufficient to reach identified viewers. Those viewers who 
simply cannot get a digital signal delivered terrestrially 
over-the-air in my view would be well served if they could get 
the digital signal of that network delivered by a satellite. 
Now I understand the concerns that Mr. Lee has put forth, that 
there would have to be some assurance that at such point in 
time as the broadcaster locally powers up and delivers that 
digital signal across his entire dominant market that the 
viewers who can then get the signal terrestrially would 
henceforth be disqualified from getting that signal delivered 
by satellite. Suppose that assurance were built into the 
provision, at that point would the broadcast industry be 
interested in considering allowing the digital signal to be 
delivered by satellite to the viewers who simply cannot get it 
terrestrially with the ability of that viewer to get the 
digital signal by satellite being terminated when he can get it 
from the local station?
    So those are the two questions that I would welcome the 
views of witnesses with regard to both and Mr. Chairman, I ask 
unanimous consent for 2 additional minutes in order to give 
witnesses time to respond.
    Mr. Upton. Without objection, the gentleman will be 
recognized for another 2 minutes.
    Mr. Boucher. Mr. Moskowitz, would you like to begin?
    Mr. Moskowitz. Certainly, Congressman. We certainly agree 
that there should be a distant HD digital signal. We think that 
it encourages broadcasters to begin to improve their service 
area. We think it's a good, competitive tool to get 
broadcasters to do this as quickly as possible. I certainly do 
agree that it's not always the broadcasters' fault that they're 
not broadcasting full power today. But in many cases, it is and 
we can do something about it. And even when it's not their 
fault, we can do something about it.
    I think it's also important to know that EchoStar and I 
believe DirecTV as well, already incorporates an HD off-air 
tuner in every HD receiver we sell so that if there is a time, 
if the time comes when it does indeed provide a terrestrial HD 
signal, they will get it automatically from the same box that 
gives them the distant HD signal today, so we're really doing 
more for the broadcaster than they can possibly do for 
themselves in that regard.
    Mr. Boucher. Very quickly, would you agree that if we amend 
the license in this fashion that at such point that the viewer 
can get the signal from the local broadcaster and good digital 
quality that the eligibility to get it by satellite should end?
    Mr. Moskowitz. I think that when the broadcasters give 
their analog spectrum back, I think it makes sense to probably 
end it.
    Mr. Boucher. Well, we're talking about a time a little bit 
before that.
    Mr. Moskowitz. Well, I think that we ought to be 
encouraging them to get to the point where they do that.
    Mr. Boucher. Mr. Lee?
    Mr. Lee. If I may, I want to circle back for just a minute, 
Mr. Boucher, and in 10 seconds say that while I'm sympathetic 
with EchoStar's need to use multiple satellite locations and 
thus multiple dishes, America's local broadcasters think it 
makes perfect sense to eliminate this satellite Siberia thing. 
Just put all the stations in any given market on one satellite 
or the other. We don't, as Mr. Moskowitz said, it's transparent 
to the subscriber on the program guide which channel it's--or 
which satellite it's coming off of.
    Now, as to your question specifically, the shareholders in 
my company pay a great deal of money for the right to be the 
CBS affiliate in our community. And the affiliation agreement, 
the contract I have with CBS, if you will, says I have 
exclusivity for CBS programming in that market. Now, the 
copyright exemption says if I can't reach them, then it's okay 
to import a distant signal, but both services now offer local-
into-local service in my market. What's the point, as Marty 
said, of subjecting your constituents to news conferences by 
the gentleman from New York rather than the gentleman from 
Virginia? It's an idea whose time has come and gone.
    As to the digital white space question, I really see this 
as a real Trojan Horse. I was interested in hearing Mr. 
Hartenstein say that they have about 100,000 grandfathered 
subscribers and Mr. Moskowitz responded that EchoStar has about 
100,000. There was a Bear Stearns piece in the last couple of 
weeks that estimates the dish network has 850,000 distant 
network subscribers and that when the Federal Court appeals 
process finally concludes and they are required to shut down 
those illegal subscribers, there will be 425,000 subject to 
turnoff. That's a far cry from the 100,000 we just heard about.
    Well, what's the point? Four hundred and twenty-five 
thousand illegal subscribers paying $6 a month results in $2.5 
million, a $30 million annual revenue stream. That funds a lot 
of litigation. Broadcasters across this country have sued these 
people for 10 years now. We're finally about to get relief and 
this is a Trojan Horse to let them introduce this.
    Mr. Boucher. Thank you very much, Mr. Moskowitz and Mr. Lee 
so much for the spirit of compromise here today.
    We shall continue to discuss these matters at another place 
and time. Thank you very much, Mr. Chairman.
    Mr. Upton. Mr. Bass.
    Mr. Bass. Thank you, Mr. Chairman. During my opening 
statement I raised and I believe three other members echoed a 
problem that is unique to States with several DMAs where the 
DMAs are centered outside of that particular State or sphere of 
influence of the viewers in that State.
    Does anybody before us this morning believe that the 
viewers in the three northern counties of New Hampshire should 
continue to be precluded by law from having access to the 
State's sole network station?
    [No response.]
    Good. Silence can be interpreted as a favorable answer.
    I have a question for the satellite operators and the NAB. 
Is it technically possible either at the satellite transmission 
or at the set top box to allow a consumer access to one or two 
stations from an adjacent DMA just to fill out the missing 
station?
    Mr. Moskowitz?
    Mr. Moskowitz. The answer is yes. It can be done virtually 
immediately from the satellite perspective.
    Mr. Hartenstein. From DirecTV's perspective, that's also an 
affirmative. It's a combination of where the spot beams that we 
have are located and the technology in the set top box, but 
yes, it can be done.
    Mr. Bass. Even if it's a distant signal?
    Mr. Hartenstein. If it's a distant signal we, and I believe 
EchoStar, transmits our distant network signals across the 
entire United States. That is not true for all of our local 
markets. We make use technologically through spot beams of the 
very precious spectrum we have for most all other local 
markets.
    Mr. Bass. Mr. Polka?
    Mr. Polka. Once again I would say it's just nice to be the 
David among Goliaths which is typically the case for our 
members who are oftentimes forced to deal with and I sympathize 
with my friends from EchoStar on their negotiations with 
Viacom, but imagine what it's like for a company of a thousand 
to be negotiating with those entities.
    The issue that you raise is one of parity. And the issue 
that you raise is one of imbalance that exists under SHVIA. And 
our view, we're all about parity. I think it's one example that 
you point out in the law where there is a disparity in relation 
to application of DMA market principles to the satellite 
companies. And frankly, that probably should be addressed, as 
well as the other numerous aspects of disparity that now favor 
the DBS industry over competition with cable and the smaller 
markets.
    Where I'm from and we have a number of members in your 
State as well, who have less than a thousand subscribers. You 
have that one small company with less than a thousand 
subscribers competing against two national entities with 
millions of subscribers and that is an area of competition and 
balance that has to be considered in the local market, if we're 
going to ensure because there's a direct relation here. If 
we're going to ensure that the promise of broadband, of 
digital, high definition television, internet is provided to 
those rural areas, our members as cable operators are the 
competitor in those communities, not the giant entrenched cable 
monopoly that we oftentimes hear commented on by both in the 
DBS industry. So it's a parity question that should be 
addressed, but if we're going to address one parity question 
then we need to address all of them.
    Mr. Bass. Mr. Kimmelman, you were nodding. Do you have any 
observation?
    Mr. Kimmelman. I definitely think that the parity concept 
is a fundamental consumer principle. We want to make sure that 
you can get on satellite everything that you can get on cable. 
There's no question about that. And I think that it's critical 
to make sure that local channels are available everywhere 
possible. I think it would be very helpful for this committee 
in the reauthorization to look to every change in law 
necessary, every direction of the FCC to make sure that you're 
helping get local channels into communities across the country.
    Mr. Bass. Thank you, Mr. Chairman. I hope that as we 
address this reauthorization that we can come up with a 
solution that will allow at least in my instance and with my 
other colleagues, the ability of our constituents to see and 
hear news, weather, emergency notifications that are germane to 
their communities and their State and not have to depend upon 
neighboring States for this information.
    Mr. Lee, did you have one other thing to add?
    Mr. Lee. If I may respond to that quickly. As you consider 
that parity, please consider both sides of it. I wish 
Congressman Boucher were still here. Nielsen surveys viewing in 
every county in America four times a year. And at the end of 
the year takes a look at where the predominance of viewing 
occurs and assigns that particular county to a television DMA. 
Then once a year the pot gets stirred and counties get moved 
out of one DMA into another and then 2 or 3 years later they 
may come back. But constant in all that is a requirement for 
local stations, exclusivity to be honored.
    There is a cable system in Marion, Virginia which is in 
Congressman Boucher's District just inside the Tri-Cities DMA, 
just outside ours. Because the Johnson City station has 
exclusivity for CBS programming, the cable system there cannot 
carry our CBS network programming, but it can carry our local 
news and other locally originated broadcasts and does. If the 
satellite people want to be able to carry the local newscasts 
or local programming from an adjacent market, I don't think 
you'd find many broadcasters who would quarrel with that. Let 
the people decide what they're going to watch.
    Mr. Upton. Mr. Markey?
    Mr. Markey. Thank you, Mr. Chairman, very much. Our ability 
to foster price constraints or price dropping, unfortunately is 
limited. Cable competition just doesn't seem to work in the 
SHVIA context. Satellite has become a choice and a quality 
competitor, but it does not drive down prices the way cable 
over builds would going head to head in a community.
    What, Mr. Kimmelman, can we do in the SHVIA context to 
foster a consumer price competition agenda?
    Mr. Kimmelman. Well, Mr. Markey, I think you have to take 
the broadest view of the satellite law and think about overall 
video policy, how to promote competition. The dispute you have 
before you today, in this case, it is CBS and EchoStar, is a 
dispute about a distributor and a company that owns a whole 
swath of very popular channels. It could be Disney, ABC with 
their channels. It could be NewsCorp which owns DirecTV or 
their channels. It could be any of these, but it's only a 
handful of companies that dominate in this space.
    The problem is the companies that own the programming want 
to sell them in a bundle and get the highest price for them and 
on the other end, the cable company, the satellite wants to 
bundle the programming and sell it at the highest price to 
consumers.
    We can't solve this problem over night, but I urge you to 
No. 1, go back and look at the ownership rules and make sure 
that companies can't own too much. No. 2----
    Mr. Markey. That would help price?
    Mr. Kimmelman. Absolutely, absolutely.
    Mr. Markey. How would that help price?
    Mr. Kimmelman. Because what happens now is one of the best 
potential competitors, DirecTV to cable companies, now has its 
profit center in programming. It makes the most money by 
getting the highest price for NewsCorp. This company now makes 
its money by selling programming. The Fox Network, Fox Regional 
Sports, Fox Cable Channels and it has no interest as we've seen 
from Mr. Murdoch's own statement in having price wars with 
cable. This is one of the two satellite competitors who are 
hoping to drive down price against cable. That's untenable. So 
it's the ownership that's a problem.
    The second thing you can do is you can require companies to 
sell their channels on an individual basis to satellite and 
cable and do anything else they want. They can bundle it also, 
but sell on an individual basis and comparably you can require 
the satellite companies and the cable companies to sell on an 
individual basis to consumers. The average consuming household 
only watches 12 to 18 channels a month. It's great to get 50, 
75, 100, but what if they only want to buy 15 or 20? What if 
they find some to be objectionable programming and some just 
want sports and some just want news? Why not let them pick what 
they want?
    Mr. Markey. Let me move on to the DTV agenda. On the one 
hand we want to move the digital transition along and fast. On 
the other hand we don't know yet given the propagation 
qualities of a digital signal as opposed to an analog signal 
who may be served or unserved.
    Shouldn't we be tasking the FCC with the job of 
ascertaining the appropriate model to determine digital signal 
eligibility? After all, DBS now has a 20 percent market share 
which is not insignificant. And so it's at the core of this 
issue of moving the DTV transition along.
    Mr. Kimmelman or anyone else, I'd appreciate hearing your 
views.
    Mr. Kimmelman. Mr. Markey, I would just say briefly from 
the consumers' perspective, they can't get a signal, they can't 
get a signal and they want a signal. They want to be able to 
watch a channel. And so I think it's absolutely critical that 
the agency that's responsible for protecting consumers finds 
out where they can get them and where they can't get them, 
whatever model they use and make sure that they are fully 
served.
    Mr. Markey. Anyone else want to comment on the DTV 
transition in the satellite context?
    Mr. Franks. I would just say that I think the transition is 
actually finally beginning to gain steam, partly through the 
efforts of the leadership of this subcommittee. I would just 
urge that anything that be done in this regard be done with 
extreme caution. There's still an enormous amount that we don't 
know about digital signal propagation and we're not going to 
know it for some period of time and I would hate to see the 
Commission take their snapshot and make their judgment when we 
are still at a fairly early stage in that part of the digital 
broadcast transition.
    We are--the pace is accelerating and I think it is frankly 
a question that might be better put to the Commission in the 
not terribly distant future, but I'm not sure it makes sense to 
do it today.
    Mr. Markey. Yes, Mr. Polka?
    Mr. Polka. I would just agree. I think that changes 
regarding the digital white area would fundamentally change the 
concept of localism and broadcast carriage rules that now both 
parties accept and are working under, so I would agree that any 
change to that aspect of the law that would fundamentally 
change broadcast signal carriage requirements must be taken 
very, very lightly.
    I would just also----
    Mr. Markey. Mr. Polka, aren't the laws of physics and 
signal propagation known? How long can this take? They've been 
experimenting--they took me out to experiments like 12 years 
ago. How much time is needed to figure out what the digital 
propagation capacity is?
    They told me they were near to solving it then. I'm sorry.
    Mr. Polka. Sure. The transition is occurring. And you're 
right, there are some technical questions which remain to be 
developed and answered. My point goes specifically to changing, 
making points of change under SHVIA that would fundamentally 
change how the rules of broadcast carriage, allowing distant 
signals to be carried in market, whether digital or otherwise.
    Right now, the rule is is that local signals are to be 
carried locally, in market and that is a fundamental balance, 
principle of competition in our market places that we hope to 
see further under SHVIA and not changed.
    Mr. Markey. Yes, Mr. Moskowitz?
    Mr. Moskowitz. I think the neat thing about the digital 
over-the-air signal is while, you know, there are all kinds of 
issues that people can throw up and raise up, the fact is that 
satellite can deliver it today and the really interesting thing 
about it is that for the most part you do either get it or you 
don't. And so while a predicted model can be useful, we can 
also just go to the consumer's house. It's not like the analog 
world where there are gradations of how good you get it.
    In the digital world, you get it or you don't. So we can 
find out pretty quickly whether the broadcaster is delivering 
the signal in the market or not. And if he's not, let's not 
make him wait for the digital transition. Let's accelerate that 
transition.
    Mr. Markey. Mr. Franks?
    Mr. Franks. Mr. Markey, we own 16 television stations 
across the country. They're all up at full power. I don't know, 
I cannot tell you today what channel they are going to be 
broadcasting on digitally in 2 or 3 years, because when this 
transition gets to the next phase, we're going to have to 
scramble the whole channel map again. I'm not a physicist. I 
have no idea what that will do to the propagation. I don't know 
whether we will go from being on channel 42 where we are in New 
York City on the Empire State Building when we get back to the 
World Trade Center site are we going to be back on Channel 2 or 
are we going to be on a different channel? That's true of every 
one of our 16 stations.
    I think it might take Einstein to figure out that 
propagation and with all due respect to the current FCC, I 
think it might be better to wait.
    Mr. Lee. If I may, Mr. Markey?
    Mr. Markey. Please.
    Mr. Upton. Last comment.
    Mr. Lee. The FCC had no choice but to design this digital 
transition in computer models and it was only when stations 
started going on the air that we began to see the propagation 
characteristics didn't match the computer models. We're on at 
full power and have been from day one and people pick us up in 
places they really shouldn't be able to get us. We throw the 
signal more than a hundred miles in mountainous terrain. It 
shouldn't be that way.
    Well, as more stations have come on the air, you've had 
instances in which I can't say this in a congressional hearing, 
the ``oh shit'' factor sets in.
    Mr. Markey. Not this committee.
    Mr. Lee. Okay.
    The public station in Norfolk and the CBS affiliate way up 
the road in Salsbury, Maryland are on the same channel and they 
interfere with each other. So the FCC has had to go there, pull 
the power back and try to have both parties find a solution. 
We're still learning this stuff, really.
    Mr. Upton. I do have a mute button up here.
    Mr. Markey. Cable is not covered by the House Indecency 
Bill. It's in the Senate, but not in the House bill.
    Mr. Upton. I thought that was your amendment before the 
Rules Committee.
    Ms. Cubin.
    Ms. Cubin. Thank you, Mr. Chairman. I come from a family of 
seven children. We had six within 3\1/2\ years of age and now I 
finally know how my mother felt when she was trying to listen 
to all of us and all of our problems and come up with a fair 
solution.
    Wyoming's markets are small. We have 197 and 200 out of 210 
and so we don't have any local-into-local service in Wyoming. 
So that's where we are. And I understand the satellite 
companies are expecting that that service will be available by 
2006. Is that right? Is that correct?
    Mr. Hartenstein. At DirecTV we did make a promise that we 
would get as quickly as we could to all 210 markets. That would 
include Cheyenne, 197; Casper-Riverton, 200, by no later than 
2008 with a goal to get there by 2006. We have some 
announcements that we should be making in the next couple of 
weeks, along with the satellite that I indicated before that we 
will be launching with some approvals, requests in at the FCC 
that we hope to get approved by them that can take us a good 
way there. Unfortunately, not yet, by this summer, to Wyoming, 
but certainly we feel that we'll be able, with everything 
working properly, to get there closer to 2006 than 2008.
    Ms. Cubin. Thank you. I wanted to ask a question. Mr. Lee, 
you talked about broadcasters not powering up and I want to 
know when I talked to one of the local television stations they 
told me that the cost to do that was prohibitive to them.
    What is the cost to these small local stations that have to 
power up?
    Mr. Lee. It depends on the channel assignment the station 
has. The higher up in the UHF band, the more power it takes to 
replicate a station's coverage. Our analog station is on 
Channel 7 and our digital is on 18. Our power bill alone for 
the new transmitter is about $72,000 a year.
    Ms. Cubin. And how much did the new transmitter cost?
    Mr. Lee. A million and a half. We've invested at our 
station about $12 to $14 million in the transition and trust 
me, we're as eager as anybody else to shut off the old analog 
transmitter and get back into a single channel.
    Ms. Cubin. But that really does explain why some smaller 
broadcasters haven't been able to power up as you said.
    Mr. Lee. In areas of low population density such as yours, 
it takes a lot of power to cover the entire State as you well 
know and I can only imagine what they're faced with in power 
bills there.
    Ms. Cubin. Mr. Moskowitz, can you explain the assumptions 
that are used to define a Grade B signal?
    Mr. Moskowitz. Yes, Congresswoman, I can. What happened is 
back in the 1950's, literally, focus groups were created and 
they were shown pictures of television signals and asked to 
rate their acceptability. And then when a consumer said it was 
a good enough signal, they said okay, now how many DB, how many 
physical DB do we need to get to the house in order to create 
that quality signal? This is really the ugly family secret and 
people are still in denial. The fact is that what those people, 
those focus groups did in 1950's is not relevant today. It's 
not relevant because people's expectations have changed in a 
digital world and in a world where cable is available and 
satellite is available and that's why we have these problems.
    Ms. Cubin. One other question for Mr. Lee. Do you think the 
current system of waivers and signal strength tests, are 
adequate to determine who is eligible to receive a distant 
signal?
    Mr. Lee. If you're familiar with that system, if I'm a 
DirecTV subscriber and I request a subscription for distant 
network signals, DirecTV or likewise EchoStar, transmits that 
request through an independent third party called Decision 
Mark. There is an ILLR predictive software that takes a look on 
the first pass and says you either meet this signal standard or 
you don't and if it's marginal, then the request comes through 
to the station, the station responds either positively or 
negatively and in all fairness, I can tell you more about our 
station's pattern and practices than anybody else's. I know it 
best.
    Prior to the beginning of local-into-local service in our 
market, we had granted waivers to 30,000 households in a market 
of 450,000 households, so a relatively high percentage. And 
most of those were accomplished through this Decision Mark 
electronic process.
    Ms. Cubin. Do you think that consumers understand what 
their rights are under the law and how to go about getting 
distant broadcasting?
    Mr. Lee. I believe so. I'm a DBS customer myself and the 
rules are pretty well spelled out on the websites of both 
companies.
    Ms. Cubin. Thank you.
    Mr. Shimkus [presiding]. Thank you. Now I'd like to 
recognize Mr. Buyer from Indiana. You have 8 minutes.
    Mr. Buyer. Thank you. This has been a good hearing. It's 
also been informative to sit here and listen to all of you, not 
only your testimony, but also in the question and answer phase.
    I would say to the gentleman from EchoStar that I've worked 
hard to be a very good listener, while at the same time I've 
struggled from within because of that your testimony to me 
comes tainted because of the actions by a Federal Judge and so 
when you come here to Congress and you ask us to do certain 
things and you could not even uphold an agreement in a Federal 
Court and the Judge comes down on you, I just want you to know 
I'm struggling with that, okay? I'm just being very open and 
honest with you. And that's why I said I'm going to be a good 
listener, but it does affect the credibility of your testimony 
today which makes it hard for you. I just--I think it does. But 
that's just Steve Buyer opinion, but I want to be open and 
honest with you.
    Second, this creation of a digital white area, I have to go 
back to the origins of the Act and so when I go back there, I 
was on the Judiciary Committee at the time and was a conferee 
on the Act. And so when we layout a game plan here and we say 
yes, we want government to get out of the way. We want to 
deregulate, but we also want to have this transition in our 
society, and we say yes, there's a value of the over-the-air 
networks. And then when we lay out this plan and there's an 
expectancy and people commit money for you to now come in and 
say well, I can really speed us up to transition. I don't know, 
I don't believe this is going to meet the equitable test and 
what is fair and what Congress laid out in a plan and in the 
end is it really going to be pro consumer? That's how I'm 
looking at this.
    So I just wanted to share with you my feelings, having 
listened to your testimony and having some history with the 
Act.
    Last, what I would like for you to do, if anyone would 
please testify to this, what has been bothersome to me over the 
years is as we were going, in the early 1990's, the Congress 
set the time, passed the Cable Act. I wasn't here in Congress 
at the time. I came in 1993, but they passed the Cable Act. 
That's a heck of an answer. Price controls, right? So they 
passed the price controls and said we're going to do that. 
That's pro consumer. We're going to keep these prices down. And 
we get to the Telecommunications Act and we say you know what, 
in order to get government out of the way and to bring all this 
straight technology and choices of the people we're going to 
repeal the Cable Act. And at the time the biggest complaint 
about the cost of programming was out of Hollywood.
    One of the interesting things about the Cable Act and what 
it had done though it had kept the lid on sports salaries. So 
when we then passed the Telecommunications Act, we popped the 
lid off of sports salaries and how sports is an unbelievable 
driver of costs. And every time--I don't think you people in 
America realize. They pick up a newspaper and they see that 
they've just paid $90 million for somebody for this or $200 
million for a baseball player. And people don't even realize 
that they're paying that. They think the sports owners are 
paying it.
    So what I would--I don't want to violate any of your 
proprietary interests, but if any of you have--the gentleman 
from the Consumer Union, you mentioned about the 54 percent 
increase in prices. If you know how much of that is attributed 
to sports programming I would love to hear that testimony.
    Second, I would love to hear any of you talk about for the 
record how a sports owner takes those salaries and how they're 
passed to programmers and programmers pass it to subscribers, 
how do you deal with this issue? I'm really curious how you can 
actually deal with the issue.
    Mr. Polka. I'd like to start. The answer is you can't deal 
with it because the terms are dictated to providers and also to 
consumers.
    You mentioned the 1992 Cable Act and the 1996 Act. What has 
occurred since 1992 is a panoply of mergers that have 
consolidated content into the hands of about four very large 
companies that control numerous, probably 70 to 80 percent of 
the programming that consumers see today and because of the use 
of rules that extend back to 1992 and also to the Network 
Nonduplication Rules of 1970's, these major media conglomerates 
are allowed to use these rules to their advantage, 
retransmission consent, retransmission consent abuse in many 
markets, to tie and bundle programming that are forced to 
consumers to take and pay for, whether they like it or not. And 
that includes sports. That includes sports.
    And the other factor is is why that occurs is because 
there's no transparency in that transaction between the media 
giant and the provider because the contracts that are dictated 
to by these entities contain very strict nondisclosure 
provisions in them prohibiting an operator such as myself or 
any of our thousand members to come to this committee or to 
anyone else or our local franchising officials or to our 
customers to even tell them the types of price increases and 
the tying and bundling that takes place in our contracts.
    So the answer is is right now, there is no market check on 
that transaction at all and the reason why everybody across the 
country is paying for Alex Rodriquez' salary is because these 
entities can do it and they can get away with it. They tie it 
and bundle it to marquis programming that we have to have that 
we have to have to be competitive and they know that by tying 
all of it together they can get the prices they want for those 
sports prices.
    It's out of control. There is no market check on it and 
unless there is some transparency in the market place at some 
point, there's nothing that's going to happen that's going to 
change it.
    Mr. Franks. Mr. Buyer, if I may, I would disagree with Mr. 
Polka, if I could figure out what he just said. Let me take 
that out of the pro leagues for a moment. We're about to do 
March Madness, so I mean the kids are getting a scholarship, 
but they're not A-Rod. I don't know if there's a solution when 
this is immensely popular programming and it is put up by the 
rights holder for a competitive bid.
    We are paying billions for their rights to the basketball 
tournament and many of our competitors would like to have those 
rights.
    I don't know how to put a price cap on that and from the 
standpoint of free over-the-air television, it is a struggle. 
Before we bought it it was a shared enterprise between 
broadcast and cable and so there were many, many, in a 
different era of cable, there were many places, many households 
that couldn't see the early rounds of the tournament. We paid a 
price to have that exclusivity so that we could broadcast it 
for free to everyone in America. And does that then put 
pressure on our business and does that put pressure on what we 
seek from Mr. Polka and his colleagues in terms of a 
retransmission consent transaction? Absolutely.
    But I guess I don't understand what the alternative would 
be short of not giving the public this incredibly popular 
programming.
    Mr. Buyer. Does anybody know of the 54 percent increase in 
cable rates can be attributed to this explosion of sports 
salaries?
    Mr. Kimmelman. Sir, the General Accounting Office has 
looked at this and it's one of the bigger driving forces, but 
it's only in about 8 or 10 percent of that. It is unique, 
largest segment, but it is not the overwhelming majority of 
what drives the rate increases. What there is, I mean, Mr. 
Franks is right. It's extremely popular. When Cox Cable 
complained about the prices, they were paying for ESPN. I'm 
sure they've been in here. They were saying only 20 percent of 
our customers want to watch this and everybody has to pay for 
it.
    Well, those 20 percent probably are willing to pay the 
couple dollars a month for ESPN that it costs, but what about 
the other 80 percent and this happens across the dial with 
every channel. So if you could just get the companies to let 
people buy what they want, it wouldn't solve all the problems, 
but we would start getting at some transparency. Unfortunately, 
you've walked in a hornet's nest here because Major League 
Baseball has an antitrust exemption, so it doesn't follow the 
competition laws of our country. And leagues are pretty 
peculiar and so this is a problematic area, but at least let's 
let the people who love sports and really want it pay, but not 
make everybody else and do the same for every other kind of 
programming.
    Mr. Moskowitz. Congressman, might I respond to your 
statement about EchoStar for a moment? I do appreciate your 
honesty very much and certainly the Court decision in Miami is 
a dark day for EchoStar, just as the prior Court decisions 
finding the other satellite broadcasters had violated the law. 
It was a dark day for everyone in the satellite industry. And 
we shoulder our responsibility for that, but I ask you to keep 
a couple of things in mind.
    First of all, the law, the SHVIA law places the burden of 
proof on the satellite provider to prove that every one of its 
customers is legal. That's a burden which--broadcasters, the 
NAB did a great job. But that's a burden that's incredibly 
difficult to meet 5 years after you just sign a subscriber up. 
On the other hand, the same Court that made those findings also 
made the following finding. The current qualification system 
employed by EchoStar and applied to every potential distant 
network subscriber is a reasonable system to prevent ineligible 
households from receiving distant network programming. Such 
efforts by EchoStar to comply with the law support the 
conclusion that no pattern or practice of willful or repeated 
violations exist. And this is part of the Court record. Even 
Robert Lee of the CBS Affiliates Association noted that today 
EchoStar is making legitimate efforts to qualify subscribers. 
Do we have a past that I wish things were different in? Yes.
    Finally, it was actually EchoStar that started that case. 
EchoStar wanted to know whether its procedures for qualifying 
customers were legitimate and you can go look it up. It was 
EchoStar who brought the suit and asked a Court to determine 
whether its procedures were appropriate or not. Now it turned 
out that the Judge said no, the procedures we've used today and 
that we've used for the past several years are different and 
have found to comply. Not to just brush under the rug the fact 
of the findings that are disappointing to us.
    Mr. Buyer. I appreciate your rehabilitation.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. I remember going back 
to the passage of SHVIA or whatever you want to call it, it was 
one of the few issues in that people would yell at an elected 
Member of Congress on a parade route that they wanted network 
broadcast. It was really an amazing time to go through with all 
of the issues that's always around us nationally.
    This was--this really had hit a chord. So it's neat that we 
continue to move down and we are seeing local stations being 
broadcast. I have a radio personality in the St. Louis media 
market that every time I see him, he thanks me, so he can get 
local stations. I made a good friend with the passage of that 
bill.
    I want to take this time and you all know how these 
hearings work and I agree with Steve that this has been a 
wonderful hearing and obviously there's a lot of work that 
needs to be done and I'm sure other actions will occur from 
this.
    I want to again just put in my plug for any ways in which 
you can through your entities whether it is the Consumers Union 
or whether it's an affiliate to look inwardly to help us fully 
employ the dot kids us website. We're going to have the 
indecency vote on the floor tomorrow. When I mentioned it at 
the last hearing I had staffers scrambling to figure out what 
in heck I was talking about, which is good, because I'm going 
to take it upon myself, along with the chairman, the ranking 
member of this committee, to help us focus on the need to 
deploy and employ the dot kids site. So if you've got 
programming, you want kids to have access to good information 
that's protected, there's no hyperlinks. There's no chat rooms. 
It's information-based only. The President signed the bill into 
law over a year ago that sets up the site and now we're--it's 
the chicken and the egg. We want providers out there so that we 
can encourage kids to go on and if you would look at that I 
would appreciate it.
    Now for another question and I'd just like to go Mr. 
Moskowitz first and I'm going to try to go to everyone who it's 
appropriate to, you all hold a license, do you not?
    Mr. Moskowitz. We hold many licenses, yes.
    Mr. Shimkus. And who is the primary grantor of the license?
    Mr. Moskowitz. The Federal Communications Commission.
    Mr. Shimkus. And would you say that in use of that license 
you use the public airways?
    Mr. Moskowitz. I think it's different than the broadcast 
airways in that satellite pays for them and they're not 
considered to be--I don't know the ins and outs, the nuances of 
it, but we're not considered a public carrier or common 
carrier. But certainly public spectrum that has been purchased 
by satellite carriers.
    Mr. Shimkus. Great. Let's go to Mr. Lee. You do hold a 
license?
    Mr. Lee. From the Federal Communications Commission.
    Mr. Shimkus. And you operate over the public airways?
    Mr. Lee. Yes sir.
    Mr. Shimkus. How about Mr. Polka with American Cable 
Association? Do you have a license?
    Mr. Polka. Yes sir, we do obtain a number of authorizations 
from the Federal Communications Commission.
    Mr. Shimkus. Okay, and do you use the public airways?
    Mr. Polka. Yes, we certainly use airways that are licensed 
by the public if we have something from the FCC and we need 
authorization, then that is the public approval.
    Mr. Shimkus. Thank you. Mr. Kimmelman. We'll skip you.
    Mr. Franks, you do have--by the FCC and you use the public 
airways?
    Mr. Franks. Yes sir, absolutely, yes sir.
    Mr. Shimkus. I guess you all know where I'm going. And I 
know the parent company here from Hughes, Mr. Hartenstein, how 
could you--can you respond to this question?
    Mr. Hartenstein. Absolutely. Our different subsidiaries 
including DirecTV have broadcast satellite and fixed satellite 
service licenses and as such those are administered by the FCC, 
albeit with a different set of rules than for example, over-
the-air broadcasters.
    Mr. Shimkus. Thank you for leading me into the question and 
we'll start with Mr. Moskowitz. Should there be separate rules? 
If we're going to police the airways on indecent standards, 
should there be different standards for use of the public 
airways by FCC license grantors?
    Mr. Moskowitz. Congressman, I believe that there should be 
some difference in that the broadcast airways are available 
without subscription, free over-the-air, anybody can view them. 
The satellites that we use, the programming is all encrypted 
and you have to pay to receive the channels. We also include in 
all of our receivers V-chips that let parents block 
inappropriate programming, not only on a ratings basis, but 
also going a level beyond that for sexually explicit matters, 
language, and so we try to be very cognizant of that and we at 
DirecTV actually led the way for the adoption of that 
technology.
    Mr. Shimkus. Let's go to Mr. Lee. We'll try to get through 
on time.
    Mr. Lee. In all honesty, I haven't considered that and I 
can give you a knee jerk reaction that we all should be subject 
to the same regulation, but I could be argued with about that.
    Mr. Shimkus. I am sure you will be, but----
    Mr. Upton. Do I need to have my finger on this mute button?
    Mr. Lee. I've cleaned it up.
    Mr. Shimkus. Mr. Polka.
    Mr. Polka. Yes sir. There are differences clearly in the 
types and methods of delivery which I think have led to the 
different regulatory regimes for both. And I do agree that 
there is a fundamental difference between broadcast and 
satellite and cable because they are subscription based.
    However, the implication concerning indecency and control 
of indecent programming is, of course, something that our 
members in smaller markets and communities are very, very keen 
to and in fact, I would just comment on something that Mr. 
Kimmelman said. We have wanted to have the choice to control 
programming and to create tiers of programming that would put 
some of this other indecent programming on tiers that would not 
be widely available to all of our customers.
    However, and I'm sorry for being passionate about this 
because it affects small businesses, but the reason why we 
cannot control that indecent programming is because the 
programming and the tying and the bundling is controlled by 
Viacom, Fox, Disney and General Electric who tie and bundle 
these services and make consumers take it whether they want it 
or not.
    Mr. Shimkus. And I understand that. And we're really 
talking about use of the public airways, capital investments, 
both on the transmitter and the receiver, really--even free 
over-the-air, someone has to invest in receipt of that and 
that's the consumer when they buy a TV.
    So let me move on to--I'll let you finish, Mr. Kimmelman, 
but Mr. Franks.
    Mr. Franks. I share your intellectual curiosity for why 
there is such completely disparate treatment. I realize there 
may be gradations as David suggested in terms of scrambling, 
but why it is so completely disparate is something I've never 
understood.
    Mr. Shimkus. And Mr. Hartenstein?
    Mr. Hartenstein. We really are the pioneers in this. We are 
an MVPD, a distributor like cable is. Not producing programming 
when we started 10 years ago and still today, we nevertheless 
viewed what comes into one's home as a family matter by the 
parents in control there. All DirecTV systems from Day One, the 
very first serial number have absolutely free, very simple to 
use locks and limits so that you can take any programming 
service off of the system. It won't even show up on the Guide 
if you don't want it. Also, we get information from our program 
providers as to what the rating is of every single program. So 
a parent can set a level of control that they want in that.
    In our entire 10 years, and I was the first president and 
chairman of DirecTV, and still heavily involved, we have not 
had a single consumer complaint about what it is that we have 
done.
    Mr. Shimkus. Thank you. And Mr. Chairman, since I allowed 
everyone but Mr. Kimmelman to respond to all of these 
questions, can he finish this? He may have a comment or two.
    Mr. Kimmelman. Thank you, Mr. Chairman. Thank you, Mr. 
Shimkus. Eighty-five percent of consumers receive their 
broadcast stations over cable or satellite. They all use the 
public airways as everyone has admitted. We believe they should 
all be subject to the exact same decency standards and we think 
that there is a very simple way for all of them to offer 
consumers a choice to pay for something individually and to be 
subject to a different standard and that should be the model 
that should be followed regardless of the technology.
    Mr. Shimkus. Thank you. And Mr. Chairman, a great hearing 
and I don't have any time, but I'll yield back.
    Mr. Upton. You can't yield back used time. You owe me 1\1/
2\ minutes.
    Mr. Engel.
    Mr. Engel. Thank you, Mr. Chairman. Mr. Franks, I'm--years 
ago there was a commercial ``I want my MTV'' and that's what I 
think a lot of my constituents are saying. I know you mentioned 
the on-going fight with EchoStar that you expected it to be 
resolved soon. I'm happy to hear that and I wonder if you could 
add anything about that?
    Mr. Franks. We very much want to be on EchoStar. I know 
EchoStar very much wants our programming services. This has 
long been a market place negotiation. The market place is well 
on its way to resolving the dispute.
    Mr. Engel. I'm happy to hear that. Let me ask Mr. 
Moskowitz, in my opening testimony I was very critical of the 
second dish and I really want to give you your chance to really 
answer that.
    What percentage of customers, in fact, have a second dish 
and what methodology do you decide on which TV stations go on 
the second dish and how many Spanish language broadcast 
stations over all does EchoStar deliver through a second dish?
    Mr. Moskowitz. Congressman, I don't know how many Spanish 
language speaking stations overall we have on second dish. I do 
know that we have a lot of them on the primary dish, for 
example, in New York. We do have of the seven stations we have 
on the primary dish one of them Univision is Hispanic. Of the 
eight on the secondary dish I believe one, perhaps two of them 
are Hispanic. The criteria we utilized to determine which ones 
we put on the second dish are what's the most popular 
programming?
    The more popular the programming, the more likely it will 
be on the primary dish. What we try to do though to eliminate 
any discrimination is provide all of the equipment, tell all 
the customers that if they want a second dish to get these 
other channels, it's available absolutely free of charge, that 
we will give them a professional installation absolutely free 
of charge and that we make it ubiquitous so that when the 
consumer pulls up his program guide that station on the second 
dish looks just like it was on the first dish.
    We do everything we can. The alternative would be fewer 
markets where we can provide local channels by satellite.
    Mr. Engel. So in any of the markets the second dish service 
I can assume by that that none of the big four, ABC, NBC, CBS 
or Fox are on a second dish in any of the markets?
    Mr. Moskowitz. I don't know with certainty. There may be a 
few exceptions where that is the case, but certainly in the 
vast majority of the cases, it wouldn't be the case.
    Mr. Engel. Mr. Lee in his testimony has said that all 
broadcast stations should be on one dish, primary or secondary. 
What's wrong with that? Why not put all the signals together?
    Mr. Moskowitz. It's the way that the satellites are 
configured. Let's take an example that I was taking a look at 
yesterday. In Tennessee, we carry--the Tennessee, Kentucky 
area, we have three local markets all on the same spot beam. 
And that spot beam on the satellite lets us provide about 20 
total channels. If we were to put all of the channels in each 
of those markets on the spot beam, we could only do two markets 
instead of three and Paducah, Kentucky would not receive local 
network channels by satellite.
    Why couldn't we take all the Paducah channels and put them 
on the secondary satellite? Because there are no spot beams on 
the secondary satellite. So you quickly run out of the spectrum 
that you would otherwise use. So it's not linear where you 
could just take it off of one and put it on the other because 
of the configuration, the design of these satellites.
    Mr. Engel. Mr. Lee, since I quoted you, I'd like to give 
you a chance to expand on what you said and would you support 
an FCC rules requiring all broadcast stations to be on a single 
dish?
    Mr. Lee. Yes. Yes, I would, Mr. Engel. This is a very micro 
example, but a number of my employees subscribe for dish 
network local-into-local service in our market and I can think 
of three right away who just haven't bothered to get the second 
dish installed because it involves going home in the middle of 
the day to meet an installer and the primary dish is already 
there. In my estimation, just some inequity in treating certain 
stations as second class citizens.
    Mr. Engel. Mr. Hartenstein, does DirecTV today require any 
customers to use a second dish to obtain some, but not all 
local-into-local stations?
    Mr. Hartenstein. No.
    Mr. Engel. Let me ask you the same question I just asked 
Mr. Lee. Would you support an FCC rule requiring all broadcast 
stations to be on a single dish?
    Mr. Hartenstein. We are waiting and we understand the FCC 
has this matter on review. There has been a bureau order and we 
understand the full Commission is waiting to go by it.
    Mr. Moskowitz is absolutely right. The example he gave and 
the example, there are many other examples that could provide 
the tradeoff of serving all local channels from one in a market 
on one dish versus serving multiple markets.
    We are anxious for the FCC to give a final ruling on that 
and we will abide with it as how it comes down.
    Ultimately, we would all like to have enough spectrum to do 
it, to not have to use multiple antennas, but we simply can't 
defy the laws of physics in terms of the spectrum available and 
are forced to make the kinds of choices in terms of do you 
serve more markets or do you split up the locals? Our practice 
today, as I said before, is not to have done that and it is a 
practice we have adhered to because of the nonfinal determinacy 
by the FCC on this rule.
    So we look forward to them ruling on it.
    Mr. Engel. Well, thank you, Mr. Chairman. I'm going to 
yield back, but obviously I just want to make the point that I 
think a second dish is not consumer-friendly. I think it places 
a burden on consumers and I believe that everything ought to be 
on a single dish. I would agree with Mr. Lee.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you again, Mr. Engel. I'd just like to 
say, know that the Judiciary has already held a hearing on this 
topic and would announce that we'll be getting together soon 
with the Judiciary Committee. We will have yet another hearing 
on that legislative proposal and we'll make the announcements 
on a timely basis, just in an effort to make sure that no 
finger is pointed toward this panel, Republicans or Democrats, 
as it relates to the current crisis with Midnight Madness 
starting soon, we'll adjourn so that the parties can get 
together and whether it's beer or champagne, it is available 
when that handshake comes. I wish you all good luck.
    Thank you.
    [Whereupon, at 1:15 p.m., the hearing was concluded.]
    [Additional material submitted for the record follows:]

  Prepared Statement of the Association of Public Television Stations

    The Association of Public Television Stations (``APTS'') hereby 
submits testimony before the House of Representatives Subcommittee on 
Telecommunications and the Internet on the extension of the distant 
signal license under the Satellite Home Viewer Improvement Act of 1999 
(SHVIA).1
---------------------------------------------------------------------------
    \1\ APTS is a nonprofit organization whose members comprise the 
licensees of nearly all of the nation's 357 CPB-qualified noncommercial 
educational television stations. APTS represents public television 
stations in legislative and policy matters before the Commission, 
Congress, and the Executive Branch and engages in planning and research 
activities on behalf of its members
---------------------------------------------------------------------------
    As the Subcommittee considers legislation to extend SHVIA's 
satellite carrier distant signal license from its current expiration 
date of December 31, 2004 to a later date, it should be aware of two 
related issues of critical importance to the nation's public television 
stations that can be resolved through appropriate legislation.

 First, EchoStar continues to violate the spirit, if not the letter, 
        of SHVIA by placing some public television stations and 
        Spanish-language television stations on ``wing satellites'' 
        that require the installation of a second dish on customer 
        premises, thus illegally discriminating against those 
        ``disfavored'' broadcasters--a practice that has been 
        continuing for over two years.
 Second, while SHVIA's local carriage provisions address carriage of 
        local analog stations on satellite, it is silent with regard to 
        digital signals. As the nation's broadcast infrastructure 
        migrates to digital distribution, it is vitally important that 
        some degree of digital carriage be mandated on satellite 
        pursuant to SHVIA.

A. FIXING THE WING SATELLITE PROBLEM: ENHANCING ACCESS TO NONCOMMERCIAL 
                    AND SPANISH-LANGUAGE PROGRAMMING

    Shortly after SHVIA's local-into-local mandatory carriage 
provisions came into effect in January of 2002, it became apparent that 
EchoStar had been placing some, but not all, local programming--
including some local public television stations and Spanish-language 
stations--on ``wing'' satellites that were accessible by consumers only 
through the installation of an additional receiving dish. However, 
while EchoStar did not charge for the additional equipment and 
installation, it actively refused to promote the availability of such 
an option, and in many circumstances provided misleading information to 
consumers who requested the necessary equipment. The intent of this 
action was clear: to cherry-pick the most popular broadcast programming 
while providing restricted access to other programming in order to 
circumvent SHVIA's ``carry one-carry-all'' mandate.
    On January 8, 2002, after an emergency petition was filed by the 
National Association of Broadcasters and others, the FCC's Media Bureau 
requested public comment on EchoStar's practice. Public Television and 
other broadcasters filed comments on January 23, 2002 objecting to 
EchoStar's practice requiring consumers to obtain a second dish to 
receive some local programming and argued that it violated the intent 
and spirit of SHVIA, which required nondiscriminatory carriage of all 
local stations if one local station is carried on satellite.
    On April 4, 2002, the FCC's Media Bureau ruled that EchoStar's 
practice constituted illegal price discrimination, essentially imposing 
greater opportunity costs on consumers who wished to access certain 
kinds of programming. It also held that EchoStar unlawfully failed to 
provide all local broadcast stations on contiguous channels and to 
provide nondiscriminatory access to all local broadcast stations on its 
electronic program guide. However, the Bureau emphasized that requiring 
installation of an additional dish to access some but not all stations 
was not inherently discriminatory. Rather, it only objected to 
EchoStar's particular implementation of its policy. The Bureau 
therefore required EchoStar to immediately remedy the discriminatory 
effects of its use of secondary dishes and report to the FCC at regular 
intervals concerning its compliance. The Bureau set forth a number of 
suggested remedies, the most prominent of which required EchoStar to 
better publicize and implement its free second dish offer. In a 
separate statement, Commissioners Copps and Martin objected that this 
remedy did not cut to the heart of the matter and suggested that the 
Bureau had acted beyond its authority, because the decision allowed 
EchoStar to remedy its discriminatory conduct merely through better 
publicity.
    Public Television and other broadcasters subsequently petitioned 
the Commission to review this ill-founded decision. However, it has 
been nearly two years since the petitions were filed with no action 
from the FCC. On May 7, 2003 APTS and PBS urged the Commission to 
speedily resolve this issue and opposed the DIRECTV's most recent 
request to allow it to use wing satellites to carry local stations. On 
January 9, 2004, shortly after the approval of its merger with 
NewsCorp, DIRECTV announced that it would expand local service into 17 
additional markets by placing local broadcasters on a second 
dish.2
---------------------------------------------------------------------------
    \2\ www.skyreport.com (January 9, 2004). Although DIRECTV plans on 
placing all local broadcasters on a second dish, thus potentially 
ameliorating any discriminatory effect, it does require local 
subscribers to purchase the additional dish.
---------------------------------------------------------------------------
    Public television is significantly disadvantaged by this 
continuing, and discriminatory practice. In light of FCC inaction, the 
time for legislative intervention is now. Presently, 30 public 
television stations in markets throughout America are placed on wing 
satellites. A list of affected stations is attached to this testimony. 
Although EchoStar has been required to report on improvements in its 
outreach efforts regarding its free second dish offer, it has been 
impossible for either the FCC or the public to fully determine the 
success of its actions, because EchoStar refuses to publicly release 
the number of local subscribers who ask for a second dish and receive 
successful installation in comparison to the total number of local 
subscribers.
    Public television urges the Subcommittee to consider legislation to 
ensure that satellite carriers providing local service to consumers 
should not discriminate against public broadcaster or Spanish-language 
broadcasters by placing these stations on hard-to-access wing 
satellites.

                    B. DIGITAL CARRIAGE ON SATELLITE

    Public Television is an enthusiastic proponent of digital 
television. With its higher quality images and sound, and its inherent 
flexibility to broadcast either a high-definition or multiple standard 
definition streams, along with additional streams of data, digital 
television gives public television stations new innovative tools to 
expand their educational mission in ways that were not possible in the 
analog world. For instance, public television stations are regularly 
producing new high-definition digital programming for national, 
regional and local distribution. In addition, multicasting will enable 
an expanded distribution of formal educational services, workforce 
development services, children's programming, locally-oriented public 
affairs programming, and programming addressed to traditionally 
unserved or underserved communities. Lastly, public television stations 
also have plans to provide innovative, educational and public safety 
data services through ``datacasting.'' 3
---------------------------------------------------------------------------
    \3\ Datacasting involves the distribution of data files (e.g. maps, 
text, video or animation) over the air and can be directed either to 
the public at large or to a select portion of the public through 
subscription or other restricted technological means (e.g. encryption).
---------------------------------------------------------------------------
    In light of the significant public interest benefits of 
noncommercial educational digital services, public television 
respectfully requests that satellite companies such as DIRECTV and 
EchoStar be required to carry all free, over-the-air digital signals 
where local television stations are being carried pursuant to SHVIA. 
Carriage should include but not be limited to both high-definition 
programming and the value-added multicast digital programming currently 
being broadcast by the 234 public television stations now on the air 
with a digital signal.
    First, digital carriage on satellite will aid in further speeding 
up the digital transition in this country. Analog broadcast television 
service is scheduled to be turned off at the end of 2006 unless 15% or 
more households cannot receive digital broadcast signals either over 
the air or through cable or satellite. Cable accounts for 67% of all 
households; satellite accounts for over 20% with significantly higher 
percentages in some markets. Over half of all satellite subscribers 
purchase a local package, and at least one satellite provider, DIRECTV, 
reports that 75% of its residential customers subscribe to the local 
package.4 In light of these figures, it is vitally important 
that satellite subscribers have access to digital broadcast signals in 
order for the digital transition to be a success within a reasonable 
period of time. In this regard, shortening the digital transition is 
especially important to public broadcasters, which must shoulder the 
substantial cost of dual analog-digital operations for an unknown 
period of time during the transition to digital.
---------------------------------------------------------------------------
    \4\ Federal Communications Commission, Annual Assessment of the 
Status of Competition in the Market for the Delivery of Video 
Programming, FCC 04-5, note 297 (rel,. January 28, 2004).
---------------------------------------------------------------------------
    Second, Congress has established the consistent federal policy that 
public television stations should have access to all telecommunications 
technologies, including satellite-delivered services.5 
Within the cable context, Congress explicitly concluded that ``the 
Federal Government has a substantial interest in making all 
nonduplicative local public television services available'' (a) because 
public television provides educational and informational programming to 
the nation's citizens, thereby advancing the Government's compelling 
interest in educating its citizens; (b) because public television 
stations are intimately tied to their communities through substantial 
investments of local tax dollars and voluntary citizen contributions; 
(c) because the Federal government has invested substantially in the 
public broadcasting system; and (d) because without carriage 
requirements there is a substantial likelihood that citizens, who have 
supported local public television services, will be deprived of those 
services.6 The reasons for this policy apply with equal 
force, regardless of whether the public television station is 
broadcasting in either analog or digital format.
---------------------------------------------------------------------------
    \5\ Congress has stated, for instance, that ``it is in the public 
interest for the Federal Government to ensure that all citizens of the 
United States have access to public telecommunications services through 
all appropriate available telecommunications distribution 
technologies.'' 47 U.S.C.  396(a)(9).
    \6\ Cable Television Consumer Protection and Competition Act of 
1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), Section 2(a)(8).
---------------------------------------------------------------------------
    Lastly, satellite carriage of digital public television signals 
would help to preserve one of few remaining locally owned and operated 
media outlets in the digital age. In an era of media consolidation, 
public television stations may represent the last true bedrock of 
locally controlled free, over-the-air media. The overarching purpose of 
public television stations is to serve the public interest by providing 
educational and informational services to their local communities. To 
that end, the 357 local public television stations that comprise the 
decentralized system of public broadcasting in this country are 
operated by local community foundations, colleges, universities, school 
districts and state commissions. In addition, many public television 
stations possess community advisory boards that provide direct feedback 
from the community regarding stations' performance of and adherence to 
public television's mission. Moreover, stations' daily business 
operations are directly funded by donations from local viewers, thereby 
ensuring community responsiveness in a very concrete financial 
way.7 Local carriage of digital public television stations 
on satellite will promote localism and diversity in the media, will 
expand the reach of noncommercial educational services available to the 
public, and will also provide a further incentive for individual 
donations to public television stations.
---------------------------------------------------------------------------
    \7\ In fact, one-quarter of Public Television's funding comes from 
individual donations, while only about 15 percent of funding comes from 
the Federal government. The balance is funded by local businesses, 
state and local governments, local colleges and universities, and 
foundations. See www.cpb.org/about/funding/whopays.html.
---------------------------------------------------------------------------
    The Subcommittee may hear from satellite carriers that they lack 
the capacity to rebroadcast the digital signals of each local station 
in each of the 210 local markets. However, DIRECTV itself has recently 
claimed that it will increase the amount of high definition television 
programming available to the public.8 And recent technical 
submissions to the FCC have demonstrated that there are technologically 
feasible means to deliver digital signals via satellite despite any 
apparent capacity constraints.9 Nevertheless, if mandated 
digital carriage on satellite systems pursuant to an amended version of 
SHVIA's carry-one-carry-all provision is not immediately possible, 
Congress may mandate as an interim measure that all satellite set-top 
boxes come equipped with integrated digital off-air tuners until the 
end of the DTV transition, after which full digital carriage would be 
required on all satellite systems providing local service. This 
approach would impose little or no burden on satellite carriers 
themselves, as some industry leaders--notably DIRECTV and Cablevision's 
Voom satellite service--are already providing this technology to their 
customers.
---------------------------------------------------------------------------
    \8\ See General Motors Corp, Hughes Electronics Corp and New Corp 
Ltd Seek Approval to Transfer Control of FCC Authorizations and 
Licenses Held by Hughes Electronics Corp to the News Corp Ltd, Public 
Notice, DA 03-1725 (May 16, 2003), p. 3. See also http://
www.directv.com/DTVAPP/imagine/HDTV.jsp, and Communications Daily, 
Satellite (June 5, 2003) (DIRECTV to add Discovery HD Theater, ESPN HD, 
HDNet and HDNet Movies).
    \9\ See Reply Comments of the National Association of Broadcasters, 
Federal Communications Commission, MB Docket No. 03-172 (Sept. 26, 
2003); and Letter from Dianne Smith, Capitol Broadcasting Company to 
Marlene Dortch, Federal Communications Commission, CS Docket 98-120 and 
MB Docket 03-15 (January 22, 2004).
---------------------------------------------------------------------------
    For the above reasons, the Association of Public Television 
Stations urges the Committee to abolish the practice of segregating 
public television and other programmers to remote ``wing'' satellites 
and urges amendments to federal law to require local carriage of 
digital signals on satellite.

                               Appendix A

      PUBLIC TELEVISION STATIONS THAT ARE BEING CARRIED BY ECHOSTAR ON A WING SATELLITE, February 19, 2004
----------------------------------------------------------------------------------------------------------------
                                                                     Station    DMA
                                                                       State    Rank
----------------------------------------------------------------------------------------------------------------
WNYE...................................  New York..................      NY        1   New York
WNJB...................................  Warren....................      NJ        1   New York
WLIW...................................  Plainview.................      NY        1   New York
KLCS...................................  Los Angeles...............        CA      2   Los Angeles
KOCE...................................  Huntington Beach..........        CA      2   Los Angeles
KVCR...................................  San Bernardino............        CA      2   Los Angeles
WYCC...................................  Chicago...................      IL        3   Chicago
WYBE...................................  Philadelphia..............      PA        4   Philadelphia
WNJS...................................  Waterford.................      NJ        4   Philadelphia
KCSM...................................  San Mateo.................        CA      5   San Francisco-Oak-San
                                                                                        Jose
KRCB...................................  Rohnert...................        CA      5   San Francisco-Oak-San
                                                                                        Jose
WGBX...................................  Boston....................      MA        6   Boston (Manchester)
WENH...................................  Deerfield.................      NH        6   Boston (Manchester)
WHUT...................................  Washington................       DC       8   Washington, DC (Hagrstwn)
WNVC...................................  Fairfax...................      VA        8   Washington, DC (Hagrstwn)
WPBA...................................  Atlanta...................      GA        9   Atlanta
KBTC...................................  Tacoma....................      WA       12   Seattle-Tacoma
WUSF...................................  Tampa.....................      FL       13   Tampa-St. Pete (Sarasota)
WEAO...................................  Akron.....................      OH       16   Cleveland-Akron (Canton)
WLRN...................................  Miami.....................      FL       17   Miami-Ft. Lauderdale
KBDI...................................  Denver....................        CO     18   Denver
WBCC...................................  Cocoa.....................      FL       20   Orlando-Daytona Bch-
                                                                                        Melbrn
WTBU...................................  Indianapolis..............      IN       25   Indianapolis
WCVN...................................  Covington.................      KY       32   Cincinnati
WNTV...................................  Greenville................       SC      35   Greenvll-Spart-Ashevll-
                                                                                        And
WNED...................................  Buffalo...................      NY       44   Buffalo
WKMJ...................................  Floyd's Knob..............      IN       50   Louisville
KYNE...................................  Omaha.....................      NE       77   Omaha
KWBU...................................  Waco......................      TX       92   Waco-Temple-Bryan
KRMJ...................................  Grand Junction............        CO    190   Grand Junction-Montrose
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