[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
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SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
MAY 7, 2008
__________
Serial Number 110-91
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona TODD AKIN, Missouri
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas STEVE KING, Iowa
DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa DAVID DAVIS, Tennessee
YVETTE CLARKE, New York MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania TODD AKIN, Missouri
MARY FALLIN, Oklahoma
.........................................................
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Braley, Hon. Bruce............................................... 1
Davis, Hon. David................................................ 2
WITNESSES
Hephner, Mr. Greg, Hephner TV, Wichita, KS, On behalf of the
Consumer Electronics Retailers Coalition....................... 3
Pardini, Mr. Ed, Senior Vice-President of Operations/North
Central Division, Mediacom Communications, West Des Moines, IA,
On behalf of the American Cable Association.................... 6
Oliver, Mr. Keith, Senior Vice President, Corporate Operations,
Home Telephone Company, Inc., Moncks Corner, SC,On behalf of
the Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO)......................... 8
Dempsey, Mr. Jack D., President/General Manager, WJHL-TV/
NEWSCHANNEL 11, Johnson City, TN............................... 10
APPENDIX
Prepared Statements:
Braley, Hon. Bruce............................................... 22
Davis, Hon. David................................................ 24
Clarke, Hon. Yvette.............................................. 25
Hephner, Mr. Greg, Hephner TV, Wichita, KS, On behalf of the
Consumer Electronics Retailers Coalition....................... 28
Pardini, Mr. Ed, Senior Vice-President of Operations/North
Central Division, Mediacom Communications, West Des Moines, IA,
On behalf of the American Cable Association.................... 32
Oliver, Mr. Keith, Senior Vice President, Corporate Operations,
Home Telephone Company, Inc., Moncks Corner, SC,On behalf of
the Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO)......................... 38
Dempsey, Mr. Jack D., President/General Manager, WJHL-TV/
NEWSCHANNEL 11, Johnson City, TN............................... 44
Statements for the Record:
Community Broadcasters Association............................... 64
(iii)
SUBCOMMITTEE HEARING ON THE DTV
TRANSITION AND SMALL BUSINESSES:
SMALL FIRMS CONTRIBUTING TO A
BIG CHANGE
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Wednesday, May 7, 2008
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:00 p.m., in
Room 1539 Longworth House Office Building, Hon. Bruce Braley
[chairman of the Subcommittee] presiding.
Present: Representatives Braley, Cuellar, Clarke, Davis,
and Akin.
OPENING STATEMENT OF CHAIRMAN BRALEY
Chairman Braley. Good afternoon. I call this hearing to
order on The DTV Transition and Small Businesses: Small Firms
Contributing to a Big Change.
This afternoon, the Subcommittee will consider the impact
of the Digital Television, also known as DTV, transition on
small firms. Throughout our country, small companies are making
significant efforts to ensure that American households are
prepared for the changes that will occur in February 2009.
Small broadcasters, electronics retailers, and cable and
telecommunications companies all are playing a critical role in
the DTV transition.
This hearing will examine those efforts and it will also
consider whether there are additional actions that Congress
should take in order to minimize the burden of the transition
on small firms, particularly those serving in rural areas. On
February 18th of 2009, television broadcasters will no longer
transmit over-the-air television broadcasts in an analog
format. As a result, millions of households with analog-only
televisions are faced with the prospect of no longer receiving
a signal unless they act. They will need to either buy a new TV
or subscribe to a new video service or these Americans will be
forced to purchase a digital-to-analog converter box. This
transition requires a public/private partnership.
The government has enlisted the assistance of businesses,
both large and small, to carry out many of these changes.
Broadcasters, retailers, electronics manufacturers and video
service companies are providing consumer education on the
transition. Federal guidelines have also been established for
equipment manufacturers and retailers participating in the
converter box program.
It is critical that the efforts of the small firms are
recognized and that the federal government's policies are not
unduly burdensome on small firms. This is particularly
important in rural areas where the broadcasters, cable
companies and primary retail outlets responsible for these
efforts of small businesses.
At today's hearing we will hear testimony from a number of
small businesses in the affected industries. I expect that this
hearing will help the Subcommittee and Congress consider more
fully the impact of the DTV transition on smaller firms.
One of the issues with the transition is whether the
Federal Communications Commission is accounting for the
concerns of small broadcasters and cable companies. Both
broadcasters and cable companies are actively promoting the
transition having spent millions to educate the public and
having invested in the necessary infrastructure to carry out
the transition.
The Subcommittee is interested in whether the regulations
issued by the FCC have taken into account the limited resources
of many small broadcasters and cable companies. It may be that
a greater public investment is necessary. These changes also
must account for the unique needs of small companies. I know
there is a concern about the must-carry requirements; resolving
this issue requires balancing the resource constraints of small
cable companies with consumers' legitimate interests in
receiving the full benefits of digital television.
It is critical that these cable companies remain viable
while addressing the concerns of TV viewers.
The role of small retailers must also be acknowledged in
this transition as well. The Committee looks forward to
testimony on how retailers are handling the converter box
program. These retailers are on the front line and are the most
likely source of where consumers will have their questions
answered on the transition. Small retailers have made the
necessary investment in new technology, training, and consumer
education to become certified retailers in the converter box
coupon program. For this program to be successful, however,
these businesses cannot be left with unredeemable government-
issued coupons or unsellable converter boxes if federal funds
for the converter box program are exhausted.
Congress is monitoring closely the success of these efforts
as the public and small businesses have a huge stake in it.
Indeed, all Members of Congress want to ensure that the
transition set for February 18, 2009 is a smooth one.
Representing a District with populations that are among the
most likely to be affected by the DTV transition, I think it is
critically important that the federal government and private
sector stakeholders minimize the number of televisions that go
dark in February. It's clear that the DTV transition will not
be a successful one without the important contributions of
small businesses in a variety of industries.
I look forward to the testimony of our witnesses today, and
thank them all for participating and I now recognize my friend
from Tennessee, Ranking Member David Davis for his opening
statement.
OPENING STATEMENT OF MR. DAVIS
Mr. Davis. Good afternoon. Thank you, Mr. Chairman, for
holding this hearing on DTV transition and its impact on small
firms. I would like to thank all of the witnesses for taking
time out of your busy schedules to come and testify before this
Committee and most particularly, Mr. Jack Dempsey has made the
trip here from Johnson City, Tennessee. Welcome, Jack.
Since the Deficit Reduction Act became law on February 6,
2006, the days of the analog television signal have been
numbered. On February 17, 2009, the nation will undergo a
change in the way television broadcasting is transmitted over
the air. On that day, all television stations will terminate
broadcasting and log signals. Thereafter, only digital signals
will be transmitted. Small broadcasters, electronic retailers
and other small firms are at the forefront of the DTV
transition.
The switch from analog to digital transmission signals will
provide television viewers with the clear pictures and more
program choices and will free up more portions of airwaves for
public safety communications such as police, fire and rescue
and new broadband wireless services. All of these are admiral
goals, but the DTV transition is not without cost. Since the
late 1990s, television broadcasters have spent billions of
dollars to build the infrastructure for into air digital
signals while continuing to broadcast in analog. While all
broadcasters are being asked with--tasked with making this
change, small cable companies and broadcasters are feeling the
pinch of these expenditures more acutely than their larger
counterparts.
Once again, I'd like to thank the witnesses for being with
us today and I'm eager to hear your testimony.
Thank you.
Chairman Braley. Thank you, Pat.
Witnesses will be allowed five minutes to deliver their
prepared statements. The way the lights work is when you have
one minute remaining, the yellow light will turn on in a light
fixture in front of you and when the time is up, the red light
is on. Your written statements will be included in the record
in their entirety and at this time it's my pleasure to
introduce our first witness, Mr. Greg Hephner is the president
and owner of Hephner TV and Electronics, Incorporated. For over
50 years, Hephner TV has been a leading retailer of home
entertainment products in Wichita, Kansas. Mr. Hephner is
testifying on behalf of the Consumer Electronics Retailers
Coalition. CERC is an association of established electronic
specialty and general retailers. Welcome. And we look forward
to your testimony.
STATEMENT OF MR. GREG HEPHNER, PRESIDENT, HEPHNER TV AND
ELECTRONICS, INC., WICHITA, KANSAS
Mr. Hephner. Chairman Braley, Ranking Member Davis, thank
you for inviting me to appear before your Subcommittee on
behalf of Hephner TV and the Consumer Electronics Retailers
Coalition.
It is our privilege to offer you our perspective as an
independent consumer electronics firm on the progress of the
DTV transition in America's heartland.
Transition in the electronics industry is nothing new. Our
company was established by my father, Lonnie, in 1950, long
before which Wichita had an TV stations. We witnessed the
transition from radio to TV from black and white to color and
now from analog TV broadcast to digital TV broadcast.
While technological changes can confuse and frustrate
consumers, these same changes eventually enhance consumers'
lives and are accepted and enjoyed once they are understood. As
probably the smallest member of the Consumer Electronics
Retailers Coalition, our management team gets to observe these
changes and consumers' reactions to them on a daily basis in
our own store. The sheer scope of the DTV broadcast transition
is without precedent, leaving some small consumer electronics
firms to choose not to participate in the NTIA coupon and
education programs. The reasons given are varied, but most of
these other dealers have told me that they wanted to avoid the
hassle of redeeming coupons providing customer education and
dealing with customer complaints.
Our company, however, embraced the transition and our
experience has been very positive. Hephner TV was an early
participant in NTIA's coupon eligible converter box program. In
partnership with CLC Services, part of the IBM Team that NTIA
is contracting with, we served as a pilot site to test the
coupon redemption system prior to the general public launch.
The application process with both NTIA and the Central
Contractor Registration are simple and fast for a company of
our size. We have redeemed coupons using both the retailer web
site and the toll-free phone number with little difficulty.
The CLS Services Retailer Support Center has been
responsive to any questions we have had and we have received
our coupon reimbursement payments in a timely manner. We have
found that customers aren't putting off the purchase of the
converter box, thus the demand for the boxes should be
consistent over the next 12 months.
In summary, we are very pleased with the coupon redemption
processes as created by the Congress, the NTIA, and IBM CLC
Services. Our observations are that consumers seem to have a
high degree of awareness and interest in the DTV transition.
Web sites dedicated to the DTV transition sponsored by the
NTIA, the Consumer Electronics Retailers Coalition, the FCC,
and countless others have provided a wealth of information to
any consumer that has questions.
In Wichita, we have cooperated with our local TV affiliates
on news stories that educate consumers about the transition.
All of our local TV stations have ubiquitous crawls along the
bottom of the screen directing consumers to call or log on to
web site for details about the transition. Our local newspaper,
The Wichita Eagle, continues to run stories and updates on the
coupon program.
It is my belief that if someone is unaware that TV is
changing, they simply haven't been paying attention. However,
we also understand that awareness doesn't always translate to
understanding. Creating consumer understanding of the
transition falls to local retailers like us. We are on the
front lines of public education, explaining the details of the
transition and reassuring the customers that the transition
will not be as draconian as some have assumed.
Through this we are successfully using the free handouts
provided by the NTIA on their web site. We also use reprints of
pertinent newspaper articles as handouts and post helpful links
on our company web site. We have observed that once we educate
customers about the transition in easy to understand terms,
they are relieved that they won't have to make any changes if
they are on cable or satellite, or that the converter box
solution is simpler than they had imagined.
We have fielded substantially fewer complaints than I had
anticipated. Very few customers have mentioned any problems
with the coupon application process. Most customers have had
little trouble connecting their boxes. In fact, many customers
have been pleasantly surprised that they are receiving more
channels via the digital box than they did with their analog
tuners.
From our vantage point, the DTV transition is progressing
very smoothly. The coupon redemption procedures designed by the
NTIA and IBM/CLC Services are easy to use and transparent for
the retailer. We have seen little of the consumer angst that
was predicted. Our customers understand the transition and are
preparing themselves for the day that most analog broadcast
end.
We would encourage the NTIA to continue the programs that
are currently in place. The existing systems strike a good
balance between the needs of the consumer and the retailer,
while offering reasonable security against fraud.
Finally, Mr. Chairman, there is one area in which Members
of your Committee could make our lives a bit easier. When we
started ordering our boxes, we found that the price had gone up
several dollars from the announced price, apparently due to a 5
percent tariff category in which the government seems to have
included these converter boxes. Representatives Ron Kind and
Kevin Brady have introduced a bill into Congress, Bill No. HR
5635 that would reform this tariff so that the government would
not be assessing a special tax that increases the cost to us of
the very products that it is subsidizing.
I would hope that your Members would consider becoming co-
sponsors of this legislation.
At Hephner TV we are excited to be part of one of the
largest technical upgrades in the last 60 years. The transition
has spurred an unparalleled public interest and enthusiasm in
the products we sell and in our industry as a whole.
I appreciate this Committee's interest in us and our
concerns and I hope you will remain in touch with us as the
transition moves to its conclusion next year.
[The prepared statement of Mr. Hephner may be found in the
Appendix on page 28.]
Chairman Braley. Thank you, Mr. Hephner, and I certainly
will take a good look at HR 5635 and the Committee will also
follow up on that. I appreciate that suggestion.
Our next witness is Mr. Ed Pardini who is a Senior Vice
President of Operations in the North Central Division at
Mediacom Communications in Des Moines, Iowa. As a Mediacom
subscriber, I look forward to your testimony.
Mediacom serves several smaller cities and towns throughout
Iowa, Minnesota, and North Illinois, South Dakota and
Wisconsin. They provide a broad array of broadband products and
services, including traditional video services, digital
television, video on demand, digital video recorders, high
definition televisions, high speed Internet access and phone
service.
Mr. Pardini is testifying on behalf of the American Cable
Association which is a voice of independent cable operators.
Welcome.
STATEMENT OF MR. ED PARDINI, SENIOR VICE PRESIDENT OF
OPERATIONS, NORTH CENTRAL DIVISION AT MEDIACOM COMMUNICATIONS,
DES MOINES, IOWA
Mr. Pardini. My name is Ed Pardini, and I am Senior Vice
President of Operations, North Central Division at Mediacom
Communications, an independent cable business. My company,
whose division is based in Des Moines, Iowa, provides essential
video and broadband products and services to smaller cities and
towns in many states represented by this Committee, including
Iowa, Wisconsin, Missouri, and several others.
I'm here today on behalf of the American Cable Association.
The Association's members range from family-run businesses
serving a single community to multiple system operators like
Mediacom that provide vital video, broadband, and advanced
services that bridge the digital divide in many smaller
markets.
Small cable operators are important businesses in their
communities, providing not only broadcast and cable
programming, but also extending the geographic reach of
broadcast programming to consumers and increasing their
viewership.
Additionally, many of ACA's members offer exclusive local
and community-oriented programming not carried by other
operators like Iowa's Mediacom Connections channel.
As we approach next year's digital transition, ACA and its
members are fully committed to ensuring its customers have a
seamless transition and we're working to ensure others know how
to prepare for the transition. ACA is an active member of the
DTV Transition Coalition and like many ACA members, Mediacom
has undertaken a massive education campaign to prepare
consumers for the digital transition that includes public
service announcements, information in our monthly billing
statements and meetings with community groups.
ACA and its members are committed to ensuring its
subscribers can continue to view broadcast stations after the
transition. To make that happen, tens of millions of dollars
have been invested in purchasing and upgrading the equipment
necessary to provide digital signals in a format that is
viewable on both digital and traditional analog sets.
Today, even as government broadcasters and cable operators
work together to minimize the confusion among consumers
associated with the digital transition, their collective
efforts may be disrupted by broadcasters who will be
negotiating retransmission consent deals with cable operators
at roughly the same time. In the second half of 2008, the
retransmission consent agreements that enable cable operators
to offer local broadcast signals will expire and ACA expects a
significant number of its members to face difficult
negotiations. In fact, while ACA members may well have good
relationships with WJHL, many are worried by the news from its
parent company, Media General, and other companies' analyst
calls, and the pressure mounting from Wall Street to extract
cash from consumers foretells a potentially very different and
ominous experience this fall.
As it stands, federal retransmission consent and network
nonduplication rules grant broadcasters unrestrained power in
these negotiations and broadcasters commonly leverage their
power to demand unreasonable prices, terms and conditions from
small and medium-sized operators. Furthermore, they use this
power to demand per subscriber fees, 200 to 1100 percent higher
for smaller operators than for larger ones for identical
content without any rational justification.
These higher costs are then borne by consumers. As a
committee focused on the important role that small business
plays in the economy and one that cares for consumers, I hope a
growing awareness of this problem of discriminatory pricing
will prompt further inquiries and action.
As a negotiating tactic, broadcasters often threaten to
force small cable operators to drop their signal, as a means of
pressuring operators into accepting unfair deals which raise
the rates on consumers. This practice, which will under the
best of circumstances disrupt service with no regard for
consumers, will cause mass confusion in the months before and
after the transition. This is precisely what happened in early
2007, when 2 million television viewers in 700,000 households
were disrupted by Sinclair Broadcast Group's unilateral
decision to pull 22 stations from Mediacom Cable Systems in 12
states, including Waterloo and Dubuque in the Chairman's
District, and other states represented on this Subcommittee.
In September 2007, the FCC issued a rulemaking seeking
comment on revisions to the Commission's program access and
retransmission consent rules. The ACA filed comments in this
proceeding describing the broadcasters' discriminatory conduct
towards small cable operators and proposing and prohibiting
these tactics.
More recently, Mediacom and several other cable operators
filed a petition with the FCC, asking the Commission to
promptly adopt a retransmission consent "quiet period" to
ensure that these disputes in the months surrounding the
digital transition do not trigger consumer confusion or service
disruptions. To put an end to the discriminatory retransmission
consent practices that harm consumers and to ensure
uninterrupted service for ACA's members' subscribers during
this transition, we encourage this Committee to conduct a
further review of these issues.We also urge every Member of
Congress to play an active role in monitoring negotiations in
their own districts.
Chairman Braley, Ranking Member Davis and Members of the
Subcommittee, thank you again for your opportunity to testify.
[The prepared statement of Mr. Pardini may be found in the
Appendix on page 32.]
Chairman Braley. Thank you.
Our next witness is Keith Oliver, who is the Senior Vice
President of Corporate Operations for Home Telephone Company in
Moncks Corner, South Carolina. Home Telephone also provides
voice services, broadband and video services to the homes and
small business in their community.
Mr. Oliver also serves as chairman of OPATSCO, the
Organization for the Promotion and Advancement of Small
Telecommunications Companies. OPATSCO is a national trade
association made up of more than 600 small, local
telecommunications carriers serving rural areas.
Welcome.
STATEMENT OF MR. KEITH OLIVER, SENIOR VICE PRESIDENT OF
CORPORATE OPERATIONS FOR HOME TELEPHONE COMPANY, MONCKS CORNER,
SOUTH CAROLINA
Mr. Oliver. Good afternoon, Mr. Chairman, Ranking Member
Davis, and Members of the Committee.
I appreciate the opportunity to testify before you today.
My name is Keith Oliver and I am Senior Vice President of
Corporate Operations for Home Telephone Company which is a
small business located on Moncks Corner, South Carolina.
We provide voice, broadband, and video service to the small
businesses and homes in the communities in which we serve. But
I'm also here today in my role as chairman of OPATSCO, the
Organization for the Promotion and Advancement of Small
Telecommunications Companies. OPATSCO is a national trade
organization made up of more than 600 small phone companies
that provide modern communication services to customers in the
rural areas of 47 states. These areas are often too sparsely
populated to attract the major national providers.
You may remember that OPATSCO was part of the High-Tech DTV
Coalition which encouraged Congress' decision to institute a
hard date in the DTV transition. We supported this effort
because the 700 megahertz spectrum involved in this transition
was ideally suited to delivering broadband services to small
communities.
OPATSCO had hoped that the auction of the 700 megahertz
spectrum would facilitate this goal. For our members, the DTV
transition has always been about deploying more broadband in
the rural areas in America.
Unfortunately, Federal Communications Commission decided to
auction the spectrum off in large geographic licensing areas
which most small carriers could not afford. When measured in
terms of population coverage and spectrum blocks in the 700 MHz
auction, the rural telecom group found that the small companies
obtained less than 1.5 percent of the coverage. This result is
not in accordance with the intent of Congress. Congress knew
that large carriers do not have incentives to serve sparsely
populated areas. Therefore, in Section 309(j) of the
Communication Act, Congress directed the FCC to ensure that
small entities specifically including rural carriers had a
reasonable chance of obtaining spectrum.We have repeatedly
asked the FCC to adhere to this goal by returning to smaller
geographic licensing areas. The 700- MHz auction represents a
lost opportunity.
I'd now like to turn my intention to the customer
notification requirements of the DTV transition. Small carriers
understand the need to help inform the public about the DTV
transition and we're happy to do our part. The FCC has required
small carriers to notify certain customers about the DTV
transition by including information in their telephone bills.
But it has barely acknowledged that there are any costs
associated with this requirement. And the FCC is now
considering expanding this requirement to all consumers of
telecommunications services.
But how will small companies recover costs such as printing
and extra postage? In my own company's case such cost alone
will exceed $23,000. That's a lot of money for a small company.
But in addition to the hard costs, we must also consider the
staff training and the manpower costs. When we include new
information on phone bills, customers understandably call the
carrier who sent them the information. We have to take extra
time to train our customer service representatives on this
issue and the small carriers, we have limited staffs. This is
one reason that we're very encouraged by the introduction in
the Senate, S.2902, the Independent Office Advocacy in Small
Business Regulatory Reform Act. This bill will enhance efforts
to consider the impacts of new rules on small businesses.
We hope that the House Small Business Committee will give
similar legislation serious consideration.
Finally, I'd like to mention several areas where it appears
the FCC is moving in the right direction. The Commission has
found that when video and broadband services are provide
together, more customers buy broadband. The FCC has also found
instances of large programmers discriminating against their
small competitors which hurts both broadband deployment and
video competition. The FCC is to be commended for its on-going
proceedings that are considering helpful reform to program
access rules. Currently, force tying of unwanted programming
content and outmoded retransmission consent results in higher
prices for our consumers and the terrestrial loophole in
programming access rules allows large programmers to restrict
access to some content.
We're hopeful that the Committee will encourage the
Commission to implement reform in all of these areas. Let me
emphasize, however, OPATSCO does not favor intrusion regulation
of the video content market. We only seek updates to existing
rules in order to recognize new technologies and competition.
In conclusion, let me stress again the need for the
government to consider the impact on small broadband providers
when it imposes new regulation. Smaller licensing areas and
wireless auctions can market opening reform to program access
rules and help expand broadband deployment.
Thank you for your attention and I look forward to your
questions.
[The prepared statement of Mr. Oliver may be found in the
Appendix on page 38.]
Chairman Braley. Thank you, Mr. Oliver.
Our next witness will be introduced by the Ranking Member.
Mr. Davis. Thank you Mr. Chairman. It is a pleasure to
introduce our next witness from my District back in Tennessee.
Mr. Jack Dempsey started his professional career with WAXU AM-
FM Radio in Georgetown, Kentucky. He then went on to work as
account executive for WKWT-TV in Lexington, Kentucky and WOWK-
TV in Huntington, West Virginia before moving to the Tri-Cities
area of Tennessee in 1985.
In August of 1985, Mr. Dempsey jointed WJHL-TV as a general
sales manager. He became president and general manager of WJHL-
TV in May of 1989. Mr. Dempsey is actively involved in numerous
organizations in the Tri-Cities such as the Rotary Club of
Johnson City, Barter Theater Board of Directors, United Way of
Greater Kingsport, Board of Directors, United--the Johnson City
and Bristol Chamber of Commerce.
Mr. Dempsey, welcome. We look forward to your testimony.
STATEMENT OF MR. JACK DEMPSEY, PRESIDENT AND GENERAL MANAGER OF
WJHL-TV, JOHNSON CITY, TENNESSEE
Mr. Dempsey.Good afternoon, Chairman Braley, Ranking Member
Davis and Members of the Subcommittee. Thank you for inviting
me to testify on what is my station's number one priority, a
successful digital television transition.
My name is Jack Dempsey and I'm the general manager of
Media General's WJHL-TV in Johnson City, Tennessee. I'm located
in a smaller market, the 91st rated market out of 210 markets
in the country. I'm happy to be here to offer my perspective on
the role of small broadcasters in the upcoming digital
television conversation.
Broadcasters are fully committed to ensuring that no viewer
loses access to free television after the transition, but I
want you to be aware that broadcasters, particularly small
broadcasters are making this transition at a significant cost.
To give you some scope of the investment, broadcasters
nationwide have spent in excess of $5 billion upgrading
equipment to migrate to an all-digital world in 2009.
My station alone has spent over $6 million to make the DTV
transition a reality. What many people don't realize is that
DTV transition costs are the same in a small market as in a
large market. The equipment costs are the same whether you're
in Johnson City or New York City. Unfortunately, the DTV
transition has produced virtually no increase in our revenues
that can be used to offset the significant costs broadcasters
have had to incur.
Take my station, for example. In first constructing WJHL's
transitional DTV facility, we had to buy and install a new
antenna on the side of our tower keeping our analog antenna on
the top. In addition to a new antenna, we had to install a new
DTV transmitter, a new filter and new transmission lines. We
completed construction of our initial DTV facility in early
2002. Since 2005, we've been broadcasting in full power in both
analog and digital which entails running two facilities with
two electric bills.
Almost a third of the $6 million we are spending will go
toward transitional equipment that we will no longer use after
February 17, 2009. Unfortunately, this equipment has no resale
value and as a result about $2 million of our DTV transition
expenses cannot be recouped.
In addition to the cost of transitioning WJHL's technical
facilities to DTV, we have undertaken extensive efforts to
educate the public about the transition. In fact, most full
power commercial stations are participating in the National
Association of Broadcasters' Public/Private Partnership,
adopted by the Federal Communications Commission on March 3rd.
Those broadcasters, like WJHL, that have opted into the
partnership have agreed to air public service announcements,
crawls, snipes, news tickers, a 100-day countdown clock and a
30-minute DTV informational television program in English and
Spanish.
All tolled, the value of this national, multi-platform,
multi-faceted campaign is estimated at more than $1 billion and
will generate 132 billion audience impressions, meaning the
country will view these images 132 billion times. All said,
every viewer will see this message approximately 642 times.
Certainly, broadcasters are excited about the possibility
that digital broadcasting brings, but there continue to be
challenges that we face. First, in the current must-carry
retransmission consent cycle, we have not received any fees
from cable systems carrying our signals, be it analog or
digital. Broadcasters provide the most watched content on
television and I believe we should be fairly compensated by
cable companies for that content.
Secondly, a digital world allows broadcasters to offer
additional streams for multi-cast channels so we can provide
more local programming. We offer a 24-hour local weather
channel, but we have very limited cable carriage for this
multi-cast channel and it affects our ability to obtain any new
advertising revenue from the channel. Although we have arranged
for its carriage on the two largest cable systems serving our
market, they carry the channel only on their digital tier,
which reaches only 35 to 40 percent of the cable homes in the
market.
Finally, as much as we would like to sell more advertising
on our multi-cast weather channel, we are hampered by the lack
of ratings information for that channel. In addition, there's
no commercially available ratings information measuring the
viewership of our primary DTV channel separate and apart from
our analog channel. Without ratings data, we are stymied with
coming up with other ways to gain more advertising revenue from
our DTV investment. This is a historic moment in broadcasting
and we, as local television broadcasters remain fully committed
to the DTV transition.
I believe that through our efforts and sacrifices, the
public will be well prepared on February 17, 2009. I thank you
for the opportunity to testify, and I look forward to answering
any questions you may have.
[The prepared statement of Mr. Dempsey may be found in the
Appendix on page 44.]
Chairman Braley. Thank you, Mr. Dempsey.
Mr. Hephner, let me start with you. I grew up in a small
town of 1500 people. I remember going down to Foster's TV back
when there were very few models available and it was a big, big
deal in a family to purchase a black and white television set,
back when looking a test pattern was considered excitement on a
late night.
One of the things that we know is that your business has
changed dramatically because of the impact of big box retailers
and competition for the products that you sell.
In your testimony, you indicated that the NTIA rules
governing the government's converter-box program helped to
facilitate the participation of small electronic retailers.
Can you share with us some of the observations you had
about the specific rules that NTIA did or did not impose that
allowed this voluntary program to assist small retailers like
yourself.
Mr. Hephner. Sure. One of the major considerations was the
fact that we wouldn't have to spend a ton of money coming up
with some kind of, or buying or having to rewrite a computer
system. The NITA/IBM CLC services system allows us to go on to
a standard Internet connection, redeem the cards, track the
payments, see how many coupons have been requested for our zip
code. All of that is very simple and easy for us to access
through normal, off-the-shelf Internet capable computers which
we have in the store.
The other thing that we really liked was that there were
essentially five major rules, none of them were very stringent
as far as--they were common sense rules. You have to provide
backup material in case somebody wants to audit. That's
reasonable.
And yet, there wasn't any rule that seemed to be--put us in
a position where if we made an honest error in accounting or
something of that nature, we were going to be hit with some
large fine. The system was simple, fair, easy for us to
understand and implement.
Chairman Braley. Thank you.
Mr. Dempsey, one of the things that we all have had
experience with is having day-to-day impact by what comes out
of our local broadcasters. Many of us depend on them for the
news that we watch and inform us about what's going on in our
communities. And I imagine, given the length of time you've
spent in the Johnson City area, you've had a good opportunity
to observe how your market depends on the station to provide
them with news and information.
Your testimony highlights many of the benefits that people
should see as a result of the DTV transition. Do you have any
concerns that people like the citizens I represent in the rural
parts of my District in Iowa may not receive the full benefits
of this transition?
Mr. Dempsey. Yes. Mr. Chairman, we have concerns really
about three groups. And this is really where we focus our
efforts: elderly folks, people with lower incomes, and then
people in very remote areas that don't have access to other
forms of delivery.
I think thus far we've done a really good job of letting
the public know what's coming. When we first started this I
spoke in February to a group in Bristol, the Bristol Rotary
Club. And I asked them the question have you heard about the
date February 17, 2009? One person in that group raised their
hand. These were business people, people "in the know."
The last group I spoke to was the Kingsport Kiwanis Club
and I asked that same question. And every hand in the room went
up. So I think we have at least made people aware that a major
change is coming.
The next step that we're concerned about is how this is
actually going to take place because it's tricky. A lot of
folks cannot connect these devices to their television. They
simply don't know how to do it. There are going to be some
antenna issues that I think need to be addressed for people to
pick these signals up. And those would be the two groups that
we would be most concerned with at this time.
Chairman Braley. Thank you.
Mr. Pardini, you happen to mention the city of Dubuque
which is where my wife was born and where I spent a good deal
of my time back in the first District of Iowa. And in my former
life, I had the opportunity to represent a UHF-ABC affiliate
named KDUB, back in a time when the whole issue of must-carry
rules and the impact they were having on different types of
markets in the cable that were being served by the cable
industry were being impacted.
In terms of Mediacom's experience, what I'd like you to do
is share with us your perspective on the impact that Iowa
subscribers and other subscribers around the country should
expect to receive on February 18th, for example, after this DTV
transition will all of the Iowa subscribers that you serve be
able to view all of the channels that they can today?
Mr. Pardini. Absolutely, all of our cable subscribers will
continue to receive all of the traditional off-air signals that
they currently receive. So on February 19th, the sun will rise,
the birds will sing and the Today Show will be on. Mediacom
cable subscribers will not need to buy additional equipment in
order to receive those signals.
We're very thankful that the chairman of the FCC, Chairman
Martin, has announced a waiver for small cable operators with
less than 552 MHz of capacity from dual carriage requirements
under must-carry. This will allow them to continue to carry
these signals and minimize the investment of very scarce
resources so that small cable operators can continue to provide
these valuable local services to their customer base.
Chairman Braley. One of the reasons I mentioned Dubuque is
because I was surprised to learn that Dubuque was one of the
pioneers in the cable TV industry in this country because of
the geography and the topography and the bluffs around Dubuque
located on the Mississippi River.
Mr. Pardini. Well, the terrain of Dubuque is a challenging
terrain to receive an off-air signal and that's one of the
benefits that cable operators provide the broadcast community.
And in exchange for the valuable entertainment services that
the broadcast community provides, cable operators extend the
range of their signals to places where off-air signals wouldn't
normally go. They generally improve the picture quality over
that terrain so that you have a very watchable snow-free
picture, and thereby increase the viewership and the eyeballs
that are enjoying the program offerings that are being put
forth by the broadcast community.
So I think that it's very much a win-win situation until
you get into the area of retransmission consent where
government regulation has created an extraordinary and unusual
market that allows broadcasters, some broadcasters to use an
unhealthy degree of leverage to extract fees from consumers
that they wouldn't normally receive in the course of their
business policy.
Mr. Dempsey. May I address that, Mr. Chairman?
Chairman Braley. You may.
Mr. Dempsey. I can't speak, of course, to Mr. Pardini's
experience, but in my market we receive no retransmission
consent fees from any cable operator. In our market, probably
80 percent of the homes who receive cable are subscribers to
either Charter or Comcast, so we've never really had any
position to go to them with demands for compensation. I want to
echo Mr. Pardini's comments that we think that we've helped
each other. We certainly recognize the value that the cable
systems bring us and we know from our own ratings information
that we bring a great deal of value to them because the
broadcast over-the-air stations are viewed significantly more
than the cable sources on their own cable systems.
So while we look at this as basically a market matter, I
want to point out that we have never in the history of our
station threatened anyone to remove our signal except one time
back in 1993 because they wouldn't sign the agreement. It had
no money attached to it. We just couldn't get the agreement.
Chairman Braley. Thank you.
Mr. Oliver, I want to talk to you a little bit about
something we hear about called triple play.
More and more of the telecommunications companies are
offering their customers a triple play of voice, Internet and
video services and we heard Mr. Pardini talk about some of the
services that his company provides.
How do you expect the DTV transition may affect consumer
demand for video services provided by telecommunications
companies?
Mr. Oliver. That's an interesting question and it's
somewhat difficult probably for us to tell in many respects. I
would not think that it would have significant impact because
of again we're talking about the consumers receiving their TV
signal off-the-air as being ones that are impacted.
Our company, for instance, does provide video. We've got
roughly 6800 video subscribers that we currently serve. And I
wouldn't necessarily expect that it's going to be tremendously
increased as a result of the DTV transition.
I don't think it's going to have tremendous impact but as
you say, the triple play has been a tremendous success for us
as rural carriers in our ability to deliver the broadband
signal out to our customers. There's been a number of studies
and the FCC has even concluded that the provision of video
signal along with broadband tremendously increases that
penetration rate and that's what we strive to do in rural areas
is to ensure that the facilities that we're putting out there
which are high cost to start with have as much subscribership
as possible. So our interest in this is again from that
broadband deployment side and being in a position to continue
to link that video with that broadband service.
Chairman Braley. Thank you. At this time I yield to the
Ranking Member.
Mr. Davis. Thank you, Mr. Chairman, and again I'd like to
thank the panel. You did a wonderful job, thank you.
I'd like to start with Mr. Oliver, if I may. You briefly
mentioned problems with technological issues related to the
equipment in your testimony. Would you like to go into a little
more detail so we could understand some of those technological
issues?
Mr. Oliver. I am not certain exactly what you're referring
to in my testimony to tell you the truth.
Mr. Davis. If you could, the equipment that you're using,
the transition, do you feel like the equipment is working well?
Mr. Oliver. Again, most of my testimony related more to the
telephone side. We do have video proponents out there as well
that we're serving. And yes, sir. I think that we are finding
not major problems at this point, and at this point in time we
would see a relatively smooth transition from our standpoint as
a cable service provider.
Mr. Davis. Okay, thank you for that.
Mr. Dempsey, thank you for being here. It's good to have
you in Washington. You mentioned $6 million it's cost your
station so far. Is that pretty typical standard for most small
stations?
Mr. Dempsey. Oh, yes. Again, you may refer to my testimony,
whether you're in Johnson City or New York City, the cost to
make this transition are basically the same. So it's very
burdensome and we're the 91st market so we're kind of midway in
the country. You get into the markets that are 150 and on up,
it's even more difficult because they have less of a revenue
stream.
Mr. Davis. How do you hope to absorb that cost, that $6
million that you've had to outlay? How do you plan on bringing
that money back into your business?
Mr. Dempsey. Well, one of the ways that we hope to is the
fact that we're able now to provide other streams of
programming. For example, WJHL-TV has a second channel. It's a
24-hour local weather and we hope once we get access to all of
the homes in the market via cable or satellite, we think that
that service will be in need, that it will get ratings and
we'll be able to sell the advertising on that.And maybe a third
channel and a fourth channel.
Mr. Davis. The $6 million that you've paid to date, do you
foresee still the on-going increases and expanse until you make
the transition in February?
Mr. Dempsey. Yes, sir.
Mr. Davis. Do you have any idea how much that costs?
Mr. Dempsey. It would probably be another million and a
half. Because when you make this transition, for example, when
you go to the full digital signal, for example, you're going to
have to have basically new equipment because when we broadcast
in high definition, you basically have to reconfigure your set
to fill that 16 by 9 ratio screen versus what we've had. So
that's just one example. That alone will probably be $150,000
to $200,000.
Mr. Davis. One thing I have noticed when I'm back home, you
are running are PSAs and you actually started those before
federal mandates kicked in to make you do those things.
Can you tell me how that's working and the feedback you're
getting on your PSAs?
Mr. Dempsey. I think it's working very well. This is so
important to us because we don't want to lose one set of eyes.
We don't want to lose one household to this transition because
they're all important to us.
We've undertaken in the last few months this education
program that I think is working. We noticed from the calls we
get at our station in addition to what we run that's broadcast,
we also have basically a grass roots approach where in my case
I go and speak to civic groups or say the First Tennessee
Development Council on Aging which was one of the best, by the
way, I ever visited, because it really did help folks
understand what they were going to have to do.
So I think we have the public. They now know that a huge
change is coming and I think we've been very successful in
doing that.
Mr. Davis. Thank you. Mr. Hephner, in your testimony you
mentioned that many retailers are hesitant to participant in
the coupon program. What concerns do they have that are
preventing them from participating?
Mr. Hephner. Well, from the feedback from the dealers
around me, they first of all thought the coupon program was
going to be very difficult. They looked it up on the web site
and they saw these four or five pages of participation rules. I
think they just felt overwhelmed by it, thought they were going
to have to do more than they have to do.
I understand that there were a lot more odious prior to
CERC getting involved, that there was a lot more regulations,
but it got streamlined down. When we started, it seemed fairly
simple. I mean once you read it through you realize it's really
not as bad as it seems. Plus they feel like it's going to be a
hassle to redeem the coupons and deal with the customers. They
would just rather say go buy your box at Wal-Mart.
For us, that wasn't an option. We have positioned ourselves
over the last 58 years to be the expert in our market area for
TV. We're going to get those calls anyway, so we have to have a
solution period.
Mr. Davis. So do you think those concerns have been valid?
Mr. Hephner. No, I don't at all.
Mr. Davis. The Government Accountability Office recently
released a report regarding the progress of DTV transition. In
this report, the GAO found that many small retailers had to
make costly changes to their point-of-sale process to
accommodate the government-issued coupons. Did you need to make
any changes to your point-of-sale process?
Mr. Hephner. The only change we made was to add a link on
our computer screen that said redeem coupon that took us to the
NTIA's web site.
Mr. Davis. Very good. I started my question--this will be
last question to Mr. Oliver and I'm going to go back and ask
that same question to everyone on the panel if anyone would
like to answer, talking about any problems or technological
issues related to the equipment. Have any of you seen that
happening and if you could, if you could respond to the
question?
Mr. Pardini. Sure, I'll talk to the point which will
hopefully in the next few weeks become moot. For example, with
Mediacom, there are some 45 signal processing centers in small
communities that service less than 100 customers. To upgrade
these centers with the necessary equipment would average
approximately $15,000 per location. So in essence, what we're
looking at was an investment on the order of $650,000 to
service 4500 customers. That means an investment of roughly
$1,000 per customer. There's very few businesses in this
country that can survive when a resource demand is placed on
them to put $1,000 down on your house. And this is on top of an
already highly-pressured great structure. So we looked at this,
and many small cable operators looked at this as being a
potential deal breaker in their business model and in their
ability to conduct businesses after that, after the February
17th transition date.
The FCC, as I mentioned, recently indicated that it was
going to adopt an order that would provide a waiver of the
dual-carriage requirements that would require such a huge
financial outlay for small cable operators and that's why we
applaud the FCC's actions. We hope that they will adopt the
order in the next coming, few coming weeks and prevent small
cable operators from having to go through such an excessive
investment for very little return.
Mr. Davis. Would anyone else like to answer that question?
Mr. Dempsey. I would just like to say that we tested
getting coupons. We purchased converter boxes. The last display
when I spoke to the group on aging was in the Millennium Center
and I took a 10-inch monitor over there and rabbit ears and it
picked up the signal. So I think they're going to be, by and
large, they work great. There will be some areas, particularly
in our region with mountains that will be some challenges, but
thus far, the coupons, we've had various people say you know,
we ordered them up, they came right in and we've had basically
all positive comments.
Mr. Davis. Thank you. I yield back.
Chairman Braley. The chair recognizes the gentleman from
Texas for five minutes.
Mr. Cuellar. I appreciate what you're all doing and I do
understand the difficulty when we have a major transition. The
general question I will ask you has to do a little bit more
with some of the TV stations that deal with the Spanish-
speaking individuals which I think provides extra challenges
from the ones that you all are talking about. And I understand
what you all are going through.
What do you do with the--what's the impact of the DTV
transition stations that do not have the must-carry rides like
several of the Univision stations? Does anybody have an idea?
Mr. Pardini. Well, I can tell you in Iowa we carry two off-
air Hispanic language stations. We also offer a tier of
Hispanic language services in our service area on our digital
tier that enable Hispanic households which represent the
largest-growing population segment in Iowa to receive services.
So we do carry all full-power Hispanic language stations in our
service areas.
Mr. Cuellar. What about the--have you all voiced as an
industry the cable plan to move Class A and lower power
broadcast stations whose transmission agreement have expired
off their analog cable tier?
Mr. Pardini. I think that that's on a market-by-market
basis dependent upon the station. I do think that low power,
Class A stations under the regulations do not have a mandatory
right of carriage on cable systems. I think that for cable
operators that are sensitive to local market conditions,
they'll continue to carry and make that service available,
simply as a matter of business survival.
Mr. Cuellar. And I appreciate that, whether it's in your
state or certainly in Texas. The Hispanic population is just
growing by large amounts and Texas I think it's almost like 36
percent is already Hispanic. Texas, as a whole, to the last
census has grown, is now--I don't know if this is a right term,
minority majority state, mainly with Hispanics and if you look
at different states you see this growth. I know on the border
we have a different type of situation because as we move to
transition right across the river, the Mexicans are not doing
that. So they're staying on that, so that means some sort of
impact, economic impact to our TV stations on the U.S. side. I
know that that's a different subject, Mr. Chairman, but
whatever you all can do to help some of those minority
businesses and keep that in consideration we would appreciate
it.
Thank you.
Chairman Braley. Thank you. We'll continue on with a second
round of questioning and we're watching to see what happens
with more votes, but as long as we're on a roll, we'll just
keep going. This is a very, very timely topic and I think that
it's been very informative, so I'm going to continue to explore
some of these issues and hopefully, we'll be able to shed some
light on some additional things.
Mr. Hephner, one of the things you've talked about was the
intimidation factor of these four to five pages of
participation rules, do you remember that?
Mr. Hephner. Yes.
Chairman Braley. I'm hopeful that my Plain Language in
Government Communications Act which has passed the House
recently by an overwhelming bipartisan majority, will have a
positive impact on reducing the length and the intimidation
portion of those participation rules.
One of the things we are all concerned about is reducing
the imposition on small businesses by regulatory communications
from our federal agencies. So one of the other concerns I had
is this whole issue of the profit margins and the impact that
these requirements have on the sale of the digital analog
converter box. If electronic retailers do not stand to make a
profit on the sale of those devices, do you believe that there
are currently adequate incentives for those retailers to
participate in the program and if so, what are they?
Mr. Hephner. In our case, being a small business, we don't
just look at the bottom line, we look at the long term. We've
been in business for 58 years. Customers come to us for
answers. If we don't have the answers, they'll go someplace
else. So we have to have the answers. We did not think about
not participating in the program just because we knew we were
going to have to. So ours is more of a customer service
incentive versus a profit incentive because there is no profit
incentive when you make $10 on a sale that's going to take you
a lot more time than most sales.Our margins are very, very
slim.
As for that tariff issue, every couple bucks we can take
off the cost side helps us. But for us, it was being there for
customer service. The customer is going to call us with these
questions and they're going to expect us to know and that's our
incentive, customer service.
Chairman Braley. One of the things we know about your
business is that it changes with the change in consumer
products and consumer demand. And obviously one of the side
impacts of this decision is probably going to have a negative
impact on companies that manufacture TV antennas or if you look
at it another way depending on some of the waivers that are
being allowed by the FCC, it could increase market demand. So
as you look at your particular business industry, what do you
see as some of the challenges ahead that could be directly or
indirectly related to this change?
Mr. Hephner. Speaking specifically to the antenna issue, we
have seen an increase in antenna sales just because customers
generally need a little bit better antenna to pull in the
digital signals. They tend to have what I've heard the "cliff"
effect. They go along great, but then once they drop below a
certain signal strength, they just drop off and they're gone.
So if a customer is used to using an old antenna where they got
a snowy picture, now they can't use that same antenna. They're
going to need something better. So I think in the short term,
things like antennas, we're seeing an increase; cable wires,
antenna masts to attach them to, all those things are going to
be increased. But there obviously is going to be a bubble
effect. Once they put the antenna in, that's not going to
continue on down the road.
And obviously, the life expectancy of this product is
fairly short term. As people's analog TVs die, they're going to
be replaced with these new digital televisions which have those
tuners already. So this whole concept of the box and all that
is fairly narrow, in our time frame anyway, it is a fairly
narrow situation we're going to be in. In a couple of years, it
probably will not be a big issue for us.
Chairman Braley. Mr. Oliver, I understand that many cable
companies are seeking an exemption from the FCC regs issued on
September 11 of 2007 and the concern that the ACA and these
small operators have is that the dual-carriage requirements
would overwhelm the limited band width for many small cable
companies.
Do small telecommunications companies have similar concerns
about the FCC's dual-carriage requirements and how they impact
small cable companies?
Mr. Oliver. Mr. Chairman, I am not a technological expert,
but I can say that in most cases that really doesn't have a
major impact on us as telephone providers because in most cases
that's being provided over either a provider to the home which
is digital or over our DSL product which is again a strong tie
back to broadband which is already a digital signal as well.
So on the telephone side, we do find ourselves in a little
bit of a different situation than typical cable companies.
Chairman Braley. Mr. Pardini, you talked a little bit about
the upcoming FCC application for a waiver of the must-carry
rules, the dual-carriage requirements and one of questions I
have for you is assuming a possible scenario that would not
include full relief from that request, what, if anything, is
the ACA and small cable companies doing in order to plan for
how they would proceed?
Mr. Pardini. I think without the waiver, you're likely to
see that a number of signal processing centers will be shut
down which means that cable customers in that part of the
country will have to switch to satellite, or find some other
way to do that because you simply can't afford to invest in the
equipment necessary to deliver all of these duplicative
programming outlets.
So I think that there are going to be some companies that
simply look to refer their customers to satellite at that point
which means that there's going to be a local business in a
small town that is shutting down and losing jobs and those jobs
are going out of state and potentially with some competitors
going out of the country.
So I think that it's very important that the FCC understand
the impact that this will have on main street America,
especially in these small communities. Within Mediacom, where
you certainly have some degree of size and scope, we're not the
big boys like Comcast and Time Warner, but where you have some
size and scope you might be able to justify the break even on
the equipment, but there would be a disruption in services as
operators, either trade service areas in order to get those
economies of scale or look to exit the business. And I think
that what we all agree here, my fellow panelists, is that we're
trying desperately to provide a minimum of disruption to the
consumer. This digital transition should be transparent when
it's done extremely well. And I think much of this partnership
has done that.
There are a few bumps in the road. There are some threats
to what is now a very smooth transition process that could loom
ahead unless oversight is exercised by you folks on the
Committee.
Chairman Braley. Thank you. Mr. Davis, any further comments
or questions for the record?
Mr. Davis. Just a follow-up of what you just said. There's
some threats looming, have you outlined those in the hearing
today?
Mr. Pardini. Yes, I have. The one threat which we believe
will become a moot point in the next couple of weeks is this
FCC waiver for small cable operators at 552 MHz or less. The
other one is the upcoming retransmission consent cycle in which
some broadcasters may be seeking to use excessive leverage to
extract fees from consumers and withhold programming and that
may be a point of confusion as to whether it's a retransmission
issue or whether it's part of the digital transition and we
want to be very clear about that. We think there are some
things by adopting a "quiet period" in the months before and
after this transition where negotiations can continue without
necessarily withholding programming. We believe that that's a
very sincere step that would allow market conditions to dictate
an outcome for these agreements to take place that reflect the
value that cable and broadcasters provide each other without
necessarily disrupting consumers.
Mr. Davis. It appears we put a panel together that can work
together as we move towards the February time line for that.
Thank you for being here today. I have no further questions. I
yield back.
Chairman Braley. Well, I would like to thank all of our
panelists. It's been a very enlightening, informative
discussion. I think one of the things that this hearing has
highlighted is what an enormous impact on this country this DTV
transition is going to have despite the incredible volume of
public service announcements and crawlers and other forms of
communication. Mr. Dempsey, I think your personal description
of some of the conversations you've had with people in your ADI
are probably representative of what other consumers around the
country are facing in terms of their lack of awareness of this
problem is rapidly approaching. I think some of the stops and
starts and when the DTV requirements are actually going to be
implemented has probably led to some of that confusion, but I
think this hearing has helped focus the attention on the
importance of everyone to do what we can to get the word out
and help make this transition as seamless as possible.
I would also like to make sure that we have unanimous
consent that Members will have five days to submit statements
and supporting materials for the record. Without objection, so
ordered. This hearing is now adjourned.
[Whereupon, at 4:16 p.m., the Subcommittee was adjourned.]
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