[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
COPYRIGHT LICENSING IN A DIGITAL AGE: COMPETITION, COMPENSATION AND THE 
           NEED TO UPDATE THE CABLE AND SATELLITE TV LICENSES

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



                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 25, 2009

                               __________

                            Serial No. 111-3

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
LUIS V. GUTIERREZ, Illinois          JASON CHAFFETZ, Utah
BRAD SHERMAN, California             TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel


                            C O N T E N T S

                              ----------                              

                           FEBRUARY 25, 2009

                                                                   Page

                           OPENING STATEMENTS

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Ranking Member, Committee on the Judiciary.     3
The Honorable Rick Boucher, a Representative in Congress from the 
  State of Virginia, and Member, Committee on the Judiciary......     4
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Member, Committee on the Judiciary..     6
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Member, Committee on the Judiciary     7

                               WITNESSES

Ms. Marybeth Peters, Register of Copyrights, U.S. Copyright 
  Office
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Mr. Fritz Attaway, Executive Vice President, the Motion Picture 
  Association of America (MPAA)
  Oral Testimony.................................................    28
  Prepared Statement.............................................    30
Mr. Bob Gabrielli, Senior Vice President, DIRECTV, Inc.
  Oral Testimony.................................................    48
  Prepared Statement.............................................    51
Mr. Chris Murray, Internet and Telecommunications Counsel, 
  Consumers Union
  Oral Testimony.................................................    66
  Prepared Statement.............................................    68
Mr. Kyle McSlarrow, President and CEO, the National Cable & 
  Telecommunications Association (NATA)
  Oral Testimony.................................................    77
  Prepared Statement.............................................    79
Mr. David K. Rehr, President and CEO, the National Association of 
  Broadcasters (NAB)
  Oral Testimony.................................................    89
  Prepared Statement.............................................    91

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Chairman, Committee on the Judiciary...........................     2

                                APPENDIX

Material Submitted for the Hearing Record........................   151


COPYRIGHT LICENSING IN A DIGITAL AGE: COMPETITION, COMPENSATION AND THE 
           NEED TO UPDATE THE CABLE AND SATELLITE TV LICENSES

                              ----------                              


                      WEDNESDAY, FEBRUARY 25, 2009

                          House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:13 a.m., in 
room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Committee) presiding.
    Present: Representatives Conyers, Boucher, Nadler, Lofgren, 
Cohen, Baldwin, Schiff, Sanchez, Smith, Sensenbrenner, Coble, 
Goodlatte, Issa, King, Franks, and Jordan.
    Staff present: Stacy Dansky, Majority Counsel; and David 
Whitney, Minority Counsel.
    Mr. Conyers. Good morning. The Committee will come to 
order.
    The purpose of our hearing today is to assess the Satellite 
Extension and Reauthorization Act and to consider what 
direction we are going in.
    We are delighted to have the Chairman of a Subcommittee of 
the Energy and Commerce Committee, who is on the Judiciary 
Committee as well, Rick Boucher, who had hearings on this same 
subject yesterday, and I am going to ask him, after Lamar Smith 
makes some comments, to review with us and make any additional 
statements that he might.
    We are indebted to Stacey Dansky and David Whitney who for 
the first time put out a single bipartisan document describing 
the issues and challenges that are involved in this satellite 
extension provision, and we are reminded that David Whitney was 
the person when Chairman Caldwell was the head of the 
Committee, who on this same subject had done so much work. And 
we are delighted that our staffs are working together so well.
    I merely want to indicate that we are all sensitive to the 
importance of this particular form of communication in our 
society. It is the primary source of information for the 
government, local events, weather, political considerations, 
emergencies--and so we are trying to determine how we sort out 
from a group of laws on copyright that have been inactive over 
a period of time where some of them did not anticipate the 
other, some are obsolete, some are overlapping, some are 
something else, and what I am suggesting, Members of the 
Committee, is that this is a quite long-range proposition that 
is going to be before us.
    True enough we are talking about the satellite extension, 
but it is hard not to involve some of the other issues that are 
before us. As you know, the Title 17 contains the Copyright 
Act. Section 122 licenses satellite, Section 111, bless its 
heart, cable, and then, of course, we come to the one that is 
expiring, 119, and so I am so happy that we have the six people 
that are with us.
    And it seems to me that what we are doing and thinking here 
is strikingly different from 1976 when the cable license was 
enacted and 1988 which was satellite license. Competition has 
grown between cable and satellite providers, there are a 
greater range of options for consumers, and so some of the same 
rationale that we likely agreed on 30 years ago are not as 
relevant now, and it is in that spirit that I have been talking 
to Lamar Smith and Jim Sensenbrenner and Rick Boucher about 
strategies that we may employ that would get everybody deeper 
into the real challenges that are before us.
    So we are looking and listening today for some of the very 
ideas which are already all over the map for us to begin to 
turn around and pull together. So it is in that spirit that we 
open this discussion, and I am going to put the rest of my 
statement in the record and recognize the Ranking Member, the 
gentleman from Texas, Lamar Smith.
    [The prepared statement of Chairman Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
in Congress from the State of Michigan, and Chairman, Committee on the 
                               Judiciary
    The purpose of today's hearing is to assess the Satellite Home 
Viewer Extension and Reauthorization Act of 2004 (SHVERA), to begin 
formal consideration of what changes, if any, Congress should make to 
this law as we evaluate how and whether to reauthorize the act.
    One cannot overstate the importance of television in our society.
    It is the primary source of information about government, weather, 
local events and emergencies. In a time of where most Americans have 
less money to spend, many rely on television as the most affordable 
entertainment for their dollar.
    That is why my critical test of this legislation will be whether it 
protects consumers and adapts their interests to this new digital age 
of broadcasting.
    First, for the consumer, we must preserve competition. Satellite 
television continues to be the main competitor to cable television in 
most areas, and helps to drive down prices and improve customer 
service. In some areas, satellite television is the only way a consumer 
can get television reception. A key question is whether we need to 
change the law to give satellite companies the ability to provide lower 
prices and more choices for consumers.
    For example, should we allow satellite companies to offer signals 
from adjacent markets--or markets that are next door to the market 
where a consumer lives--so that a consumer has more choices? This would 
also allow the satellite company to increase its bargaining power in 
negotiations with network affiliates.
    But we must also ask whether both of these changes would begin to 
erode local broadcasting and result in a loss of local weather, news, 
and emergency information? There can be little doubt that local 
stations play a critical role in educating the public about local 
government, community activities, and public safety information.
    Second, with the digital transition delayed, and the broadcasting 
world in transition, for how long should we extend the Satellite Home 
Viewer Act? Although we have traditionally done 5 year extensions in 
the past, this time we may need to revisit the law sooner to ensure 
that the changes we make today still make sense for consumers as we see 
the results of the digital transition. For example, what is considered 
a poor quality signal in today's analog world, may be a better quality 
signal in the digital world. The reverse may also be true. This will be 
a critical question in determining whether a consumer is entitled to a 
distant signal.
    Third, do we need to further level the playing field between cable 
and satellite by streamlining the licensing system? There is a 
patchwork of different royalty structures that satellite and cable 
companies are required to pay and I think it is time to ask whether 
this helps or hinders competition for consumers.
    Fourth, to ensure consumers have quality programming, we must 
protect copyright owners. They create the programming that people want 
to watch. Without the programming there is no cable or satellite 
television.
    For thirty years, we have used compulsory licenses to compensate 
creators of content. Under sections 119 and 111 of the Copyright Act, 
this has allowed the cable and satellite companies to broadcast 
programming and pay the copyright owner at a rate set by the 
government--a rate that most content owners would say is grossly below-
market.
    I think it is time to ask--should we continue to require creators 
to take the rate that the government gives them, or should they be free 
to get a better deal through individual negotiations? Or is that 
unworkable?
    I intend to consider each of these options and want to take a broad 
and expansive look at the different possibilities. This means every 
single issue is on the table at this point. I want each of the 
witnesses to approach this hearing with that in mind, and I look 
forward to a robust conversation among all of you.
                               __________
    Mr. Smith. Thank you, Mr. Chairman, and I certainly agree 
with you on the need to stay this issue.
    Fortunately, the license does not expire until the end of 
the year, and as you and I discussed a few minutes ago, that 
gives us ample time to educate ourselves a little bit more and 
make sure that we have study all the issues that you have 
mentioned and come to a good conclusion in plenty of time 
before the end of the year. So the informal task force that you 
have proposed, I think, is a good idea, and I thank you for 
suggesting that.
    Mr. Sherman, one thing we can all agree on, for better or 
for worse, is that Americans care passionately about their TV. 
Today, consumers want to have more rather than fewer options 
for determining how, when, and what programs to watch. A recent 
example of this was reported just last week in Joplin, 
Missouri, where Walter Hoover decided to shoot his TV set after 
he lost his cable and was unable to get his new digital 
television converter to work. After a brief standoff with 
police, Mr. Hoover was apprehended, placed under arrest, and 
charged with unlawfully discharging a firearm. After his 
arrest, I suspect Mr. Hoover found his TV choices were even 
more limited than before. [Laughter.]
    Mr. Chairman, I hope when we complete the process of 
evaluating the compulsory copyright licenses that no one will 
feel compelled to shoot their TV set--or anything else, for 
that matter.
    Absent congressional action, similar provisions of the 
distant satellite license in Section 119 of the Copyright Act 
will expire at the end of 2009. First enacted in 1988, this 
license was extended for 5 years when last reauthorized in 
2004. This license is one of three that permits cable and 
satellite providers to retransmit copyrighted broadcast 
programming to subscribers without negotiating and reaching 
separate agreements with each affected copyright owner.
    Unlike the Section 119 license, the other two licenses, 
which regulate the retransmission of local broadcast 
programming via satellite in both local and distant broadcast 
programming over cable, are permanent. It is due in part to 
this permanency that these licenses have not undergone a 
serious review by the Committee. Today's hearing presents an 
excellent opportunity to begin a comprehensive examination of 
the policies embodied in these licenses and the challenges of 
adapting these laws to the emergence of new technologies and 
new competition.
    The starting point for our analysis is the Copyright 
Office's Section 119 report which stated, ``The current 
versions of Section 111 and Section 119 are arcane, antiquated, 
complicated, and dysfunctional.'' The office recommended 
Congress adopt a new forward-looking unified statutory license 
with a view toward encouraging the development of free market 
alternatives to compulsory licensing. This hearing is an 
important first step to educate ourselves on what steps 
Congress ought to contemplate addressing this year and what 
steps, though desirable, may take a little longer to achieve.
    Mr. Chairman, thank you for having this hearing, and I will 
yield back the balance of my time.
    Mr. Conyers. Rich Boucher has been working on this subject 
and related ones from a very unique vantage point by being on 
Energy and Commerce. He is now Subcommittee Chairman of that 
part of the Energy and Commerce Committee that is involved with 
us in these considerations. We consider it a privilege to have 
him working with us now, and I would yield him as much time as 
he needs.
    Mr. Boucher. Well, Mr. Chairman, thank you very much for 
recognizing me this morning, and I also want to commend you for 
organizing what I think is a very timely hearing on the 
reauthorization of the Satellite Home Viewer Act.
    The legislation expires at the end of this year, and if it 
is not reauthorized within the course of this year by a new 
statute passing, then the Section 119 license, which enables 
the importation of distant network signals into households that 
cannot get local television signals over the air from a local 
TV station, would also expire, and that expiration would 
operate to the disadvantage of hundreds of thousands of viewers 
across the country, mostly in rural areas, who would be 
adversely affected by it. So I appreciate your very timely 
scheduling of the hearing this morning.
    As you have indicated, the jurisdiction over this matter is 
shared between the House Judiciary Committee and the House 
Committee on Energy and Commerce, and we began our process 
yesterday by having our first hearing on the reauthorization of 
the act, and some of the same witnesses who are with us this 
morning and many of the same organizations were represented at 
our hearing yesterday, and I am sure many of the issues we 
explore today will be somewhat similar to the conversation we 
had in the Commerce Committee yesterday.
    It is my hope, Mr. Chairman, that working with you and Mr. 
Smith and our excellent staff here on the House Judiciary 
Committee, Stacey Dansky and David Whitney--and we are very 
fortunate to have their expertise--that we can agree through 
our conversations and our work together on a coordinated text. 
And then a common text, perhaps at the proper time, could be 
introduced by both of us, and then we could proceed very 
quickly to process that agreed upon legislation through both of 
our Committees. I hope that process can work, and from our 
vantage point on the Commerce Committee, we would be fully 
committed to doing that.
    And I want to say thank you to you and Mr. Smith and your 
very excellent staffs for the outstanding cooperation you have 
provided so far to me and to my staff as we have undertaken our 
preliminary conversations.
    I thought I would take just a moment this morning to 
highlight a couple of the key issues that surfaced during the 
course of our hearing yesterday. These are matters that Members 
of our Committee had expressed particular interest in, and I 
know these issues will be the focus of our ongoing 
considerations. Our focus necessarily is more on the 
communications aspect of the law, and the focus here will be 
somewhat more directed toward the copyright aspects of the 
legislation, and I would just indicate two key areas of 
conversation that we had yesterday suggesting that our 
principal debate is likely to be on these subjects.
    The first of these is a measure that has been separately 
introduced by our colleague, Mr. Stupak from Michigan, that 
would require that local-into-local television service be 
delivered in all of the 210 television markets across the 
United States. Today, there are about 30 of those markets that 
do not have local-into-local service delivered through the 
Section 119 copyright license.
    That license is now 10 years old. Technology has improved. 
Spot beams are now in much more common usage, and that allows 
for a far more efficient use of the satellite spectrum, and so 
many are saying, including those who represent these 30 rural 
markets, that the time has come for the satellite carriers to 
offer those markets through the local-into-local service also.
    Many of those are very rural, they are mountainous, and the 
viewers in that area cannot get a local television signal over 
the air because it is blocked by the mountains and because of 
distance from the station. And that means that in the absence 
of local-into-local service delivered by satellite, that those 
viewers simply do not have access to local television service 
at all and the kind of emergency information about natural 
disasters that typically comes from the local TV station. And 
so many are saying the time has come to add that feature to the 
law and make sure that service is available in all of the 210 
television markets.
    The other key concern that was raised is the circumstances, 
if any, under which there should be a permission for residents 
in a given television market to be able to access the local 
television stations in an adjacent market within that same 
state, and two circumstances have been highlighted.
    The first of these is where the market in which that 
individual resides does not have a full complement of local 
affiliates for the major networks. So, for example, a market in 
which a person resides might have an NBC affiliate. It might 
have an ABC affiliate, but it might not have the CBS and FOX 
affiliates. And the argument is that in that kind of situation, 
rather than have a distant network signal imported from the 
East Coast or the West Coast in order to complement network 
affiliates that are already there and fill in the gap, it might 
be better to allow the local TV station from the adjacent 
market in the same state to be accessible by that individual as 
a gap filler, so that the full complement of local network 
affiliates is made available, the thought being that that 
provides more relevant information because it is in-state news 
and programming and weather that might be relevant, certainly 
more so than a distant network signal imported into that 
market.
    So we call these short markets, and so the situation would 
be in short markets to allow the adjacent local stations to be 
uplinked to fill the gap.
    The other situation that was raised is markets that 
straddle state lines, and in many of these instances, you have 
viewers in one state receiving television service that 
originates in another state, and under the existing law, they 
are therefore restricted in terms of local-into-local delivery 
to out-of-state television programming. And that means the 
local news is more oriented to a state other than the one they 
live in, and the argument has been raised that in that narrow 
circumstance, it might also make sense to allow the adjacent 
market in that person's state of residence and the local 
signals in that market to be available to that resident so that 
his local service carries in-state news.
    We had a number of more technical issues that were 
addressed, and I know some of those are on our list for 
conversation here today. But those two matters are the primary 
things that we focused on during our hearing yesterday, and I 
would predict that those would be two matters that would be 
subject to our debate as this consideration progresses.
    Well, Mr. Chairman, you are very kind to recognize me this 
morning. I do appreciate the promptness with which the House 
Judiciary Committee is beginning to examine this subject, and I 
look forward to close cooperation with you, Mr. Smith, and your 
staffs as we undertake this exercise with the hope that we can 
agree on a uniform text that you and I at the proper time can 
then process together.
    Thank you, Mr. Chairman. I yield back.
    Mr. Conyers. Thank you, Rick Boucher, Subcommittee Chair, 
and we will be depending on your long work in this area.
    Bob Goodlatte has asked to express an opinion. I recognize 
him at this point.
    Mr. Goodlatte. Thank you, Mr. Chairman. I very much 
appreciate your holding this hearing, and I look forward to 
working with you and Ranking Member Smith on this very 
important legislation.
    I, too, was very involved, along with Mr. Boucher, in the 
creation of the original license that allows satellite 
providers to retransmit local broadcast stations via satellite 
back into their local DMAs. And I continue to have a keen 
interest in ensuring that consumers have access to their local 
stations and, thus, local news and emergency information. And I 
applaud the efforts so far by the satellite providers to get 
local-into-local service deployed to the vast majority of 
areas. But I, along with Congressman Boucher, have a keen 
interest in the rural areas and areas with geographical 
obstacles to clear broadcast signal transmission.
    One topic I am particularly interested in is examining why 
significantly viewed stations are not more frequently offered 
by satellite companies, especially in areas where there is not 
a full complement of local stations. Another important topic we 
need to address is how the mandatory transition to digital 
television broadcasting will affect the statutory licenses for 
retransmitting television signals.
    The transition is an exciting time, but, as we have seen, 
all too often, it is very challenging to enact static laws in 
the area of technology because of its dynamic and ever-evolving 
nature. We need to make sure that we are taking the necessary 
steps to anticipate and address any necessary challenges that 
the digital transition will bring.
    I look forward to hearing from our expert witnesses today 
on these topics and to hear their ideas for how we can continue 
to ensure that creators have the incentive to continue 
producing quality television programming and that consumers 
continue to have ready access to that programming.
    Thank you, Mr. Chairman.
    Mr. Conyers. Thank you very much, Bob.
    I would like to recognize the former Chairman of the 
Intellectual Property Committee, Howard Coble, for any comments 
he might have before we call our witnesses.
    Mr. Coble. Thank you, Mr. Chairman. I will be very brief.
    I want to thank you and Mr. Smith for having arranged this 
very significant hearing, and it is real good to see old 
friends back at the title table.
    Thank you, Mr. Chairman.
    Mr. Conyers. All right. You are welcome.
    We welcome Mr. Rehr, Mr. McSlarrow, Mr. Murray, Mr. 
Gabrielli, Mr. Attaway, and I introduce, of course, our 
continual leadoff witness who has been before us more than 
anybody else I can remember, Marybeth Peters, the Register of 
Copyrights for many years and, before that, the policy planning 
adviser to the Register for over a decade, served as acting 
general counsel to the Copyright Office, and is the author of 
``The General Guide to the Copyright Act of 1976.''
    So start us off again on the path we are going to be taking 
between now and December 31, 2009. Welcome, again, Ms. Peters.

  TESTIMONY OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, U.S. 
                        COPYRIGHT OFFICE

    Ms. Peters. Thank you, Mr. Chairman.
    Mr. Chairman, Ranking Member Smith, distinguished Members 
of the Committee, I appreciate the opportunity to appear before 
you to testify on our recent comprehensive report to Congress 
on the cable and satellite statutory licenses found in Sections 
111, 119, and 122.
    Our report and this hearing today are part of an important 
debate on the continuing viability of these statutory licensing 
regimes and their relevancy in today's ever-evolving digital 
marketplace.
    Sections 111, 119, and 122, as you have already mentioned, 
were enacted in 1976, 1988, and 1999, respectively, and they 
govern the retransmission of distant and local broadcast 
signals by cable operators and satellite carriers. These 
provisions cover the public performance of copyrighted works 
transmitted by broadcast stations licensed by the Federal 
Communications Commission.
    Cable operators under Section 111, and satellite carriers 
under Section 119, pay distant signal royalties to the 
Copyright Office as a condition of the licenses. Section 122, 
which permits the retransmission of all those signals by 
satellite carriers, is a royalty-free license. Sections 111 and 
122 are permanent. Section 119, however, is limited to 5 years, 
and it expires on December 31 of this year unless you 
reauthorize it.
    We are required to examine the licenses and recommend 
legislative changes. That was the charge that we got by 
Congress. We were instructed by you to analyze the differences 
among the three licenses and consider whether they should be 
eliminated, changed, or maintained with the goal of harmonizing 
their operation. We released our report to Congress as required 
on June 30 of 2008.
    The main factival findings in our report, which provided 
the basis for all of our recommendations, are as follows:
    One, the distant signal licenses whose foundations were 
built upon analog broadcast technology cannot readily 
accommodate digital television.
    Two, changes in the structure, size, program offerings of 
the cable and satellite industries cast doubt on the continuing 
need for the distant signal licenses.
    Three, new video distribution systems, such as AT&T's U-
verse, test the scope of the Section 111 statutory license.
    Four, the economic rationales for the distant signal 
licenses are less justifiable in light of the success of 
marketplace models for video program distribution over the 
Internet.
    And, five, statutory royalties for the retransmission of 
distant broadcast signals are lower than the license fees paid 
to comparable non-broadcast networks, such as USA and TNT.
    We also examined the historical technical and regulatory 
disparities between Sections 111 and 119. We noted that while 
communications technology and media marketplaces have evolved 
and converged, the statutory licenses remain separate and 
unequal. For example, under Section 119, satellite carriers pay 
a flat royalty fee on a per-subscriber basis, while under 
Section 111, cable operators pay royalties based on a complex 
gross-receipts system tied to the cable system's size and based 
on FCC rules that were repealed 30 years ago.
    Satellite carriers are only permitted to market and sell 
distant network signals to unserved household, while cable 
operators are not so restricted and can serve every household 
with distant signals as long as they pay the required 
royalties.
    These and other significant differences affect competition 
between the cable and satellite industries and the provision of 
video services, especially in the distant signal context. In 
fact, the current statutory licensees not only pay copyright 
owners below market rate, they also create distortions in the 
delivery of distant broadcast signals.
    Our personal recommendation to you is that you should move 
toward abolishing the Section 111 and 119 licenses. The cable 
and satellite industries are no longer considered nascent 
entities in need of government subsidies through statutory 
licenses. They have a substantial market presence. They are 
able to negotiate private distant signal programming 
agreements, as they now do for basic cable networks. Moreover, 
the Internet video marketplace is robust and is functioning 
well without a statutory license. We do believer however, that 
a royalty-free, local-into-local license should be retained.
    We believe, however, that a transition period is necessary, 
and we suggest that the transition period should be from 
January 1, 2010, through December 31, 2014, and we suggest 
that, for that period, you create a unified statutory license 
covering the retransmission by cable operators and satellite 
carriers of local and distant broadcast signals. This license 
should incorporate the best elements of the existing statutory 
licenses while at the same time address the unique 
characteristics of digital television signals. Such a license 
would establish parity between cable operators and satellite 
carriers as they both would operate under the same terms and 
conditions.
    However, if Congress decides that the existing separate 
statutory licenses should be maintained, we believe a number of 
changes should be made to those licenses, and our 
recommendations are set forth in our report.
    This is the beginning of your process. You will receive 
many other recommendations for changes, and you no doubt will 
need to consider and address the issues presented to you, and 
we would be pleased to assist you in any way that you deem 
appropriate.
    One final note: As you move forward in this debate, you, of 
course, should be cognizant of and address the challenging 
economic conditions confronting each of the industries 
represented on this panel. However, this should not be a bar 
from examining what works, what does not work, and what needs 
to be fixed.
    Thank you.
    [The prepared statement of Ms. Peters follows:]
                 Prepared Statement of Marybeth Peters


































                               APPENDIX 1






                               __________
    Mr. Conyers. Well, I am glad you got your recommendations 
in first, as usual, and we are happy to have you here as we 
have this, I think, initial discussion which will be very 
interesting.
    The Motion Picture Association is normally represented by 
Dan Glickman, but the vice president is here today, Fritz 
Attaway. Dan was a Member of the Committee on Judiciary, so we 
hope we will be seeing him before too long. But Attorney 
Attaway was the advisor in the cable television bureau of FCC, 
he is a current member of the Advisory Committee on 
International Communications and Information Policy in the 
State Department, and he is vice president of the Motion 
Picture Association.
    Thank you for being here.

   TESTIMONY OF FRITZ ATTAWAY, EXECUTIVE VICE PRESIDENT, THE 
          MOTION PICTURE ASSOCIATION OF AMERICA (MPAA)

    Mr. Attaway. Thank you, Mr. Chairman. And I want to thank 
you in particular for not mentioning how long ago it was that I 
was at the Federal Communications Commission.
    As you mentioned, Dan Glickman had a longstanding 
commitment with Diversity Kansas in Wichita and could not be 
here, and thank you for accepting me as, I am sure, a poor 
substitute.
    I would also like to express particular appreciation for 
old friends being here who have heard this presentation many 
times before in the last 20 years, and, Mr. Coble, Mr. 
Goodlatte, Mr. Smith, Mr. Boucher, I am really pleased to see 
you once again here.
    Chairman Conyers, Ranking Member Smith, Members of the 
Committee, I want to thank you for allowing me this opportunity 
to present the views of creators and distributors of 
prerecorded entertainment programming that constitute the 
largest category of television programming retransmitted by 
satellite carriers and cable operators under the statutory 
compulsory licenses in Sections 111, 119, and 122 of the 
Copyright Act.
    MPAA represents its six member companies and some 200 other 
producers and syndicators of programming in proceedings 
relating to the distribution of cable and satellite compulsory 
license royalties. To stay in business, these program creators 
and distributors, big and small, along with the tens of 
thousands of people they employ, rely on revenues from 
exhibition of their creative works, including the 
retransmission of those works by cable and satellite companies.
    Mr. Chairman, as you examine the cable and satellite 
compulsory licenses, I urge you to focus on programming and the 
people who create it because that programming is why consumers 
subscribe to cable and satellite systems. Consumers do not pay 
monthly fees because they love headends or satellites or fiber-
optic cables. They want access to creative, entertaining 
programming. The actions you take today or you will take as a 
result of this hearing should be designed to promote the 
overarching public interest in maintaining a steady supply of 
quality programming to consumers.
    The cable and satellite compulsory licenses, as Ms. Peters 
mentioned, were enacted a long time ago under very different 
marketplace circumstances. They were fashioned to meet the 
needs of then emerging industries. But, today, cable and 
satellite are well entrenched, mature industries that can and 
do acquire programming without government assistance.
    In today's cable and satellite market environment, the 
compulsory licenses are historic anachronisms, no longer needed 
or justified. The government-imposed subsidies that they confer 
on cable and satellite industries, which are borne by program 
creators and distributors, should be eliminated in favor of 
negotiated marketplace licenses similar to those governing the 
vast majority of programming now provided by cable and 
satellite companies.
    If the compulsory licenses are nevertheless retained, their 
statutorily imposed subsidized royalty fees should be replaced 
by marketplace compensation to program owners. By any objective 
standard, the current compulsory license fees do not fairly 
compensate program owners. Yet, despite widespread recognition 
of the inadequacy of the current royalties, there will be calls 
to lower compulsory license royalty payments further and also 
to broaden the scope of the licenses.
    The end result of such actions should be obvious: even more 
meager compensation to programs creators and further lessening 
of their ability to obtain market fees from new and existing 
delivery systems, and, of course, reduced incentives to create 
the programming that viewers find most attractive and on which 
the cable and satellite industries are built.
    Mr. Chairman, whatever you do, please do not further hinder 
the ability of program creators to produce the programming that 
consumers want to see. The drive to harmonize the cable and 
satellite rates is nothing more than tinkering around the edges 
of the existing compensation schemes. To be sure, harmonization 
will create some short-term winners and losers among those who 
pay, but, more important, it will do nothing to encourage the 
creation of abundant and affordable television programmers that 
consumers want to watch.
    Current compulsory license royalties constitute a miniscule 
portion of the cable and satellite operational costs, roughly 
one-tenth of 1 percent of their revenues. Based on past 
experience, increases or decreases in the royalty fees have a 
negligible impact on the monthly subscriber fees paid by 
consumers. On the other hand, many program suppliers, 
particularly the smaller ones, depend on these compulsory 
license royalty fees to sustain their business.
    Finally, program owners should be able to verify that 
whatever royalty payments are due them under the compulsory 
licenses are, in fact, paid. The current licenses provide no 
verification mechanism. Program owners should be afforded the 
right to audit cable and satellite records to ensure compliance 
with the compulsory licenses. In addition, marketplace 
licensing alternatives to the statutory plan should be 
encouraged.
    Thank you, once again, for the opportunity to be here 
today, and I look forward to responding to your questions.
    [The prepared statement of Mr. Attaway follows:]
                  Prepared Statement of Fritz Attaway






































                               __________
    Mr. Conyers. Thank you so much.
    From DIRECTV satellite, Mr. Bob Gabrielli, senior vice 
president, who is now leading the biggest satellite 
organization in the country.
    We welcome you here to discuss that portion of the 
copyright law that we are beginning to tackle and try to 
unravel, along with our friends on the Energy and Commerce 
Committee. Welcome to our hearing.

  TESTIMONY OF BOB GABRIELLI, SENIOR VICE PRESIDENT, DIRECTV, 
                              INC.

    Mr. Gabrielli. Thank you, Chairman Conyers, Ranking Member 
Smith, and Members of the Subcommittee. Thank you for the 
opportunity to testify here today.
    My name is Bob Gabrielli. I am the senior vice president 
for programming operations and distribution at DIRECTV, and on 
behalf of our more than 17 million customers, I offer the 
following suggestions for updating SHVERA.
    First, Congress should retain and modernize the existing 
satellite distant signal statutory license.
    Second, Congress should improve consumer access to local 
stations.
    Third, Congress should not require satellite subscribers to 
bear the burden of nationwide mandatory carriage.
    And, fourth, the retransmission consent system should be 
modernized to protect consumers from high prices and withheld 
signals.
    To begin, I would like to discuss the digital signal 
license. Today, the vast majority of subscribers get network 
programming from local, not distant stations. Only about 2 
percent of satellite subscribers receive distant signals, but 
those rely on distant signals to receive network programming 
and many will continue to do so in the future.
    Congress should thus renew the distant signal license. It 
should also modernize the license to make it simpler and to 
protect consumer access to network programming. In particular, 
it should ensure that consumers in markets missing one or more 
local affiliates have access to network programming through 
distant signals.
    The Copyright Office has proposed harmonizing the satellite 
and cable licenses. While this is a laudable goal, we recommend 
repeating the separate licenses as they reflect fundamental 
technological differences between the two platforms. For 
example, the harmonization program will replace the unserved 
household test that satellite uses with the cable exclusivity 
rules. This would be completely unworkable for DIRECTV because 
we cannot block out thousands of programs from across the 
country 24 hours a day.
    Next, let me discuss DMAs. Millions are unable to receive 
truly local news, sports, and entertainment because they live 
in one state, while their DMA is mostly in another state. For 
example, viewers in Fulton County, Pennsylvania, are assigned 
to the Washington, DC, DMA. As a result, they do not receive 
any Pennsylvania-based local programming. Five years ago, 
SHVERA addressed a handful of these situations by creating 
special results.
    The time is right for a more general approach. Congressman 
Ross has proposed allowing delivery of neighborhood stations to 
households in these orphan counties, like Fulton County, and 
DIRECTV endorses this effort. Time and again, consumers tell us 
what local channels best meet their needs and, where possible, 
we should be able to meet those demands.
    I would like now to discuss local carriage. Satellite is an 
excellent medium for distributing national programming to even 
the most remote locations, but it is far more difficult to 
deliver thousands of local network stations from a handful of 
satellites in space. Congress recognized the difficulty of this 
task when it created the carry-one-carry-all rules.
    We have nonetheless made extraordinary progress in offering 
local programming. Our track record speaks for itself. We have 
spent billions of dollars to provide local service. We now 
offer local television stations by satellite to 95 percent of 
households, and we intend to add six more markets by the end of 
this year.
    Using the FCC calculations, over 80 percent of our 
satellite capacity is now devoted to this local service, nearly 
triple the amount cable operators are required by law to carry. 
For the remaining 5 percent of the households, we now offer a 
local seamless solution. We will install a rooftop antenna, a 
tuner that integrates broadcasting into the set-top box to our 
subscribers off their signals, and it will now appear and 
function exactly as any other channel. It will be on the guide 
function, in the DVR, et cetera.
    If the broadcasters made their signals available throughout 
the DMA, every DIRECTV subscriber could receive local channels 
in this fashion. This would be a simple investment in repeaters 
and translators by broadcasters. It would be the fastest and 
most efficient way to reach all markets.
    Last, I would like to discuss the retransmission consent. 
Congress created the must-carry retransmission consent regime 
before we ever offered local channels. The regime functioned 
until recently, in part because of the equilibrium that existed 
between monopoly broadcasters and monopoly cable operators. But 
as satellite emerged, broadcasters found their relative 
bargaining power increased.
    Today, with satellite and telephone companies in the mix, 
broadcasters now routinely demand fees three times those 
previously paid, and it does not appear that this additional 
money is being used to provide more or better local 
programming. In fact, the opposite appears to be true. Many 
broadcasters are producing less and less local news, while 
others have replaced local programming with national 
infomercials.
    DIRECTV willingly pays for high-quality content. We think 
programmers do get fair and reasonable compensation for the 
products they create, but it is not fair to the American public 
if broadcasters have the unfettered ability to raise rates 
without any obligation to provide local content. We would like 
to work with you to establish a new retransmission consent 
policy that compensates the broadcaster fairly for its 
investment in high-quality content, yet protects consumers from 
withheld service.
    In closing, millions of your constituents throughout 
America, whether they subscribe to satellite or not, are better 
off because of the legislation this Committee has championed 
over the years. I ask you to keep those consumers in mind as 
you consider SHVERA reauthorization this year.
    Thank you.
    [The prepared statement of Mr. Gabrielli follows:]
                  Prepared Statement of Bob Gabrielli































                               __________
    Mr. Conyers. Thank you. We will keep those recommendations 
in mind.
    We will turn to Chris Murray, Consumers Union, publisher of 
the magazine, and has been before the Committee repeatedly, and 
we welcome you today to share with us your concerns about 
satellite TV and the licensing issue that is before us and any 
other related matters.
    Welcome to the Committee.

  TESTIMONY OF CHRIS MURRAY, INTERNET AND TELECOMMUNICATIONS 
                    COUNSEL, CONSUMERS UNION

    Mr. Murray. Chairman Conyers and Ranking Member Smith as 
well as the distinguished Members of the Committee, I do 
appreciate the opportunity to appear before you once again.
    Today's question is whether or not we should extend the 
license that allows satellite services to be a robust 
competitor for pay television services. We submit that the 
answer is an easy and emphatic yes. Since we have deregulated 
the pay television market in 1996, we have seen consumer prices 
for television service go up and up at nearly twice the rate of 
inflation, and while I do not believe that competition from 
satellite is a perfect solution to counterbalance the problem 
of market power for pay TV services, it is probably the best 
partial solution we have by a mile.
    I have heard a little bit about challenging economic 
circumstances that are facing some industries here today, but I 
would also like to submit that the challenging economic 
circumstances facing consumers are quite severe.
    So the question is: What can be done to ensure that 
satellite and other competitors for pay TV services can be as 
robust a competitor as possible? And I will submit three quick 
suggestions.
    The first, as we have heard not only from Mr. Gabrielli, 
but also I think we heard from a number of witnesses at 
yesterday's Commerce hearing, we need to reform the distant 
signal qualification process. We think that there is no good 
reason to prevent consumers from having greater choice in local 
broadcast content, and we applaud efforts to move toward a 
greater number of DMAs that are served by satellite.
    I think some study is also warranted as to what percentage 
of capacity do they have to put up in order to get those local-
into-local signals in all 210 markets. I think we would find 
that it is a significant percentage of capacity and that we 
would be loathe to require other services at the table, such as 
cable television, to dedicate as much of their capacity as we 
are asking of the satellite guys. But I do believe that that is 
something that needs to be looked at.
    The second important thing is how do video competitors get 
video programming and what do they pay for it, and perhaps as 
importantly, what happens when the process of negotiation for 
those channels breaks down. What do we do? We have all seen an 
instance, if we have satellite TV or another service, where 
because a negotiation is not going well, consumers actually 
lose a television signal for a while, and we see consumers 
being used as a bargaining lever in order to get a higher price 
for programming.
    We think that fresh scrutiny is warranted to look at how 
can we fix program negotiation processes, how can we close 
things like the terrestrial loophole, and how can we ensure 
that exclusive programming arrangements are not being used with 
those who have a vertical arrangement where they own both the 
content and the distribution for that to shut out competition. 
We think that if Congress has decided that competition is going 
to be the way that we are going to keep consumer prices down, 
we have to be sure that we are making competition function as 
fully as possible.
    My final suggestion is regarding rate transparency. We see 
a lot of finger-pointing at the table and a lot of name-calling 
for why consumer rates continue to go up, and I cannot tell you 
exactly what the reason is that they do continue to go up, but 
what I can tell you is that we need more transparency in the 
rates that cable programming providers are paying for content, 
that satellite providers are paying for content. We need to see 
the whole input process to understand where is it that 
consumers are being price gouged and where is it perhaps that 
they are being undercompensated.
    I am frankly astonished at the suggestion that we should 
not extend this compulsory license because if you want to see 
the marketplace break down almost instantaneously and you want 
to see consumer prices go through the roof almost 
instantaneously, then let's consider just allowing, you know, 
market-by-market, copyright-by-copyright negotiation. It is 
almost an unthinkable mechanism.
    But we look forward to any questions that the Committee may 
have, and thank you again for the opportunity to appear before 
you.
    [The prepared statement of Mr. Murray follows:]
                   Prepared Statement of Chris Murray




















                               __________
    Mr. Conyers. Thank you for your testimony.
    The president and CEO of the National Cable and 
Telecommunications Association is Kyle McSlarrow, and he is 
here. We are delighted. He has been on the advisory committee 
and has been the deputy secretary of the U.S. Department of 
Energy, chief of staff for Senator Paul Coverdell, vice 
president of political and government affairs for 
grassroots.com, and assistant to the general counsel of the 
Army.
    We welcome you here today, sir, and look forward to your 
suggestions.

 TESTIMONY OF KYLE McSLARROW, PRESIDENT AND CEO, THE NATIONAL 
         CABLE & TELECOMMUNICATIONS ASSOCIATION (NATA)

    Mr. McSlarrow. Thank you, Mr. Chairman, Ranking Member 
Smith, and distinguished Members of the Committee.
    Let me just say at the outset I understand that this 
Committee and the Energy and Commerce Committee have several 
different options in terms of the path you want to go down with 
reauthorization of SHVERA, and whatever path you choose, you 
have my commitment that our industry will work constructively 
with you as with other stakeholders represented at the table.
    I should also say, as odd as it may sound, we support the 
reauthorization of SHVERA. We support continuing what has been 
a success story in a rough, competitively neutral balance among 
us and our competitors, principally the satellite industry and 
now the telephone industry. It is very clear that competition--
and it is very intense competition now--among cable, satellite, 
and telephone providers, in video has produced great benefits 
for consumers.
    I guess there are three things that I would--I would break 
it down--ask you to consider.
    First, the notion of the compulsory license itself: I have 
to admit, as I prepared for this hearing and started examining 
the cable compulsory license, it is horrifyingly complex, and 
the quite natural reaction, as was mine, is to say, ``Let's 
clean it up. Let's make it simpler. Let's harmonize it,'' and 
that is just the natural reaction. But I would ask you to 
consider two things that make that very tough.
    The first is, even though on average, there may only be two 
distant signals that an average cable subscriber gets, there 
are something like 25 million households that have two or more 
distant signals available to them and another 25 million that 
have one distant signal. There are really settled expectations. 
So we have to be very careful as we go through this process. 
And all of us are living through the digital transition that is 
taking place right now and understand the great length that all 
the stakeholders and Congress have gone to ease that 
transition.
    The second point I would make about it is that, as complex 
as it is, the compulsory license for us and for satellite has 
basically worked. It is actually a great public policy success 
story. So, even though it may look arcane, if you step back and 
you ask the question: ``Is the consumer being served?''--yes, 
because we are disseminating content that the consumer wants as 
widely as possible; ``Are the distributors being helped?''--
yes, because we are at a rough competitive balance in terms of 
how we are treated; ``Are the copyright holders being 
compensated fairly?''--our answer would be yes.
    So, on the one hand, one direction this Committee can go 
would be--and we would urge you to consider this--
straightforward reauthorization with some modest reforms.
    One reform that we would ask the Committee to consider is 
reforming what we call the phantom signal policy where you 
actually have an interpretation of the statute where consumers 
who do not receive a distant signal actually have to pay for 
other consumers receiving a distant signal.
    Nonetheless, the Copyright Office, as Congress asked it to 
do, has come forward with a report and has made a number of 
fairly far-reaching reform proposals, and harmonization or 
suggestions of a flat fee at first blush are very appealing, 
but one has to understand that you cannot solve those issues in 
the context of just the Copyright Act itself. You have to open 
up the Communications Act in significant ways, particularly on 
the carriage side.
    And I would identify just one provision which I think 
illustrates this, and that is that the cable industry has an 
obligation that every broadcaster we carry must be shown to 
every consumer before they can go on to buy any other service, 
any other cable network, any other premium channel. The 
satellite industry does not have a similar obligation. For 
them, the choice of carrying the broadcaster is an optional 
one. So, if you move to a flat fee, which sounds appealing at 
first blush, by definition, because we have a must-buy 
requirement, every one of our consumers is paying for the 
signals, whereas, for a satellite customer, they would have a 
choice.
    It is not a question of right or wrong. It is just 
different, and it has a huge significant impact.
    The other point that I would make is that if you are 
looking at the Copyright and Communications Act in tandem, to 
some extent, we would be focusing on the wrong issue. A couple 
of folks have already mentioned that if you are looking at 
carriage obligations and how we compensate copyright holders, 
it would be odd not to think about taking a hard look at 
retransmission consent, which is a Communications Act 
provision, but I would submit is at odds with the theory behind 
the compulsory licenses.
    Compulsory licenses work because they provide an efficient 
and seamless way to get programming out while fairly 
compensating copyright holders, and it does so with a minimum 
of disruption, whereas the retransmission consent provision, by 
definition, increasingly poses a threat of disruption where 
broadcasters can threaten to withhold or actually do withhold 
signals from consumers in order to extract more compensation in 
some form or another.
    Again, those two are in conflict with one another. So, if 
the Committee does choose to examine both these statutes and 
the carriage obligations in their entirety, we would urge that 
you examine retransmission consent as well.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. McSlarrow follows:]
                  Prepared Statement of Kyle McSlarrow






















                               __________
    Mr. Conyers. Thank you very much.
    We have three short votes, but we will save the biggest 
witness for last, maybe the one in the most trouble.
    Mr. Rehr, we will be looking forward to your testimony when 
you get back.
    We will stand in recess now.
    [Recess.]
    Mr. Conyers. Mr. David Rehr is the president and CEO of the 
National Association of Broadcasters, NAB, and has led in his 
field of expertise for nearly 25 years on Capitol Hill. He has 
worked with us across the years. We are delighted to have him 
today and we are going immediately into the questions following 
his statement.
    Welcome, sir.

        TESTIMONY OF DAVID K. REHR, PRESIDENT AND CEO, 
         THE NATIONAL ASSOCIATION OF BROADCASTERS (NAB)

    Mr. Rehr. Thank you, Mr. Chairman.
    Chairman Conyers and Congressman Gonzalez, thank you very 
much for having me here today. My name is David Rehr, and I 
serve as the president and CEO of the National Association of 
Broadcasters.
    The NAB proudly represents over 8,300 diverse television 
radio stations across the United States, employing nearly 
250,000 hardworking Americans. Our member companies keep their 
communities informed and connected. We work every day to embody 
the spirit of localism, which Congress has embraced and 
affirmed time and time again as a vital public policy goal.
    We do not charge our viewers to watch our programming. We 
rely on payments from advertisers to deliver a free service to 
your constituents. Without free over-the-air television, pay TV 
models would be unrestrained their ability to attempt to 
maximize their profitability.
    Broadcast television stations remain the primary source of 
the most diverse and popular entertainment, news, weather, and 
sports programming in the country. In fact, according to data 
from Nielsen Media Research, in the 2007-2008 television 
season, 488 of the top--that is most watched programs--500 
primetime television programs were broadcast over the air. 
While these stations represent a relatively small number of 
channels on pay systems, broadcasters offer a highly demanded 
and desired unique and valuable service to local markets and to 
your viewers.
    I would like to make two points. Number one, localism must 
remain central to any policy deliberations with respect to 
satellite and/or cable compulsory licenses. Two, the Copyright 
Office recommendations must be evaluated individually for both 
intended and unintended consequences.
    Starting with my first point. One, localism must remain 
central to any policy deliberations with respect to satellite 
and/or cable compulsory licenses--unlike other countries that 
only offer national television channels, the United States has 
succeeded in creating a rich and varied mix of local television 
service providers so more than 200 communities, including towns 
as small as Glendive, Montana, which has fewer than 4,000 
television households, can have their own voices. This is the 
genius of the American system and should be celebrated.
    The pillars of this system are the availability of signals 
to viewers throughout the market and the ability to offer 
exclusive programming in that market, often through a network 
affiliation relationship. We urge this Committee to view any 
changes through the prism of localism and the core principles 
of localism.
    Two, the Copyright Office recommendations must be evaluated 
individually for both intended and unintended consequences. 
Broadcasters and cable have been working under the cable 
compulsory license for over 30 years and, by and large, this 
system has worked well. The experience under the satellite 
compulsory licenses has been more challenging. Here are a few 
reactions to some of the report's recommendations.
    We agree with the office on the retention of a local-into-
local compulsory license. We agree with the office on the call 
for phasing out the distant signal license for satellite 
providers. Beyond that, in fact, broadcasters believe that the 
license should be replaced with a requirement for local-into-
local carriage in all television markets.
    There are 31 of the 210 television markets in small and 
rural areas that satellite companies do not serve. The 
satellite companies have said that this is a capacity issue, 
yet it is more likely a simple business decision.
    Broadcasters, including those in the 31 smallest markets, 
have invested well over a billion dollars in making the 
transition to digital television, and I think we have done a 
pretty good job educating America. So far, there is very little 
economic return on that investment. Nevertheless, those 
investments were made and are in the public interest.
    The satellite industry investment in providing local-into-
local to all Americans is also in the public interest. I am 
certain that if Congress does not step in, local service will 
never be provided.
    We disagree with the Copyright Office on the 
recommendations to harmonize cable and satellite licenses. They 
are very different business models, different technologies, and 
have different evolutions. We are unsure of all the unintended 
consequences of that harmonization, particularly in this 
difficult economic period.
    We share the concerns of the Copyright Office as expressed 
in their report regarding compulsory licenses to permit 
retransmission of broadcaster signals on the Internet as well 
as the requirements they would impose. As you know and as you 
have heard here today, the reauthorization is complicated, yet 
extremely important to American television viewers.
    The underlying principle or focus, which I encourage this 
Committee to use as its guide in its deliberations, is 
localism. Localism continues to provide Americans a connection 
to their communities.
    Thank you for giving me the opportunity to testify, and I 
welcome any questions you might have.
    [The prepared statement of Mr. Rehr follows:]
                  Prepared Statement of David K. Rehr







































































































                               __________
    Mr. Conyers. Thank you, Mr. Rehr.
    I am going to ask Judge Charles Gonzalez of Texas to begin 
questioning.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    Mr. Rehr, I love the fact that you start off with a dilemma 
that I face--and I am sure Mr. Boucher and others that serve on 
Energy and Commerce--and we are on Judiciary and we talk about 
retransmission, and I thought I understood retransmission, but 
this is a totally different and distinct issue. It is really 
kind of difficult.
    So if I ask an Energy and Commerce question, forgive me, 
Mr. Chairman. I really did not mean to do that.
    The delivery system appears to determine policy many times, 
and the delivery system on the box can be an Internet delivery 
system and such and what that means. But, Ms. Peters, you said 
something--or you may not have actually covered it. I am not 
real sure--on page 7 of your testimony, ``On a related subject, 
it must be noted that the Copyright Office is not in favor of a 
statutory license for retransmission of broadcast signals over 
the Internet.'' The last sentence is interesting. ``An Internet 
statutory license, in fact, would likely remove incentives for 
individuals and companies to develop innovative business 
models.''
    Now why wouldn't that same reasoning apply to what we have 
in not the newcomer, but the existing technologies and delivery 
systems of cable and satellite?
    Ms. Peters. Actually, the point I was actually trying to 
make was that because there is no statutory license and because 
Internet deals are being made every day, it actually proves the 
point that you do not need the statutory licenses for cable and 
satellite.
    So I was actually trying to say you do not need to go 
there. And I think that if, in fact, we took away the cable and 
satellite, they would be able to do the same kind of things, 
kind of deals that they are doing today with regard to the 
Internet and mobile phones and all kinds of mobile devices, as 
well as service to your computer at home.
    I do not know. I mean, I just really believe that the 
Internet is where more and more people are going, more and more 
of these mobile devices are what people have and the way they 
are getting things, and the licensing seems to be working in 
that area.
    Mr. Gonzalez. Yes. And you are probably right that we are 
not going to do anything that we do not have to do at this 
point, and then harmonization is probably between cable and 
satellite, and most of our attention, I think, would be 
directed in that manner.
    Mr. Murray, I think you indicated a position that I think 
would be contrary to Mr. Attaway. And that is if you do not 
have statutory licenses and you do not have some uniformity--
and that is the concept and that is the model--and then if you 
break it down and you do not have it, that would open the door, 
obviously, to a lot of individual and separate transactions, 
negotiations, and so on. What is wrong with that? And, in fact, 
is it the model that is defective, or is it just that component 
of trying to establish adequate compensation?
    Mr. Murray. It is certainly not a problem of establishing 
adequate compensation. I think if you ask consumers who have 
had, let's say, a satellite channel withheld from a programmer, 
what is the problem with the situation that you are in?
    So what I am talking about here is the situation where 
satellite companies try to negotiate with a program provider, 
and because the program provider cannot get exactly the terms 
that they do, they use the lever of withholding that content 
from consumers. So consumers, you know, have American Idol go 
dark or something like that.
    Now if you take that model and extend it to the point where 
now what you have basically set up is a marketplace where 
market-by-market, broadcaster-by broadcaster--because this is 
not just a national broadcaster negotiation, this is a local 
broadcaster-by-local broadcaster negotiation--you have a market 
destined for gridlock, destined for higher prices for 
consumers. And I do not think that is the result that Congress 
wants here.
    I think that this--the compulsory license here has served 
as a very positive model. It is the only force that has kept 
cable television prices in check, and I cannot see any 
rationale for undoing that system.
    Mr. Gonzalez. Mr. Attaway?
    Mr. Attaway. Well, as you indicated, we certainly do have a 
difference of opinion. I am just astonished that Mr. Murray 
thinks that eliminating the compulsory licenses would be 
unthinkable when, if you look at the program schedule for a 
cable or satellite provider--I happen to have DIRECTV's right 
here--you go down the list of offering. And the vast majority 
of channels that are being offered, all of the programming is 
negotiated for in the marketplace, channel by channel, and it 
works quite well to serve the interests of the consumers as 
well as the satellite and cable companies and as well as 
program producers.
    There is no reason to think that the marketplace cannot 
work. Maybe in 1976, there were problems. Those problems do not 
exist today, and if you look at the Internet, that is a perfect 
example of how the marketplace is working to meet the needs of 
consumers. Almost every television program available today on 
broadcast television is also being made available on the 
Internet. The marketplace works.
    Mr. Gonzalez. Thank you very much. I yield back, Mr. 
Chairman.
    Mr. Murray. I was just going to say and yet we see 
proposals right now to make broadcast programming available 
exclusively. So, if we are talking Internet here, I am talking 
about--and this is a very recent thing that has just come up 
this week where there is a proposal out there to take cable 
programming, put it on the Internet, and then the only place it 
could be available is to subscribers of that particular pay 
cable television service.
    So we see this marketplace closing. We have seen instances 
of folks blocking content because it might be a competitor, 
and, you know, clearly, if I am the content industry, I would 
love to have the maximum lever over consumers and over other 
vendors in the marketplace, but does that serve consumers? I 
submit that it does not. I think it is going to result in 
higher prices and an absolute gridlock of copyright clearance.
    Mr. Conyers. Ms. Peters, you okay on that?
    Ms. Peters. No, I actually disagree. I think the 
marketplace is the best place to resolve these issues. Nobody 
produces a program not to sell it. They really want to make it 
available. It may be that the terms and conditions, you know, 
are at issue, but you don't not license your program, and any 
business that is not meeting the expectations of its consumers 
is not going to last very long. So I happen to be a very strong 
advocate of the marketplace and consumer choice.
    Mr. Murray. And I am an advocate of the marketplace, but 
isn't our counterfactual here that many instances of 
programming exclusives--because this cuts exactly against what 
you are saying, that, of course, you produce content, you want 
to sell it to the maximum amount of people, maybe, unless what 
you can do is really price gouge some folks with exclusives. 
And that is what we see this marketplace trending towards, you 
know, and so I think the existence of exclusives is the proof 
that we have these problems, and that it is going to get worse 
if we allow the content industry to have greater leverage over 
consumers.
    Ms. Peters. I would argue that with the Internet, it is 
becoming less exclusive, that you see content in many different 
forums throughout the world on many different devices. The 
exclusivity of only giving it to one person, I think, is 
exactly the opposite of the trend today.
    Mr. Conyers. Help us, Lamar Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Ms. Peters, on the way to larger issues, I wanted to ask 
you about a specific provision. You mentioned in your written 
testimony that you felt that the unserved household requirement 
had basically outlived its usefulness. Real quickly would you 
explain why?
    Ms. Peters. The whole purpose of the unserved household 
piece was that if you cannot get the full complement, and you 
prove yourself to be unserved, then you can bring a distant 
signal in. With more and more local signals being made 
available, I think the need is less.
    I am a strong advocate of serving consumers their local 
programming. That seems to be where the push is. Now I heard 
people testify and say people still get two distant signals and 
they still get one. I still think that that could be licensed 
content if that is what they really want, but I do not think 
you need a compulsory license for it.
    Mr. Smith. Okay. Thank you.
    Did you want to respond, Mr. Gabrielli, really quickly?
    Mr. Gabrielli. I would. And for DIRECTV, because we have 
spent the billions of dollars and do cover 95 percent of the 
country with local channels, our number of distant subscribers 
has gone down by more than half in the last 4 years. But there 
still are a couple of cases where customers need distant 
signals. They need them where we do not cover the market yet 
and the broadcaster does not cover that. This is----
    Mr. Smith. Is that the 5 percent you are talking about?
    Mr. Gabrielli. That is the 5 percent.
    Mr. Smith. And, Ms. Peters, what about the 5 percent? I am 
sure that is millions of people, but anyway----
    Ms. Peters. Well, I am not sure. I still do not get who is 
not served and why that could not be licensed content from some 
provider.
    Mr. Smith. Okay.
    Mr. Gabrielli----
    Mr. Gabrielli. Well, again, the satellite is a secondary 
transmission of a primary broadcast. If the broadcaster covered 
the entire market, there would be no need for distant signals.
    Mr. Smith. Right.
    Mr. Gabrielli. So we only get the license where they do not 
cover. We have done a great job of covering 95 percent of those 
with local channels. There is still 5 percent. There are 
markets that are missing networks. We have to bring in a 
network from another market. That is a distant signal. 
Otherwise, you would have some markets that have one or two 
stations. That is all we could provide if we did.
    You still have RVs, long-haul trucks, airplanes, and ships 
that are not in any market that we use a distant signal license 
for, and there is always the public safety officials given in 
any country that, you know, or county that need these----
    Mr. Smith. Okay. All right. Thank you. Two sides on that 
issue.
    Mr. Attaway, you mentioned in your oral testimony--or was 
it in your written testimony which you sourced--that royalty 
payments are only one-tenth of 1 percent of revenues. I am 
going to ask some of the witnesses to your left what they think 
about that. What do you think is the significance of the fact 
that, as you claim, the royalties are only one-tenth of 1 
percent?
    Mr. Attaway. Well, I think that goes to illustrate that the 
royalties that are paid by cable and satellite providers are de 
minimis. There is certainly no consumer issue here because, in 
terms of their overall cost structure, they are de minimis. If 
you are really concerned about prices being passed on to 
consumers, you ought to be looking at postage rates because the 
cost of sending out monthly invoices is almost four times what 
cable and satellite systems may----
    Mr. Smith. Let me ask the other witnesses if they agree 
with your one-tenth of 1 percent and the significance that you 
just mentioned.
    Mr. Gabrielli. I am assuming you are strictly talking about 
the royalty payments, and I actually do not know about 
percentages, but, overall, we pay 50 percent of our gross 
revenue for programmer payments to the broadcast stations, to 
the cable networks. So we are at a 50 percent number from our 
opinion.
    Mr. Smith. From your point. Okay.
    Anyone else on the panel want to comment?
    Mr. McSlarrow?
    Mr. McSlarrow. Well, the situation for cable operators is 
the same as Mr. Gabrielli just described. The only additional 
point I would make is that under this regime, we are 
essentially paying for distant signals. On average, a cable 
system has hundreds of channels and only on average two of them 
are distant signals. So the fact that our two industries 
together plus the telephone companies are paying a quarter of a 
billion dollars a year in copyright royalties suggests to me 
that content owners are probably not underpaid here.
    Mr. Smith. Okay. Mr. McSlarrow, I am going to have time for 
one more question, which I am going to direct to you. You 
mentioned in your testimony a few minutes ago that you favor a 
straight reauthorization with modest reforms, compulsory 
licenses work, and so forth. I wonder if you might explain part 
of the reasoning for your stand as being that there is a 
technological difference between satellite and cable, and if 
you want to explain what those technological differences might 
be that would support your position.
    Mr. McSlarrow. Part of it is a technological difference, 
and I think the technology differences play out in carriage 
obligations. So, for example, I made the point in my oral 
testimony that we have an obligation to carry every broadcaster 
on the must-buy a tier. That is something the satellite 
industry does not have. We also have a difference with must-
carry obligations where we have to carry every must-carry 
station. The rule for DBS is carry one, carry all.
    So I think over time, interestingly enough, the 
technological differences have actually diminished, but they 
are still present. But I would also say that I think it is 
actually the regulatory differences today that are probably the 
larger issue.
    Mr. Smith. Thank you.
    Thank you, Mr. Chairman.
    Mr. Conyers. Thank you.
    Rick Boucher?
    Mr. Boucher. Well, thanks very much, Mr. Chairman.
    I am going to be directing questions to Ms. Peters.
    And, Ms. Peters, welcome again. We are delighted to have 
you here today. Before I ask you some questions about areas in 
which we might consider amending the statute, let me just 
briefly comment on your proposal to phase out the Section 119 
license, and I really do not want to spend my 5 minutes on 
this. So I am not going to ask you to respond. I have heard 
carefully what you have had to say and others have had to say.
    The purpose of this license was never to subsidize 
satellite service. It was always to serve people who could not 
get a distant network signal any other way. They could not get 
it from the local station. In the days when we originated this 
license back in 1988, there was no local-into-local service.
    Today, we have local-into-local service, but it only 
serves--well, it does not serve 30 markets. I cannot do the 
math in my head. There are 210 and 30 are not served. So what 
is that, 180 are served and 30 are not, and within those 30 
markets not served by local-into-local, you have, I am sure, 
more than a million people who cannot get that network signal 
by any means other than the import under Section 119.
    And my sense is that negotiating the clearance rights in 
the absence of the 119 license might be somewhat more difficult 
than some of the conversation here has suggested. I suspect it 
is not as simple a matter as dealing directly with the networks 
themselves. There are probably syndicated programs and other 
things contained within that network signal that would require 
a multiplicity of negotiations with a variety of parties, and 
that might be quite complex.
    So that is my comment. We need to keep this 119 license, 
and it would be my goal strongly to defend it.
    The questions I have for you are these. Under the existing 
Section 111 license, the cable compulsory license, is there any 
doubt in your mind about whether the telephone companies that 
are now seeking to offer multichannel video using an IP-based 
platform to do that would be entitled to use the Section 111 
compulsory license, and if you think the statute is unclear in 
that regard, should we amend it to clarify it?
    Ms. Peters [continuing]. Talking about AT&T and Verizon, or 
are you talking about----
    Mr. Boucher. Yes.
    Ms. Peters [continuing]. Cable----
    Mr. Boucher. Yes. No. I am talking about specifically 
AT&T----
    Ms. Peters. Right.
    Mr. Boucher [continuing]. And perhaps also Verizon is in 
that category, but I know AT&T intends to use an Internet 
technology solution, an IP solution, to offer its multichannel 
video service. Do you believe that the statute clearly makes 
them eligible for the 111 license, or should we clarify it to 
ensure that?
    Ms. Peters. My recollection, what was in the study, was 
that the definition of cable system in 111 would cover AT&T in 
general, but the definition of cable system in other contexts 
may not fit exactly. I know that our recommendation is that one 
of the things is the issue of whether or not they comply with 
FCC regulations, and so, in our study, we recommend that if 
they are going to take advantage of the 111 license, they 
should also be required to comply with FCC regulations.
    Mr. Boucher. Okay. Does your report answer this question, 
or do you address the subject in your report?
    Ms. Peters. Yes, we do.
    Mr. Boucher. I will turn to the report for the answer then. 
Thank you.
    The second question I have is this. The Section 119 license 
allows the import of distant signals to households that cannot 
receive an analog over-the-air television signal from the local 
station, and with the DTV transition, obviously, the analog 
signals are going to be turned off. The natural consequence of 
that with the statute unamended is that the entire Nation will 
be a white area, and distant network signals could be imported 
into every home once the DTV transition is complete. I assume 
you would agree we should amend the statute to replace analog 
with the digital.
    Ms. Peters. Yes.
    Mr. Boucher. Okay.
    Ms. Peters. I do agree.
    Mr. Boucher. Next question: Should we, in your opinion, 
move the significantly viewed provisions from the current 
Section 119 license to the Section 122 local-into-local 
license?
    Ms. Peters. Yes, we do.
    Mr. Boucher. Thank you.
    And then the fourth question: The Section 119 license says 
that if local signals are offered in a given market, then 
distant network signals cannot be imported into that market, 
say, for some special grandfathering situations.
    But there are markets in some rural areas, largely out in 
the West, where the markets are extremely large and where the 
new spot beam technologies that the satellite carriers are 
using do not cover the entire market. So you will have homes 
within these very large DMAs served with spot beans where 
local-into-local is offered on the spot beam, but it does not 
reach all the homes.
    Now, in those instances, should those homes that are not 
served with the local-into-local service be permitted to import 
a distant signal, and should we amend the statute to permit 
that?
    Ms. Peters. I am not sure what we said in the study, so, at 
the moment, I am not sure. If I can get back to you--I think 
the answer is yes, but let me get back to you.
    Mr. Boucher. Okay. I will look forward to your response to 
that.
    And then finally, do you have any comment on whether or not 
we should amend the statute to permit adjacent local signals to 
be brought into DMA in instances where that DMA is short from a 
network affiliate, so that the gap is filled, in essence not by 
an imported network signal, but by a local signal imported from 
the adjacent market for that missing affiliate?
    And then, secondly, for markets that straddle state lines 
where the television coverage originates out of state and is 
serving people who live in another state in that DMA, should 
the people who live in the state where the TV stations are not 
located be able to get local signals imported from an adjacent 
market in the state where they live?
    Ms. Peters. I think the premise that we believe in is that 
everybody should be able to get their local signals, and I 
think we do cover that situation in our report. Yes.
    Mr. Boucher. So just to take these one by one, with regard 
to the short markets, today under the law you could bring in a 
distant network signal. Do you think it would be better to let 
a local television signal from an adjacent market to be brought 
in to fill the gap in that instance?
    Ms. Peters. Mr. Boucher, I am going to be honest and 
basically say that I am not an expert in communications policy 
and those kind of issues. We do have those people on my staff--
--
    Mr. Boucher. Okay.
    Ms. Peters [continuing]. So we would be happy to respond to 
your question----
    Mr. Boucher. Thank you. I realize the question----
    Ms. Peters [continuing]. In an accurate way.
    Mr. Boucher [continuing]. Is a little bit beyond the 
purview of copyright.
    Thank you very much. I appreciate your answers.
    Ms. Peters. Okay. Thank you.
    Mr. Boucher. Thank you, Mr. Chairman.
    Mr. Conyers. You are welcome.
    Before we go to vote, because Mr. Rehr, David, has been so 
cooperative, I want to ask him has there been any 
reconsideration of whether broadcasters should pay artists for 
performance of their copyrighted works since you want everybody 
else to get it. Thinking about it?
    Mr. Rehr. Yes. No. Thank you, Mr. Chairman. I expected to 
get that question today.
    The performance fee which our member stations consider by 
many to be a fee, a royalty, a tax really is not part of this 
SHVERA discussion. The suggestion that NAB's opposition to 
performance rights in sound recordings is inconsistent with its 
support for the compulsory license in SHVERA notwithstanding.
    Cable and satellite systems, unauthorized third-party 
Internet retransmitters, and others seeking to exploit 
broadcasters' signals are competitors to broadcasters for 
programming, advertising, and for our viewers. In some 
instances, these unauthorized retransmissions from distant 
markets result in broadcasters having to compete against their 
own programming.
    By contrast, it is a different matter with radio. Radio 
stations do not compete with record companies. Rather, radio 
stations use the records, promotes their sale, a fact reflected 
in industry practice, in some instances, of radio stations 
being provided complimentary copies of records. Unlike the 
recording industry, which provides its product for sale to 
consumers, television programming has no retail market enhanced 
by earlier broadcast play.
    So, in essence, I think that there is a difference between 
radio broadcasters and television broadcasters on this issue. I 
know we are hoping to more fully explore this with you in the 
upcoming weeks, and I look forward to it.
    Mr. Conyers. I could not have you come before me without 
tossing that out. You know that.
    Mr. Rehr. I know that.
    Mr. Conyers. All right.
    We are going to have a vote on the rule, one vote. We will 
be right back.
    All right. Sheila Jackson Lee?
    Ms. Jackson Lee. It will not be a question, Mr. Chairman. I 
want to thank you for holding this hearing, and I am conflicted 
because I am in between Homeland Security, but this is very 
important to me.
    What I would just leave on the table for a question to be 
answered in writing is the importance of consistent 
modernization in our reauthorization, why wouldn't that be the 
right approach, that we reauthorize all of the facets together. 
And then, secondly, how much of an expanded outreach would come 
about through the modernization and putting the different 
facets together?
    So I hope that I can get an answer, and I will look forward 
to working with you, Mr. Chairman, on the question you 
previously asked.
    Thank you. I yield back.
    Mr. Conyers. Thank you.
    Lady and gentlemen, because of the scheduling, we are going 
to ask--if you are in agreement, we will submit the remainder 
of the questions to you and free you up. I feel badly keeping 
all of you here for a few more hours. So just count this as the 
first opening salvo of a discussion that is probably going to 
go a little bit longer into the spring. And I thank you all for 
your attendance.
    The Committee stands adjourned.
    [Whereupon, at 12:09 p.m., the Committee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

       Prepared Statement of the Honorable Sheila Jackson Lee, a 
    Representative in Congress from the State of Texas, and Member, 
                       Committee on the Judiciary
    Mr. Chairman, thank you for convening today's very important 
hearing on copyright licensing in a digital age. This hearing will 
examine competition, compensation, and the need to update the cable and 
satellite TV licenses. The Committee on the Judiciary will conduct an 
oversight hearing on the copyright compulsory licenses that govern the 
``retransmission'' of broadcast television programming. Central to this 
inquiry is consideration of the Satellite Home Viewer Extension and 
Reauthorization Act (SHVERA), which contains provisions that are 
scheduled to expire December 31, 2009.
    SHVERA was enacted in 1988 and created a copyright compulsory 
license for the benefit of the satellite industry to retransmit distant 
television signals to its subscribers. The license, codified in section 
119 of the Copyright Act, was originally intended to ensure the 
availability of broadcast programming to satellite providers. This was 
intended to assist the satellite industry which was then in its infancy 
in the 1980s. As discussed above, Section 119 is about to expire in 
December 2009.
    The Committee is likely to consider both modernizing and 
simplifying the statutory licenses governing the retransmission of 
over-the-air broadcasting television stations, including sections 119 
and 111 (for cable retransmission) and 122 (local-into-local) of the 
Copyright Act.
    Three of the most common methods consumers use to receive 
television signals are broad cast, cable, and direct broadcast 
satellite. Broadcast television is free to consumers. In the broadcast 
context, consumers receive signals via over-the-air, either via rooftop 
or ``rabbit ear'' antennas. Cable and direct broadcast satellite 
compete in the multichannel video programming distribution marketplace. 
In this situation, providers offer packages of video and sometimes 
audio programming for a monthly subscription fee. These media tend to 
offer consumers diversity of programming and better signals than over 
the air broadcasting but they are costly. There is considerable 
competition in this area and it is encouraged by Congress. Each 
requires compulsory licenses. The purpose of these compulsory licenses 
is to provide a mechanism for the retransmission of over-the-air 
broadcast signals by cable and satellite operators without those 
operators incurring the transaction costs associated with marketplace 
negotiations for the carrying copyrighted programs. In exchange for 
these licenses to perform copyrighted works, the users of the license 
pay royalty fees at government regulated prices, which are distributed 
by the Copyright Royalty Judges to the Copyright Owners.
    Section 119 contains the satellite distant signal license and is 
set to expire in December 2009. It lays out the terms and conditions 
that govern the ability of satellite providers to retransmit distant 
network and superstation programming. Recently, Section 119 was amended 
to permit satellite providers to retransmit certain ``significantly 
viewed'' stations from nearby local markets. This change was made to 
form parity between broadcasts between satellite and cable providers 
and to provide more viewing options for subscribers.
    Section 111 allows a cable operator to retransmit both local and 
distant radio and television signals to its subscribers. Today's 
hearing will address whether these compulsory licenses have outlived 
their utility, whether the licenses should be unified, and what should 
be done to illegal subscribers, among other significant issues.
    I am delighted to hear from today's witnesses. The witnesses are 
distinguished and include: Marybeth Peters, Register of Copyright, Bob 
Gabrielli, Sr. Vice President of DIRECTV, Kyle McSlarrow, President and 
CEO of NCTA, Fritz Attaway, Vice President of the MPAA, Chris Murray, 
Internet Counsel for Consumers Union, and David Rehr, President and CEO 
of the NAB. I welcome today's witnesses and I look forward to their 
testimony.
    Thank you, and I yield the balance of my time.

                                

 Prepared Statement of Charles W. Ergen, Chairman and Chief Executive 
                  Officer of DISH Network Corporation
    The U.S. Copyright Office has provided this Committee with a 
roadmap for updating the cable and satellite compulsory copyright 
licenses to reflect the changing video landscape. We agree with the 
Copyright Office that the digital age has arrived and the laws need to 
catch up. I would like to highlight three issues from the 2008 
Copyright Office Report:

        First, the separate cable and satellite copyright regimes no 
        longer make sense. We compete for the same customers and should 
        have the same rules;

         Second, many consumers cannot get local news and sports from 
        their home state because of the way local markets are defined; 
        and

        Third, many rural communities are missing one or more of the 
        four major networks.

    In addition, Congress should also address the interrelated issues 
of retransmission consent and must-carry when updating the compulsory 
copyright licenses this year.
    With respect to the first issue, the Copyright Office recommended 
folding the existing licenses into a unitary digital copyright license 
to reflect changes in technology and place all providers on a level 
playing field. We support that approach. Specifically, a unitary 
license for all pay-TV providers would ensure that all consumers get 
the services they need in a digital world, in a manner that is fair to 
the copyright holders, broadcasters, cable, satellite, and new entrants 
such as the telcos.
    Absent a unified license, we agree with the Copyright Office that 
there should at least be parity going forward between cable, satellite, 
and telco regimes. Consumers should have the benefit of the same bundle 
of rights under the law regardless of the pay-TV provider they select. 
It should not be harder or more expensive for one pay-TV provider to 
carry a local, significantly viewed, or nearby broadcaster than a rival 
platform because of distinctions in copyright law.
    With respect to the second issue, the Copyright Office also 
recognizes the need for DMA reform and enhanced competition between 
video providers.para.itizens living in DMAs that straddle state borders 
are often denied access to news, weather, and election coverage from 
their home state. This is an issue in 45 states.
    Indeed, this has been a key constituent concern for many years. 
During the last reauthorization, the stranded-county issue was 
addressed for four specific DMAs. Importantly, these fixes helped 
consumers and did not cause any actual harm to broadcasters. Building 
off the hard work started in 2004, we recommend a more global DMA fix. 
Specifically, a broadcast station from a neighboring DMA should be 
treated as ``local'' for purposes of the copyright laws, particularly 
if it furthers the concept of ``state unity.'' With this change, 
citizens living in DMAs that straddle state borders would no longer be 
prevented from receiving local news from their home state.
    Third, we agree with the Copyright Office that all consumers should 
have access to NBC, CBS, ABC and FOX programming. Today, DISH provides 
local service in 178 markets, reaching 97 percent of households 
nationwide. This translates into over 1400 local broadcast stations, 
which is far more than any other pay-TV provider. In most of the 
remaining markets, one or more of the big four networks is missing. If 
a local community is missing a broadcast station, pay-TV providers 
should be able to treat a nearby affiliate as the ``local'' affiliate 
under copyright and communications law.

                            *      *      *

    Finally, Congress should use this opportunity to examine 
retransmission consent and must carry, given that those issues have 
been tied to our compulsory license. Technology and competition have 
come a long way in the past five years since the last reauthorization 
of the Satellite Home Viewer Act. Today, there are multiple pay-TV 
providers in every DMA. Broadcast stations electing retransmission 
consent hold DISH customers hostage, as they play their local monopoly 
off multiple providers to extract huge license fees. In 2008 alone, 
consumers lost programming in approximately 15 percent of our markets 
because of retransmission consent fee disputes. Yet the same 
broadcasters provide their content for free on the Internet and to 
those lucky enough to live within the shrinking areas of digital over-
the-air coverage.
    Because the broadcasters received billions of dollars of spectrum 
for free, we think retransmission consent should be free. Failing that, 
we support the creation of a national retransmission consent rate. 
Satellite providers already pay a fixed, per-subscriber copyright 
royalty rate, and we see no reason why a similar concept would not work 
for retransmission consent. Alternatively, we support the creation of 
an actual market. If a broadcaster threatens to drop programming, pay-
TV providers should be able to go get a nearby affiliate to fill the 
gap. Consumers should never have to wonder what happened to Sunday 
Night Football.
    With respect to must carry, we are forced to carry hundreds of must 
carry stations that have little or no local content. This increases our 
costs, and raises our prices to consumers at a time when consumers need 
all the disposable income they can get. Must carry stations should be 
required to earn carriage by airing 20 hours of local programming every 
week. This would be beneficial to consumers and would have no harmful 
effect on broadcasters that invest in their local market.

                            *      *      *

    We are in the middle of a digital transition that is changing the 
way people watch TV. It is pretty simple: people want to watch what 
they want, when they want, where they want. The Copyright Office 
recognizes that TV has changed fundamentally and concludes in its 
report that incremental changes to outdated rules are not good enough. 
We encourage you to build on the hard work of the Copyright Office and 
act boldly on behalf of your constituents.

                                

              Prepared Statement of Mike Mountford, CEO, 
                      National Programming Service
    National Programming Service (NPS) submits this testimony for 
inclusion in the record as part of the Subcommittee on Communications, 
Technology, and the Internet's oversight hearing entitled 
``Reauthorization of the Satellite Home Viewer Extension and 
Reauthorization Act.''
                              introduction
    NPS is a small business located in Indianapolis, IN that has been 
serving the direct-to-home satellite industry for the past two decades 
by offering satellite reception equipment, consumer electronics and 
programming to customers through its website. Since 2006 NPS has been 
offering DISH subscribers that qualify as unserved households distant 
network signals. The company has approximately 108,000 subscribers 
nationwide. That is the part of NPS' business that is the subject of 
this hearing.
    The Satellite Home Viewer Act and its subsequent reauthorizations 
have been very successful in creating an alternative way for consumers 
to receive multi-channel video programming. Initially, the Act's focus 
was on rural and exurban households that utilized the big C-band 
satellite dishes to receive multiple channels of television 
programming. As technology has evolved the Act has been revised to keep 
pace with the latest developments in satellite technology. The dish 
sizes have gotten smaller, the technology has improved and all of these 
benefits have been passed on to the satellite consumer.
    Throughout the 20-plus year history of the Satellite Home Viewer 
Act, however, one category of satellite subscriber has seen little 
change. Satellite households that cannot receive a viewable picture of 
their local network station continue to face barriers and limited 
choices. Even in markets where local signals are available via 
satellite, many households are unable to get their local signals 
because of the limitations of the technology. As the nation converts to 
all digital television programming there is a concern that the number 
of households unable to receive a local network signal over-the-air may 
actually increase. An examination of the Satellite Home Viewer Act 
should include a discussion about changes to the law that could benefit 
the unserved household.
             satellite home viewer act: the need for change
    Many of the changes to the Satellite Home Viewer Act over the last 
20 years have benefited the broadcaster at the expense of the consumer. 
As Congress considers legislation to reauthorize the Act it should be 
mindful that there will continue to be households that must rely upon 
distant network signals to access network programming.
    Picture Quality Standard--Unserved households are disserved by the 
law's current methodology for determining an acceptable television 
signal. The Committee should take the opportunity to revise this 
methodology to ensure that all consumers have access to a viewable 
television picture. This is particularly important as the nation moves 
to all digital television.
    The law currently defines an acceptable television signal as 90% of 
the time the consumer receives 60% of the picture. Understandably most 
consumers are unhappy watching a signal with such low quality 
transmission but at least with an analog signal it is possible to 
follow the content being presented and to hear the audio accompanying 
the pictures. Digital television will operate quite differently. 
Applying this methodology for determining a viewable picture to digital 
transmissions doesn't make sense. With a digital picture the signal is 
either 100% on or the consumer sees nothing. A standard that accepts 
only 60% of a picture as viewable will not be acceptable to most 
television viewers. Nor will consumers stand for a picture that goes 
out 10% of the time. With digital transmissions even very short 
interruptions in the signal make it impossible to follow the content or 
to hear the action. Congress should ensure that a viewable digital 
picture is 100% of the signal 100% of the time with exceptions for 
periodic interference.
    Revise the Predictive Model--The predictive model now in use to 
qualify subscribers for distant network signals is based on the analog 
signal contour of each television station. To be relevant for digital 
transmissions, the predictive model must be based on the new digital 
contours of broadcast stations. The model should also take into account 
all of the anomalies and differences that occur between the two 
different types of transmissions. While the predictive model has been 
extremely helpful in ensuring that only those consumers who are truly 
unserved receive access to distant network signals, the current fails 
to recognize that by its nature the model is only a prediction of 
whether a particular household should be able to receive an over-the-
air signal. It is not 100% accurate. When the predictive model is 
wrong, the current law provides consumers with a difficult path to 
overcome the presumption that the consumer gets a viewable picture.
    Signal Testing Requirement--The requirement that consumers get a 
signal strength test at their home has not worked in the past and 
should be eliminated. While it makes sense in theory, the reality is 
that this provision is never used. The high costs of the tests and the 
difficulty in finding someone to perform the tests have resulted in the 
consumers not using this provision.
    The Waiver Process--The current system of consumers' obtaining 
waivers from their local broadcasters if they want to receive a distant 
network signal has not worked. NPS hears from frustrated subscribers 
every day who have attempted to get a waiver from their local 
broadcaster with no success. While some broadcasters are diligent in 
evaluating waiver requests, hundreds of broadcasters either reject them 
outright or worse--they don't even respond to the customer. Waivers 
haven't worked in the past and they won't work in the future if they 
are structured as they have been under the present Act.
    The waiver provisions of the Act are in need of revamping. The 
burden under the current law is on the consumer to prove that they are 
unable to receive a viewable picture. NPS's experience shows that 
consumers want access to their local broadcast stations. They view 
distant network signals as a last resort to obtain access to network 
programming. Unserved households, eligible to receive distant network 
signals make up a small percentage of the total satellite television 
households. For this reason NPS believes the burden should be shift to 
the broadcaster to prove that the consumer is receiving a viewable 
signal. The broadcaster is in a better position to know the where the 
signal goes and where it doesn't.
    NPS supports changing the law so that a consumer can sign a legal 
affidavit that declares the inability to receive a network signal. This 
affidavit would be sent to the satellite carrier. The consumer would be 
authorized to receive the signal. The affidavit would be filed and 
forwarded to the broadcaster. The broadcaster would have the option of 
challenging the affidavit and if successful there could be a fine and 
legal costs could be recovered by the broadcaster from the consumer. 
This is essentially the current process that is used to qualify owners 
of recreational vehicles to receive distant network signals. NPS is 
unaware of any abuse of process or unaware of any charges that 
consumers have falsified data on the affidavits.
                       distant signal limitations
    The world today is much different than it was when the Satellite 
Home Viewer Act was first enacted. Consumers have more access to 
content than before from a variety of sources. Today consumers can 
access television programming remotely through a Sling Box. You can be 
at any place in the world and watch local television with a broadband 
connection and the Sling Box. Networks are streaming much of their 
content over the Internet. With a computer and an Internet connection 
consumers can access local news programming as well as network 
programming from a variety of free and subscription sources. The 
digital video recorder allows consumers the flexibility and convenience 
to watch television programming when they want rather and studies show 
consumers are watching more television as a result.
    Americans expect to have access to information and do not 
understand when that access is denied them. If you live in Washington, 
DC you can subscribe to the New York Times or the Chicago Tribune but 
you can't watch a Chicago or New York local network station. Our 
democratic society depends upon an informed electorate. Government 
policies have been designed to create more access to information not 
less. Rights holders should be compensated for the increased 
distribution of their works and as we have seen in other industries, 
such as radio and music licensing, there are schemes that facilitate 
payment and ensure adequate compensation.
    Lifting the distant signal limitations would afford consumers' the 
same opportunity to access television programming that they currently 
enjoy for other sources of news and information like newspapers and 
radio. Opening the skies to consumers is an important improvement for 
consumers, especially consumers on a limited budget, that is justified 
given the way that technology is changing the way consumers access 
information. While some may resist that change, as we have learned from 
the past, technology ultimately will win. Congress should use the 
reauthorization of the Satellite Home Viewer Act to make fundamental 
changes to law to benefit the consumer.
                               conclusion
    The Satellite Home Viewer Act's provisions authorizing the 
retransmission of network signals to households otherwise unable to 
obtain access to a local broadcast network signal have ensured that 
hundreds of thousands of homes can watch network television 
programming. The need for this provision continues today despite the 
many technological advances that have given most consumers more choices 
in how they receive television programming. Congress should use the 
reauthorization process to make needed pro-consumer improvements in the 
Act such as eliminating the signal testing requirement, creating an 
accurate digital predictive model and shifting the burden of proof in 
the waiver process. Satellite households that cannot receive local 
over-the-air television signals should not be penalized but rather the 
government should assist these consumers by making the process of 
obtaining distant network signals less burdensome.

                                


                                










                                






                                





                                 
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