[Senate Hearing 108-571]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-571

                THE SATELLITE HOME VIEWER EXTENSION ACT

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 12, 2004

                               __________

                          Serial No. J-108-75

                               __________

         Printed for the use of the Committee on the Judiciary


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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
             Bruce Artim, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director



                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

DeWine, Hon. Mike, a U.S. Senator from the State of Ohio, 
  prepared statement.............................................    70
Feingold, Hon. Russell D., a U.S. Senator from the State of 
  Wisconsin, prepared statement..................................    91
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     1
    prepared statement...........................................   104
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin...     4
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     3
    prepared statement...........................................   110

                               WITNESSES

Attaway, Fritz, Executive Vice President and Washington General 
  Counsel, Motion Picture Association of America, Washington, 
  D.C............................................................    13
Carson, David O., General Counsel, Library of Congress Copyright 
  Office, Washington, D.C........................................     6
Ergen Charles W., Chairman and Chief Executive Officer, EchoStar 
  Communications Corporation, Littlewood, Colorado...............     7
Hartenstein, Eddy, Vice Chairman, The DirecTV Group, Inc., El 
  Segundo, California............................................    11
King, John, President and Chief Executive Officer, Vermont Public 
  Television, Colchester, Vermont................................    15
Reese, Bruce, President and Chief Executive Officer, Bonneville 
  International Corporation on behalf of the National Association 
  of Broadcasters, Salt Lake City, Utah..........................     9

                         QUESTIONS AND ANSWERS

Responses of Fritz Attaway to questions submitted by Senators 
  Durbin, Kohl, and Leahy........................................    23
Responses of David Carson to questions submitted by Senators 
  Leahy, Kohl, and Durbin........................................    27
Responses of Charles Ergen to questions submitted by Senators 
  Durbin, Kohl, and Leahy........................................    29
Responses of Eddy Hartenstein to questions submitted by Senators 
  Durbin, Kohl, and Leahy........................................    35
Responses of John King to questions submitted by Senators Kohl 
  and Leahy......................................................    41

                       SUBMISSIONS FOR THE RECORD

American Society of Composers, Authors and Publishers and 
  Broadcast Music, Inc., Marilyn Bergman and Frances W. Preston, 
  letter.........................................................    44
Attaway, Fritz, Executive Vice President and Washington General 
  Counsel, Motion Picture Association of America, Washington, 
  D.C., prepared statement.......................................    47
Carson, David O., General Counsel, Library of Congress Copyright 
  Office, Washington, D.C., prepared statement...................    58
Ergen Charles W., Chairman and Chief Executive Officer, EchoStar 
  Communications Corporation, Littlewood, Colorado, prepared 
  statement......................................................    72
Gottsch, Patrick, President on behalf of RFD-TV, prepared 
  statement......................................................    93
Hartenstein, Eddy, Vice Chairman, The DirecTV Group, Inc., El 
  Segundo, California, prepared statement........................    98
King, John, President and Chief Executive Officer, Vermont Public 
  Television, Colchester, Vermont, prepared statement and letter.   106
Orlando, John, Executive Vice President, Government Relations, 
  National Association of Broadcasters, Washington, D.C..........   112

 
                THE SATELLITE HOME VIEWER EXTENSION ACT

                              ----------                              


                        WEDNESDAY, MAY 12, 2004

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:35 p.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Orrin G. 
Hatch, Chairman of the Committee, presiding.
    Present: Senators Hatch, Leahy, and Kohl.

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
                       THE STATE OF UTAH

    Chairman Hatch. We apologize for being here late.
    Good afternoon and welcome to today's hearing on the 
Satellite Home Viewer Extension Act. Today, we will be 
discussing some very important issues relating to the 
reauthorization of Section 119 of the Copyright Act which 
provides a statutory license for the retransmission of distant 
network signals.
    The extension of Section 119 has far-reaching implications 
for the satellite and broadcast television industries, as well 
as for those who create video content, and I am sure that this 
tremendous panel of witnesses that we have here today will do 
their best to make this somewhat difficult subject matter 
accessible to all of us, while also providing us with some 
insight into the economics of providing direct broadcast 
satellite, or DBS, service.
    Television has come a long way since it was invented by a 
Utah native, Philo T. Farnsworth, in 1927. The first television 
image was nothing more than a straight line that rotated 90 
degrees from a vertical to a horizontal position on the screen. 
I think that most people would agree that television 
programming has, at the very least, become more interesting 
than Philo's rotating line, although based on all the letters I 
have received about the last Super Bowl halftime show, I am not 
sure that all of my constituents think that the taste in 
programming has improved all that much.
    I would like the transcript to reflect that I used that 
same joke about television programming at the last hearing on 
the Satellite Home Viewer Act 5 years ago, and I am pretty sure 
I got a bigger laugh last time.
    Senator Leahy. Ha ha.
    Chairman Hatch. That is typical. That is just typical, 
isn't it?
    [Laughter.]
    Chairman Hatch. Luckily for all of you, if Congress passes 
the Satellite Home Viewer Extension Act, I will have another 5 
years to perfect my delivery before you hear it again.
    I will keep my remarks brief today and submit a longer 
statement for the record, but I do want to take some time to 
describe in a general way the approach that I believe Congress 
needs to take on this legislation. And before I do that, I want 
to emphasize that I have been impressed by the degree of 
bipartisan and bicameral cooperation that has been apparent 
thus far in our work on this legislation.
    I want to thank Senators Leahy, Kohl and DeWine for their 
efforts on this bill, and I hope that we will continue to work 
together to pass legislation that appropriately balances the 
interests of the affected parties and industries, while 
advancing sound public policy and consumer choice.
    With that in mind, I will outline some of the larger policy 
objectives that I believe should be important in guiding us to 
a resolution of a number of issues that have been raised in 
connection with this particular piece of legislation.
    First, we need to bear in mind that compulsory licenses are 
strongly disfavored due to the market distortions they create 
and then perpetuate. Although I support extending the statutory 
license in Section 119 for another 5 years, Congress needs to 
think carefully about how to begin minimizing the overall 
distorting effect of this compulsory license on the market, 
while retaining its central purpose of providing broadcast 
network signals via satellite to households that cannot receive 
them over the air.
    With local stations now available from DBS providers in 
over 110 markets, which I am told encompass roughly 85 percent 
of U.S. television households, one obvious approach is to 
create appropriate incentives that will further encourage a 
transition from the Section 119 distant signal license to the 
Section 122 local-into-local license.
    Second, I believe that we need to have a reasonable 
adjustment of the copyright royalty rates that are paid under 
the Section 119 license. Once we depart from rates that are set 
at or near fair market value under a compulsory license, not 
only do we introduce substantial and potentially increasing 
market distortions, but Congress eventually finds itself 
without any clear guiding principle to apply in determining the 
proper rate.
    For this reason, unless the affected parties can move 
toward some resolution on the rate issue, the Senate should 
consider an approach similar to the approach taken in the House 
Judiciary Committee in which a Copyright Arbitration Royalty 
Panel would determine the rate and it would then be subject to 
Congressionally-mandated discounts.
    Third, Congress should carefully consider ways to increase 
parity between cable and DBS to ensure that consumers continue 
to benefit from competition and have increased programming 
choices. For example, I believe satellite providers should be 
allowed to provide significantly viewed stations to their 
subscribers in the same way that cable companies do.
    Finally, I want to mention the two-dish issue. I believe 
that the Senate should prohibit the discriminatory placement of 
certain stations on a second satellite requiring subscribers to 
obtain a second dish to receive them. I am particularly 
concerned that Spanish language, religious and public broadcast 
stations have been singled out for this treatment.
    Now, with that, I am going to turn to Senator Leahy for his 
opening statement.
    [The prepared statement of Chairman Hatch appears as a 
submission for the record.]

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Leahy. Well, thank you very much.
    My friend, Senator Hatch, and I have worked very closely 
together on satellite television issues for many years. Many of 
you have been here for some of these hearings and you know that 
in November of 1997 we joined together to find a way to avoid 
cutoffs of satellite TV service to millions of homes and to 
protect the local affiliate broadcast system.
    In early 1998, working with members of this Committee, 
especially Senator Kohl and Senator DeWine, we forged a 
bipartisan alliance behind a strong satellite bill to permit 
local stations to be offered to viewers by satellite, 
increasing competition between cable and satellite providers.
    We worked with the Public Broadcasting System so that they 
could offer a national feed as they transitioned to having 
their local programming beamed up to satellites and then beamed 
back down to much larger, new audiences. I am pleased that my 
friend, John King, of Vermont Public Television, will testify 
today about how local-into-local television benefits 
Vermonters, as well as residents of other States. He will talk 
about how VPT is now available in Bennington and Windham 
Counties through the EchoStar Dish Network.
    I want all other Vermont broadcast stations to be available 
in those two counties. Those are the two southernmost counties, 
one on the eastern side of our State and one on the western 
side of our State. They haven't been able to receive television 
news about what is happening in Vermont. If you live in 
Vermont, if you hear about a school fire or a traffic jam or a 
flood in Framingham, Massachusetts, it is not the same if you 
hear about the same school fire, traffic jam or flood in 
Rutland, Vermont.
    We have worked together in this Committee and we have made 
it possible for millions of viewers to receive all their local 
network broadcast stations over satellite. Millions of 
consumers now have a choice between cable service or satellite 
service, which is important because consumers then have 
competition.
    We started working on this in 1997. Millions of viewers 
across America couldn't even receive signals from the four 
broadcast networks over the air. In my own State, a small State 
with a whole lot of mountains, we have many towns in the 
saddles of these mountains and they get no signals at all.
    In that regard, Mr. Chairman, I want to thank Charlie 
Ergen, who is here. His Dish Network has been offering local-
into-local service in Vermont since 2002. Vermont is also 
looking forward to DirecTV satellite service in the near 
future.
    This Committee worked with other committees in the Senate 
and the House during the past 7 years on this. It is 
interesting in working with them that you find so many members 
of both parties who have common interests in this because they 
are the interests of their constituents. We have helped to 
create vast viewing options and alternatives for consumers, but 
we have also helped to expand a tremendous new industry.
    I will work with Chairman Hatch and all members of this 
Committee to go the next step forward as we reauthorize the 
Satellite Home Viewer Act, our original legislation, which I 
think both the Chairman and I would agree was a homerun. Now, I 
want to build on that.
    Mr. Chairman, I am happy to see that our bill, S. 2013, 
that we introduced with Senators Kohl and DeWine is on the 
agenda for tomorrow's markup. I understand, as we often do with 
something that significant, we will put it over until the next 
meeting, which I totally agree with. It will help us draft a 
necessary consensus substitute bill, but it also forces 
everybody on the Committee to step up to the plate and decide 
just what we want.
    So I just wanted to mention that and thank you for setting 
up that procedure.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you, Senator.
    We will turn to Senator Kohl, and if Senator DeWine comes, 
we will be glad to hear his statement because both of them have 
worked extensively in this area as well.

 STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF 
                           WISCONSIN

    Senator Kohl. Thank you, Mr. Chairman.
    Today, we revisit the Satellite Home Viewer Improvement 
Act, a law we passed just a little less than 5 years ago. 
Having participated in that conference, we appreciate how 
complicated this issue can be.
    The simple goal of this law was to level the playing field 
between satellite and cable companies to give consumers greater 
choice and better value. We must bear that principle in mind 
when working on the reauthorization of the legislation this 
year.
    Most importantly, by permitting local-into-local service, 
we made satellite an even better competitor to cable. A 2002 
GAO study requested by Senator DeWine and myself concludes that 
satellite subscribership was 32 percent higher in markets where 
satellite companies offered local broadcast signals. Moreover, 
satellite subscribers have more than doubled since the passage 
of the Satellite Home Viewer Improvement Act.
    It is therefore essential that we reauthorize the parts of 
the law that are set to expire at the end of this year, and 
where necessary we should tweak the law to further spur 
competition between cable and satellite. One section that will 
soon expire involves distant network signals. Until local-into-
local service is introduced in all 210 media markets, we should 
continue to permit distant signals for those consumers who are 
legally entitled to them, and consider extending this privilege 
to those who were grandfathered in 1999.
    We hope that as local-into-local rolls into more markets, 
this issue will become obsolete. After all, local-into-local 
has been very successful in Wisconsin, with local channels 
being offered in Milwaukee, Green Bay, Madison, and with other 
markets on the way.
    To further level the playing field for cable and satellite 
competition and to bring more benefits to consumers, we should 
let satellite companies retransmit significantly viewed 
stations into local markets on a royalty-free basis. Cable 
companies have enjoyed this privilege for years and it is time 
to extend this right to the satellite industry. By doing so, 
satellite companies will be able to craft a local channel 
lineup more similar to what cable currently offers.
    We must pass this legislation this year. Indeed, it would 
benefit consumers and satellite companies alike if we acted 
quickly to reauthorize and improve the Satellite Home Viewer 
Improvement Act. It has worked well, and only a minor tune-up 
is needed at this time. We look forward to working hard to get 
this bill passed before we adjourn.
    I thank you, Mr. Chairman.
    Chairman Hatch. Thank you, Senator.
    We are first going to hear testimony from David Carson, 
general counsel of the Copyright Office. We look forward to 
hearing your perspective as an authority on copyright policy 
matters.
    Next, we will listen to Charlie Ergen. We welcome you, Mr. 
Ergen, again, founder and CEO of EchoStar Communications 
Corporation, one of the pioneering forces in satellite-
delivered television, a person we have a great deal of respect 
for.
    Third, we will hear from Bruce Reese, president and CEO of 
Bonneville International Corporation. Mr. Reese is from my home 
State of Utah, the same State that Philo T. Farnsworth came 
from, and we expect you to be just as important as Philo T. 
Farnsworth has been to all of us.
    Senator Leahy. But with a better picture.
    Chairman Hatch. Yes, a better picture.
    Bruce, we are happy to have you here. We know it is a long 
trip for you, but we also know that this testimony you are 
about to give is important.
    Next, we have Eddy Hartenstein, vice Chairman and board 
member of the DirecTV Group, from El Segundo, California, the 
State where Philo T. Farnsworth lived when he invented 
television. So we have got to give you credit, Eddy, too. We 
are glad to have you here and appreciate the expertise that you 
bring to this Committee year after year.
    After Mr. Hartenstein, we have Fritz Attaway, executive 
vice president and Washington general counsel of the Motion 
Picture Association of America. I was at Jack's reception last 
night, which was really good, and appreciate all you folks do 
down there.
    Fritz now lives in D.C., but he is actually from the State 
of Idaho which, according to some historians, is the State in 
which Philo T. Farnsworth first came up with the idea of 
inventing television while working in a potato field, of all 
places.
    Senator Leahy. I have heard you really stretch for some of 
these, Orrin, but my God.
    [Laughter.]
    Chairman Hatch. Look, it isn't just Vermont that is 
permitted to stretch.
    Last but not least, we have John King, president and CEO of 
Vermont Public Television. Now, as far as I can tell, Vermont 
has no connection to Philo T. Farnsworth, although my staff did 
try to come up with one. But we know that Vermont has a beauty 
all its own that doesn't need television. At least that is what 
Senator Leahy tells me anyway.
    With that, we will go to our first witness, Mr. Carson.

STATEMENT OF DAVID O. CARSON, GENERAL COUNSEL, U.S. LIBRARY OF 
          CONGRESS COPYRIGHT OFFICE, WASHINGTON, D.C.

    Mr. Carson. Thank you, Mr. Chairman, Senator Leahy, Senator 
Kohl. I am pleased to appear before you to present the views of 
the Copyright Office on the extension of the satellite carrier 
Section 119 statutory license.
    Statutory licenses represent a complex, detailed area of 
the law. In my written testimony, I have laid out the history 
and operation of the Section 122 and Section 119 statutory 
licenses covering the retransmission of local and distant over-
the-air broadcast signals by satellite carriers, as well as the 
Section 111 statutory license dealing with retransmission of 
broadcast signals by cable operators.
    In a nutshell, Mr. Chairman, our message is that if there 
is one piece of copyright legislation that must be enacted this 
year, this is it. Section 119 of the copyright law will expire 
at the end of this year unless it is extended. Failure to 
extend it would mean that millions of subscribers to satellite 
TV services will lose their access to broadcasts of network 
stations and superstations. While there are many differences of 
opinion as to what the terms and conditions of the statutory 
license should be, virtually everyone agrees that the license 
should continue.
    Congress and the Copyright Office have had to face the 
issue of extension of this license on two previous occasions in 
1994 and again in 1999. Our position remains the same. In 
principle, the Copyright Office disfavors statutory licenses. A 
statutory license should be a last resort. The Office strongly 
favors marketplace solutions.
    On the other hand, the cable compulsory license has been a 
part of the law since 1978 and is permanent. Believing in 
parity among providers, the Office supports reauthorization of 
the Section 119 license for satellite carriers. While we 
believe that, in principle, the satellite license should 
continue for as long as the cable license is in place, we also 
believe that we are in a period of transition.
    Issues such as the transition from analog to digital 
broadcasts and the projected expansion of local-into-local 
service to virtually all households mean that only a few years 
from now it may be necessary to reexamine the terms and 
conditions of the satellite license again. Therefore, at this 
point we favor a 5-year extension of the Section 119 license.
    During those 5 years, consideration should be given to 
whether the two statutory licensing regimes for cable and 
satellite should continue in existence, and if so, whether they 
should be harmonized as much as possible, as recommended in the 
1997 report of the Register of Copyrights that at your request, 
Mr. Chairman, reviewed the copyright licensing regimes covering 
retransmission of broadcast signals.
    Although the legislation that you have introduced, Mr. 
Chairman, is a simple 5-year extension that amends Section 119 
only by extending its sunset date, we understand that it is 
likely that the legislation that is ultimately enacted will 
amend Section 119 in a number of respects, and we agree that 
several amendments are advisable.
    We note that the House Subcommittee on Courts, the Internet 
and Intellectual Property has marked up a bill that contains 
several such amendments, and we anticipate that this Committee 
will consider such amendments as well. Therefore, I would like 
to spend a moment addressing some of these amendments.
    First, we agree that the royalty rates paid by satellite 
carriers need to be adjusted. At a minimum, the royalty fees, 
which have not changed since 1999, should be increased to take 
into account the rise in the cost of living over the past 5 
years and should continue to receive an annual cost of living 
adjustment. It is hard to argue against this provision.
    We note, however, that the current royalty fees represent a 
significant discount--30 percent for superstations and 45 
percent for network stations--from the marketplace rates 
determined by a Copyright Arbitration Royalty Panel in 1997. 
Because we strongly believe that royalties for the statutory 
licenses should reflect marketplace rates, we recommend that 
the royalties be brought back to fair market value either by 
reinstating the CARP determination with a cost of living 
increase or by conducting a new rate-setting proceeding based 
on fair market value.
    There has also been discussion about harmonizing the 
satellite license with the cable license by permitting a 
satellite carrier to transmit a television station's signal 
outside the station's local market and into a locality in which 
the signal is significantly viewed over the air, typically in 
certain adjacent localities. The FCC maintains a list of 
significantly viewed stations for each locality.
    The amendment proposed in the House would permit 
transmission of a significantly viewed signal only to 
households that also receive the signal of the local network 
affiliate under Section 122's local-into-local license. We 
think this is a reasonable proposal.
    As always, Mr. Chairman, the Copyright Office stands ready 
to assist you in any way as you craft legislation that will 
reauthorize the satellite license.
    Thank you.
    [The prepared statement of Mr. Carson appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you.
    Charlie Ergen, we will turn to you at this point.

  STATEMENT OF CHARLES W. ERGEN, CHAIRMAN AND CHIEF EXECUTIVE 
   OFFICER, ECHOSTAR COMMUNICATIONS CORPORATION, LITTLEWOOD, 
                            COLORADO

    Mr. Ergen. Thank you, Chairman Hatch, Senator Leahy, 
Senator Kohl. On behalf of EchoStar Communications, I want to 
thank you for inviting me to testify on the Satellite Home 
Viewer Improvement Act.
    The reauthorization of SHVIA offers Congress an excellent 
opportunity to preserve and extend the pro-competitive measures 
in the current Act, as well as to improve the regulatory parity 
between cable and satellite TV providers. While SHVIA has been 
a good first step in addressing the huge disparities between 
DBS and dominant cable operators, it has not gone far enough. 
Congress should take steps to eliminate those differences and 
ensure that satellite carriers can better compete with cable.
    At the same time, it is important that you not impose new 
requirements on satellite carriers that might further 
disadvantage our industry relative to the dominant cable 
providers. I would like to suggest a few ways to improve the 
law.
    The lack of parity in royalty rates and the mechanism for 
establishing those rates between satellite and cable is a major 
problem for our industry and our customers. First, cable enjoys 
a permanent compulsory license that includes a permanent 
copyright structure, but the royalty rates that satellite pays 
are subject to review by Congress every few years, along with 
the temporary licenses that Congress has been enacting since 
1988. The lack of permanence fosters great uncertainty.
    Second, the royalty rates under the cable compulsory 
license are calculated according to a statutory formula and may 
be adjusted for inflation only once every 5 years. Satellite 
carriers, on the other hand, have been subject to a process of 
rate adjustments by Copyright Arbitration Royalty Panel, or 
CARP. In 1997, this process led to excessively high rates that 
Congress had to step in and reduce.
    Third, while it is difficult to compare the rates that 
cable and satellite carriers pay because of complexities in the 
cable formula, the net effect has been that satellite carriers 
pay much more than cable systems in the majority of cases. 
There is a simple way to resolve this problem. Whatever rates 
you decide to impose on satellite carriers, impose the same 
rates on cable systems as well. A regime of uniform rates and a 
uniform method for adjusting them would automatically achieve 
parity between satellite and cable.
    I strongly urge you not to relegate rate-setting to the new 
CARP process. CARP proceedings are cumbersome and protracted. 
The outcome is uncertain. They hamper business decisions and 
planning. In addition, the last CARP implemented the statutory 
standards in a misguided way. It derived excessive rates mainly 
by looking at the rates paid by cable systems not for the same 
distant broadcast networks, but rather from the most popular 
cable networks such as CNN and ESPN.
    Among other factors, cable networks give distributors 
valuable ad avails and free time in exchange for the fees they 
receive. By contrast, in the case of distant broadcast 
networks, satellite carriers are prohibited by the terms of 
Section 119 licenses from deleting any content. By relegating 
the rate-setting function to the CARP process, you could be 
paving the path for another unreasonable result where you might 
have to step in again and try to rectify it, as you did in 
1999. I urge you not to go down this path.
    As you look forward to renewing SHVIA, I would like the 
opportunity to talk about a fundamental part of the law that 
has not worked well--retransmission consent. The law directed 
the FCC to establish good-faith obligations for retransmission 
consent bargaining arrangements, but it has not been enough to 
adequately police the unreasonable behavior of several powerful 
media conglomerates.
    Companies with multiple video programming properties now 
control many local broadcast stations. In our experience, the 
retransmission consent negotiations provide those companies 
with the opportunity every three or 4 years as a condition for 
retransmission to force us to pay for channels that we do not 
want and our customers do not want to pay for. The good-faith 
requirement has not been effective in preventing such practices 
and it should be strengthened. We do believe that it has some 
influence on bargaining behavior and, at a minimum, should be 
preserved.
    Looking to the future, we believe that reauthorization of 
SHVIA offers Congress a unique opportunity to speed up the 
stalled transition to digital television. Today, 2 years before 
the transition deadline, we still 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 should be allowed to 
receive HD via satellite.
    We are now more than 2 years past the May 1, 2002, deadline 
Congress established for local TV broadcasters to convert 
digital signals, and still more than half of the 1,600 
broadcasters are not providing full-power digital signals. But 
Congress can stimulate local broadcasters to speed up digital 
transmission by allowing TV providers to offer digital high-
definition programming to households that are not served with a 
local over-the-air 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' value to consumers. In reauthorizing and revising SHVIA, 
Congress should eliminate those differences so that satellite 
can compete more vigorously, and impose no new requirements 
that would further disadvantage us relative to cable 
competitors.
    We believe you have a unique opportunity with SHVIA to 
further the transition to digital. We hope you will seize it in 
order to achieve the transition policies you have already 
enacted to benefit consumers who are being ill-served by the 
currently digital delay.
    Thank you.
    [The prepared statement of Mr. Ergen appears as a 
submission for the record.]
    Chairman Hatch. Thank you.
    Mr. Reese, we will turn to you now.

    STATEMENT OF BRUCE REESE, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, BONNEVILLE INTERNATIONAL CORPORATION, SALT LAKE CITY, 
  UTAH, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS

    Mr. Reese. Thank you, Mr. Chairman.
    As the legislation process on SHVIA reauthorization has 
begun, in keeping the interests of consumers foremost NAB has 
attempted to work with all affected parties to find reasonable 
compromises on a number of thorny issues. In that vein, we 
endorse the common ground we have found to date with DirecTV. 
We will continue seeking accord as the Senate approaches SHVIA 
reauthorization.
    As you know, SHVIA contains two compulsory licenses. The 
first, the local-to-local license, allows satellite to deliver 
local stations to local viewers. It has been a tremendous 
success, allowing many of your constituents to receive local 
news, weather and sports via satellite. DirecTV should be 
commended for its pledge to provide local-to-local in all 210 
markets no later than 2008.
    While DirecTV's aggressive expansion has forced EchoStar to 
move forward with local-to-local carriage, unfortunately in 
many markets EchoStar requires consumers to obtain a second 
satellite dish in order to receive some stations, most often 
Spanish-language, religious and public stations. We hope 
Congress ends this discriminatory two-dish practice.
    The second license, the distant signal license, has been a 
recipe for abuse. For decades, satellite ignored the rules 
governing eligibility for distant signals, signing up anyone 
and everyone willing to say they were unhappy with their over-
the-air reception. Even after broadcasters filed a series of 
lawsuit--and won, I would add--EchoStar continues providing 
illegal service to hundreds of thousands of subscribers.
    A Federal judge recently found EchoStar broke a sworn 
promise to the court by failing to disconnect those illegal 
subscribers. With this sordid record, EchoStar now asks that 
you expand the distant signal license by creating a digital 
white area. The Committee must reject this proposal.
    Let's dispel some myths being spread about the status of 
the DTV transition. According to the FCC, 1,411 television 
stations are on air in digital today in 203 markets that serve 
over 99 percent of U.S. households. Broadcasters are close to 
replicating their analog coverage areas, already reaching 92 
percent of the populations they will be required to serve.
    EchoStar's assertion that the 771 stations operating at 
special temporary authority power levels are not serving their 
full market area in digital is false and misleading. Many of 
these digital stations are not only serving their market area, 
but exceeding their analog coverage areas, even at lower 
authorized power levels. While digital white areas would do 
nothing to stimulate the DTV transition, it would have a severe 
consequence in the few remaining markets where broadcasters are 
struggling with bureaucratic and technical obstacles.
    A couple of examples. Our market, Salt Lake City, covers 
not only the entire State of Utah, but also counties in 
Wyoming, Nevada and Idaho. To serve viewers in this enormous 
DMA, Salt Lake City stations use 622 translators, more than 90 
percent of which are licensed to local governments and civic 
organizations, not to the stations.
    Moreover, the FCC has not yet authorized upgrading the 
translators to digital. Salt Lake City stations have been on 
the forefront of the DTV transition. Our station, KSL, went 
digital in 1999, broadcasting, I would add, Senator Hatch, from 
Farnsworth Peak, continuing your theme, and has been a leader 
in local digital wide-screen news. Utah stations have been 
active in working with the industry and the FCC to find a 
solution to the translator issue. Under a digital white area 
regime, EchoStar would steal our viewers, your constituents, by 
bringing Los Angeles stations to San Juan, Kane and other rural 
Utah counties.
    The five Vermont television stations spent 7 years working 
with State authorities and other parties to place their DTV 
facilities at a common site atop Mount Mansfield. The stations 
have also negotiated a new lease with the site owner. These 
preparations, now close to completion, have been further 
complicated by the difficulties of obtaining the necessary 
Canadian clearances. If digital white area becomes law, 
EchoStar will siphon off these stations' viewers as well.
    And make no mistake, EchoStar has no intention of returning 
these viewers to their Salt Lake, Burlington, or any other 
local broadcast service. EchoStar's digital white area scheme 
would do nothing to accelerate the transition. If EchoStar 
really wishes to be a partner in the DTV transition, it should 
bring local HD signals to local television markets.
    Mr. Chairman, since the first Satellite Home Viewer Act was 
enacted in 1988, Congress has repeatedly affirmed two goals. 
First, the preferred method to provide network programming is 
through local affiliate stations. And, second, importing 
distant signals should only be used as a last resort in extreme 
circumstances where there is no alternative.
    Over the years, EchoStar has repeatedly misused and abused 
this second, last-resort option. I strongly urge the Committee 
to reauthorize a SHVIA that recognizes the paramount importance 
of localism, takes heed of the mistakes of the analog past, and 
does not repeat those mistakes in the digital future.
    Thank you.
    [The prepared statement of Mr. Reese appears as a 
submission for the record.]
    Chairman Hatch. Thank you so much.
    Mr. Hartenstein.

   STATEMENT OF EDDY HARTENSTEIN, VICE CHAIRMAN, THE DIRECTV 
              GROUP, INC., EL SEGUNDO, CALIFORNIA

    Mr. Hartenstein. Chairman Hatch, Senator Leahy, Senator 
Kohl and members of the Committee, my name is Eddy Hartenstein. 
I am the vice Chairman of the DirecTV Group and it is my honor 
to be here today. Thank you for allowing me to testify on 
behalf of DirecTV regarding SHVIA.
    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 
enacted, extended a compulsory copyright license to the 
retransmission of local television signals within each 
station's local market, known as local-in-local. This, combined 
with improved technology, has allowed satellite operators such 
as ourselves and EchoStar to offer programming service much 
more comparable to that offered by cable.
    For us, with last week's launch of our DirecTV 7S spot beam 
satellite, we will in a matter of days begin the process of 
providing local-into-local service in just over 100 DMAs 
nationwide. And we also have pending in front of the FCC 
another proposal which will extend our capacity to reach 130 
DMAs as soon as this summer. At that point in time, we will be 
offering local broadcast channels in markets serving 92 percent 
of American television households. And in coming years, we plan 
to continue rolling out the rest of the DMAs into the remaining 
markets.
    In other words, SHVIA has been an extraordinary success and 
we hope Congress will build on its success. But we know SHVIA 
is a complex issue in these complex times, and we realize that 
with today's world events of last week and going forward, this 
is a very busy legislative session and Congress and this 
Committee do not have a lot of time to act.
    With that realization in mind, and putting things in proper 
perspective, we have been meeting with representatives of the 
broadcast industry to see if we could reach some common ground 
on some of the issues associated with SHVIA reauthorization. 
These discussions are still ongoing, but we have been able to 
agree on several basic points. Among them are the following.
    Legislation should extend satellite operators' ability to 
import distant signals for up to 5 years or longer; permanently 
would be nice, but again we would be willing to settle for 5 
years. The legislation should also, subject to some 
limitations, allow satellite operators to offer the same out-
of-market significantly viewed stations that cable operators 
already offer today.
    That same legislation should extend for 5 years the 
satellite carrier retransmission consent exemption for distant-
signal stations, and we should extend for the same period of 
time the provision prohibiting television stations from 
entering into exclusive retransmission consent agreements.
    The legislation should extend the good-faith negotiating 
requirement to all distributors and it should provide a 
mechanism for grandfathered distant-signal subscribers to 
choose between distant and local signals. We should also 
gradually implement a ``no distant where local'' concept 
whereby satellite operators can't offer new subscribers distant 
signals where local-into-local signals are available. But in 
doing so, however, I think we should ensure that the 
legislation allows existing subscribers who have both distant 
and local-into-local to keep them.
    Finally, the legislation should clarify what ``carry one, 
carry all'' means, and we believe that satellite carriers may 
not split local analog or local digital signals, respectively, 
in one market between two dishes.
    Now, do these principles reflect everything that DirecTV 
would like from a SHVIA reauthorization? Of course not. But all 
and all, we think that these principles represent a reasonable 
compromise. There is, however, another issue to discuss that 
lies at the heart of this Committee's jurisdiction.
    We are deeply troubled by the prospect of rate increases, 
particularly if there is no such increase in the rates paid by 
cable operators. We are also concerned with the prospect of 
participating in an admittedly flawed, distracting, extremely 
expensive and time-consuming CARP process, and that is a 
process that cable operators are not even subjected to.
    You may hear a lot this afternoon about whether the 
satellite industry pays more or less in royalty fees than 
cable. The fact is one cannot make an apples-to-apples 
comparison because the two royalty regimes are so very 
different. So I would take with a grain of salt any analysis 
claiming that cable operators pay more than satellite 
operators.
    To the extent that copyright-holders are really saying that 
neither cable nor satellite fees adequately compensate them, I 
would note that Congress must balance the goal of reimbursing 
copyright-holders with the goal of giving consumers access to 
programming at a reasonable price.
    Most importantly, I would remind the Committee that 
satellite operators control, in aggregate, only about 20 
percent of the subscription television market. And in nearly 
every town in America, we compete against a cable operator with 
at least 70-percent market share. In such a market structure, 
any effort to raise only satellite royalty rates would be a 
competitive disaster. If Congress truly believes it is time to 
raise royalty rates, and thus pay TV prices, it should do so 
only in the context of harmonizing the cable and satellite 
royalty rate regimes.
    In conclusion, Mr. Chairman and members of the Committee, I 
would like to thank you for all that Congress has done to 
nurture the satellite industry as a vibrant competitor to 
subscription television and cable, and with your help we will 
continue to do this and provide the highest quality, best, 
competitive service to consumers.
    Thank you.
    [The prepared statement of Mr. Hartenstein appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Eddy.
    Fritz, we will turn to you.

   STATEMENT OF FRITZ ATTAWAY, EXECUTIVE VICE PRESIDENT AND 
   WASHINGTON GENERAL COUNSEL, MOTION PICTURE ASSOCIATION OF 
                   AMERICA, WASHINGTON, D.C.

    Mr. Attaway. Thank you, Mr. Chairman, Senator Leahy, 
Senator Kohl. I appreciate you affording me this opportunity 
today to speak on behalf of content owners, without which, I 
should point out, none of the people at this table would be in 
business.
    The Satellite Home Viewer Act was enacted in 1988 and 
extended for 5-year periods in 1994 and 1999. In 1999, in 
response to fierce lobbying by the satellite industry, Congress 
imposed a substantial discount on market-based compulsory 
license rates set a year earlier by an independent arbitration 
panel and approved by the Copyright Office and the Librarian of 
Congress.
    These discounts--30 percent for superstation programming 
and 45 percent for network and PBS programming--went into 
effect in July of 1999. Since the reduction of royalty rates in 
1999, there have been no further adjustments of the compulsory 
license rates. In the 5 years since the last extension of the 
satellite compulsory license, the cost of programming that 
satellite companies license in the free market for resale to 
their subscribers has increased substantially, as have the fees 
charged by satellite companies to their subscribers. The only 
financial figure that has not increased is the compensation 
provided to owners of retransmitted broadcast programming.
    Satellite carriers now pay 18.9 cents per subscriber, per 
month, for all of the programming on a distant independent 
broadcast station like WGN in Chicago and KTLA in Los Angeles. 
The satellite carriers then sell this programming to their 
subscribers for many times that amount. The royalty rates for 
the year 2004 should increase to reflect increases that 
satellite companies have paid in the marketplace for comparable 
programming.
    Some satellite carriers--I say ``some'' now because Mr. 
Hartenstein was absolutely correct; you cannot compare cable 
and satellite. They are apples and oranges. Any claim that 
cable systems pay more now than satellite is simply not true. 
The cable compulsory license is so completely different from 
the satellite compulsory license formula that any attempt at 
comparison is likely to be misleading. As I said, it is 
comparing apples and oranges.
    But with that disclaimer in mind, let me give you some 
comparisons. EchoStar charges $34.99 for its basic package that 
includes WGN as a distant signal. It pays 18.9 cents in 
compulsory license royalties. Under the cable formula, it would 
pay 33.5 cents. DirecTV charges $39.99 for its Total Choice 
package, which includes WGN. It pays 18.9 cents under the 
satellite compulsory license formula. It would pay 38 cents 
under the cable formula.
    EchoStar sells its add-on Dish Net Superstation Package, 
which includes five distant independent stations, for an 
additional $5.99 a month. It pays 94.5 cents for these five 
stations under the satellite formula. Under the cable formula, 
for these same five distant independent stations, the cable 
system in Ogden City, Utah, would pay $1.57. The cable system 
in Provo would pay $2.33. The cable system in Salt Lake would 
pay $1.66. The cable operator in St. Johnsbury, Vermont, would 
pay only $.52, actually less than the satellite carrier would 
pay. But the cable operator in Montpelier would pay $2.27, and 
the cable operator in Burlington, Vermont, would pay $5.79.
    The cable operators that we have looked at would pay more 
than satellite would pay. However, the truth is we are 
comparing apples and oranges. I think the point to be made here 
is that in the past 5 years, satellite carriers have 
experienced cost increases. I suspect the cost of transponders 
has gone up, as has the cost of parabolic dishes.
    Certainly, the cost of programming on the 100-or-so non-
broadcast channels carried by satellite operators has gone up. 
But in none of these cases have the satellite carriers come to 
the Congress and asked for a subsidy. Only in the case of 
retransmitted broadcast programming do these carriers say that 
they should be insulated from market forces.
    Mr. Chairman, Senator Leahy, Senator Kohl, by any 
reasonable market analysis the cable compulsory license rates 
should be adjusted upward. I trust that you will help make that 
happen.
    Thank you very much.
    [The prepared statement of Mr. Attaway appears as a 
submission for the record.]
    Chairman Hatch. Thank you.
    Mr. King, we will take your testimony last here.

STATEMENT OF JOHN KING, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
         VERMONT PUBLIC TELEVISION, COLCHESTER, VERMONT

    Mr. King. Thank you, Mr. Chairman, and thank you for 
inviting me to appear today to testify on behalf of the 
Satellite Home Viewer Extension Act. I would like to thank you 
and the members of your Committee for the work that you have 
done for satellite viewers, and a special thank you to Senator 
Leahy for all he has done especially in Vermont to get 
satellite signals to our State. It has been extremely important 
to us.
    Today, I would like to speak to the importance of local-to-
local satellite carriage for educating, informing and 
connecting viewers, especially in rural States like Vermont. 
And I will ask help from this Committee so that Vermont 
stations will be available by satellite in Vermont's two 
southern counties.
    Vermont Public Television is proud to be a PBS station 
broadcasting national PBS programming, but what really makes us 
Vermont Public Television is the local programming we produce 
about Vermont's public affairs, culture, nature and history.
    We are more than a TV station. In our programming and 
community outreach, we are a unifying force helping Vermonters 
understand one another and fostering participation in civic 
life. Although Vermont Public Television operates four 
transmitters, our State's mountainous terrain makes over-the-
air reception difficult, particularly in the southern area of 
the State.
    In Vermont, there are many daily and weekly newspapers, but 
no single statewide newspaper. Public broadcasting and the 
commercial TV stations are the only statewide media, and access 
by satellite is crucial for all Vermonters. When satellite 
service began, Vermonters embraced it. The one drawback was the 
absence of local channels. There was great excitement 2 years 
ago when EchoStar began offering local channels. Satellite 
subscription spiked and now more than 30 percent of the 
households in the Burlington DMA have satellite.
    I would like to thank you, Mr. Ergen, for that service.
    Viewers were delighted. One woman from a small town in 
Vermont wrote, quote, ``We are happy to say that as of today we 
now have truly local Vermont TV channels through Dish Network. 
We have felt disconnected and alienated from the State of 
Vermont as far as the news is concerned. Once we heard that 
local Vermont TV, including Vermont Public Television, was 
available in our county, we immediately signed up.''
    One of the best features of SHVIA is the ``carry one, carry 
all'' provision. Vermont Public Television is on EchoStar's 
main satellite, along with the four commercial affiliates as 
part of the local channel package. Unfortunately, the good news 
in 2002 about local-into-local did not apply statewide. Because 
local service is determined by Nielsen DMAs, Vermont's two 
southern counties are excluded, as they lie outside the 
Burlington DMA.
    Windham County, in the southeast corner, is assigned to the 
Boston DMA, and Bennington County, in the southwest corner, to 
the Albany, New York, DMA. Would-be viewers in those counties 
were surprised to find they couldn't get Vermont channels, only 
Boston and Albany stations. As good as those stations are and 
as interesting as the news from New York and Massachusetts may 
be, Vermonters wanted news, weather, emergency information and 
local public affairs programming from Vermont.
    Last month, EchoStar took a positive step toward bringing 
southern Vermonters into the community of Vermont viewers. 
Thanks to an agreement between EchoStar and Vermont Public 
Television, EchoStar began offering Vermont Public Television 
as an a la carte channel. This is a good first step, but we 
think viewers would prefer access to Vermont Public Television 
as part of a local channel package.
    Vermont Public Television and the commercial TV stations 
are a unifying force in our rural State, giving Vermonters 
information to help them to be more knowledgeable, active 
citizens of their State and community. We look forward to the 
day when all Vermont satellite viewers can see our programs 
about State government. The Speaker of the House in Vermont and 
the Chair of the Vermont Senate Judiciary Committee are both 
from southern Vermont, and we think their constituents should 
have been able to see their recent appearances on our air.
    We would like all Vermonters to be able to participate in 
the regular call-in shows we do with the Governor or the 
members of our Congressional delegation. In an election year, 
statewide TV is essential. I would like Vermont Public 
Television's candidate debates and public affairs programs and 
the commercial stations' news and information to reach all 
Vermonters. I urge this Committee to work with the satellite 
companies on giving all Vermonters access to all of their 
State's television stations.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. King appears as a submission 
for the record.]
    Chairman Hatch. Well, thank you, Mr. King.
    Let me turn to you, Mr. Reese. Can you discuss the long-
term effect on advertising revenues in small markets if we were 
to allow the continual retransmission of distant signals by 
satellite in areas already served by local-to-local 
retransmission?
    Mr. Reese. I find it interesting that the SHVIA Act and 
SHVIA reauthorization are characterized here as a way to 
balance the playing field between satellite and cable, and that 
the sort of fundamental communication mechanism, the policy 
decision that was made in this country 80 years ago about the 
need for local, over-the-air, free broadcasting, is sort of a 
footnote in this conversation.
    What we as broadcasters have to support in our obligations 
to serve the community is the ability to reach our audiences. 
There is an absolute need that we have access to those people. 
We are grateful to have competition to cable via satellite. We 
are pleased with the results from local-to-local. We look 
forward to the day when satellite and cable will be delivering 
our digital signals within the markets that we serve.
    But it is extremely important that broadcasters have access 
with their signals to all of the viewers within our area, and 
the retention of these so-called grandfathered homes is simply 
not justifiable either in terms of retaining the viability of 
commercial television, but more importantly in terms of the 
public policy, the public safety, the localism situations, the 
localism policies that underlie the Telecommunications Act.
    Chairman Hatch. Would you please comment further on Mr. 
Ergen's digital white area proposal? Tell me how that would 
work in my home State of Utah. And, of course, I would be happy 
to hear from the rest of you witnesses on that as well.
    Mr. Reese. Well, in the State of Utah, as you very well 
know, despite being the seventh largest State geographically, 
we are also the seventh most urban State in America because so 
much of the population is concentrated in and around the Salt 
Lake City area, with about 90 percent of the land mass of Utah 
owned by the Federal Government and fairly sparsely populated.
    Beginning 40 years ago, through the combined efforts of the 
State and two legendary broadcasters in Utah, Arch Madison and 
George Hatch, broadcasters there began building translators 
throughout the State of Utah, not because there was a 
commercial benefit to it, because local Salt Lake advertisers 
receive no benefit from viewership in Monticello, Utah, but 
because there was a feeling that it was important that those 
people be part of the State, that they have access to the news 
and public safety information that comes out of the State 
capital.
    Those translators--and there are now 622 of them in Utah 
that we know about. They are not licensed generally to the 
stations, but are licensed to county governments, city 
governments, the Lion's Club, the Rotary Club, in a community 
that wanted to see television.
    Until we solve the bureaucratic issues related to the 
transition of those translators, which is an issue that is 
before the FCC and that they are moving on, but until we solve 
all of the technical issues related to the main channel 
transitions, we really don't get to the translator issues.
    What happens if we do a digital white area is that large 
portions of your State might well be watching Los Angeles 
television stations. It provides no incentive, then, to try and 
solve this translator problem to be able to deliver local Salt 
Lake City television stations into the State of Utah.
    We have local-into-local satellite. There is no need for 
those people to be able to--they can see Salt Lake City 
stations now under SHVIA. We hope someday to be able to have 
digital local-into-local, in which case those rural viewers 
would be able to watch digital Salt Lake City stations. There 
is no policy that is benefitted by getting those people 
watching Los Angeles digital signals.
    Mr. Ergen. I think it is a little bit different. Our white 
area proposal is for high-definition television. Through 
satellite today, every square inch of the United States and 
every consumer in America could get HD signals. They could get 
the football games, the Master's golf tournament, the Tonight 
Show, all the things that are being broadcast on HDTV public 
broadcasting.
    Should you be denied that because you live in rural 
America? Should you be denied that because your local 
broadcaster hasn't put up the signal, even though they were 
supposed to 2 years ago?
    In fact, in Salt Lake City a majority of broadcasters now 
are leasing their digital spectrum to a service--I think it is 
called U.S. Digital--which is broadcasting, in competition with 
satellite and cable systems, channels like ESPN and CNN news. 
So they are not using the signal for HDTV and we don't have the 
right to bring HDTV in, and the only people we can get it from, 
broadcasters in Salt Lake City, aren't using it for HDTV. So I 
think the translator issue that Mr. Reese mentioned is a valid 
issue, but it is a smokescreen in terms of Salt Lake City 
because they are not doing high-definition television.
    Having said that, I think that there should be some common 
ground here. You now, we are problem-solvers. We don't have all 
the solutions and we certainly are willing to enter into 
dialogue. It seems to me that we should have some kind of 
transition period to bring HDTV to the State of Utah until the 
translator issue can be resolved.
    At some point, we need to get spectrum from the FCC, and so 
forth, so that we can do local-to-local HD, and it seems to me 
that we shouldn't deprive people today. We should speed the 
digital revolution for HD. We should get the analog spectrum 
back so it can be used by other people to increase productivity 
in the United States.
    It seems to me that we want to open the dialogue. We don't 
have all the answers and I think there are good points on every 
side. But we do know that consumers aren't calling us about two 
dishes. Consumers are calling us about why can't they get HDTV. 
Consumers are calling us about why they can't get a network 
signal when it is snowy with an off-air antenna. They are 
calling about a waiver process they don't understand. Those are 
things we hope this legislation will address.
    Chairman Hatch. Thank you.
    Does anybody else care to comment?
    Mr. Reese. If I could just add, Senator, some stations in 
Salt Lake are cooperating with U.S. DTV. Those stations can, 
however, still broadcast a digital signal. There is the 
flexibility in the spectrum to do that and to be able to 
provide this further competition to cable and to satellite with 
Steve Lindsley and U.S. DTV.
    Mr. Ergen. We are talking about two different things. I am 
talking about high-definition television and Mr. Reese is 
talking about a digital signal. The digital signal is very 
similar to the analog signal. It doesn't go on a wide screen. 
It doesn't go on the 16-by-9 with all the 1080(i) lines. So 
that takes the full spectrum.
    I believe, based on everything I have seen, that what we 
have proposed is high-definition television using the full 
spectrum through the 1080(i) that was mandated by Congress.
    Mr. Reese. Which, as I understand it, is what we are still 
able to do while working with Steve Lindsley and U.S. DTV.
    Chairman Hatch. Thank you. My time is up.
    Senator Leahy.
    Senator Leahy. Thank you, Mr. Chairman. You know, as I was 
listening to some of the openings on this, we are expecting a 
grandchild in July. We don't know whether it is going to be a 
boy or a girl, but whatever it is, I think I will name it 
Farnsworth. It is the only way I am going to get into this 
plan, with apologies to the child when the child hears that.
    Chairman Hatch. Well, I want the name ``Philo,'' as well, 
you know.
    [Laughter.]
    Senator Leahy. Don't push it. That will be the next one; 
that will be the next grandchild.
    Chairman Hatch. Can you imagine, Philo Leahy? That sounds 
pretty good. It has a ring to it.
    Senator Leahy. I am not sure it will in Vermont, but that 
is okay.
    Chairman Hatch. I think I am going to start calling you 
Philo.
    Senator Leahy. The President has nicknames for all of us, 
and we were out to dinner and somebody asked my wife what his 
nickname was for me and she said, well, we don't use that in 
polite company.
    [Laughter.]
    Senator Leahy. No. Actually, it was very nice.
    Getting back to the subject, Mr. Carson, first off, I just 
want to thank you and the Copyright Office. You come over here 
so often, all of you, and you are so helpful. The hearings are 
the tip of the iceberg. I know the staffs on both sides of the 
aisle are calling all the time, and I have never known a time 
when the Copyright Office wasn't ready and able to come right 
back with answers for us.
    I think in the satellite TV industry, you don't have to be 
a genius to know that one of the reasons for the growth of it 
is partly due to the availability of local-into-local 
television, and a lot of that came from the work done in this 
Committee and the House Judiciary Committee. You might have two 
satellite companies and a cable company in an area, and it is 
great because you get some competition and go from there.
    If we do this reauthorization, assuming like most 
reauthorizations it is not just simply a one-line ``it is 
hereby reauthorized for `x' amount of time'' and we start 
adding some things, what can we do to increase competition in 
the areas where it now exists?
    Mr. Carson. Well, Senator Leahy, there are a number of 
things you can think about doing. Actually, in 1997 we made 
quite a few suggestions, including, for example, trying to 
harmonize the rate structures which are very different in the 
two industries.
    But if your question is, as I understand it, what can you 
do this year in the context of a reauthorization, I think you 
have to set your sights considerably lower. First of all, while 
we recommend that you take a look at the cable regime--and when 
we are talking about harmonization and convergence, we are 
talking about looking at both licenses, not just changing one 
to look more like the other--I don't think anyone is talking 
about changing the cable regime this year.
    What can you do this year? Well, one thing that I mentioned 
in my testimony that you could do would be to deal with the 
issue of the significantly viewed signal. As I mentioned, cable 
has the ability right now to transmit a signal from an adjacent 
area when it is significantly viewed over the air in a 
particular locality.
    Most people, I think, who have been discussing 
reauthorization of the satellite license this year have agreed 
that that is not a bad idea with respect to satellite. It helps 
in terms of convergence. It helps in terms of giving satellite 
the ability to deliver something that many customers will want 
and that they can get from cable. That may be all you can do 
this year, really, in that respect, given the very limited 
nature and limited time of the process this year.
    Senator Leahy. Mr. King, thank you for coming down from 
Vermont this morning to be here. I will probably see you on the 
streets or in the grocery store in Vermont this weekend when I 
am back up there.
    The House Judiciary Committee passed out a bill that 
addresses a problem regarding two northern counties in New 
Hampshire which seem to have very similar situations to the two 
southernmost counties that you talked about, Windham and 
Bennington counties. The counties in northern New Hampshire are 
Grafton and Sullivan and they are actually in the Burlington 
designated market area, even though our whole State is between 
there. They receive Vermont stations through local-into-local 
satellite service.
    Under the House bill, a major network station in 
Manchester, New Hampshire, would be able to have its signals 
offered through local-into-local service to those northern New 
Hampshire counties even though they are in the Burlington, 
Vermont, market. That means some New Hampshire residents would 
be offered both WMUR, the Manchester station, and a competing 
Vermont network station. We have to assume that probably they 
are watching the New Hampshire one more.
    Do the same reasons you gave in your testimony about 
providing Vermont station signals to our southern counties 
apply with equal force to permitting a New Hampshire station to 
serve two northern counties in New Hampshire with local-into-
local? That is a long way around to ask a simple question.
    Mr. King. I don't know whether to call you Senator 
Farnsworth or not, but in response to your question, absolutely 
the logic applies equally in my mind to WMUR in New Hampshire 
in the northern counties of Vermont as it does to the southern 
counties of Vermont in terms of Vermont stations.
    People who live in New Hampshire may receive Vermont 
stations, but clearly our indication from our viewer responses 
and letters and phone calls and e-mails would indicate that 
nothing is more important to them than local news. And if WMUR 
serves a statewide population, which in most cases I believe it 
does, then the logic would apply and they should be on the dish 
as well.
    Senator Leahy. Speaking of calling me Senator Farnsworth, I 
actually ran into somebody once who called me Senator Tuttle. 
That is a local joke, for those of you who don't know Vermont.
    I also had somebody come up to me in the Capitol here 
recently who said I looked familiar. I told him I was Pat 
Leahy, a Senator from Vermont, and he looked at me carefully 
and said, no, no, you are not. And I said, well, I will accept 
that, but why aren't I? He said, well, I have seen him on 
television; he is about five-two and you are about six-four. I 
said, what if I was a foot shorter? He said, oh, you could pass 
for him easy.
    Mr. Attaway, sometimes we look different wherever we are.
    Mr. Ergen, there has been some question here, and I know 
you have heard this criticism about two satellite dishes to 
offer the full complement of stations. Am I correct that this 
allowed local-into-local faster than it would have been 
otherwise?
    Mr. Ergen. First of all, as you recall, in 1999 all of us 
were involved, as were you, in legislation for SHVIA. The 
``must carry'' passed, which is ``carry one, carry all,'' and 
as part of that legislation the compromise was that a two-dish 
solution was allowed. The broadcasters' lawyers and teams of 
lobbyists were certainly well aware of that; it has been black 
and white in the law. So we have followed the law.
    Every Congressman and every Senator that I have seen since 
1999 has begged us to bring local-to-local to their 
communities, and we have done that. We have done almost twice 
as many as our competitor, DirecTV. In other words, we are the 
good guys here.
    The only channels that we put predominantly on the wing 
satellites are channels that do not have local content. In 
other words, they don't have local news, weather, sports. If it 
is a religious station, it is exactly the same as a national 
religious channel. We carry Trinity Broadcasting and we carry 
them on a national basis. If there is not capacity available, 
they have gone on a wing satellite. Only 11 percent of our 
channels are on wing satellites. Only 30 percent of our markets 
require two dishes. So that allows us in your case to do 
Vermont some three or 4 years before maybe DirecTV is going to 
do that.
    So the balance for us had to be do we bring more 
competition with local channels and more local markets? And we 
are now in 49 States, Senator, 88 percent of the population. Or 
do we go to a single-dish solution and do half that number?
    Because it was the law, because it was agreed to by all 
parties in 1999, and because we were encouraged by Congress, we 
did that. It seems to me very punitive to now pass a law that 
says, EchoStar, you did a great job, but now we are going to 
penalize you and you have to retroactively go out and take 
those customers who are on one dish and put them on two-dish 
markets, or in some cases take down local markets.
    I think the solution is to give us a period of time, going 
forward, to be able to implement that. That may require 
spectrum. It may require a new satellite. As you know, it takes 
probably 3 years to build and launch a new satellite and some 
$250 million.
    We don't want to be in a two-dish solution. We don't want 
any broadcaster to be on a second dish, even in local content, 
but we need time to do that. DirecTV, of course, is now against 
two dishes because they are not really a satellite company, 
solely. They are obviously a broadcaster owned by news 
corporations. So we are the only independent company left. And 
they don't have spectrum for two dishes. Everything they have 
ever done has been on a single dish because that is the only 
spectrum they have.
    So we are kind of fighting this. While you may see 
agreement to the left-hand side of me on two-dish, it is rare 
that Congress would pass legislation that is solely directed 
anti-competitively at one company, particularly a company that 
has done more for local-to-local than any other company.
    Senator Leahy. My time is up. I will have some questions 
for the record. The question was raised on HDTV. Are any of you 
suggesting that you would not be planning to carry HDTV on 
every channel that might have it? I don't think anybody is 
suggested that, are they?
    The reason I ask this is I know I hear some talk about, 
gee, this is great if we give the broadcasters more spectrum so 
that we can have HDTV. And they say, well, if we just send a 
regular signal, of course, we can use that extra bandwidth to 
use any number of commercial things on it.
    Let me ask this question. Is anybody suggesting in their 
business, assuming they are in the business, that they are not 
going to carry HDTV everywhere it is available?
    Mr. Reese. Mr. Leahy, we are certainly not suggesting that, 
but we need help from the Congress and from the regulatory 
perspective to make sure that a group not here today, the cable 
industry, and the satellite people carry our digital signals, 
our HD signals when we as broadcasters put them on the air.
    Senator Leahy. You know, this is a whole new consumer area 
once it becomes available. Senator Hatch and I are old enough 
to remember when the first TV sets started showing up in our 
homes, and then the wonder of color, even though I think RCA 
carried about--it could only be seen by a handful of people, 
but they started broadcasting more and more programs in color, 
and then everybody did. And today the rare set is the black-
and-white set.
    Thank you, Mr. Chairman. I have some thing I will submit, 
but I just want to compliment you again for holding this 
hearing.
    Chairman Hatch. Well, thank you, Senator Leahy. We are 
going to keep the record open for questions, and I have a 
number of questions I am going to submit in writing.
    We are appreciative of all of you being here and for the 
respective points of view. Mr. Carson, we will particularly pay 
attention to what you suggest to us. You have been terrific 
through the years, and so has the Office. So we just want to 
compliment you on that.
    In closing, I would like to thank all of you witnesses for 
your testimony today. I think we have had a good, small hearing 
here, and I will look forward to working with interested 
parties to go ahead with legislation this year. I want to 
mention that I would anticipate fairly quick action on this in 
our Committee. We have put S. 2013 on the agenda for the markup 
tomorrow, and I hope that we will be able to move that through 
Committee within the next couple of weeks. So we need all your 
suggestions.
    We certainly don't want to hurt anybody. We want to get 
this so that it works in the best way for everybody. As you 
know, I take particular interest in the Satellite Home Viewer 
Act. I remember when we had to fight that through and it was a 
very, very difficult thing to do. Hopefully, we will have a 
little easier time this time and hopefully we can resolve some 
of these conflicts that we have. If not, we will do the best we 
can.
    So with that, we will adjourn until further notice.
    [Whereupon, at 3:43 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]
    [Additional material is being retained in the Committee 
files.]

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