[Senate Hearing 108-1023]
[From the U.S. Government Publishing Office]
S. Hrg. 108-1023
REAUTHORIZATION OF THE SATELLITE HOME VIEWERS IMPROVEMENT ACT OF 1999
(SHVIA)
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 4, 2004
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South
CONRAD BURNS, Montana Carolina, Ranking
TRENT LOTT, Mississippi DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas JOHN D. ROCKEFELLER IV, West
OLYMPIA J. SNOWE, Maine Virginia
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada RON WYDEN, Oregon
GEORGE ALLEN, Virginia BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
MARIA CANTWELL, Washington
FRANK R. LAUTENBERG, New Jersey
Jeanne Bumpus, Republican Staff Director and General Counsel
Robert W. Chamberlin, Republican Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
C O N T E N T S
----------
Page
Hearing held on May 4, 2004...................................... 1
Statement of Senator Burns....................................... 3
Prepared statement........................................... 5
Statement of Senator Lautenberg.................................. 54
Prepared statement........................................... 54
Statement of Senator Lott........................................ 56
Prepared statement........................................... 60
Statement of Senator McCain...................................... 1
Letter dated April 28, 2004 to Hon. John McCain from
Congressman Raul M. Grijalva, Member of Congress, House of
Representatives............................................ 2
Statement of Senator Sununu...................................... 3
Witnesses
DeLeon, Araceli, Vice President and General Manager of Stations
KDRX-TV, Phoenix and KHRR-TV, Tucson, Arizona.................. 44
Prepared statement........................................... 45
Ergen, Charles, Chairman and Chief Executive Officer, EchoStar
Communications Corporation..................................... 6
Prepared statement........................................... 7
Hartenstein, Eddy, Vice Chairman, The DIRECTV Group.............. 40
Prepared statement........................................... 42
Sohn, Gigi B., President, Public Knowledge....................... 48
Prepared statement........................................... 50
Yager, Jim, Chief Executive Officer, Barrington Broadcasting
Company........................................................ 13
Prepared statement........................................... 14
Appendix
Letter dated August 19, 2003 to David R. Goodfriend, Director,
Legal and Business Affairs, EchoStar Satellite Corporation from
William J. Roberts, Jr., Senior Attorney, U.S. Copyright Office 69
REAUTHORIZATION OF THE SATELLITE HOME VIEWERS IMPROVEMENT ACT OF 1999
(SHVIA)
----------
TUESDAY, MAY 4, 2004
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 9:32 a.m. in room
SR-253, Russell Senate Office Building, Hon. John McCain,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN McCAIN,
U.S. SENATOR FROM ARIZONA
The Chairman. Good morning. Today, the Committee reexamines
its previous work, the Satellite Home Viewers Improvement Act
of 1999, commonly known as SHVIA. Portions of SHVIA are set to
expire at the end of this year, and efforts to reauthorize this
legislation have begun in both the House and the Senate.
In 1999, Congress's goal in enacting SHVIA was to place
satellite operators on equal footing with cable operators.
Congress's attempt at achieving regulatory parity for these two
providers of video subscription services has produced mixed
results. Five years after the enactment of SHVIA, cable
companies remain the dominant providers of subscription video
services. According to the Federal Communications Commission,
these companies have more than 75 percent of the market for
delivering video programming, and continue to press forward
each year with rate increases considerably above the rate of
inflation.
Unfortunately, the General Accounting Office has found that
the presence of a satellite operator in a local market has no
competitive effect on the rates a cable operator charges. A
February USA Today article noted recent rate hikes aptly
stated, ``So much for predictions Rupert Murdoch and News Corp.
would start a cable-satellite-TV industry price war after
taking over DIRECTV, the top U.S. satellite service.''
There is good news, however; satellite operators are now
offering more consumers the ability to receive their local
broadcast stations. In 2000, approximately 19 percent of
satellite subscribers were able to receive local signals. By
the end of 2003, that number increased to 86 percent of the
U.S. households. The General Accounting Office has found that
DBS operators have 40 percent higher subscribership in markets
where local broadcast stations are offered.
In 1999, I voted against SHVIA, not only because it was
included as part of an appropriations bill, but also because I
did not feel the legislation went far enough in promoting
regulatory parity and encouraging the growth of satellite-
delivered television programming against the entrenched cable
monopoly.
As we now look to reauthorize SHVIA, I believe we must keep
the goal of real regulatory parity in mind. This time around,
Congress must ensure satellite operators have the right tools
to bring robust competition to the video subscription market,
which will lead to more programming options and lower prices
for consumers. Additionally, Congress must review SHVIA in
light of the looming transition to digital television, and
ensure that cable and satellite operators can provide consumers
with outstanding high-definition digital television content to
facilitate this transition.
I have a letter from Congressman Grijalva concerning the
use or discrimination against Spanish language independent
public broadcasters, and, without objection, it'll be included
in the record at this time.
[The information referred to follows:]
House of Representatives
Washington, DC, April 28, 2004
Hon. John McCain,
United States Senate,
Washington, DC.
Dear Senator McCain:
In further reference to our conversation on the reauthorization of
the Satellite Home Viewers Improvement Act (SHVIA), EchoStar's practice
of placing major English language network affiliated broadcasters on a
favorable satellite dish, while relegating Spanish language,
independent and public broadcasters to a second, disfavored dish is
discriminatory and in violation of current law. As you are aware, the
FCC found this practice to be inconsistent with SHVIA and its own
agency rules. Still, EchoStar is clearly abusing the statute and is now
seeking codification of their practices in the reauthorization of
SHVIA.
I find it disturbing that in markets in which EchoStar ``found it
necessary'' to split broadcasters between two dishes, Spanish language
broadcasters were systematically relegated to a second dish, while
other, often lower rated stations, were placed on the main satellite
dish. While EchoStar made the case that capacity was the issue and that
local-into-local service would need to be terminated in some areas if
all broadcasters are placed on the same dish, it is surprising that
EchoStar ``found'' capacity for some Spanish language broadcasters on
the main dish after House members from both sides of the aisle
questioned their practices. Still, many Spanish language stations
remain on the disfavored dish. While I am pleased that some capacity
was made available (after EchoStar made several statements that it was
not), I am concerned that EchoStar reassigned these stations for
political purposes and will move them back to the second dish after the
SHVIA bill passes if it does not address the matter.
Spanish language, independent and public broadcast stations in
Arizona and across the country are an important part of the broadcast
television landscape and it is important that EchoStar follow the law
in regards to equitable placement on their satellite network.
In this regard, I would reinforce the message expressed to you by
the Congressional Hispanic Caucus to include language in the Senate
version of SHVIA that requires all broadcasters be placed on one dish
and ask you to establish a 6 month compliance deadline.
Sincerely,
Raul M. Grijalva,
Member of Congress.
The Chairman. Senator Sununu?
STATEMENT OF HON. JOHN E. SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Sununu. Thank you, Mr. Chairman.
I'm very interested in what our panel has to say today
about the success of the Satellite Home Viewer Act, and, in
addition to the regulatory issues that you raised, I think the
question is whether or not the Act has performed as hoped for,
in terms of providing access and competition and good prices
for consumers.
In addition, I'm very interested in an issue which I've
been working with the Chairman and his staff on, dealing with
an anomaly, in that we use these DMAs, these marketing areas,
for regulatory purposes. And in small states, like New
Hampshire, where we have very limited access to local
affiliates, I think there's only one broadcast affiliate,
sometimes satellite consumers are prevented from getting access
to local signals. We want to try to deal with this anomaly, and
have been working with most all of the participants in the
issue. Everyone seems pretty receptive to some kind of a fix,
and I'm working to structure legislation that will attempt to
deal with this problem felt by New Hampshire and a couple of
other small states, again where the number of local affiliates
is limited to two or even fewer.
I hope to be able to come to some accommodation, and look
forward to the testimony today.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Burns, welcome, and thank you for your long
involvement in this issue.
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Thank you very much, Mr. Chairman. And thank
you for this hearing to reauthorize this Act.
I think it's probably one of the really good pieces of
legislation that we all got to work on. It's also important to
my state of Montana. As you know, we have the highest
penetration level of satellite television in the country, over
40 percent. Over-the-air broadcast signals, cable delivery
limited to the geography of my state, of course, and satellite
television has been a staple for our video marketplace for a
long time.
I think today's hearing should focus on this
reauthorization, which corrected problems that satellite TV's
customers faced in getting access to network television
programming and helped to level the playing field so that
satellite TV could compete with cable. To a large degree, this
bill has functioned as intended. In fact, it has had some
dramatic effect on subscribers in my state.
While I'm a former broadcaster, I recognize the tremendous
contribution that local broadcasting makes to our communities,
particularly in rural states. The ability to receive local
television signals is more than just having access to local
sports or entertainment programming; it's critical for the way
we receive our local news and our community information. Access
to local signals is particularly critical where we are; when we
experience extreme weather conditions, ranging from severe
floods to intense blizzards. Not to say that they need a little
farm news out there in markets, too, every now and then, so I
think that's pretty important.
Unfortunately, the vast majority of the local-to-local
offerings by DBS operators serve urban markets, while Congress
has heard numerous proposals and promises for local-into-local
signals in rural areas by satellite broadcasters over the
years, the reality seems to always be driven by raw economics.
With this in mind, I was the author of the Local TV Act of
2000, which created a $1.25 billion loan program, guarantee
program, to fund local-to-local services to be administered by
the Rural Utility Service. Unfortunately, as with so many
issues, passing legislation was only the first step in moving
forward. In fact, the board created under the local TV only
issued final regulations for that program last December.
Frankly, it is moving at a glacial pace, and it should be
moving much more quickly. I will do everything in my power to
make sure that that RUS makes up for lost time and moves
quickly on the applications to provide local-to-local services
in rural America.
I'd also like to touch on two areas in the current debate
on the Home Viewer Act reauthorization which concerns me
greatly. I have serious reservations about the idea of a
digital white area which would supplant the current grade B
contour definitions for purposes of allowing distance signal
carriage by satellite providers. I'm concerned that localism
would be significantly harmed by allowing for the import of
out-of-market signals even when viewers are able to receive
quality local over-the-air analog signals.
I'm troubled by EchoStar's requirement that consumers
obtain a second dish to receive local Spanish language
programming. I believe this is a direct violation of the Act's
``carry one, carry all'' provision.
Despite the inevitable challenges in what is still a
relatively new technology, the future of the DBS industry in
rural America remains bright. DBS has substantially contributed
to the quality of rural life, opening up new sources of news,
information, and entertainment. In turn, rural Americans have
helped power-drive DBS into a major communications force.
Rural America needs access to local television stations and
network programming. This former farm broadcaster also believes
that rural America is unique in news and information needs,
needs that are being met elsewhere. Whether it's information
about mad- cow disease, commodity markets or equine West Nile
virus, there are fewer and fewer outlets of this type of
information being made available.
So bearing that in mind, the information needs of rural
America, and I'm pleased that both DISH Network and DIRECTV
carry RFD-TV, a rural public-interest television network which
is helping to keep farm broadcasting alive. I'd like to hear
more about that as we move along.
I want to thank all the people who have come here today,
and I'm looking forward to the testimony, Mr. Chairman.
Thank you very much.
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator from Minnesota
Thank you, Mr. Chairman, for holding today's hearing which is
particularly crucial to rural states such as Montana. In fact, Montana
has the highest penetration level of satellite television in the
country at over 40 percent. With over-the-air broadcast signals and
cable delivery limited by the geography of my state, satellite
television has been a staple of our video marketplace for many years.
Today's hearing focuses on the reauthorization of the ``Satellite
Home Viewer Improvement Act,'' which corrected problems that satellite
TV customers faced in getting access to network TV programming and
helped to level the playing field so that satellite TV could compete
with cable. To a large degree, the bill has functioned as intended, and
in fact satellite providers have dramatically increased subscribers
where they offer local signals.
As a former broadcaster, I recognize the tremendous contributions
that local broadcasting makes to our communities, particularly in rural
areas. The ability to receive local television signals is more than
just having access to local sports or entertainment programming. It is
a critical and immediate way to receive important local news and
community information. Access to local signals is particularly critical
in Montana, where we often experience extreme weather, ranging from
severe floods to intense blizzards.
Unfortunately, the vast majority of ``local-to-local'' offerings by
the DBS operators serve urban markets. While the Congress has heard
numerous proposals and promises for local-into-local signals in rural
areas by the satellite broadcasters over the years, the reality seems
to always be driven by raw economics. With this in mind, I was the
author of the LOCALTV Act of 2000, which created a $1.25 billion loan
guarantee program to fund local-to-local services to be administered by
the Rural Utilities Service.
Unfortunately, as with so many issues, passing legislation was only
the first step in moving forward. In fact, the Board created under the
LOCALTV only issued final regulations for the program late last
December. Frankly, I have been very frustrated at the glacial pace that
the program has been implemented, which was recently criticized by GAO.
I will do everything in my power to make sure that the RUS makes up for
lost time and moves quickly on applications to provide local-to-local
services for rural America under the program.
I would like to touch upon two areas in the current debate on SHVIA
reauthorization which concern me greatly. I have serious reservations
about the idea of a ``digital white area'' which would supplant the
current grade 8 contour definition for the purposes of allowing distant
signal carriage by the satellite providers. I am concerned that
localism would be significantly harmed by allowing for the import of
out-of-market signals even when viewers are able to receive quality
local, over-the-air analog signals.
I am also troubled by EchoStar's requirement that consumers obtain
a second dish to receive local Spanish language programming. I believe
this is a direct violation of SHVIA's ``carry one, carry all''
provision.
Despite the inevitable challenges in what is still a relatively new
technology, the future of the DBS industry in rural America remains
bright. DBS has substantially contributed to the quality of rural life,
opening up new sources of news, information and entertainment. In turn
rural Americans have helped power drive DBS into a major communications
force.
Rural America needs access to its local television stations and
network programming. As a former farm broadcaster, I also believe that
rural America has unique news and information needs that are not being
met elsewhere. Whether it is information about mad cow disease,
commodity markets or equine West Nile Virus, there are fewer and fewer
outlets for this type of important information.
Bearing the unique information needs of rural America in mind, I am
pleased that both Dish Network and DirecTV carry RFD-TV, a rural public
interest television network, which is helping keep farm broadcasting
alive. I would like to hear more about how the satellite TV industry
sees its relationship with rural America and what the industry is doing
to meet those special rural needs.
I look forward to the testimony of the witnesses. Thank you, Mr.
Chairman.
The Chairman. Thank you very much.
Our panel this morning is Mr. Charlie Ergen, well known to
this Committee, Chairman and Chief Executive Officer of
EchoStar Communications Corporation; Mr. Jim Yager, Chief
Executive Officer of Barrington Broadcasting Company; Mr. Eddy
Hartenstein, Vice Chairman, Executive Board, DIRECTV; Ms.
Araceli De Leon, Vice President and General Manager of
Telemundo Communications Group; and Ms. Gigi B. Sohn, President
and Co-Founder of Public Knowledge.
Good morning, and welcome.
And, Mr. Ergen, we'll begin with you. Welcome back.
STATEMENT OF CHARLES ERGEN, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER,
ECHOSTAR COMMUNICATIONS CORPORATION
Mr. Ergen. Thank you, Mr. Chairman and distinguished
Members of the Committee. On behalf of EchoStar Communications,
I'm pleased to be invited to discuss the Satellite Home Viewer
Act.
As you know, EchoStar led the fight in the late 1990s for
the right to transmit local signals, arguing this was critical
to our ability to compete. We've invested billions of dollars
in technology to launch local markets, and today, in less than
5 years, we're in 119 markets servicing almost 90 percent of
the United States with local signals.
While SHVIA has been a good first step in addressing huge
disparities between DBS and dominant cable operators, it has
not gone far enough. Reauthorization is a tremendous
opportunity for Congress to cement the good parts of the Act
and to bridge those disparities.
Let me point out ways to improve the law. First, the laws
directed to the FCC to establish good faith obligations for
retransmission consent bargaining agreements is not complete
enough to adequately police the unreasonable behavior of
powerful media conglomerates, and it was further watered down
in its implementation. Many local broadcast stations are now
controlled by companies with multi-video programming
properties. In our experience, retransmission consent
negotiations provide those companies with the opportunity every
three or 4 years to foist on us additional channels that
consumers do not want, and do not want to pay for, as a
condition of retransmission consent. While good faith
requirement has not been effective in preventing such
practices, and needs to be strengthened, we do believe that it
has had an influence on the bargaining behavior of some
broadcasters, and should, at a minimum, be preserved.
Second, the must-carry obligations imposed on satellite
carriers did not adequately take into account the enormous
technical difficulties associated with satellite must-carry.
EchoStar vehemently protested must-carry obligations in the
1999 Act, arguing that spectrum constraints would result in the
inability to do all 210 local television markets, and would
result in carriage of many stations that contain no local
content and that were already being broadcast nationally by DBS
companies. It doesn't make a lot of sense for home-shopping
channels and many religious networks to be broadcast
nationally, and have absolutely no local programming--no local
news, no local weather--to be part of the must-carry act.
Third, with respect to distance stations, the law left some
important things undone. While the law required the FCC to
improve the model for predicting whether a household is
unserved, the improvements that the FCC came up with did not
take into consideration two fundamental issues. It did not take
into account interference to the over-air broadcasts which
weaken stations, and it did not take into consideration the
phenomenon of ``ghosting,'' which makes many stations
unwatchable in today's world. These households count as
``served.'' Congress should require the FCC to implement
improvements to the model in both these areas.
Fourth, we encourage you to improve the parity between
cable and satellite by giving satellite TV providers the
ability to retransmit significantly viewed stations with a
community, and afford the same market modification
opportunities that cable systems have.
And, finally, looking forward, we believe that the
reauthorization of SHVIA offers Congress the opportunity to
facilitate the digital transition. Today, 2 years before the
transition deadline, we have a Satellite Home Viewer Act that
addresses only analog unserved households. Consumers who cannot
receive an over-the-air HD signal, either because a local
broadcaster has only built a low-power facility or because he
has not built any facility whatsoever, should be allowed to be
broadcast via satellite.
DBS can speed the transition to digital broadcasting. We
are now 2 years past the May 1, 2002, deadline for local TV
broadcasters to make the conversion, and still more than half
of the 1,600 broadcast stations are not providing full power
digital broadcasts. While the broadcasters have told Congress
that only a handful of networks have failed to build DTV
stations that operate at full power, a study the NAB recently
presented to the FCC contradicts this claim. Their own study,
again, verifies that more than half the operational DTV
stations are not licensed at their full power. But Congress can
stimulate local broadcasters to speed up their digital
transmission by allowing satellite TV providers to provide DTV
programming to households that are not served with a local
over-the-air digital signal.
In conclusion, while SHVIA has helped create a more level
playing field between cable and satellite, there are many
significant differences in the regulatory treatment that affect
DBS's value to the consumers. In reauthorizing and revising
SHVIA, Congress should eliminate these differences so that
satellite can compete more vigorously and impose no new
requirements that would further disadvantage us relative to our
dominant cable competitors.
We believe you have a unique opportunity with SHVIA to spur
the transition to digital. We hope you will seize it with both
hands.
Thank you.
[The prepared statement of Mr. Ergen follows:]
Prepared Statement of Charles W. Ergen, Chairman and Chief Executive
Officer, EchoStar Communications Corporation
Thank you Chairman McCain, Senator Hollings, and distinguished
members of the Committee, 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 Charles
Ergen, and I am Chairman and Chief Executive Officer of EchoStar
Communications Corporation.
The reauthorization of the Satellite Home Viewer Improvement Act
(``SHVIA'') offers Congress an excellent opportunity to preserve and
extend the pro-competitive measures in the current Act, as well as to
improve regulatory parity between cable and satellite TV providers.
While SHVIA helped create a more level playing field for cable and
satellite TV providers in the multichannel video programming
distributor (``MVPD'') market, there are still many significant
differences in the regulatory treatment of cable and satellite that
affect their relative attractiveness to consumers. In reauthorizing and
revising SHVIA, Congress should take steps to eliminate these
regulatory differences and ensure that satellite carriers can continue
to compete vigorously with cable in the MVPD market. At the same time,
care should be taken not to impose new requirements on satellite
carriers that further disadvantage them relative to their primary MVPD
competitors, the dominant cable industry.
Reauthorization of Section 119--Carriage of Distant Network Signals
Under Section 119 of the Copyright Act, which is set to expire on
December 31, 2004, satellite carriers are allowed to make distant
network programming available to ``unserved households.'' Satellite
carriers' ability to provide distant signals is of crucial importance
to millions of consumers, mostly in rural areas, who cannot receive an
adequate, over-the-air local broadcast signal. One of the reasons there
are so many unserved households is because the cost to broadcasters of
serving these additional households often exceeds the advertising
revenue that the broadcasters hope to generate. To ensure that such
households continue to have access to distant network signals from
their satellite providers, we urge you to reauthorize Section 119 and
to make the statutory license permanent. Cable operators currently
enjoy a permanent license with respect to distant signals. Satellite
carriers should enjoy the same right.
Broadcasters have asked you to limit our ability to provide distant
signals in markets in which we provide local-into-local service. We
oppose this change to the distant signal license. Consumers who do not
have access to an over-the-air signal, and who have to pay for their
television service, should have a choice as to whether to watch their
local broadcaster or a distant broadcaster on their satellite platform.
Just as a consumer in Kalamazoo, Michigan can purchase either the
Kalamazoo Gazette or the Los Angeles Times, satellite subscribers who
qualify under the current law should continue to have this same basic
choice. It is not right to penalize satellite carriers for making the
substantial investments necessary to provide local-into-local service
by taking away their distant signal rights. Nor is it right to penalize
consumers by taking away an option they have today merely because a
satellite carrier has worked to make available to them an additional
option.
By reauthorizing the distant signal license, you will also be
providing a spur to broadcasters to improve and extend their over-the-
air signal to reach as many households as possible. In contrast, taking
away that license would remove any such incentive for broadcasters who
find it less costly to serve unserved households by cable or satellite
than to improve their signals.
Section 119 also permits satellite carriers to retransmit non-
network broadcast stations (i.e., superstations) to satellite
subscribers. Superstations are a staple of cable line-ups and their
availability on satellite systems has been a key driver of growth in
the satellite television industry. Reauthorization of Section 119 will
ensure that satellite carriers will continue to have the same
opportunity as cable to offer such popular programming to satellite
subscribers.
Also, Congress should extend the ``grandfather'' clause in Section
119 so that households that subscribed to distant network signals prior
to October 31, 1999 can continue to receive such signals. We have
hundreds of thousands of satisfied, long-term subscribers that have
come to rely on this provision. There is no reason to disenfranchise
them now.
And Congress should not place a new deadline on eligible consumers'
ability to receive distant stations. Congress has now had long enough
experience with the distant station license to appreciate its benefits.
The license should become permanent.
Transition to Digital Television
The reauthorization of SHVIA also offers Congress an opportunity to
broaden the existing definition of ``unserved household'' so that
consumers who cannot receive a digital television (DTV) signal from
their local broadcaster will have the ability to receive it from their
satellite TV provider. This will spur the transition to digital TV
broadcasting, which has lagged to date despite the statutory deadline
of December 31, 2006 for the relinquishment of analog TV spectrum.
Specifically, a significant number of viewing households (as of
February 2004, all except 17 out of 210 markets) still lack access to a
full complement (ABC, CBS, NBC, FOX, and PBS) of full power digital
broadcasts from the networks serving their areas. And while the
broadcasters have told Congress that only a handful of network stations
have failed to build DTV stations that operate at full power, a study
the NAB recently presented to the FCC contradicts this claim--even
according to that partisan study, more than half the operational DTV
stations are not operating at their licensed power level. Consumers
cannot reasonably be expected to make the investment in DTV equipment
if they cannot even receive DTV signals.
By allowing satellite TV providers to offer DTV programming to
households that are not served with a local over the air digital
signal, Congress would increase demand for digital television sets
among satellite TV subscribers. With more digital TV sets in the
market, broadcasters will have increased incentives to make their
digital signals available to more households sooner. To a significant
extent, the rate of DTV adoption has been slow because consumers are
not willing to buy DTV sets until there is more DTV programming, while
broadcasters are not willing to provide DTV programming until more
consumers have DTV sets. Allowing satellite carriers to beam distant
DTV signals to unserved households would help cut this Gordian knot by
leveraging the deployment of DTV in one part of the country into other
parts of the country that have no such service. By accelerating the
rate of DTV adoption in this way, the vicious cycle that impedes DTV
deployment may at last be broken.
To achieve this, however, it is not enough to ask the FCC to submit
a report to you about an appropriate predictive model. First of all,
this is a ``death by committee'' approach: it would ensure that nothing
happens to expedite the DTV transition until after the deadline for the
transition has elapsed.
Second, no model is necessary in cases where the local broadcaster
has not built any DTV facilities whatsoever. In those cases, there is
no need for a prediction--all of the households that the broadcaster
was supposed to reach with a DTV signal are certainly unserved.
Consequently, Congress should allow immediate distant HDTV service to
those DTV unserved households for which no prediction is necessary, and
should require the FCC to establish a DTV predictive model by expedited
rulemaking for all other cases.
Not surprisingly, this plan is vehemently opposed by broadcast
interests. But these same broadcasters are busily developing lots of
creative ideas for extracting all the benefits offered by digital
spectrum, including a plan to use their DTV spectrum to set up wireless
cable systems to compete with satellite and traditional cable systems.
At the same time, they are failing to hold up their end of the bargain
with the American public by providing full power DTV and returning the
analog spectrum on a timely basis. The broadcasters should not be
permitted to reap all of the benefits of digital, while shirking their
obligations. Congress should adopt our proposal to hasten the digital
transition.
Determining Which Households are ``Unserved Households''
Congress also has an opportunity to improve the process for
determining which households are ``unserved households'' under Section
119 in the following ways.
First, it can improve the model used to predict whether a household
can receive a local network signal of grade B intensity so as to take
into account interference conditions and ``multi-path'' transmission
problems. Currently, the Individual Location Longley Rice (``ILLR'')
model predicts many households to be served when in fact they cannot
receive an adequate signal because local interference conditions have
weakened the signal. In addition, even when the signal strength is
adequate, a household may receive an unwatchable picture as a result of
``ghosting'' caused by multi-path transmissions. Such households should
be treated as unserved. Congress should also consider directing the FCC
to increase the grade B intensity threshold to reflect modern consumer
expectations about picture clarity. The current standard was adopted in
the 1950s and based on consumer quality expectations from that era of
hazy TV reception. Modern consumer expectations are considerably
higher.
Second, Congress could improve SHVIA's waiver and signal strength
testing process, which is not working as envisioned. Five years of
experience with this process shows us that it often leads to a bad
customer experience. In some instances, the law is unclear; in other
cases consumers have unrealistic expectations; and in still other
cases, DBS providers and their customers are subject to the whims of
broadcasters. We recommend narrowing the waiver process to permit only
consumers predicted as receiving weak Grade B signals to request a
signal strength test. We also recommend an explicit clarification of
what we believe to be the current law: that broadcasters may not revoke
waivers once given so long as a subscriber receives continuous service
from the DBS provider--the customer should not be victim to whimsical
rescissions of previously granted waivers. Further, the rules should be
clarified to eliminate consumer confusion when a subscriber is
predicted to receive the same network signal from two local network
affiliates in different DMAs. In those cases, a waiver should be
required 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.
Third, Congress should clarify that where there is not the full
complement of four network stations in a given DMA (e.g. ABC, CBS, NBC
are present, but not Fox), then satellite providers can import a
distant signal of the missing network into that DMA, even though some
households in the DMA might be predicted to be served by an affiliate
of that network in a neighboring DMA.
Carriage of Broadcast Stations
Significantly Viewed Stations. We encourage the Senate to improve
regulatory parity between cable and satellite by giving satellite TV
providers the ability to retransmit ``significantly viewed'' stations
within a community, and afford the same market modification
opportunities that cable systems have. Significantly viewed signals
should also be exempted from network nonduplication, syndicated
exclusivity and sports blackout rules in the communities where those
stations are significantly viewed. We note that, even with these
changes, cable operators will still enjoy a broader copyright license
than the license of Section 119, but these adjustments will help lessen
the gap.
Retransmission Consent. The Committee should also eliminate the
sunset on the non-exclusivity and good faith requirements for
retransmission consent. Currently, for local stations that elect
retransmission consent rather than must-carry, Section 325(b)(3)(C)(ii)
of SHVIA and the Commission's rules prohibit exclusive retransmission
consent agreements and require the local station to negotiate
retransmission agreements in good faith. These requirements sunset on
January 1, 2006.
EchoStar considers these limitations on broadcasters' ability to
negotiate retransmission consent agreements to be essential for the
preservation of a competitive MVPD market and for keeping video
programming prices low. Exclusive retransmission consent agreements not
only can result in limiting the distribution of a local station's
signal to a single MVPD (rather than all of the providers that choose
to carry that signal), but may even give that unfair advantage to an
affiliate of the local broadcaster. In addition, elimination of the
good faith requirement might further encourage troublesome current
practices such as bundling of programming networks. Many local
broadcast stations are now controlled by conglomerates with many other
video programming properties. EchoStar's experience has been that
retransmission consent negotiations provide such companies with the
opportunity every three years to renegotiate video programming deals or
to foist on MVPDs additional video programming that consumers do not
want as a condition of retransmission consent for important local
broadcast stations. While the good faith requirement has not been very
effective in preventing such practices and may need to be strengthened,
EchoStar believes that it does have an influence on the bargaining
behavior of broadcasters and should, at a minimum, be preserved.
Also, Congress should resist the ``symmetry'' of imposing
``reciprocal'' requirements on distributors. Such restrictions make
sense only when the negotiating party has market power that it can use
as leverage in the negotiations. This is true of broadcast stations
that elect retransmission consent versus must-carry, and it may also be
true of the dominant MVPDs--cable systems. But it is not true of all
MVPDs, and Congress should not impose such obligations across the board
on all distributors. To do so would only give broadcasters a
negotiating tool that would neutralize the discipline Congress intended
to impose on broadcasters by making provision for a unilateral good
faith obligation in 1999.
Local-into-local and Two-dish
EchoStar is a pioneer of local-into-local service. We knew that it
was essential to provide such service if we were to compete effectively
with cable. We lobbied Congress in the late 1990s for the rights to be
able to retransmit such signals, and were pleased when Congress passed
SHVIA to give satellite providers such rights. We then invested
billions of dollars in satellite technology to launch local markets as
quickly as possible. Today, EchoStar offers more local broadcasters'
signals within their local communities than any other cable or
satellite TV provider. DISH Network was the first satellite TV provider
to offer local channels with a roll-out of 13 markets. In less than
five years since passage of SHVIA, EchoStar's DISH Network has launched
local-into-local service in 119 television markets, serving more than
86 percent of the country.
Early on, in order to make maximum use of scarce spectrum
resources, we began providing local-into-local service in a number of
markets using a 2-dish solution. Under this solution, subscribers who
want local stations in certain markets are provided with a second dish
completely free of charge so that they can receive all of their local
stations. Once the second dish is installed, the fact that the local
stations are being provided through two dishes instead of one is
completely transparent to the consumer--all the local channels are
listed contiguously on our electronic program guide. The use of the 2-
dish solution has allowed us to deliver local-into-local into more
markets, more quickly than would otherwise have been possible.
Notably, our two dish solution is no different conceptually from
the requirement, in many locations, of multiple over-the-air antennas
to receive all local stations. The multiple antennas are necessitated
by the fact that all broadcasters in a market seldom use the same
transmitter tower, or even locate their individual towers in the same
area. Where transmitter towers are located in different areas, multiple
reception antennas pointed in the direction of the different
transmitters are necessary. Ironically, while broadcasters have decried
EchoStar's two-dish solution, broadcasters appear to expect consumers
to accept the need for multiple over-the-air antennas as a fact of
life.
Nevertheless, the broadcasters are asking Congress to outlaw our
company's specific plan for complying with must-carry and require its
abolition within one year. The wiser course is to resist these
misguided calls and let consumer preferences be the guiding criterion
that will lead to optimal carriage of local broadcast stations. There
are many good reasons for this.
First of all, it is important to recognize that a ``same dish''
requirement for all broadcast stations does not necessarily mean a
``single dish'' for all consumers. If our two dish plan were
prohibited, compliance with the new rule would still require many two-
dish markets, albeit with all broadcast stations on the same dish. In
those two-dish markets, all subscribers that want even one network
station will need a second dish. Furthermore, compliance with the rule
will likely require some current single-dish markets to be converted to
two-dish markets, as shown by DIRECTV's own attempt at remapping
EchoStar's system.
Second, prohibiting our plan would cause massive disruption and
possibly loss of local service for our subscribers in 15 to 30 markets.
This is because moving a market A station from a wing slot to a ``full-
CONUS'' spot beam that now provides some local stations from markets A,
B and C will require the displacement of markets B and/or C from the
spot beam. This in turn means that the subscribers whose stations are
displaced will need a second (or different) dish. To illustrate, take
our EchoStar 7-11 spot beam. That beam currently provides more fully
effective competition to cable, and more choice for consumers, in
Chicago, Indianapolis, St. Louis and Grand Rapids. It has the physical
capacity to carry a total of 24 channels. Some have suggested that we
should increase the compression ratio of our signals to squeeze more
channels onto the spot beam. We have concluded, however, that
increasing the compression ratio above current levels would degrade
signal reception quality to a level we are unwilling to impose on our
customers. We do not compress our signal to a greater extent on any of
our satellites, whether spot beam or full CONUS.
Consequently, the entire capacity of that spot beam is consumed by
four channels from Chicago, seven channels from Indianapolis, six
channels from St. Louis and seven channels from Grand Rapids. In order
to be able to serve all of these markets, five channels from Chicago,
two channels from Indianapolis and two channels from St. Louis were
placed on the wing satellite located at 61.5 degrees in compliance with
existing law. If the law is now changed, the five wing channels from
Chicago could be placed in the spot beam, but since the capacity of the
spot beam is limited to 24 channels, in order to comply with a single
dish edict this would necessitate that all of the channels from
Indianapolis, St. Louis and Grand Rapids which are currently in the
spot beam be relocated to the 61.5 degree location, or to a satellite
located at some other orbital position in order to make all markets in
this spot beam ``same dish'' markets.
Equally important, the number of subscribers that will need second
or new dishes will overwhelm EchoStar's capacity to install them. The
result? With a one-year time frame, many subscribers will lose their
local service.
Third, there are many misconceptions circulating about our two dish
solution. For example, the argument that no one is willing to install
dishes to watch programming from two locations is just plain wrong.
Almost two million of our customers have had dishes installed to view
programming from our 61.5 or 148 degree locations. While the ``look
angle'' from those locations has been cited as a problem by detractors,
in fact with respect to most of our 61.5 degree two dish markets, the
angle for a dish pointed at EchoStar III, located at our 61.5 degree
orbital location, is better than the angle of a dish pointed at the
spot beam satellites located at our 119 and 110 degree orbital
locations, where the remaining local channels are carried. That is, a
consumer is actually more likely to be able to view programming from
the 61.5 degree wing location, than from the 119 degree ``core''
location. Simple math, and the help of a map, confirms the mid-point of
119 and 61.5 degrees longitude to be approximately 90 degrees, a
longitudinal line running approximately through Madison, Wisconsin, to
Springfield, Illinois and Memphis, Tennessee, to Jackson, Mississippi
and New Orleans, Louisiana in the southern United States. From any
location east of that line, the look angle to the 61.5 degree satellite
is empirically better than is the look angle from a dish which must
view programming from a satellite located at 119 degrees.
Another common misconception is that EchoStar charges more for
channels located at wing slots, or charges for the dish required to
view those channels. Again, this is simply not accurate. The second
dish necessary to view those channels, together with professional
installation of the second dish and the channels themselves, are in all
cases offered absolutely free to the customer. While the cost to
EchoStar to provide the second dish and installation is substantial, we
absorb that cost, having concluded that it is more important to be able
to offer the local channels in the greatest number of markets.
Detractors also have complained that EchoStar does not inform
customers of the availability of the wing channels free of charge, and
that we discriminate against the wing channels in channel guide
location. These assertions are inaccurate. Channels at a wing location
are located in our program guide in a fully integrated manner with the
channels located at other locations. Channel numbering--regardless of
location--is contiguous, with each local channel assigned the channel
number it carries off air (with the exception of older EchoStar boxes
where off air channel numbering is not possible for any local channels,
but all local channels are in that event offered with contiguous
numbering). Scrolling through the on screen channel guide, a consumer
who has installed a second dish has no visibility to the existence of
that second dish and can not in any way distinguish between channels
being delivered from satellites located at different orbital positions.
Importantly, where a consumer decides not to take local channels
from the wing satellite, the on screen guide boldly advertises the
availability of the second dish and installation free of charge. Tuning
to the wing channel produces the following bold message: ``YOU MUST
HAVE A SECOND DISH TO VIEW THIS CHANNEL. DISH NETWORK WILL PROVIDE THE
DISH FREE OF CHARGE. CALL 1-800-333-DISH''. Clearly, we give our
customers notice and the choice of getting the wing slot stations for
free, if they want them.
Fourth, it is important to recognize that we have reduced the
number of two-dish markets to only 38 out of 119 markets currently
being served with local stations. Overall, we now carry a total of 895
of local broadcast stations. Of those, only 106 are offered from one of
our wing satellites. Economics has been the driving force for this
reduction. Economically, it is in our best interest to offer a single-
dish solution where possible simply because we offer the second dish
and related hardware, and a professional installation, free to every
consumer who wants a second dish. The cost to EchoStar is well over
$100 for each second dish installed, a significant incentive to offer
channels from a single dish wherever possible, and eliminating the need
for governmental intervention. In fact, over the last year we have
already transitioned eight two dish markets to a single dish solution
(Charlotte, Cincinnati, Ft. Myers, Grand Rapids, Kansas City,
Lexington, Miami and Raleigh), and based on the focus on this issue
provided in recent weeks, we are pleased to advise that effective this
week we have also been able to transition Albuquerque, Phoenix, San
Antonio and Tucson from two dish, to one dish solutions. We are also
moving a total of 27 channels from wing satellites to spot beams over
the next week. As stated, this reduces our two dish markets from 42 to
38 and reduces the number of wing satellite channels from 133 to 106.
In fact, I am prepared to commit to you today that, barring changes
in channel configurations in local markets, we do not intend to add any
more 2-dish markets beyond the 38 that currently exist. We will
continue to migrate existing 2-dish markets to single dish as we are
able to find or create additional spectrum capacity to do so. We hope
to be able to complete that process entirely within four years. But if
we are required to complete the transition on an artificially
compressed time schedule (such as the one-year time frame being
mentioned), the result will be a lose-lose for consumers and
competition. That deadline is both unrealistic and, in any case,
unnecessary because EchoStar plans on migrating all of its subscribers
to a same-dish solution for local-into-local service within four years
anyway. Legislation is simply not necessary to address this transitory
issue.
Conclusion
In conclusion, in reauthorizing SHVIA, I urge you to lessen the gap
that still separates DBS providers from cable operators, create greater
parity between the two competing modes, and resist the creation of
obstacles that would further hamper our efforts to compete.
The Chairman. Thank you very much.
Mr. Yager?
STATEMENT OF JIM YAGER, CHIEF EXECUTIVE OFFICER, BARRINGTON
BROADCASTING COMPANY
Mr. Yager. Thank you, Mr. Chairman, Members of the
Committee.
There are two paramount goals that Congress has repeatedly
reaffirmed since the first Satellite Home Viewer Act was
enacted in 1988. First, the preferred method to provide network
programming to viewers is through local affiliated stations.
And, second, providing network programming by importing
distance signals should only be used when the local station
cannot be provided to a subscriber.
As you know, SHVIA contains two compulsory licenses.
The first, a license allowing DBS to deliver local stations
to local viewers, the so-called local-to-local license, has
been a tremendous success. Since Congress created this license,
tens of millions of your constituents can now receive local
news, weather, and sports programming via satellite. The number
of viewers enjoying this important benefit will grow. DIRECTV
should be commended for its pledge to provide local-to-local in
all 210 television markets across this country as soon as 2006,
and no later than 2008. This aggressive competition has prodded
EchoStar to move forward with its own local-to-local carriage,
currently serving, as Mr. Ergen said, 119 markets.
Unfortunately, in many markets EchoStar forces consumers to
obtain a second satellite dish in order to receive some
stations. Most often Spanish language, religious, and public
stations. We hope Congress will end this discriminatory
practice.
The second license, the distance signal license, has been a
recipe for DBS mischief and abuse. For decades, DBS ignored the
rules for governing who should be eligible for distance
signals, signing up anyone and everyone willing to say they
were unhappy with their over-the-air signal. When the courts
finally ended the illegal practice, there was a firestorm of
consumer outrage, much of which DBS unfairly funneled toward
Congress. Since that time, DIRECTV has complied with the law.
EchoStar, however, continues providing illegal service to
hundreds of thousands of subscribers. A Federal judge recently
found EchoStar broke a sworn promise to a Federal court by
failing to disconnect them. Fortunately, as the local-to-local
rollout accelerates, the distance signal compulsory license
will become increasingly irrelevant.
A major advantage in the expansion of local-to-local is
that is that it eliminates the need for importing distance
signals into local markets. In this regard, NAB urges that in
any market in which local-to-local is offered, the right to
import distance signals should be eliminated.
Today, some in DBS ask that you provide them a new benefit
by vastly expanding the distance signal compulsory license to
create a so-called digital white area. Their claim that this
would accelerate the DTV transition is without merit.
Let me dispel some myths that some in the satellite
industry recently spread. Today, according to the FCC's own
figures, 1,411 television stations are on the air in digital in
203 television markets that serve over 99 percent of U.S.
households, and broadcasters are close to replicating their
analog coverage areas. DTV stations already are reaching 92
percent of the populations they will be required to serve.
Collectively, these stations have spent billions of dollars on
their digital buildouts, and have every incentive to see the
transition completed. EchoStar's claim that a majority of
stations are not complying is false and misleading.
A few examples. Scores of stations cannot complete their
digital buildouts because Mexico and Canada have not provided
the necessary clearances. Under EchoStar's criteria, these
stations are noncompliant. In other areas, particularly out
West, stations must use translators to cover their vast market
areas. The FCC has not authorized upgrading these translators
to digital. In some cases, a station may need as many as 50 to
60 translators to cover their market. EchoStar counts these
stations as noncompliant.
In short, EchoStar evidently asserts that 771 stations
operating at special temporary authority power levels are not
serving their full market area in digital. That's simply not
true. Many of these stations, my three included, are not only
serving their market area in digital, but exceeding their
analog coverage area. EchoStar is simply playing fast and loose
with the numbers. Letting EchoStar siphon off local television
station viewers by providing distant digital signals will not
expedite the DTV transition, but could well undermine localism.
And EchoStar has no intention of returning these viewers, even
after they receive local over-the-air digital signals.
I submit that the answer to stimulating the digital
conversion is not massive importation of distance signals into
a local station's markets. The answer is to have DBS carry the
digital signals of local stations into their market.
At the end of the day, the Committee may choose to simply
extend the Satellite Home Viewer Improvement Act in its current
form for another 5 years. Should the Committee go any further,
we would suggest two changes: ending EchoStar's two-dish
scheme, and ending distance signal importation in any market
that has local-to-local.
As the Committee is aware, the House has begun to
legislate. During that process, NAB has worked with the House
Committee and attempted to work with all affected parties to
find reasonable compromise in these many issues. In that vein,
we endorse the common ground outlined in DIRECTV's written
statement, and will continue to seek accord as the Senate
approaches SHVIA.
Mr. Chairman, this Committee has repeatedly emphasized that
localism should be central to broadcasting. I strongly urge the
Committee to adopt a SHVIA reauthorization that strengthens
localism and does not harm it.
Thank you, sir.
[The prepared statement of Mr. Yager follows:]
Prepared Statement of Jim Yager, Chief Executive Officer, Barrington
Broadcasting on behalf of the National Association of Broadcasting
Thank you, Mr. Chairman.
There are two paramount goals that Congress has repeatedly
reaffirmed since the first Satellite Home Viewer Act was enacted in
1988:
First, the preferred method to provide network programming
is through local affiliate stations and
Second, providing network programming by importing distant
signals should only be used when the local station cannot be
provided to a subscriber.
As you know, SHVIA contains two compulsory licenses.
The first, the license allowing DBS to deliver local stations to
local viewers--the so-called local-to-local license--has been a
tremendous success.
Since Congress created this license, tens of millions of your
constituents can now receive local news, weather, and sports
programming via satellite. The number of viewers enjoying this
important benefit will grow.
DirecTV should be commended for its pledge to provide local-to-
local in all 210 markets as soon as 2006 and no later than 2008.
This aggressive competition has prodded EchoStar to move forward
with its own local-to-local carriage, currently serving 119 markets.
Unfortunately, in many markets, EchoStar forces consumers to obtain
a second satellite dish in order to receive some stations . . . most
often Spanish language, religious and public stations.
We hope Congress will end this discriminatory practice.
The second license, the distant signal license, has been a recipe
for DBS mischief and abuse.
For decades, DBS ignored the rules governing who should be eligible
for distant signals, signing up anyone and everyone willing to say they
were unhappy with their over-the-air signal.
When the courts finally ended this illegal practice, there was a
firestorm of consumer outrage . . . much of which DBS unfairly funneled
towards Congress.
Since that time, DirecTV has complied with the law.
EchoStar, however, continues providing illegal service to hundreds
of thousands of subscribers. A Federal judge recently found EchoStar
broke a sworn promise to a Federal court by failing to disconnect them.
Fortunately, as the local-to-local rollout accelerates, the distant
signal compulsory license will become increasingly irrelevant.
A major advantage of the expansion of local-to-local is that it
eliminates the need for importing distant signals into local markets.
In this regard, NAB urges that in any market in which local-to-local is
offered, the right to import distant signals should be eliminated.
Today, some in DBS ask that you provide them a new benefit by
vastly expanding the distant signal compulsory license to create a so-
called ``Digital White Area.''
Their claim that this would accelerate the DTV transition is false.
Let me dispel some myths that some in the satellite industry
recently spread.
Today, according to the FCC, 1,411 television stations are on-air
in digital in 203 markets that serve over 99 percent of U.S.
households.
And broadcasters are close to replicating their analog coverage
areas.
DTV stations already are reaching 92 percent of the populations
they will be required to serve.
Collectively, these stations have spent billions of dollars on
their digital build-outs and have every incentive to see the transition
completed.
EchoStar's claim that a majority of stations are not complying is
flawed and misleading.
A few examples:
Scores of stations cannot complete their digital build-outs
because Mexico and Canada have not provided the necessary
clearances.
Under EchoStar's criteria, these stations are non-compliant.
In other areas, particularly out West, stations must use
translators to cover their vast market areas.
The FCC has not authorized upgrading these translators to digital.
In some cases, a station may need as many as 50 or 60 translators to
cover their market.
EchoStar counts these stations non-compliant.
In short, EchoStar evidently asserts that 771 stations operating at
Special Temporary Authority power level are not serving their full
market area in digital.
That's false.
Many of these stations--my three included--are not only serving
their market area in digital, but exceeding their analog coverage area.
EchoStar is simply playing fast and loose with the numbers.
Letting EchoStar siphon off local television stations, viewers by
providing distant digital signals will not expedite the DTV transition.
. . . But it will undermine localism.
And EchoStar has no intention of returning these viewers. . . .
Even after they receive local, over-the-air digital signals.
I submit that the answer to stimulating the digital conversion is
not massive importation of distant signals into local stations'
markets. The answer is to have DBS carry the digital signals of local
stations into their markets.
At the end of the day, the Committee may choose to simply extend
the Satellite Home Viewer Improvement Act in its current form for
another five years.
Should the Committee go any further, we would suggest two changes:
Ending EchoStar's 2--dish scheme and
Ending distant signal importation into any market that has
local to local.
As the Committee is aware, the House has begun to legislate. During
that process, NAB has worked with the House Committees and attempted to
work with all affected parties to find reasonable compromise on these
many issues. In that vein, we endorse the common ground outlined in
DirecTV's written statement and will continue to seek accord as the
Senate approaches SHVIA.
Mr. Chairman, this Committee has repeatedly emphasized that
localism should be central to broadcasting.
I strongly urge the Committee to adopt a SHVIA reauthorization that
strengthens localism . . . and does not harm it.
______
Attachment
Written Testimony of K. James Yager, Chief Executive Officer,
Barrington Broadcasting on Behalf of the National Association of
Broadcasters
Introduction and Summary
Ever since Congress crafted the original Satellite Home Viewer Act
of 1988 (``SHYA''), it 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.s
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
119 Designated Local Markets (``DMA's'') that collectively cover more
than 85 percent 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 (set for this week), DirecTV expects to serve 100 DMAs
covering 85 percent 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 percent 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.'' And even if Congress elects to allow certain subscribers who
are technically considered ``unserved'' today to retain distant network
signals, Congress should not allow any new signups for distant signals
in local-to-local markets.
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 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. Congress should step in to
halt this misconduct.
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 tum 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, EchoStar 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, EchoStar 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 EchoStar proposal--by a company 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 tum 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 Congress has consistently stressed--going back to 1988, when it
originally crafted 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 Red 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.'')
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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, Sec. 307(b), 48 Stat. 1083,
47 U.S.C. Sec. 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 Congress
recognized in drafting 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\
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\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-1960s imposed ``network nonduplication'' rules on cable systems. 47
C.F.R. Sec. Sec. 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 Red 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).
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B. 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, Sec. 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.
C. 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 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 Conference Report 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 Conference Report 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 percent. 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 percent 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 Red. 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 DES.'' 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 US.
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 119 Designated Local Markets (``DMA's''), which
collectively cover more than 85 percent 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 Channels to La Crosse-Eau Claire,
Wis., Area. (April 29, 2004) (EchoStar now serving 119 DMAs); EchoStar
Testimony on Reauthorization of the SHVIA Before the House Energy &
Commerce Committee (April 1, 2004), available at http://
energycommerce.house.gov/108/Hearings/04012004hearing1246/
Moskowitz1923.htm (EchoStar offering local-to-local to more than 85
percent of all U.S. television households when it was serving 110
DMAs).
---------------------------------------------------------------------------
DirecTV's plans are still more ambitious. As of November 2003,
DirecTV offered local-to-local to 64 markets covering more than 72
percent 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 percent of all U.S. TV households. By the end of2004,
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
percent 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 EchoStar told Congress and the FCC just two
years ago that this result was unthinkable unless the two firms merged.
---------------------------------------------------------------------------
\5\ Press Release, DIRECTV Names 18 New Local Channel Markets to
Launch in 2004 (Jan. 8, 2004), www.directv.com/DTVAPP/
aboutuslheadline.dsp?id=01_08_2004B.
\6\ 1AIn 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 percent 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/
prograrnming/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 Website,
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\
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\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).
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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).
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This year, the Committee can expect to hear from EchoStar yet again
that it has no hope of significantly expanding their capacity. For
example, we can expect to hear from EchoStar that it will never be able
to carry the digital signals of local television stations, and that it
should instead be given a crutch by Congress to help it 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.s
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. Sec. 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 website, www.dishnetwork.com/content/programming/locals/
index.shtml. On the other hand, viewers wishing to see Channel14
(Univision), Channel 32 (WHUT--PBS), Channel 53 (WNVT--International),
Channel 56 (WNVC--International), or WJAL (Channel68--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 1980s, 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. Sec. 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.,
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 119(e), and (2) qualified owners of recreational vehicles and
commercial trucks, see id., Sec. 119(a)(11).
By its terms, grandfathering will expire at the end of2004. 17
U.S.C. Sec. 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
percent of U.S. television households. EchoStar already offers local-
to-local in 119 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 until1998, 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-hand'' 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 relied on a
distributor called PrimeTime 24 as their wholesaler of distant network
station signals. 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 the DBS firms 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 attempted this in February 1999, a United States
District Judge promptly stopped it from doing so. CBS Broadcasting Inc.
eta/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 was 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. Sec. 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 tum 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\
---------------------------------------------------------------------------
\161\ 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 percent 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.
The House Energy & Commerce Committee has approved a bill that
would bar any new signups for distant network stations in local-to-
local markets and create transitional procedures for existing distant
network customers. In the spirit of compromise, on the understanding
that other important reforms (such as elimination of the two-dish scam)
will be implemented, and that other ill-advised proposals (such as the
so-called ``digital white area'' and ``ILLR reform'' proposals) are not
adopted, NAB believes that such an approach is reasonable.
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 percent
of U.S. television households by the end of2004 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,'' ``1950s-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 1950s, 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 1950s 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 ``modem 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 now demands that Congress
radically expand the distant-signal license they have abused. The
Committee should reject this irresponsible proposal out of hand.
In essence, EchoStar asks 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 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 1990s 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.)
EchoStar's current proposal is equally self-serving. EchoStar 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, 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 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
99.6 percent of all U.S. TV households.\17\ Midway through the
transition, almost three-quarters--73.7 percent--of U.S. television
households have access to at least six free, over-the-air digital
television signals.\18\ Nationwide, 1411 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.
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\17\ National Association of Broadcasters, DTV Stations in
Operation, http://www.nab.org/Newsroom/issues/digitaltv/DTVStations.asp
(last checked Apr. 30, 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'').
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In the top ten markets, covering 30 percent 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 percent ofU.S. households), all 79 top four
affiliated stations are on-air--72 with full power licensed digital
facilities and seven with STAs. Thus, all ABC/CBS/Fox/NBC affiliates in
the top 30 markets, representing 53.5 percent of all U.S. households,
are on-air with DTV--110 stations with full power licensed digital
facilities and nine with STAs.\20\
---------------------------------------------------------------------------
\20\ Id.
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Even as to smaller stations in these markets and stations in
smaller markets--which have far fewer resources but equally high
costs--1292 of 1524 stations are on air with digita1,\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.
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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 percent or more of
their analog service areas. Almost 19 percent of current DTV stations
operating pursuant to STAs currently serve more than 100 percent 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.
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An authoritative study from last fall shows that on-air DTV
facilities are serving 92.7 percent 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, e-mails, 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 EchoStar 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. EchoStar knows all of
this, and it fully understands 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 to hook customers on (distant) satellite-
delivered digital signals and keep them forever.\25\
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\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 EchoStar's 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 tum 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 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
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, 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 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 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\
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\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 EchoStar proposal would also sabotage another key objective of
the SHVIA, namely minimizing unnecessary regulatory differences between
cable and satellite. If EchoStar could deliver an out-of-town digital
broadcast to anyone who does not receive a digital broadcast over the
air, it would have a huge (and wholly unjustifiable) leg up on its
cable competitors, which are virtually always barred by the FCC's
network non-duplication rules from any such conduct. See 47 C.P.R.
Sec. Sec. 76.92-76.97 (1996).
Finally, it would be particularly inappropriate to grant EchoStar a
vastly expanded compulsory license when it has 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. DBS Carriage of ``Significantly Viewed'' Stations
The concept of ``significant viewing'' of TV stations--as applied
to cable carriage--dates back more than 30 years. In 1972, the FCC
adopted a rule, using data about over-the-air viewing in 1971, to
establish which television stations were viewed over the air by a
significant number of households in each community (usually by county).
Local cable systems that would not otherwise have been allowed to carry
these stations were permitted to do so on the theory that, if
significant numbers of viewers could watch a station over the air in a
given area, cable subscribers in that area should also be able to view
the station. See 47 C.F.R. Sec. 76.92(f) (exception to ``network
nonduplication'' rule permitting cable carriage of stations in areas in
which the stations are significantly viewed).
The FCC maintains a list of significantly-viewed stations, based on
standards set forth in 47 C.F.R. Sec. 76.54. If a station is
significantly viewed in the community served by a cable system, the
cable operator may carry that station on a copyright-free basis in that
community under 17 U.S.C. Sec. 111. The Commission has procedures for
adding stations to the list for additional communities based on new
data, as well as a waiver procedure by which stations can effectively
be removed from the list for particular communities. If a station is
dropped from the list for a particular area, the network nonduplication
rules once again apply to carriage of that station in that area.
The local-to-local compulsory license for satellite carriers is
currently limited to retransmissions within a station's own local
market, or DMA. The DBS industry has asked Congress to modify the law
to permit satellite carriers to deliver TV stations outside of their
own local markets into areas in which the stations are considered
``significantly viewed'' by the FCC.
In the spirit of accommodation, NAB does not oppose a carefully-
tailored amendment extending to DBS to ability to retransmit
``significantly-viewed'' television stations. Any amendment to allow
DBS firms to retransmit TV stations into ``significantly viewed''
areas, however, needs to be consistent with the principles of localism
that underlie the entire Satellite Home Viewer Improvement Act. Such
amendments should, to the extent possible, provide the satellite
industry with the same right to retransmit ``significantly viewed''
stations that the cable industry now enjoys, and impose the same
restrictions now imposed on cable. In addition, given the years of
violations of existing copyright law and abuse of FCC processes by
EchoStar, any amendments must be airtight--and create the strongest
possible incentives to those companies to comply with the law--to
reduce the risk that a new exception will become the basis for a new
round of lawbreaking.
In particular, an amendment to add ``significantly-viewed''
stations to the list of those that DBS firms may carry should implement
the following principles:
1. Strict enforcement provisions to protect against abuse by DBS
firms. As Congress is aware, EchoStar has broken a sworn promise to a
Federal judge to tum off illegal distant-signal subscribers, and in
many other instances has shown a disregard for compliance with the
law.\31\ Any ``significantly-viewed'' amendment should guard against a
new wave of lawbreaking by creating strict, objective, verifiable, and
enforceable rules about when satellite carriers can deliver out-of-
market signals into ``significantly viewed'' areas. In particular:
---------------------------------------------------------------------------
\31\ The following very recent examples (from 2003 and 2004)
illustrate EchoStar's indifference to legal requirements: CBS Broad.,
Inc. v. EchoStar Communications Corp., 276 F. Supp. 2d 1237, 46 (S.D.
Fla. 2003) (``EchoStar executives, including [CEO Charles] 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''); In Re Agape Church, Inc. v. EchoStar Communications Corp.,
CSR-6249-M (FCC Media Burea Mar. 16, 2004) (EchoStar violated
Commission's Order on local-to-local service by unlawfully discouraging
subscribers from obtaining access to local religious station); In Re
Tri-State Christian, Inc., Mem. Op. & Order, Dkt. No. CSR-5751 (FCC
Media Burea Feb. 5, 2004) (same); EchoStar Satellite Corp. v. Brockbank
Ins. Servs., Inc., No. 00-N-1513, at 3 (D. Colo. Feb. 5, 2004)
(imposing $30,000 sanction against EchoStar and finding that its
actions ``rose to the level of conscious wrongdoing'').
The FCC, and not any DBS company, should make the
determination about whether a particular TV station is
---------------------------------------------------------------------------
``significantly viewed'' in a particular community.
To make it easier to check on their compliance, DBS firms
should indicate separately which subscribers are being served
under the ``significantly viewed'' provision in their monthly
reports to networks listing new local-to-local subscribers..
If DBS firms violate these simple, objective rules after
being notified of the violation, they would forfeit the
privilege of delivering stations in that market to
``significantly viewed'' areas outside the market. For example,
if EchoStar illegally delivered Washington, D.C. stations to
viewers in Florida, falsely claiming that the stations are
``significantly viewed'' over the air there, EchoStar should
lose the privilege of retransmitting any Washington, D.C.
station outside of the Washington, D.C. DMA. In addition, if
the FCC determines that a station is no longer significantly
viewed in a defined geographic area, the compulsory license
permitting DBS to carry that station should expire shortly
thereafter.
The FCC should be directed to establish expedited
enforcement procedures so that affected stations can obtain
quick relief from the Commission for violations by a DBS finn.
(In the example above, stations in Florida could quickly obtain
relief against the unlawful retransmission of Washington, D.C.
stations to subscribers in Florida.)
2. Protection against potentially severe harm to localism. Delivery
of out-of-market stations to a household should be a supplement to the
DBS firms' delivery of a viewers' local stations, not a substitute for
true local-to-local. (This is always true for cable, which always
offers local stations.) For example, in the case cited by the DBS firms
in their testimony, delivery by DBS firms of New York City stations to
``significantly viewed'' areas in the Hartford/New Haven DMA would be
in addition to DirecTV's and EchoStar's delivery of local Hartford/New
Haven stations.
It would be extraordinarily damaging, however, if the DBS firms
could deliver an out-of market station into a market in which they do
not offer local-to-local service. For example, if EchoStar could
deliver out-of-market stations into DMAs in which EchoStar does not
offer local-to-local, EchoStar subscribers in the latter markets would
see an out-of-town station on their DBS lineup, but would not see their
own local stations. Particularly because the DMAs in which local-to-
local is not yet available are generally small markets, the economic
health, and even the viability, of free, over-the-air local stations
could be threatened as out-of-town stations siphoned off their local
viewers.
For the same reasons, delivery of an out-of-market station in
digital (or high-definition) format into a market in which the local
stations are available only in an analog form would be very damaging to
the local stations in the ``invaded'' market. Congress should therefore
draft any amendment carefully to ensure that any importation of digital
signals into a market does not harm the local stations in the market.
In addition, allowing importation of signals into non-local-to-
local markets (or allowing importation of digital signals into analog-
only local-to-local markets) would damage the incentives for the DBS
firms to continue expanding the number of markets they serve with local
to-local. In some small markets, DirecTV and EchoStar could get much of
the benefit of local-to-local by relying on the ``significantly-
viewed'' exception to deliver stations from neighboring markets. As a
result, the satellite carriers would have much less reason to invest in
providing true local-to-local service in currently unserved markets.
To ensure that expanding the DBS license to include carriage of
``significantly viewed'' stations does not have these harmful effects,
therefore, any proposal to do so must permit delivery of stations into
``significantly-viewed'' areas only if the satellite carrier is already
providing local-to-local service in those areas. When the DBS firm
carries the ``significantly viewed'' station in a digital format, it
should be allowed to import the station into another market into the
relevant community only if doing so will not unfairly harm the local
stations--for example, if the DBS firm is already offering the local
stations in digital.
Finally, an additional amendment is necessary to put broadcasters'
carriage negotiations with satellite carriers on the same footing as
negotiations with cable operators, once both cable and DBS have the
benefit of delivering stations in ``significantly viewed'' communities.
The amendment should direct the FCC to amend its regulations to allow
broadcasters, in appropriate cases, to make their elections between
retransmission consent and mandatory carriage on a community-by-
community, rather than DMA-wide, basis.
VI. 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. (At a minimum, Congress should cease any new
signups for distant signals in local-to-local markets, and
establish appropriate transition provisions for existing
customers who are (under current law) legally receiving distant
network signals today.)
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 EchoStar's predictable claims that
it lacks 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.
Significantly-viewed stations. As an accommodation to the
satellite industry, NAB does not oppose adoption of a provision
allowing importation, in certain instances, of stations that
are considered ``significantly viewed'' in the community to
which they are delivered by the DBS firm--provided that the
amendment contains strong safeguards (and potent penalties) to
ensure against damage to localism.
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'' (subject, perhaps, to limited transitional
provisions). 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), Raycorn Media stations KHNL (NBC) and
KFVE (WB), KIKU (International Media Group, Independent), Ernrnis
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 Horne 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 percent 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
April2002. 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 tum 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 Red 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 (April15, 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 Red 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 Red 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 Red
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
entirey, 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 Red.
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).
The Chairman. Thank you.
Mr. Hartenstein?
STATEMENT OF EDDY HARTENSTEIN, VICE CHAIRMAN,
THE DIRECTV GROUP
Mr. Hartenstein. Chairman McCain and Members of this
Committee, my name's Eddy Hartenstein. I'm the Vice Chairman of
the DIRECTV Group. And it's my great honor and pleasure to be
here today, and I thank you for allowing me to testify on
behalf of DIRECTV regarding the SHVIA reauthorization. The
Members of this Committee, even if you didn't vote for it,
deserve a great deal of credit for creating interest in, and
ultimately creating competition in, the subscription television
industry.
SHVIA, which you helped enact, 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, has
allowed satellite operators to offer a programming service much
more comparable to that offered by cable, unleashing, for the
first time, real competition in the subscription television
market.
In particular, the ability to offer local-into-local
service has enabled satellite operators such as ourselves to
offer a full slate of quality programming comparable to cable
offerings. With this morning's successful launch, just about an
hour ago, of our DIRECTV 7S spot-beam satellite, we will soon
be able to provide local-into-local service in just over a
hundred DMAs nationwide. And we also have pending, before the
FCC, other proposals that'll give us the capacity to reach 130
DMAs by the end of this year, and maybe even as soon as this
summer. At that point in time, just a few months away, we'll be
offering local broadcast channels in markets serving 92 percent
of American television households.
The results have been nothing short of astounding. When
SHVIA was enacted in 1999, the DBS industry, as a whole, had 10
million customers. In the last 5 years, that number has more
than doubled, reaching, collectively, between DIRECTV and
EchoStar, 22 million subscribers, of which DIRECTV serves over
12 million. The increased competition to cable is, in the large
part, due to our ability to retransmit local-into-local
signals. In other words, SHVIA has been an extraordinary
success, and we hope Congress will build on its success through
this opportunity.
We know it's difficult and a complex issue, and we also
know that this is a very busy legislative session, and this
country has a lot of other issues that are extremely important.
Congress does not have a lot of time to act, and with this
realization in mind, we've been meeting with representatives of
the broadcast industry to see if we could reach a common ground
in some of the issues associated with SHVIA reauthorization.
The discussions are ongoing, but we have been able to find
some common ground, at least conceptually, on several basic
issues.
Number one, legislation should extend satellite operators'
ability to import distance signals for at least 5 years, if not
permanently. Legislation should allow, subject to some
limitations, satellite operators to offer the same out-of-
market significantly viewed stations that cable operators
already offer today.
Next, legislation should extend for 5 years existing
retransmission consent exemption for distance network signals.
Legislation should extend for 5 years the existing statutory
provision prohibiting television stations from entering into
the exclusive rate transmission consent agreements. The
legislation should extend the good faith negotiating
requirement to distributors and broadcasters, alike.
Next, legislation should provide a mechanism for
grandfathered distant signal subscribers to choose between
distant and local signals. Legislation should also gradually
implement a no-distance-where-local concept, whereby satellite
operators cannot offer new subscribers distance signals where
local-into-local signals are available. In doing so, however,
legislation must ensure that existing subscribers with both
distant and local-into-local service get to keep both.
Finally, legislation should clarify that ``carry one, carry
all'' means that satellite operators cannot split local analog
or local digital signals, respectively, in one market between
two dishes.
Now, do these principles reflect everything DIRECTV would
want from SHVIA reauthorization? Well, no, of course not. We
still think, for example, that Congress should authorize a
distance signal compulsory license on a permanent basis so that
we don't find ourselves, once again, discussing these very same
issues in another 5 years.
All in all, we think that these principles represent a
reasonable compromise between the two parties and two entities
and two industries that entered these discussions with very
different points of view. We think these principles represent a
modest improvement over current law. Yet I must point out that,
although the issue is outside the Committee's jurisdiction, any
SHVIA reauthorization that includes a satellite-specific
royalty fee hike would not--I repeat, not--represent an
improvement over current law.
Others sitting at this table have their own ideas and will
doubtless submit their own proposals, if they haven't already
done so. That's as it should be. That's this great American
process. Their ideas, like ours, must stand or fall on their
own merits. DIRECTV looks forward to working through these
issues with the Committee to craft the best possible
legislation to continue SHVIA's pro-competitive legacy.
In conclusion, I would like to thank you for all that
Congress has done to nurture the satellite television industry
as a vibrant competitor in the subscription television market.
And with your help, we'll continue to provide the highest
quality, best priced, competitive service to consumers across
America.
I'm happy to take your questions later. Thank you.
[The prepared statement of Mr. Hartenstein follows:]
Prepared Statement of Eddy Hartenstein, Vice Chairman,
The DIRECTV Group
Chairman McCain, Senator Hollings, and members of the Committee, my
name is Eddy Hartenstein and I am the Vice Chairman of The DIRECTV
Group, Inc. 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 this
Committee in 1999 when Congress was deliberating SHVIA. I am pleased to
return to report on the progress that the Direct Broadcast Satellite
(``DBS'') industry has made as a competitor to cable since that time.
The members of this Committee deserve a great deal of credit for
their role in creating competition in the subscription television
industry. SHVIA, which you helped enact, 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 subscription television market.
In particular, the ability to offer local-into-local service has
enabled satellite operators to offer a full slate of quality
programming comparable to cable offerings. With this morning's
successful launch of our DIRECTV 7S spot beam satellite we will soon
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 130 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 percent 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.
The results have been nothing short of astounding. 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 over 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, SHVIA has been an extraordinary success. And we
hope Congress will build on its success.
But we know that SHVIA is a difficult and complex issue, and we
also know that, in this busy legislative session, Congress does not
have a lot of time to act. With this realization in mind, we have been
meeting with representatives of the broadcast industry over the last
month or so to see if we could reach common ground on some of the
issues associated with SHVIA reauthorization. We thought that, if we
could reconcile our differences on these issues, the end result would
likely represent sound and reasonable public policy.
These discussions are still ongoing. But we have been able to find
some common ground, at least conceptually, on several basic SHVIA
issues. Among these issues are the following:
Legislation should extend satellite operators' ability to
import distant signals for five years.
Legislation should allow, subject to some limitations,
satellite operators to offer the same out-of-market
``significantly viewed'' stations that cable operators already
offer.
Legislation should extend for five years the existing
satellite carrier retransmission consent exemption for distant
signal stations.
Legislation should extend for five years the existing
statutory provision prohibiting television stations from
entering into exclusive retransmission consent agreements.
Legislation should extend the good faith negotiating
requirement to all multichannel video providers.
Legislation should provide some sort of mechanism for
``grandfathered'' distant signal subscribers (also known as
``Grade B Doughnut'' subscribers) to choose between distant and
local-into-local signals.
Legislation should gradually implement a ``no-distant-where-
local'' concept, whereby satellite operators cannot offer new
subscribers distant signals where local-into-local signals are
available. In doing so, however, legislation must ensure that
existing subscribers with both distant and local-into-local
service get to keep both.
Finally, legislation should clarify that ``carry one carry
all'' means that satellite carriers may not ``split'' local
analog or local digital signals, respectively, in one market
between two dishes.
Do these principles reflect everything DIRECTV would want from
SHVIA reauthorization? Of course not. We still think, for example, that
Congress should reauthorize the distant signal compulsory license on a
permanent basis, so that we don't find ourselves once again discussing
these same issues in five years. But all in all, we think that these
principles represent a reasonable compromise between two parties that
entered these discussions with very different points of view. We think
these principles represent a modest improvement over current law. Yet I
must point out that--although the issue is outside of this Committee's
jurisdiction--any SHVIA reauthorization that includes a satellite-
specific royalty fee hike would not represent an improvement over
current law.
Others, perhaps including some at this table, have their own ideas,
and will doubtless submit their own proposals if they have not already
done so. That is as it should be. Their ideas--like ours--must stand or
fall on their own merits. DIRECTV looks forward to working through
these issues with the Committee to craft the best possible legislation
to continue SHVIA's pro-competitive legacy.
Conclusion
In conclusion, Chairman McCain and members of the Committee, I
would like to thank you for all that Congress has done to nurture the
satellite television industry as a vibrant competitor in the
subscription television market. With your help, we will continue to
provide the highest quality, best-priced competitive service to
consumers.
I am happy to take your questions.
Senator Sununu [presiding]. Thank you.
And Ms. De Leon?
STATEMENT OF ARACELI DeLEON, VICE PRESIDENT
AND GENERAL MANAGER OF STATIONS KDRX-TV, PHOENIX AND KHRR-TV,
TUCSON, ARIZONA
Ms. DeLeon. Thank you. Good morning.
Good morning to Chairman McCain and the Members of the
Senate Commerce Committee. My name is Araceli DeLeon, and I'm
the General Manager of Telemundo Phoenix and Telemundo Tucson
Channel 40, which also includes Digital Channel 42. It's an
honor and a privilege to appear before you today to address an
issue of vital importance to Telemundo's Spanish language
broadcasters generally and our Nation's growing Hispanic
population.
It is critical that Congress ensures that DBS providers do
not discriminate against Spanish language broadcasters and
their predominantly Spanish-speaking audiences by requiring
these viewers to use a second dish, which most English language
broadcast programming is primarily on a primary dish. This
discriminatory practice is a direct threat to media diversity.
It undermines our ability to serve the rapid-growing Spanish
language population, and it has no place in our communications
laws or in our society.
The two-dish policy used by EchoStar/DISH Network in many
markets violates SHVIA's nondiscrimination principle and it's
``carry one, carry all'' rule, which provides all broadcasters
in a market with equal access to potential viewers served by
satellite carriers. The purpose of ``carry one, carry all'' is
to prevent satellite carriers from carrying only the most
popular local stations, and depriving other less-popular
stations with access to potential viewers in their service
areas. This policy preserves free television and promotes
diverse sources of news and information. Telemundo's local
broadcast stations are the very type of stations that Congress
sought to protect with the ``carry one, carry all.'' A
discriminatory two-dish policy circumvents the ``carry one,
carry all.''
The real victims in this discriminatory practice are the
Spanish-speaking viewers. This community is paying hard-earned
dollars to have access to Spanish language news and
programming, and they should not be burdened with confusing
sales practices forcing them to take additional steps, to pay
additional charges, just to get local news and programming in
their native language. Indeed, consumers generally are not even
notified or informed at the time of purchase or installation
that they need a second dish in order to receive Telemundo.
We are working hard to make Telemundo the premier outlet
for Spanish language programming, local news, and information
in the Tucson and Phoenix communities. For many viewers,
Telemundo and other Spanish language broadcasters urge their
ability to participate fully and receive critical information
concerning quality-of-life issues and their respective
communities. From health information to elections, and
education to employment opportunity, it is critical to the
entire community that everyone has an understandable source of
news and information about their local community. Satellite
carriage is essential to fulfilling that mission.
Last week, the House Energy and Commerce Committee's
Subcommittee on Telecommunications and the Internet approved
SHVIA reorganization legislation that will eliminate the two-
dish discriminatory practices. That legislation requires
satellite carriers offering local-into-local service in the
market to all local broadcast stations in that market available
to subscribers on one receive dish. The DBS providers would be
free to use another dish, if necessary, to accommodate capacity
limits, but it would no longer be permitted to discriminate
against Spanish language, religious, or public local
broadcasters, or the Spanish-speaking community. Telemundo
respectfully urges this Committee to adopt similar language in
its SHVIA reauthorization.
Thank you.
[The prepared statement of Ms. DeLeon follows:]
Prepared Statement of Araceli DeLeon, Vice President and General
Manager of Stations KDRX-TV, Phoenix, and KHRR-TV, Tucson, Arizona
Chairman McCain, Senator Hollings, and Members of the Senate
Commerce Committee. My name is Araceli DeLeon, and I am Vice President
and General Manager of Station KDRX TV (Telemundo Channel 48) in
Phoenix, and KHRR-TV (Telemundo Channel 40) in Tucson. It is an honor
and a privilege to appear before you today to address an issue of vital
importance to Telemundo, Spanish language broadcasters generally, and
our Nation's growing Hispanic population: the need to ensure that DBS
providers do not discriminate against Spanish language broadcasters and
their predominantly Spanish-speaking audiences by requiring these
viewers to use a second dish, reserved for ``less popular''
programming, all too often translated to include local Spanish language
broadcast programming. This discriminatory practice is a direct threat
to media diversity and to the imperative of serving the rapidly growing
Spanish-speaking population, especially in states such as my home state
of Arizona. It has no place under our communications laws or in our
society. Unfortunately, this is not just a theoretical concern; it is a
real problem that I have encountered personally.
In providing local-into-local service under the Satellite Home
Viewer Improvement Act (``SHVIA''), EchoStar has adopted a ``two-dish''
policy for local television stations in many Designated Market Areas
(``DMAs''). Under EchoStar's two-dish plan, subscribers who want to
view all local television stations in a DMA must obtain and install two
receive dishes. To date, most subscribers have installed only the
single main dish, which is the dish that receives signals from
EchoStar's continental United States (``CONUS'') satellites. The CONUS
satellites carry all local English language commercial broadcast
network affiliates (ABC, CBS, NBC, Fox, UPN and WB) in the Station's
DMA, as well as other EchoStar non-broadcast programming, including
basic cable programming networks, premium services such as HBO and
sports packages, and pay per view and adult content services. In
contrast, EchoStar carries local television stations that EchoStar
deems ``less popular'' on secondary ``wing'' satellites.\1\ Relatively
few subscribers have the capability to receive signals from the
``wing'' satellites, because subscribers who wish to receive these
signals must first obtain a second receive dish. EchoStar's practice of
requiring subscribers to obtain a second dish to receive local Spanish
language programming that they already pay to receive discriminates
against local Spanish language broadcasters and Spanish-speaking
subscribers in violation of SHVIA's nondiscriminatory principles, as
well as the ``carry one, carry all'' requirement.
---------------------------------------------------------------------------
\1\ Declaratory Ruling, 17 FCC Red 6069, citing ``EchoStar Subs
Will Need Dish for Some New Local Stations,'' Satellite Business News,
Fax Update, Vol. 7, No. 139 (Dec. 17, 2001) (quoting an EchoStar
executive who stated, ``If the customer wants the less popular
channels, they will need a second dish'').
---------------------------------------------------------------------------
The 2000 Census revealed that 12.4 percent of the U.S. population
is Hispanic, an increase of almost 60 percent from 1990.\2\ The Census
Bureau estimates that by 2020, the U.S. Hispanic population will grow
to represent 17.8 percent of the U.S. population, and by 2050 Hispanics
will account for 24.4 percent of our Nation's population.\3\ As our
Nation's Hispanic population continues to grow, local Spanish language
television is becoming an increasingly important source of news and
information nationally.
---------------------------------------------------------------------------
\2\ U.S. Census Bureau, ``The Hispanic Population,'' Issued May
2001, U.S. Department of Commerce, Economics and Statistics
Administration.
\3\ U.S. Census Bureau, 2004, ``U.S. Interim Projections by Age,
Sex, Race, and Hispanic Origin,'' http://www.census.gov/ipc/www/
usinterimproj/ (rel. March 18, 2004).
---------------------------------------------------------------------------
Telemundo is responding to this growing need. Telemundo was
launched in 1987 as a national Spanish language broadcast network,
providing original programming and vitally important local news to
Spanish-speaking viewers across the United States. Telemundo's owned
and operated stations currently serve 59 percent of all Hispanic
households in the United States, and provide 150 hours of local news
weekly to our local communities.
In Arizona, I manage both the Phoenix and Tucson Telemundo
Stations. Our stations are relatively new, and we are working hard to
make them premier outlets for Spanish language programming, news, and
information in the Tucson and Phoenix communities. I am pleased to tell
you we have had great success to date. Not only do our Tucson and
Phoenix Telemundo stations provide daily local news programming, but we
also provide a strong commitment to public service in the form of
public service announcements, and we continue to increase our
participation in our local communities by supporting important
community activities and initiatives. For instance, in Phoenix,
Telemundo 48 continues to sponsor the Summer Safety Campaign, where,
working with Phoenix Fire Fighters, we are combating summer-time
increases in incidents of drowning by promoting awareness among our
Hispanic viewers of the dangers posed by swimming pools for children
during the summer. We give our viewers weekly tips in order to keep
this problem from becoming even more widespread. In Tucson, Telemundo
40 partners with the Tucson Police Officer's Association to increase
awareness about missing children, and to educate parents about the
steps they can take to help protect their children by fingerprinting
them and taking their picture. Both stations participate in numerous
community and cultural events throughout the year.
As a network formed in 1987, Telemundo is still young, but growing,
just like the U.S. Hispanic population. Our ratings continue to grow,
our popularity continues to grow, and we are proud of the work we have
done to improve and increase Telemundo's reach within the Hispanic
community. EchoStar's ``popularity'' practices, however, utterly ignore
Telemundo's growth and increasing popularity and undermine Telemundo's
efforts to serve Spanish-speakers by effectively closing off satellite
subscribers to our programming.
Until just last week, EchoStar had placed almost all of Telemundo's
Stations, including our Tucson station, on wing satellites, along with
virtually every other Spanish language station in that station's DMA.
EchoStar has just switched several Telemundo stations from its second
dish to its primary dish.\4\ Unquestionably, this is a welcome
development for which we commend EchoStar. However, this is far too
important a matter to be left to the discretion of a DBS provider.
Congress must ensure that DBS operators provide nondiscriminatory
treatment to all local broadcast stations carried as part of their
local-into-local service.
---------------------------------------------------------------------------
\4\ San Antonio, Los Angeles, Dallas, Albuquerque, Tucson and
Phoenix (KPHZ-TV Ch. 11, Holbrook, AZ, is the Telemundo station carried
by EchoStar for the Phoenix DMA) will be received by EchoStar
subscribers through their primary dish effective April 21, 2004.
---------------------------------------------------------------------------
SHVIA requires satellite carriers to carry local broadcast signals
in a nondiscriminatory manner.\5\ The essence of Telemundo's concern
with EchoStar's two-dish policy, ostensibly based on EchoStar's
assessment of a station's popularity, is that it has an unlawful
discriminatory effect on Spanish language stations and Spanish-speaking
subscribers. As the Federal Communications Commission itself has
recognized,\6\ in SHVIA, Congress prohibited satellite carriers from
requiring subscribers to obtain a second dish to receive some local
signals if such a requirement would have a discriminatory effect on
local broadcasters.\7\
---------------------------------------------------------------------------
\5\ 47. U.S.C. 338(d) (requiring satellite carriers to provide
subscribers' access to local signals in a nondiscriminatory manner).
\6\ In the Matter of Implementation of the Satellite Home Viewer
Improvement Act of 1999, Order on Reconsideration, 16 FCC Red 16544,
16566 (2001).
\7\ 47. U.S.C. 338(d).
---------------------------------------------------------------------------
The issue is whether the de facto segregation of local television
stations on the basis of language is a prohibited ``discriminatory
effect.'' The answer is obvious. EchoStar's satellite-assignment policy
has a disparate adverse effect on Spanish-speaking stations and
Spanish-speaking subscribers, because it results all too frequently in
the placement of Spanish language stations on satellites that require
separate receive dishes, while all English language ABC, CBS, NBC, Fox,
UPN and WB affiliates remain accessible to all subscribers via their
single main satellite dish. Spanish-speaking subscribers, who are
overwhelmingly Hispanic, are required to obtain and install a second
dish to receive local Spanish language television programming. This
policy has a discriminatory effect because all subscribers in a market
have the reception equipment necessary to access the ``more popular''
English language network affiliates, but only those subscribers that
request and install an additional dish are able to access Spanish
language broadcast stations, such as Telemundo's Stations. The
discriminatory effect is particularly pernicious because it affects a
group-Spanish-speaking subscribers-more likely to encounter language
barriers while navigating EchoStar's obscure and cumbersome process of
arranging for the installation of a second dish.
Putting aside for the moment the discriminatory effect of
EchoStar's two-dish policy on Spanish-speaking subscribers, the more
general notion that it is permissible to discriminate between local
television stations on the basis of popularity is also inconsistent
with the very purpose of SHVIA. SHVIA includes what is referred to as
the ``carry one, carry all'' rule,\8\ which requires a satellite
carrier carrying one station in a market to carry all stations in that
market. The purpose of the ``carry one, carry all'' rule is to prevent
satellite carriers from carrying only the most popular local stations,
and depriving other less popular stations with access to potential
viewers in their service areas.\9\ By adopting the ``carry one, carry
all'' rule, Congress intended to ``preserve free television for those
not served by satellite or cable systems and to promote widespread
dissemination of information from a multiplicity of sources.'' \10\
Congress determined that without such a rule (1) satellite carriers
would continue to deny carriage to significant numbers of independent
stations in markets where they choose to offer local-into-local
service, and (2) non-carried stations in those markets would be harmed
by losing access to parts of their potential audiences.\11\ Telemundo's
complaint against EchoStar's two-dish policy thus goes to the essence
of the ``carry one, carry all'' rule. Telemundo's stations, which
broadcast Spanish language news, information, and entertainment
programming for a largely Spanish-speaking audience, are the very type
of broadcast stations that Congress intended to preserve and to promote
with SHVIA. EchoStar's two-dish policy, however, intentionally and
pervasively deprives the stations of access to parts of their potential
local audiences. It harms consumers because subscribers who do not have
a second dish are unable to receive the programming of all local
broadcast stations, and subscribers who wish to receive all such local
stations must go through the trouble of contacting EchoStar to order
the second dish with the attendant burdens and confusion that entails.
---------------------------------------------------------------------------
\8\ 47 U.S.C. Sec. 338(a)(1).
\9\ See Joint Explanatory Statement of the Committee of Conference
on HR. 1554, 106th Cong., H.R. Conf. Rep. No. 106-464, at 102 (1999).
\10\ Id. at 101.
\11\ Id. at 102.
---------------------------------------------------------------------------
Congress, in adopting SHVIA's ``carry one, carry all'' rule,
recognized that subscribers might as a practical matter not be willing
to endure the burden of installing the requisite additional equipment
to receive local channels if not carried by satellite carriers:
``Although the conferees expect that subscribers who receive no
broadcast signals at all from their satellite service may install
antennas or subscribe to cable service in addition to satellite
service, the Conference Committee is less sanguine that subscribers who
receive network signals and hundreds of other programming choices from
their satellite carrier will undertake such trouble and expense to
obtain over-the-air signals from independent broadcast stations.'' \12\
By analogy, it is overly optimistic to expect that subscribers will
obtain second dishes if they can receive all local English language
network signals and hundreds of other programming choices using the
main dish alone.
---------------------------------------------------------------------------
\12\ Id. at 102 (1999).
---------------------------------------------------------------------------
In enacting SHVIA, Congress intended to ensure that satellite
carriers provide all local stations in a market without discrimination.
Requiring subscribers to install additional equipment to receive local
Spanish language stations but not local English language stations
constitutes illegal discrimination against alternative media and this
country's growing Hispanic population. Such discrimination is
unacceptable, and has no place in a carriage scheme carried out by a
company utilizing the public's spectrum.
Telemundo is striving to provide Spanish language programming to
our nation, and to Spanish-speakers eager for the additional content,
news, and information that a unique service like Telemundo and local
Spanish language broadcasting generally can provide. EchoStar is
frustrating our efforts by closing off large swaths of the satellite
subscriber base to our signal in a discriminatory manner. Last week the
House Energy and Commerce Committee's Subcommittee on
Telecommunications and the Internet approved SHVIA reauthorization
legislation that will eliminate this discriminatory practice. That
legislation, the Satellite Home Viewer Extension and Reauthorization
Act of 2004 (``SHVERA''), requires satellite carriers offering local-
into-local service in a market to make all local broadcast stations in
that market available to subscribers through one receive dish. EchoStar
would be free to use another dish if essential to accommodate capacity
constraints, but it will no longer be permitted to discriminate against
some local broadcasters, including local Spanish language broadcasters.
Telemundo respectfully urges this Committee to advance the same
one-dish policy for local broadcast signals in Senate SHVIA
reauthorization legislation.
Thank you, and I look forward to answering any questions you may
have.
Senator Sununu. Thank you very much, Ms. DeLeon.
Ms. Sohn, welcome.
STATEMENT OF GIGI B. SOHN, PRESIDENT,
PUBLIC KNOWLEDGE
Ms. Sohn. Chairman McCain and distinguished Members of the
Committee, my name is Gigi Sohn. I'm the President and Co-
Founder of Public Knowledge, a nonprofit organization that
seeks to ensure that citizens have access to a robust public
domain, an open Internet, and flexible digital technology. I
have more than a decade of experience working on digital
television policy issues.
I want to thank the Committee for inviting me to give a
public-interest perspective on the reauthorization of the
Satellite Home Viewer Improvement Act, or SHVIA.
Public Knowledge has two core interests in SHVIA, which has
benefited consumers by allowing the satellite TV industry to
become a competitive alternative to cable. Our foremost
interest is that SHVIA remains a bill that addresses only the
carriage of local-broadcaster network signals by satellite
providers. We are concerned that, because SHVIA must pass by
year's end, it may become a vehicle for other intellectual-
property-related legislation. Some of these bills would make
radical changes to copyright and trademark laws, some are more
benign, and some Public Knowledge even supports. These bills
should be debated separately on their merits, and not simply
attached to SHVIA.
The bill that we are most concerned about is H.R. 4077, the
Piracy Deterrence and Education Act of 2004. This bill would
lower the legal standard for criminal copyright infringement,
making felons out of people who accidentally make copyrighted
works available over computer networks. It would also require
Internet service providers to share personal information about
their customers with the government and the content industries.
A coalition of ISPs, Web-based e-mail providers, software
providers, tech companies, and public-interest groups oppose
this measure. We urge the Committee to reject any and all
attempts to turn SHVIA into a Trojan horse for those who would
like to change copyright and trademark law.
Public Knowledge's second interest in SHVIA is its
potential to speed the transition to digital television, which
actually started in 1986 when the FCC, at the behest of
broadcasters, set aside unused broadcast spectrum for what was
then known as analog high-definition television. Much has
changed in 18 years, not the least of which has been the
explosion of new wireless telephone and broadband technologies,
none of which will realize their full potential without access
to the extra spectrum that broadcasters are holding.
If you haven't seen The New York Times today, there's a
whole separate section on the explosion of wireless technology,
called ``Wireless Living.'' I would commend you all to read it.
Now, perhaps more than at any other point over the past two
decades, completing the digital television transition is
vitally important to the economic and social well-being of this
country. Reclaimed spectrum could help to vastly improve
current licensed and unlicensed wireless services, including,
one, permitting interoperability among local and national
public safety and law enforcement personnel, and enabling those
end-users to send and receive video, pictures, data, and phone
calls. Imagine if the FBI could send, via broadband networks,
mug shots and fingerprints to local law enforcement officials
or public safety officials; two, filling in cell phone dead
zones where signals routinely get dropped; and, three,
providing wireless last mile Internet connections that can
compete with DSL and cable modem services. These more powerful
and lower cost connections would improve Internet access for
healthcare agencies, schools, and people in underserved areas,
such as rural and poor communities.
Improvements in these services will undoubtedly speed
broadband deployment in the U.S., which lags far behind
countries like South Korea and Japan. Moreover, and equally as
important, the reclamation of the spectrum will permit great
future innovation, the creation of new technologies and
services, that will redound to the public's benefit.
In the absence of a hard deadline for the transition to
DTV, this country is caught in a vicious cycle. Viewers don't
buy digital television sets because there is little compelling
digital programming, and broadcasters don't provide digital
programming because viewers lack the equipment. The only way to
break this cycle is to ensure that viewers have access to
programming that would encourage them to buy digital
televisions. But the ability for them to do so is hampered by
the fact that many broadcasters are not operating digital
stations at their full transmission power.
One way that Congress can help to ensure that viewers have
access to digital television programming is to permit satellite
TV companies to provide distant digital TV signals to those
viewers who cannot receive additional television signals from
their local broadcaster. Congress can do this simply by
broadening SHVIA's definition of ``unserved households'' to
include those viewers.
There are no good reasons why Congress should not adopt
this digital wide areas plan. To the extent that the ability to
view distant digital television signals gets viewers hooked on
the technology, the public interest is served. To the extent
that the importation of digital signals propels local
broadcasters to complete the transition and broadcast their
digital signals in full power, the public interest is served.
To the extent that these two actions together lead to the
completion of the digital television transition, which then
frees up valuable ``beachfront'' spectrum for critical public
uses, the public interest is served. But it is not in the
public interest for Congress to shield broadcasters from
competition, and, thereby, extend the digital television
transition, when there are so many important economic and
social reasons to complete it at or near the 2006 deadline.
I want to, again, thank this Committee and Chairman McCain
for giving me the honor of appearing before you today.
[The prepared statement of Ms. Sohn follows:]
Prepared Statement of Gigi B. Sohn, President, Public Knowledge
Chairman McCain, Senator Hollings and distinguished members of the
Committee, my name is Gigi B. Sohn. I am the President and Co-Founder
of Public Knowledge, a nearly three-year old nonprofit public interest
organization that seeks to ensure that citizens have access to a robust
public domain, an open Internet and flexible digital technology.
Previously, I worked on digital television issues for nearly a decade
as the Executive Director of the Media Access Project and as a member
of the Advisory Committee on Public Interest Obligations of Digital
Television Broadcasters. I want to thank the Committee for inviting me
to give a public interest perspective on the reauthorization of the
Satellite Home Viewer Improvement Act (SHVIA).
Public Knowledge has two core interests in SHVIA. Our first and
foremost interest is that SHVIA remains a bill that addresses only the
carriage of local broadcast and network signals by satellite providers.
As discussed below, we are concerned that because SHVIA must pass by
September 30, 2004, it may become a vehicle for other intellectual
property-related legislation, some of which proposes radical changes to
copyright law.
Public Knowledge's second interest in SHVIA involves its potential
to speed the transition to digital television. As discussed in detail
below, it is both in the public interest and in the interest of many
communications industries, including the wireless, telecommunications,
cable and broadcast industries, to complete the transition to digital
television as close to the FCC's original December 31, 2006 deadline as
possible. Completion of the transition and the subsequent return of the
spectrum now used for analog television service will permit an
explosion in new wireless broadband, public safety and cellular
telephone services that will benefit the public in a myriad of ways.
One way to encourage greater adoption of digital television by
consumers would be to permit satellite providers to import distant
digital network television signals into markets where viewers cannot
receive such a signal locally. This ``digital white areas'' plan will
allow satellite customers to see the benefits of digital television and
hopefully encourage them to purchase the equipment they need to make
the switch.
I. SHVIA Should Remain A ``Clean'' Bill
As this Committee knows, the current SHVIA expires on September 30
of this year. SHVIA and its predecessor, the Satellite Home Viewer Act
of 1988, have been key drivers in ensuring that satellite TV providers
can compete with cable TV providers. Indeed, in just ten years since
the inception of direct broadcast satellite service (DBS), viewership
has grown to almost 20.4 million households representing nearly 22
percent of the multichannel video provider (MVPD) market.\1\ This
competition has benefited the public with lower prices and more
programming when they choose an MVPD.
---------------------------------------------------------------------------
\1\ See Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming, MB Docket No. 03-172
(released January 28, 2004).
---------------------------------------------------------------------------
It is for this core reason that Congress should reauthorize SHVIA
without delay. But in doing so, it should be wary of attempts to turn
this proposed law into something that it is not and should not be: a
vehicle for other copyright and trademark legislation. Some of these
bills would make radical changes to copyright and trademark law, some
are more benign, and some Public Knowledge supports. In any event,
these copyright and trademark bills should be debated separately on
their merits, and not simply attached to SHVIA.
As of today, there are no fewer than four copyright and trademark-
related bills pending in the Senate and nine pending in the House that
Public Knowledge believes their sponsors may wish to attach to SHVIA.
The bill that we are most concerned about is H.R. 4077, ``The Piracy
Deterrence and Education Act of 2004.'' Among other things, this bill
would lower the legal standard for criminal copyright infringement from
one of ``willfulness'' to one of ``reckless disregard,'' making felons
out of people who accidentally make copyrighted works available over
computer networks. H.R. 4077 would also require Internet Service
Providers to share personal information about their customers with the
government and the content industries, in contravention to the D.C.
Circuit's recent ruling in Recording Industry Association of America v.
Verizon Internet Services, 351 F.3d 1229 (C.A.D.C. 2003). A coalition
of Internet Service Providers, web-based e-mail providers, software
providers, tech companies and public interest groups oppose this
measure.
Thus, we urge the Committee to reject any and all attempts to turn
SHVIA into a Trojan Horse for those who would like to change copyright
and trademark law. SHVIA should be kept to its intended purpose--as a
means by which satellite TV providers are permitted to carry local and
network television signals under certain conditions.
II. Rapid Completion of the Transition to Digital Television is in the
Public Interest
Whenever the beginning of the transition to digital television is
discussed in this country, three government actions are inevitably
mentioned: (1) passage of the Telecommunications Act of 1996, which
required the FCC to give broadcasters an extra six Mhz block of
broadcast spectrum ``if the Commission determines to issue additional
licenses'' for digital television services;\2\ (2) the FCC's 1997 Fifth
Report and Order, which set out the schedule for the digital television
transition, including the December 31, 2006 deadline for the return of
the ``analog'' spectrum,\3\ and (3) passage of the Balanced Budget Act
of 1997, which permits broadcasters to keep their extra channel until,
among other things, no less than 85 percent of household's in a
broadcaster's market are: (a) capable of receiving digital television
broadcasts using either a digital television set or an analog set
equipped with a digital-to-analog set-top box or (b) able to receive at
least one digital programming channel of each broadcaster in a market
from an MVPD.
---------------------------------------------------------------------------
\2\ 47 USC Sec. 336(a)(1).
\3\ Advanced Television Systems and Their Impact on the Existing
Television Broadcast Service, 12 FCCRcd 12809 (1997).
---------------------------------------------------------------------------
If we view the digital television transition in this light--as a
mere seven year process imposed by the government on an unwilling
broadcast industry, then there might be a colorable argument to be made
that the transition is moving apace and that broadcasters should be
commended for their diligence in promoting digital television
irregardless of the costs.
Unfortunately, that vision is revisionist history. As journalist
and author Joel Brinkley recounted in his book ``Defining Vision: How
Broadcasters Lured the Government into Inciting a Revolution in
Television,'' the transition to what we know now as digital television
actually started a full decade before the 1996 Act was passed, and as
the book's title indicates, was promoted by the broadcast industry
itself. In 1986, as the FCC was on the brink of giving the spectrum to
the ``land mobile'' industry for use in two-way radios, the National
Association of Broadcasters embarked on a campaign to convince the
government to let it keep the spectrum because each broadcaster needed
two channels to broadcast in analog high definition television. The NAB
argued that ignoring their request would allow the Japanese, who had
just started broadcasting in analog high definition, to beat out U.S.
industry again, as it had several times in the 1970s and 1980s. The NAB
was victorious and the FCC took billions of dollars of unused
``beachfront'' spectrum off the market, where it has lain largely
underutilized for eighteen years.
Much has changed during that time. Analog high definition
television gave way to digital television, but the extra spectrum was
still needed to ensure that viewers did not lose broadcast television
during the transition. Cable and satellite television both grew
tremendously during that time (indeed, DBS services did not exist until
1993), so much so that almost 90 percent of households subscribe to an
MVPD. And perhaps most important, new wireless telephone and broadband
technologies have proliferated to such an extent that the extra
spectrum that broadcasters are holding is preventing these industries
from realizing their full potential.\4\
---------------------------------------------------------------------------
\4\ Demand for wireless services has grown from $30 billion in 1997
to $78 billion in 2002. See Statement of Reed E. Hundt before the
United States Senate Committee on Commerce, Science and Transportation,
April 28, 2004 at 3.
---------------------------------------------------------------------------
So now, perhaps more than any other point over the past two
decades, completing the transition to digital television is vitally
important for the economic and social well being of this country. While
some have derided calls to speed the transition to digital television
as a mere spectrum reclamation project, reclaiming that spectrum has
undeniable and very palpable public interest benefits.\5\ These
benefits include the ability to vastly improve current licensed and
unlicensed wireless telephone and wireless broadband services,
including:
---------------------------------------------------------------------------
\5\ Statement of Reed E. Hundt, supra at 7-18.
permitting interoperability among local and national public
safety and law enforcement personnel and enabling end users to
---------------------------------------------------------------------------
send and receive video, pictures, data and phone calls;
filling in cellphone ``dead zones'' where signals routinely
get dropped; and
providing wireless ``last mile'' Internet connections that
can compete with copper-based DSL and coax-based cable modem
services. These more powerful and lower cost connections would
improve Internet access for health care agencies, schools and
people in underserved areas such as rural and poor
communities;\6\
---------------------------------------------------------------------------
\6\ Perhaps the biggest barrier to providing pervasive wireless
broadband service in many areas, and in particular rural areas is that
because of the quality of the spectrum now used to provide those
services, signals cannot easily pass through trees, houses and bad
weather. Using high-quality broadcast spectrum would vastly ameliorate,
if not eliminate, that problem.
Improvements in these services will undoubtedly speed broadband
deployment in the U.S., which lags behind far countries like South
Korea and Japan. Moreover, and equally as important, the reclamation of
this prime spectrum will permit great future innovation--the creation
of new technologies and services that will redound to the public's
benefit. But for now, as it has been for nearly two decades, this
public ``beachfront'' is occupied by just one industry.
What can be done to move the transition to its completion so that
the public can benefit from these new uses of spectrum? One way is to
repeal the 85 percent cap and reinstate the December 31, 2006 deadline.
Another way, as some FCC staff have proposed, is to interpret the 85
percent threshold to include all MVPD households regardless of whether
those households are receiving a real digital television signal or a
digital television signal that is down-converted to analog. These
proposals may be controversial for broadcasters, but would ensure that
the transition would be completed close to or at the deadline.
In the absence of those two solutions, the 85 percent threshold
will be met only if people are educated about, and can see the benefits
of, digital television. The consumer electronics industry has done a
fine job educating retail sales staff and the public about digital
television, and as a result, sales have increased enormously over the
past several years. By contrast, there is little evidence that the vast
majority of broadcasters have used the power of their local stations to
embark on a similar campaign. Confusion about digital television is
rampant. A recent Consumer Electronics Association study showed that
nearly a quarter of digital television consumers are confused about
some aspect of the purchase--and these are the people that wanted to
buy a digital television set! \7\
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\7\ Sean Wargo, Director, Industry Analysis, Consumer Electronics
Association, ``HDTV Summit: A Market in Control,'' presented at the
Consumer Electronics Association's Ninth Annual HDTV Summit, March 30,
2004.
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The ability to actually see digital television is in part hampered
by the fact that many broadcast stations are not operating at full
transmission power. There may be sound technological or other reasons
why this not the case, but these do not argue for Congress to stand
idly by while these problems eventually get resolved. As discussed in
the next section, there is a small fix that Congress can make that will
ensure that millions of viewers without access to digital television
can see and enjoy it.
III. Congress Should Permit Satellite Providers to Carry Distant
Digital Network Signals in Areas Where Viewers Cannot Receive
Them
In the absence of a hard deadline for the transition, this country
is caught in a vicious cycle--viewers don't buy digital television sets
because there is little compelling digital programming and broadcasters
don't provide digital programming because viewers don't have the
equipment. The only way to break this cycle is to ensure that viewers
do have access to the kind of programming that would encourage them to
buy digital television sets.\8\
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\8\ As the New York Times reported on Sunday, analog format
television shows, which are predominant on local television stations,
appear distorted and out of focus on flat-panel high definition
television sets. The report went on to say that ``[b]ased on that
factor alone, diving into the flat-panel market now would seem grossly
unwise, like buying a great-looking car with shoddy brakes, or trading
in an 18-inch, all-meat hero sandwich for something smaller in a pita
with a side salad.'' Matt Richtel, ``See the Big Picture? Don't Forget
to Examine the Fine Print,'' NY Times, May 2, 2004.
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One way that Congress can help ensure that viewers have access to
digital television programming is to permit satellite TV companies to
provide distant digital TV signals to those viewers who cannot receive
a digital television signal from their local broadcaster. Congress can
do this simply by broadening SHVIA's definition of ``unserved
household'' to include those viewers. This ``digital white area''
proposal would not only encourage the purchase of digital television
sets, but would provide local broadcasters an incentive to provide a
full power digital signal.
Predictably, the broadcast industry is opposed to this plan. Their
arguments can be grouped into three categories: (1) the change is not
necessary because most of the country's television viewers do receive
digital television signals; (2) importation of distant signals would
harm localism; and (3) EchoStar, the main proponent of the plan, is a
bad actor whose intention is to provide distant signals in
perpetuity.\9\
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\9\ See March 22, 2004 Letter of Marsha McBride, Executive Vice
President--Legal & Regulatory Affairs, National Association of
Broadcasters to Hon. Michael K. Powell.
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As to the first argument, if we assume that the broadcasters'
numbers for what percentage of television viewers are served by digital
signals are correct, then one must ask, ``where is the harm?'' The
broadcasters claim that on-air digital television facilities are
serving 92.7 percent of population served by corresponding analog
stations.\10\ If that is indeed the case, then it is curious why they
are so bitterly opposed to a plan that would, by their own estimation,
affect not even eight percent of television households.
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\10\ McBride Letter, supra at 4.
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The broadcasters' second argument is equally suspect, and is just
one of the many times that broadcasters have hidden under the cloak of
``localism'' to stave off competition. To the extent that local
broadcasters provide excellent local news, weather, public affairs and
other programming, importation of a signal from New York or Los Angeles
cannot begin to compete with their programming. And if importation of a
distant digital network signal compels a local broadcaster to
transition to digital faster, shouldn't such a policy be applauded?
As to the third argument, Public Knowledge believes that it is up
to Congress and the FCC to set guidelines to ensure that bad actors are
prevented from providing distant digital signals in perpetuity. The
fact that some satellite providers have in the past ran afoul of the
law does not diminish the positive effect that permitting digital white
areas could have on the transition to digital television.
In short, there are no good reasons why Congress should not permit
satellite providers to import distant digital TV signals to those
households who cannot receive them. To the extent that the ability to
view distant digital television signals gets viewers hooked on the
technology, the public interest is served. To the extent that the
importation of distant signals propels local broadcasters to complete
the transition and broadcast their digital stations in full power, the
public interest is served. To the extent that these two actions lead to
the completion of the digital television transition, which then frees
up valuable ``beachfront'' spectrum for critical public uses, the
public interest is served. But it is not in the public interest for
Congress to shield broadcasters from competition and thereby extend the
digital television transition when there are so many important economic
and social reasons to complete it at or near the 2006 deadline.
Conclusion
I want to again thank the Committee for permitting me to present a
public interest perspective on SHVIA. That perspective is
uncomplicated. First, it is in the public interest for Congress to
ensure that the reauthorization of SHVIA remains a vehicle for
permitting satellite television providers to carry local and network
broadcast signals under certain circumstances, and not also for non-
germane intellectual property matters. Second, it is in the public
interest for Congress to accelerate the transition to digital
television by broadening the definition of ``unserved households'' to
permit the importation of distant digital network signals to those
viewers who cannot receive such digital signals from their local
broadcasters. The sooner the digital television transition is
concluded, the sooner the American public can benefit from better and
new wireless broadband and telecommunications services that have been
unavailable because of the spectrum that has been tied up for nearly
two decades.
Senator Sununu. Thank you, Ms. Sohn.
We'll begin the questioning with Senator Lautenberg.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Thanks very much, Mr. Chairman.
I would just take a minute to set the stage for my
interest, and that is that in our state of New Jersey we have
very little activity by the satellite companies that get
through to the subscribers. We have, in the more than 560
little towns and municipalities in New Jersey--and that the
cable and satellite providers have effective competition in
only 53 of those 562 towns. And it doesn't represent a picture
that tells me that there's real choice for the subscribers.
And, Mr. Chairman, I would just ask that my full statement
be recorded as if read.
Senator Sununu. Without objection.
Senator Lautenberg. Thank you.
[The prepared statement of Senator Lautenberg follows:]
Prepared Statement of Hon. Frank R. Lautenberg,
U.S. Senator from New Jersey
Mr. Chairman:
Thank you for holding this hearing on the Satellite Home Viewer
Improvement Act (SHVIA) and our continuing effort to promote regulatory
parity between cable and satellite.
I supported the Satellite Home Viewer Improvement Act in 1999
because I believed then, as I believe now, that regulatory parity and
competition between cable and satellite is necessary to ensure that
consumers will get more options, better rates and service when they buy
multi-channel video services.
According to the FCC, franchised cable operators control about 75
percent of the multi-channel video program distributor (MVPD) market.
Direct Broadcast Satellite (DBS) providers account for 22 percent of
subscribers-and the number is growing.
While recent data reveal that DBS service is winning the battle for
new subscribers, effective competition currently exists in very few
markets.
In my home state of New Jersey, for example, the FCC has determined
that there is ``effective competition'' between traditional cable and
satellite providers in just 53 of 562 towns and municipalities.
``Effective competition'' means that satellite has a penetration
rate of as little as 15 percent of the market.
The numbers for New Jersey are disappointing because GAO has found
that competition from satellite providers leads to lower rates and
improved quality and service for all subscribers.
Since 1999, when satellite operators acquired the legal right to
broadcast the signal of local broadcast stations, satellite emerged as
a real competitor to cable.
In areas where subscribers can receive local broadcast stations
from DirecTV and EchoStar, the satellite penetration rate is
approximately 40 percent higher than it is in areas where subscribers
cannot receive local broadcast stations from DBS operators.
We need to do everything we can to promote more head-to-head
competition between cable and satellite providers. That's clearly in
the public interest. I look forward to hearing from our witnesses today
about the best way to foster that competition.
Thank you, Mr. Chairman.
Senator Lautenberg. What's been the experience of--any of
you--in the state of New Jersey? Why is it, do you think, that
there are so few options for the subscriber in the number of
communities where the satellite is available?
Mr. Hartenstein. I'll take a stab, Senator Lautenberg. As
far as I know, there is--you used a term, ``effective
competition''--the FCC has a definition for that, which means
when satellite has, I believe, achieved some 15 percent of the
homes passed. Now, nationwide, with some 100-plus million
television households collectively as an industry, we are just
coming up to, as I said before, about 22 million. That's not
the same everywhere. So where we might not have met the FCC, if
you will, ``artificial test'' of effective competition by that
percentage, I think we, from DIRECTV's perspective, are very
much alive and are hoping to, as our results that I think both
of our companies are going to be announcing--us later today,
and Mr. Ergen later this week--announce that we are still
growing nationwide.
I'd be happy to sit down with you or your staff and talk
about specific cities, specific towns, what we are doing. We
are, more and more, realizing that to be an effective
competitor, we do need to provide local service, first by the
local stations and next by local service with our
representatives, both installation and service, on a local
basis. We're doing everything we can to promote that and to
promote a whole-house solution for every television set in
every home.
Senator Lautenberg. Mr. Ergen?
Mr. Ergen. Senator, if I may add, your comments I get from
every Senator and every staff that I have talked to over the
last 7 years on satellite issues, which is, How do we bring
more and provide more competition? For example, more local
cities. And, on the one hand everybody wants local cities, and
our company has gone out and done more local cities, almost by
double, than anybody else in our industry; at the same time,
broadcasters then say, ``Well, you can't do it on two dishes,''
even though that's the law that we all agreed to 5 years ago.
So it never seems to be enough.
The SHVIA law allows broadcasters from markets outside of
New Jersey to have restrictions on what we can do, as satellite
companies, in the state of New Jersey's so-called DMAs, and we
think that should be eliminated and fine-tuned in this
legislation.
High-definition television, your customers in New Jersey
want high-definition television today. The fact of the matter
is, is that the broadcasters in New Jersey aren't broadcasting
high enough power to broadcast over the entire state of New
Jersey. But our company today can broadcast every square inch,
high-definition television in New Jersey.
I was very disappointed to hear the Senator from Montana
talk about Montana, with 40 percent of the people in that great
state of Montana have satellite television today, it's a great
geographic area, and we broadcast to every square inch high-
definition television. Local broadcasters may broadcast in low
power, or they may not broadcast at all, and so customers are
being denied that service. So it's no wonder we can't provide
effective competition to cable.
Senator Lautenberg. So to kind of sum it up for me, is it
because of restrictions that you find that are beyond your
control. Mr. Hartenstein, did I understand you to kind of
rhetorically say that, ``Well, there are things that we--more
things that we should offer''? Was I correct in describing what
you said?
Mr. Hartenstein. Yes. In the next, roughly, three to 4
months, we hope to double the number of designated market
areas, DMAs, that we will be serving local-into-local, going
from where we are today, at about 64 markets, to about 130
hopefully by the end of this summer. We still need some action
from the FCC. And we took a big step this morning with the
launch of our eighth satellite, our second spot-beam satellite,
which should now be operational and online in about 30 days.
Beyond that, that will take us to about 130 markets.
And, as everybody has indicated, there are some 210
markets. We have made a promise to deliver local channels to
all 210 markets by the end of 2008, and, if possible, by 2006.
We intend to live up to that, not just because we promised the
FCC we would do that, but because it makes competitive good
sense for us as a business.
Senator Lautenberg. So the subscribers across the country
can look forward to the result of keen competition--that is
better pricing. Does that represent a point of view that you
have?
Mr. Hartenstein. We think we deliver a better product,
superior performance, and, we think, at a better value, more
economic for consumers.
Senator Lautenberg. Is better value the same as better
price?
[Laughter.]
Mr. Hartenstein. Yes, I believe so. Yes. If you look at
what we deliver, yes, sir.
Senator Lautenberg. Thank you very much.
Thanks, Mr. Chairman.
Senator Sununu. Senator Lott?
STATEMENT OF HON. TRENT LOTT,
U.S. SENATOR FROM MISSISSIPPI
Senator Lott. Thank you, Senator Sununu. And you're doing
an excellent job presiding over this hearing.
[Laughter.]
Senator Lott. Thank you to the panel for being here this
morning. Your part of this technology revolution is just
breathtaking, the things that are occurring, the access, and
the choices we have, so we appreciate you being here and giving
us your thoughts on how you're doing and how we can be helpful
to you in providing good quality competition in this tremendous
area.
I'm looking forward to the day when I only have to pay one
bill to one company after selecting between competing companies
for my television service, my utility bill, my telephone bill,
Internet, long distance, the whole package, one company. It
sure would save me a lot of time. I'm getting dang tired of
paying all these bills. And, of course, I know it's all going
to be digital and high quality and all of that.
I was very interested, Mr. Hartenstein, that you said that
your intent is to have local-to-local service by 2008 or
perhaps even 2006. Now, that would be really well received by
people in Mississippi. You only have two areas that get the
local-to-local in my state: Jackson, Mississippi, the Columbus/
West Point area. You're not on the Gulf Coast, but you're
continuing to work in that direction. Is the technology there
to do that?
Mr. Hartenstein. Senator, yes, the technology is there. We
are just in the process of getting it launched and utilizing
the spectrum that we have within our resources. That means more
satellites, and that's exactly what we intend to do.
In about three more months, we will hit our tenth
anniversary of the first DIRECTV system, the first DBS system,
18-inch system, sold, and that, indeed, happened in Jackson,
Mississippi. And we just brought local----
Senator Lott. Oh, we were first in that area. Good, we like
to make note of any area that we're first.
[Laughter.]
Mr. Hartenstein. Yes, one of your good constituents, the
Maloney family, was, indeed, there with us as we launched. And
we intend to bring local channels to such DMAs as Biloxi and
others in the time-frame that I outlined, yes, sir.
Senator Lott. I discussed that with you, too, Mr. Ergen,
about the hope that we could have that service on the Gulf
Coast. But it's bigger than just my own state. I mean, we're
hoping we can have this service all over the country. I know
you want that and you're working on that. How are you doing?
Mr. Ergen. Well, good. First I want to mention that we were
first to switch a DIRECTV customer over to the DISH Network----
--
[Laughter.]
Mr. Ergen.--in the state of Mississippi.
But we've had a lot of discussions, as you know----
Senator Lott. Sure.
Mr. Ergen.--and you have been a great champion of providing
competition for video in the state of Mississippi and all
across the country. And, again, your comment--I'll just repeat
my previous comment--every single Senator or Congressman asked
us to deliver their local channels and provide competition in
HD in their local areas. There's only so much spectrum to do
that. And, of course, with technology, enough time, and enough
money, I think we can accomplish great things.
Senator Lott. You all seem to be making plenty of that,
so----
Mr. Ergen. There's FCC. There's FCC.
[Laughter.]
Mr. Ergen. We're spending a lot of money. More than we're
making, I can tell you that.
Senator Lott. Good.
Mr. Ergen. But the FCC needs to provide us more spectrum.
And, again, the two-dish solution, I want to point out to this
Committee, as you know, was a compromise. While we fought
vehemently against must-carry, the compromise that the
broadcasters agreed to, even the broadcaster on this panel,
was, if we have to do must-carry, that we could do it on two
dishes. They want to change those rules now. That rollback
would--we do Jackson, Mississippi. We have plans to put Biloxi,
Mississippi, up later this year. Without a two-dish solution,
we wouldn't be able to put up Biloxi. So there's a compromise
we have to make--and this Committee needs to look at that--as
to whether you want more cities with more competition or
whether you want to eliminate a two-dish solution for
consumers, that we all agreed to 5 years ago.
We don't want to be on two dishes, because we're not as
effective of a competitor as we can. But we don't discriminate
against anybody with two dishes. It's free to all those
customers. All those Spanish-speaking customers, not one of
them has to pay for it. I am not aware of any single household
in the United States today who wants two-dish who cannot get it
from us for free.
Senator Lott. What are you saying now? You have two dishes,
but you only have to pay for one? Did you say that?
Mr. Ergen. That's right. There is actually no extra charge
for two dishes, and we have over two million customers today
that have two dishes, for a variety of reasons. And, of course,
local is one of those. So we don't discriminate. It is the law.
It was the law that broadcasters agreed to. They want to change
that now, and somehow think we're doing something that we're
not supposed to be doing. And it's a compromise. And I
personally think that if given enough time and money--we very
much want to be on a single dish, and it's just really a
question of working with broadcasters to find a transition plan
that we can--so we're able to do that.
Senator Lott. Ms. DeLeon, you've already commented on this,
but----
Ms. DeLeon. Yes.
Senator Lott.--would you like to sum up what your----
Ms. DeLeon. Just to add and to clarify----
Senator Lott.--response was and further response to what he
just said.
Ms. DeLeon. Yes. I just want to clarify that the problem, I
suppose, that I have as a Spanish language broadcaster is that
most Spanish language, if not all Spanish language, are on the
second dish. And I have a--from a personal experience with my
parents, who live in San Antonio, Texas, when they called to
get satellite service, they were not told that they needed a
second satellite dish to get Spanish language, and it wasn't
until they come out and install it, and you realize that you
don't get the Spanish language networks, that you then have to
go back and ask for someone else to come out and install that
second dish. So it makes it complicated, you know, not knowing
at the beginning that you need two dishes, and then having to
request to get the second one installed. And it's--in some
cases, it's hard enough to have one dish installed, let alone a
second one.
Senator Lott. But it is for free, huh?
Ms. DeLeon. Well, if--you know, I have been told--I mean,
I've heard different stories. I've had people call the station,
who say that they were asked to pay another $5 or another $10
for installation. I mean, I don't know that personally, but
I've heard that. Once it has been installed, and if you get it
installed under a certain--whether it's a promotion or
something that's happening, and then they have to come back and
install the second one, but there may be a small charge.
Senator Lott. Let me, if I could, move along, because my
time's about to run out.
Mr. Yager, obviously your association has some problem with
this distant digital usage by the dishes here. I apologize for
missing your statement. Could you, sort of, sum up----
Mr. Yager. Well----
Senator Lott.--your concerns there?
Mr. Yager. We believe strongly, Senator, in localism as the
foundation for the broadcast system in this country. It has
worked, and worked very well----
Senator Lott. I agree, but your networks apparently don't
agree with that.
Mr. Yager. Well, strangely enough, I think the networks do
agree with that, because their local stations are an extremely
important part of----
Senator Lott. I hope they know that.
Mr. Yager.--their corporations. But we believe that that
localism is fundamental. Anytime you bring in a distant signal
into a local market that diminishes the value or the viewing of
your local station, it affects the advertising rates you can
charge for your station. Now, how does that impact the public?
It impacts the public in the resources you have to devote to
local news, local public service, local sports, anything you
might do in terms of community involvement.
We are not a subscription-based service. Free, over-the-air
broadcasting is just that--free, local. We don't get a monthly
subscriber fee from anyone. You don't write us a check each
month, Senator. We provide that service based upon one single
source of revenue, and that is advertising. Anytime that our
audience is diluted or diminished, it affects the rates we can
charge our advertisers. It also affects the effectiveness of
the local advertiser in his market, or our markets, to reach
the right population, and the population that would either buy
their service or their products.
Senator Lott. Mr. Chairman, if you would give me just one
more question, I----
Senator Sununu. Is there objection?
[Laughter.]
Senator Lott. Well, thank you very much.
Mr. Ergen, in your testimony, which I did not get to hear
when you presented it, you talked about this carriage of
broadcast stations or significantly viewed stations. Would you
sum up what you're saying there and how we need to treat this
area, in your opinion, in the bill?
Mr. Ergen. Before I get to that, let me just respond to Mr.
Yager. We're not asking to broadcast HDTV where the local
broadcaster is broadcasting it. We'd love for the local--the
problem is that most Americans today--I'd dare say if you'd go
back to your home state of Mississippi, or any of the staff
here goes back to their home state, and you tried to get HDTV
from the local broadcaster today, I'd dare say you can't do it.
In America, we're trying to lead the technological revolution.
Right? And since we can do that today via satellite through
every square inch of the United States, in every hometown,
those HD signals, we think that, at least for a transition
period, we need to be able to do that. And, of course, that
does speed up the digital transition, which frees up the
spectrum to help us. We're a country that is not in the top ten
for Internet connections anymore, and we're going to go fall
behind technologically, productivity, and everything else if
we're not able to free up that spectrum and use it for more
productive uses.
So on the significantly viewed areas what happens is, and
sometimes Washington is a great example, where you have
Washington and Baltimore, cities very close together, and a
cable company can broadcast, in some cases, both to Baltimore
and to Washington network stations, where satellite's
restricted to just one station. And so in a market where more
than one local broadcaster of a network is widely viewed, and
Washington is an example, then we would like to technically be
allowed to do that to put us on a more level playing field.
Senator Lott. And the law does not now allow you to do
that?
Mr. Ergen. The law allows cable to do it, but not
satellite, today.
Senator Lott. Thank you, Mr. Chairman.
[The prapred statement of Senator Lott follows:]
Prepared Statement of Hon. Trent Lott, U.S. Senator from Mississippi
Mr. Chairman, thank you for holding this hearing today so that the
Committee can begin the essential process of considering the
reauthorization of the Satellite Home Viewers Improvement Act of 1999--
or SHVIA. That was an important piece of legislation which required
quite a bit of hard work in order to guarantee that the Nation had
updated and fair guidelines for the provision of Direct Broadcast
Satellite (DBS) services. I learned many years ago that Americans have
increasingly come to rely on competitive options for television
viewing, and that the government should be very cautious when
legislating and regulating in this area.
Mississippi is primarily a rural state, and the deployment of
Direct Broadcast Satellite services has been a welcome development for
television viewers in my home state. Currently, approximately 300,000
homes in Mississippi subscribe to Direct Broadcast Satellite services,
which is one of the highest DBS penetration rates in the country. For
many of these viewers, they have no other option for receiving a full
compliment of television channels, and the deployment of ``local-into
local'' satellite signals is another positive step in the right
direction. Unfortunately, ``local-into-local'' is not yet available in
most Mississippi markets, so I am eager for the Direct Broadcast
Satellite providers to offer this service to all markets in the state.
DBS has provided a competitor to cable in many communities in my State,
and I believe the multichannel video market is healthier as a result.
As we look at reauthorizing the Satellite Home Viewers Improvement
Act of 1999, Congress should be prudent and make certain that any such
new legislation is fair to everyone. We should take great care that any
changes or revisions to this law do not cause unwarranted disruptions
to American television viewers, but we must also be sure that any new
legislation is fair to the various industries which are affected by the
law--including copyright holders, broadcasters, and the Direct
Broadcast Satellite companies.
I am hopeful that this issue will not become sidetracked by
partisanship, because Congress has historically been able to find
common ground in this area. As we approach the end of the year and the
expiration of provisions in the Satellite Home Viewers Improvement Act
of 1999, I also encourage my colleagues to focus on working across
Committee jurisdictional lines and in a bicameral fashion to find the
legislative approach that would best benefit the American public.
I am looking forward to hearing the testimony of the witnesses
today as the Committee gathers the information needed to address this
reauthorization. Thank you again, Mr. Chairman, for holding this
hearing.
Senator Sununu. Thank you, Senator Lott. You're a shining
light in this Committee.
[Laughter.]
Senator Lott. Well, there are only two of us.
[Laughter.]
Senator Sununu. I need all the help I can get.
Mr. Yager, did you want to respond to that last point?
Mr. Yager. Well, if I may, the significantly viewed status
that cable was afforded in 1972, and that was because there
were many markets that had stations on the air early, let me
give you an example of Charlotte, North Carolina. They had a
station that was on the air in 1947. I happened to run stations
in Columbia, South Carolina, for a number of years. Charlotte
was considered significantly viewed in Columbia, South
Columbia, in 1971. Today, that would not be the case.
We believe there's a compromise that can be reached in
significantly viewed for satellite, but it is a very slippery
slope that you don't destroy local television stations, the
audiences they've developed, as you try to apply a 1972 rule to
satellite in 2004. We're willing to discuss it, we're willing
to talk about it, but we think we have to take it very
judiciously.
Senator Sununu. Thank you, Mr. Yager.
There are some industries that would probably think
applying 30-year-old rules to be advanced compared to some of
the rules that we're applying that were in more like 60 or 70
years ago.
Mr. Ergen, Ms. DeLeon described the process of getting the
second dish installed for some of her viewers that didn't sound
very simple or streamlined or maybe common sense to me. Is the
process that she described a reasonable reflection of the way
EchoStar operates?
Mr. Ergen. No, I don't believe it is. First of all, it is
free. There is no $5 charge. There is no charge for
installation of a second dish, either at the time of
installation or later. If, by chance, a customer is unaware,
for some reason, they need a second dare, if her parents didn't
know they needed the second dish, even after the system's
installed, our on-screen guide--and this was a recommendation
by the FCC that we voluntary have put into action--every one of
our channels on the guide is contiguous. And if you keypunch to
a Telemundo channel in a certain city--and, by the way, we
carry her stations on one dish today in the state of Arizona
and Tucson and Phoenix--and we carry the vast majority of
Telemundo stations on one dish--but if you're in a city where
we don't, and you punch on Telemundo, a screen will come that
says, you know, ``To get a free--you'll need a dish for this
signal. It's free. Call 1-800 DISH Network, and we'll come out
and put it in for you.'' So nothing could be farther from the
truth. And, again, this is the law.
And we want to be on one dish. We're not in disagreement
with anybody on this panel from the broadcasts, and it's in our
best interest. If cable doesn't have a dish, if DIRECTV's on a
single dish, then we're disadvantaged in the marketplace, and
the marketplace is going to force us to go a single dish. On
the other hand, we have to make a decision, do we do 60
markets, and put everything on a single dish, or we do 119
markets and, for a period, have things on two-dish while we
work toward those things? And the vast majority of channels
that are on two-dish have no local programming, no local news,
no local weather. Things like home shopping, who don't do
anything for the local community, and were already broadcasting
their station on a nationwide basis. The signal is not
indifferent from a local broadcast to the national broadcast.
So it's very misunderstood that some of the broadcasters want
to point to without giving you all of the facts.
Senator Sununu. Other than the issue or the question of
whether there's local content, how do you decide what goes on
the second dish?
Mr. Ergen. It typically is that, where you have local
content. So if a Telemundo station does not have----
Senator Sununu. Well, but the majority of stations, the
majority of channels that you provide don't have local content,
correct?
Mr. Ergen. The majority probably do have some local
content, whether it be a PBS station that has local input, or
whether it be local news, weather, or sports. But we have only
about 15 percent of our channels are on a wing. It's typically
a home shopping channel, a religious channel, where we carry,
for example, Trinity Broadcasting under a nationwide license
for nationwide, but local signal is exactly the same. Those
would be ones that would go. Sometimes it's a technical reason,
where we just don't physically have the capacity from a
particular spot beam of a satellite. We pioneered that
technology, so it's not like a spot beam suddenly can get
bigger and bigger and bigger, and more and more channels. It's
pretty fixed in the number of channels that it can do.
It's simply a balance between, Would you rather us do more
local markets, or would you rather do us on a single dish?
That's a decision for this Committee to make. You made that
decision in 1999. We honored our agreement to every single
Congressman and Senator. We have 48 states today. Within 2
weeks, we'll be in all 50 states with local-to-local, the first
company to do that. We did that because we promised people that
we'd do it, with the legislation of 1999.
Now the broadcasters want to change the rules. Now they
want to change the rules. And if you want to change the rules,
going forward, I think that makes sense. We don't have a
problem with that. But to retroactively change a rule, it would
be like if you went to the car companies and said, ``Well, you
know, your gas mileage is 15 miles a gallon, and we want it to
be 17 miles a gallon. You've got to go back and give people
free cars for the cars you sold last year, or 2 years ago, or 3
years ago, under the old rules. We're going to change the rules
now. You've got to replace all those cars.'' We're not capable
of doing that without massive disruption to our customers.
Long term, I think we can do it, and I think we're happy
to. I'm glad to hear Mr. Yager talk about compromise on the
widely viewed. By the same token, I think it's the kind of
thing that we can have dialogue with both DIRECTV and the
broadcasters as to how we might make a transition to two-dish
that'll work for everybody.
Senator Sununu. I want to give Ms.----
Mr. Ergen. One dish. Excuse me. Not two dish.
Senator Sununu. I want to give Ms. DeLeon a chance to
respond, although I do want to clarify--while EchoStar provides
local-into-local into New Hampshire, not all of New Hampshire
gets their local station because----
Senator Sununu. I'm surprised you get it at all. That's
really----
Senator Sununu.--because of the issue with the definition
of DMAs that I described. I know you've been very helpful, and
your staff, in trying to deal with this issue. But this is the
kind of thing that drives consumers crazy, is when they see the
president of EchoStar saying, you know, ``48 states have got
local-into-local,'' and one of your customers is in Northern
New Hampshire, and they're going, ``I've been calling
EchoStar,'' or, ``I've been calling Senator Sununu,'' or,
``I've been calling the local broadcaster about this for a year
or for 2 years, and now he's on--I see him on C-SPAN saying
that''----
Mr. Ergen. Well, let me make----
Senator Sununu.--``that the problem's''----
Mr. Ergen.--let me--let me make the point.
Senator Sununu.--``been solved.''
Mr. Ergen. Let me make the point. This is not the president
of EchoStar who doesn't want to deliver the local channels
throughout the country.
Senator Sununu. I understand that.
Mr. Ergen. This is the law that was passed in 1999. For
example, if we would enact the DMA rule, as cable companies
enacted, if we enacted widely viewed, if we would enact high-
definition legislation to be proposed, then your customers
would, in fact, be able to get----
Senator Sununu. And I'm simply trying----
Mr. Ergen. You know, I feel for customers. But we need
waivers from broadcasters who don't give the waivers. I guess I
would say it's time we put satellite home viewer--put the
satellite home viewer back in the Act. Today, it's--today it is
not----
Senator Sununu. I recognize that.
Mr. Ergen.--a home viewer Act.
Senator Sununu. That's the point in the clarification that
was I was precisely trying to make so that your switchboard
doesn't light or up our local broadcaster's switchboard doesn't
light up or my switchboard doesn't light up. Simply because you
are able to offer local-into-local under the current law
doesn't mean all viewers are served with the benefit of that
technology.
Ms. DeLeon, you had wanted to----
Ms. DeLeon. Yes, what I wanted to say is that, yes,
EchoStar did put the Telemundo full-powered stations on the
primary dish, but that happened just recently. That was within
the last two to 3 weeks that we saw that change.
And also, regarding the changing of the law, we don't want
to change the law. It is, you know, ``carry one, carry all.''
We are just asking to be all on the primary dish so that we can
be seen and we're next to the other general market stations in
English language/Spanish combined. So that's really what we're
asking for.
Senator Sununu. Mr. Yager, let me ask you this question,
and I think you had wanted to add something there. In your
testimony, you talked about 1400 stations providing digital
broadcasts covering 99 percent of the country, 92 percent of
the population with those digital broadcasts. But, at the same
time, you said that you don't want the legislation to be
modified at all to allow any white area definition if there is
no digital broadcast being received by consumers. Now, it would
seem to me that if 92 percent of the population, or 99 percent
of the country, is being covered, then allowing that digital
white space to be defined should make no difference.
Mr. Yager. I would agree with you, Senator, if we were not
in the middle of the digital transition. We are not complete
with the digital transition, from broadcasting's point of view.
And what do I mean by that? We still have zoning problems. We
still have certain tower-siting problems to get certain
stations up in digital. We still have tremendous interference
problems to work out with Canada and Mexico. We still have a
number of stations that have until 2005 to elect their final
power.
If we let this camel get its nose under the tent in terms
of bringing distant signals into areas that are served and plan
to be served by local stations, we are going to have the same
kind of mess on our hands that we had in 1999, when Congress
first dealt with the distant signal problem. What we're saying
is that the digital white-area problem is a problem that
doesn't exist at this point as broadcasters fully build out
their digital stations.
And let me respond to one thing, if I might, that Mr. Ergen
said, that broadcasters don't grant waivers. Broadcasters, to
date, have granted over seven million distant signal waivers.
Senator Sununu. Am I misreading your testimony when I state
that only 8 percent of the population isn't served by digital,
and, therefore----
Mr. Yager. They're not being----
Senator Sununu.--only 8 percent would----
Mr. Yager. Only 8 percent are not being replicated with the
analog signal, to the extent that their analog signal reaches
them under the Grade B contour standard----
Senator Sununu. So it was----
Mr. Yager. That's correct.
Senator Sununu. So only 8 percent would be affected by the
creation of a digital white space for the----
Mr. Yager. Today that would be the case. My bet is----
Senator Sununu. But it would----
Mr. Yager. Excuse me.
Senator Sununu. Then it would be even less in the future.
Mr. Yager. Yes, I would think so.
Senator Sununu. Mr. Ergen?
Mr. Ergen. Yes, I think your point is exactly on point,
Senator. I don't believe, for a minute, that the broadcasters
are delivering an HD signal to 92 percent of the country today.
I read my mail, too. My customers can call me and send me--and
we get more requests, particularly in states like Montana and
places out west, where people just don't have access to a
digital signal. And I think that we can--they're 2 years
behind. And there are some valid reasons. I think that some of
the interference issues on the borders are valid reasons. But
those are not valid reasons in Denver, Colorado. Those are not
valid reasons in Grand Junction, Colorado. Those are not valid
reasons in Biloxi, Mississippi. And I think that you need a
little carrot and stick, and I think it would be great
government policy to--if these customers are economic, if they
value those advertising dollars, then they will build their
towers. And if they build their towers, we wouldn't have the
right to bring a distant signal in. But if they refuse to build
those towers, if they drag their feet building those towers,
should we deprive the American public, who's watching this
broadcast today--should we refuse to give them an HD signal
when we have the technical ability to do it? I say it's time to
get them the signal.
Senator Sununu. Would you commit to cutting off those
customers from their distant digital signals as soon as the
local digital signal is available?
Mr. Ergen. I think that that is a plan that can be
endorsed, so that we can get--we can get this digital
revolution going and make sure the consumers are able to get a
choice.
Senator Sununu. And you think that's a plan that could be
endorsed. Is that a yes?
[Laughter.]
Mr. Ergen. Well, you'd have to see the details of that. And
I think that we--we didn't have a good transition in 1999, so I
think that--I think that is something that we'd have to work
with broadcasters on. But I believe that, yes, that you can--
you can keep the integrity of local broadcasting and have some
kind of transition plan so that customers can get it today, and
you can get the digital spectrum back, as government policy.
Senator Sununu. Senator Lott?
Senator Lott. Mr. Chairman, with your permission, I'd like
to ask that my whole statement be made a part of the record
after the conclusion of the----
Senator Sununu. Without objection.
Senator Lott.--statements by the witnesses.
Second, I want to urge the two satellite folks here,
remember your installers and their rights and needs, too, as
you go forward. And I think you know, Mr. Ergen, why I say
that.
And then last, but not least, Senator Sununu, you don't
have to carry those Boston stations in New Hampshire, do you,
on the satellite?
Senator Sununu. Yes.
Senator Lott. You do? That's a shame.
[Laughter.]
Senator Lott. Are you working on resolving that problem?
[No response.]
Senator Lott. I yield the floor.
[Laughter.]
Senator Lott. Thank you all very much.
Senator Sununu. Very expensive to advertise in Boston.
The last question is a technical question. I had, at one
point, a technical background. I guess I still have the
technical background, but the longer I serve in public officer,
the grayer some of that education gets. But on the issue of
unserved households, whatever technical education I have seems
absolutely useless. I start reading about Grade B intensity in
the ILLR model, and I'll sit down with a broadcaster and talk
about this issue of how you define technically when a household
is served and when it isn't, and I finish the conversation
thinking, ``I think I understand this whole Grade B contour
model thing.'' And then I'll sit down with someone who's
affiliated with one of the DBS providers, a satellite provider,
and have the same conversation, and get a completely different
answer.
So I just want to give Mr. Yager and Mr. Ergen--I think you
mentioned it in your testimony--so I'll kick it to you, give
you each a short time, just a couple of minutes, to try to
summarize your side of the unserved household technical
argument.
Mr. Ergen. Well, thank you. If you want to further confuse
yourself, talk to consumers.
[Laughter.]
Mr. Ergen. Right?
Senator Sununu. Well----
Mr. Ergen. Because I can't--I helped write the law, and I
can't----
Senator Sununu.--in a way, it's not confusing to consumers,
because----
Mr. Ergen. They just don't get it.
Senator Sununu. Yes, well, they know for--they know, with
absolute certainty, whether they're served or not served.
There's no question in their mind. So----
Mr. Ergen. Well, the confusion to them is that they aren't
served many times because of interference and things that SHVIA
doesn't take into consideration in ILLR, and then they wonder
why--they call us, they call you--and they wonder why they
can't get this signal.
Now, on digital, that's solved. So our digital plan to
broadcast digital in is very easy because digital, as you know,
is--you either get the signal or you don't. There's no
ghosting, there's no drop-off----
Senator Sununu. But I don't want to talk about digital, at
least at the moment; I want to talk about the current
definitions--whether you think the current definition is
accurate and whether you think it's fairly applied.
Mr. Ergen. OK. There's no question that it's not accurate.
It was in the 1950s that the model was predicted, when there
were very few broadcast stations. Now that we've got broadcast
stations in buildings and things that have--and trees that have
grown up over the last 40 years, 50 years, there's quite a bit
of interference and ghosting that the model does not take into
consideration. So I think would be very imperative that the
legislation have the FCC go back and update ILLR to be--rather
than a predictive model, to be an accurate model.
Senator Sununu. Mr. Yager?
Mr. Yager. Senator, it's a great question. But really you
can't change physics. ILLR is based on physics. A Grade B
intensity signal is based on predicted contours of the
television station signal at a certain height at a certain
power. Now, we can talk about all of these other elements that
you want, but that's what it's based on, and the physics aren't
going to change. They were the same in 1953 as they are in
2004.
Let me say that I believe this Committee directed the FCC
twice to review the ILLR techniques. The FCC came back in 2000
and said it was a good standard, it met the tests. It came back
in 2002 and said it was the standard--the best standard they
could come up with.
Senator Sununu. Mr. Hartenstein, is the FCC being
unreasonable in reaffirming the validity of the standard?
Mr. Hartenstein. I haven't sat down and reviewed what
they've looked at. We've chosen to, you know, accept the
standard, move on with it, try to make amends, and try to level
the playing field as best we can, through opportunities such as
this hearing today, on all issues regarding the satellite
business and how we, at DIRECTV, see it. Like any model, it's
never perfect, but it is what it is, and we try to make do with
what we can.
It is--I will echo Mr. Ergen's comments--it is often very
confusing to customers that live out in the far reaches of some
of the states to understand why something is not allowed to
them when they, in fact, have trouble seeing it. But, on the
other hand, you know, in an imperfect world, we'll work with
what we have.
Senator Sununu. I want to thank all the panelists very
much. I appreciate your patience and your testimony.
The hearing is adjourned.
[Whereupon, at 10:45 a.m., the hearing was adjourned.]
A P P E N D I X
August 19, 2003
David R. Goodfriend,
Director, Legal and Business Affairs,
EchoStar Satellite Corporation,
Littleton, CO.
Dear Mr. Goodfriend:
I am in receipt of your letter dated June 18, 2003, wherein you
seek assistance in completing Form SC, the Statement of Account for
Secondary Transmissions by Satellite Carriers for Private Home Viewing.
Form SC is used by satellite carriers making royalty payments under the
statutory license set forth in 17 U.S.C. Sec. 119 for the
retransmission of distant broadcast signals. The circumstances of your
request for guidance, as you present them, are as follows.
You state that EchoStar has entered into a private agreement to
carry the digital high-definition (HDTV) signals of over-the-air CBS
television network stations. Under the agreement, EchoStar ``may
distribute the CBS HDTV programming to any subscriber residing in (a) a
market served by a CBS [owned and operated] station (i.e., CBS granted
us a waiver for such distribution); (b) a market served by a CBS
affiliate which has granted EchoStar a waiver; and (c) an 'unserved'
area.'' Letter at 1. You note that Form SC requires reporting the
number of subscribers who receive distant over-the-air network
television stations but does not distinguish between receipt of an
analog over-the-air signal and a digital over-the-air signal. Your
inquiry to us is whether EchoStar should report carriage on Form SC of
the distant subscribers who receive the digital CBS over-the-air
signals. You conclude that, as a matter of law, the section 119
statutory license covers the retransmission of distant digital over-
the-air signals as well as distant analog over-the-air signals.
The statutory license set forth in section 119, with respect to
network stations, applies to ``secondary transmissions of a performance
or display of a work embodied in a primary transmission made by a
network station. . . .'' 17 U.S.C. Sec. 119(a)(2)(A). A ``primary
transmission'' is defined as a ``transmission made to the public by the
transmitting facility whose signals are being received and further
transmitted by the secondary transmission service, regardless of where
or when the performance or display was first transmitted.'' 17 U.S.C.
Sec. 119(d)(4), quoting 17 U.S.C. Sec. 111(). No mention is
made of the character or type of signal that makes up the primary
transmission, i.e., whether it can be analog, digital, or both. Section
119 requires that a television station retransmitted by a satellite
carrier must be licensed by the Federal Communications Commission. It
is our understanding that the Commission does permit over-the-air
television stations that it licenses to transmit a digital as well as
an analog signal.\1\ Because section 119, by its terms, does not
distinguish between analog or digital over the-air television signals,
it appears that the license applies to secondary transmissions of both,
provided, of course, that all other terms and conditions of the license
are satisfied. Thus, in completing Form SC, it is correct to include
all distant subscribers receiving digital CBS over-the-air signals,
plus the distant subscribers of the analog CBS over-the-air signals
that EchoStar is retransmitting.
---------------------------------------------------------------------------
\1\ There is apparently at least one Florida broadcast station that
transmits in digital only.
---------------------------------------------------------------------------
In support of your argument that section 119 applies to carriage of
digital as well as analog over-the-air network stations, you assert a
distinction between the digital network of CBS stations and the analog
network of CBS stations. You submit that EchoStar may provide distant
digital network signals to subscribers who reside in unserved
households and then offer an interpretation of the definition of an
``unserved household'' that distinguishes between receipt of digital
versus analog network signals. We do not agree with your approach.
First, the ``unserved household'' provision of section 119 has nothing
to do with whether the statutory license applies to digital as well as
analog over-the-air television signals. Consequently, there is no
reason to address, let alone interpret, that provision of the law.
Second, for the reasons stated above, section 119 does not distinguish
between retransmission of a digital or analog distant signal of an
over-the-air television station. There is, therefore, no such thing as
a digital network of CBS stations and a separate analog network of CBS
stations for purposes of the section 119 license.
Sincerely,
William J. Roberts, Jr.
Senior Attorney.
______
Economic Policy Institute
Washington, DC, May 4, 2004
FCC Policies Stymie Telecom Industry
Ill-advised policies contributed to the loss of 380,000 jobs
Outdated rules in the Telecommunications Act of 1996 strangle the
established local wired phone companies and have contributed to the
loss of 380,000 jobs across the entire economy, or as much as 15
percent of the total jobs lost in the last recession. Stephen Pociask
lays out the facts in A Failure to Communicate: Reforming Public Policy
in the Telecommunications Industry, released today by the Economic
Policy Institute.
``Reforming and updating current policies will promote job growth
and revitalization of the telecom industry,'' said Jeff Keefe, EPI
telecommunications project director.
The Telecommunications Act of 1996 was intended to promote
investment and innovation, thus lowering prices to consumers and
encouraging investment in local wired phone networks. In reality, it
pits the established local wired telephone companies, like Verizon,
Bell South, SBC and Qwest, against other phone companies, including
AT&T and WorldCom, in ways that discourage investment in building and
stymie technological advances.
The FCC set rules under the Act that obligate established local
wired phone companies to make their telephone facilities available to
other companies at prices substantially below the actual cost of
building and maintaining those facilities. According to A Failure to
Communicate, the established telephone companies are not receiving
enough return on their investment to continue building and maintaining
their wired facilities.
Although other companies poured into the market initially, the
bargain wholesale rates competitors pay are so low that there is no
incentive to build new and more advanced networks. As a result, both
the established local wired phone companies and other companies have
cut their capital spending significantly.
The obvious competition to the wired phone industry is from
intermodal companies, i.e., competitors using wireless cell phones and
cable networks capable of providing voice, data, and video services.
The outdated FCC rules did not anticipate that these intermodal
competitors would come to define the market.
Established local wired phone companies lost nearly 193,000 jobs
between January 2000 and November 2003 (See Figure 1 attached). Many
jobs were lost due to the collapse of the Internet bubble in 2000.
However, a significant number of jobs were lost when phone companies
failed to invest in new and upgraded lines to meet the demands of the
broadband market. That market is now dominated by the cable industry.
``Established local wired phone companies were caught in a regulatory
time warp that discouraged growth and innovation,'' said Stephen
Pociask, president of TeleNomic Research.
Hardest hit states
The job loss in this industry is geographically widespread and
affects other industries. All states where data were available lost
telecom jobs. The hardest hit states were Texas and California, with
the loss of 26,700 and 20,200 wired telecommunications jobs,
respectively, between August 2001 and August 2003. New Jersey,
Colorado, Virginia, Massachusetts, and Maryland also suffered losses of
over 20 percent of their telecom services jobs. (NJ lost 24.30 percent,
CO lost 26.30 percent, VA lost 23 percent, MA lost 22.90 percent, and
MD lost 20.60 percent. See Table 1 below for more state listings.)
Employment levels in films that make telephone equipment fell 56
percent since December 2000, for a loss of another 57,000 jobs
nationwide.
Lowering consumer prices is another goal the Act has failed to
achieve. A Failure to Communicate shows that local telephone prices
have increased by nine percent since 1996, compared to the seven years
prior to the Act, when prices fell by 13 percent.
Policy recommendations
A Failure to Communicate recommends raising the prices that
established telecom companies can charge to market challengers. When it
is no longer cheaper to rent than to build new and efficient
facilities, challengers will be driven to invest in new technology,
thereby creating more jobs.
Cable, cell phones, and Internet services also compete in the race
to transport electronic voice, data, and video. Cell phones, in
particular, are making a serious impact on the established wired phone
companies. As the soaring number of cell phone subscribers cuts into
the demand for wired phone lines, regulations need to keep pace. The
study recommends that the FCC look beyond the wired phone technology
and include cable, cell phone, and Internet services when defining the
marketplace.
Stephen Pociask is president of TeleNomic Research, a consulting
firm specializing in public policy analysis for information technology
industries. He is affiliated with the New Millennium Research Council
and previously served as chief economist and executive vice president
for Joel Popkin and Co.
The Economic Policy Institute is a non-profit, non-partisan
economic think tank founded in 1986. The Institute is located on the
web at http://www.epinet.org.
Table 1.--Telecommunications services employment
August 2001 and August 2003 [thousands of jobs]
------------------------------------------------------------------------
200l 2003 Difference % change
------------------------------------------------------------------------
Texas 125.3 98.6 -26.7 -21.30%
California 142.6 122.4 -20.2 -14.20
New York 79.2 64.1 -15.l -19.10
New Jersey 55.6 42.1 -13.5 -24.30
Florida 79.5 66.6 -12.9 -16.20
Colorado 46.0 33.9 -12.1 -26.30
Georgia 66.9 55.0 -11.9 -17.80
Virginia 47.4 36.5 -10.9 -23.00
Massachusetts 28.8 22.2 -6.6 -22.90
Missouri 32.5 26.2 -6.3 -19.40
Washington 31.2 25.3 -5.9 -18.90
Maryland 25.7 20.4 -5.3 -20.60
Illinois 50.7 46.2 -4.5 -8.90
Ohio 37.5 33.2 -4.3 -11.50
Pennsylvania 47.3 43.3 -4.0 -8.50
Michigan 26.8 23.5 -3.3 -12.30
Minnesota 17.6 14.9 -2.7 -15.30
Oklahoma 17.5 14.8 -2.7 -15.40
Alabama 17.9 15.4 -2.5 -14.00
Arizona 21.6 19.2 -2.4 -11.10
Connecticut 16.1 13.8 -2.3 -14.30
North Carolina 28.8 26.8 -2.0 -6.90
Indiana 16.7 14.9 -1.8 -10.80
Oregon 10.7 9.2 -1.5 -14.00
Kansas 31.0 29.6 -1.4 -4.50
Tennessee 18.2 16.8 -1.4 -7.70
Nevada 8.6 7.3 -1.3 -15.10
Utah 6.5 5.4 -1.1 -16.90
New Mexico 8.8 7.9 -0.9 -10.20
Mississippi 9.2 8.4 -0.8 -8.70
West Virginia 6.5 6.0 -0.5 -7.70
Hawaii 4.9 4.5 -0.4 -8.20
Kentucky 10.3 9.9 -0.4 -3.90
South Carolina 13.6 13.2 -0.4 -2.90
Louisiana 13.9 13.6 -0.3 -2.20
Arkansas 8.9 8.7 -0.2 -2.20
Alaska 4.5 4.3 -0.2 -4.40
Idaho 3.3 3.2 -0.1 -3.00
------------------------------------------------------------------------
U.S. Total 1,293.0 1,129.1 -163.9 -12.70%
------------------------------------------------------------------------
Note: Telecommunications services data were not available for Delaware,
Washington D.C., Iowa, Maine, Montana, Nebraska, New Hampshire, North
Dakota, Rhode Island, South Dakota, Vermont, Wisconsin, and Wyoming.
Data are not seasonally adjusted. These data include wired and
wireless telecommunications. U.S. totals are from Bureau of Labor
Statistics industry employment data; therefore, column totals do not
sum to the U.S. totals shown in the last row.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Note: Telecommunications figures are not seasonally adjusted and
exclude the strike affecting August 2000.
Source: Bureau of Labor Statistics, detailed reports at www.bls.gov
[all]