[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
__________
92-540 U.S. GOVERNMENT PRINTING OFFICE
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
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\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
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\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).
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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
----------------------------------------------------------------------------------------------------------------