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





                     THE SATELLITE HOME VIEWER ACT

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

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 16, 2009

                               __________

                           Serial No. 111-51










      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



                                _____

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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
      Subcommittee on Communications, Technology, and the Internet

                         RICK BOUCHER, Virginia
                                 Chairman
EDWARD J. MARKEY, Massachusetts      FRED UPTON, Michigan
BART GORDON, Tennessee                 Ranking Member
BOBBY L. RUSH, Illinois              J. DENNIS HASTERT, Illinois
ANNA G. ESHOO, California            CLIFF STEARNS, Florida
BART STUPAK, Michigan                NATHAN DEAL, Georgia
DIANA DeGETTE, Colorado              BARBARA CUBIN, Wyoming
MICHAEL F. DOYLE, Pennsylvania       JOHN SHIMKUS, Illinois
JAY INSLEE, Washington               HEATHER WILSON, New Mexico
ANTHONY D. WEINER, New York          CHARLES W. ``CHIP'' PICKERING, 
G.K. BUTTERFIELD, North Carolina         Mississippi
CHARLIE MELANCON, Louisiana          VITO FOSSELLA, New York
BARON P. HILL, Indiana               GEORGE RADANOVICH, California
DORIS O. MATSUI, California          MARY BONO MACK, California
DONNA M. CHRISTENSEN, Virgin         GREG WALDEN, Oregon
    Islands                          LEE TERRY, Nebraska
KATHY CASTOR, Florida                MIKE FERGUSON, New Jersey
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
PETER WELCH, Vermont
JOHN D. DINGELL, Michigan (ex 
    officio)








                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     3
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, prepared statement..............     4
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     5
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, prepared statement....................................     7
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................     9
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   136
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, prepared statement....................   137
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, prepared statement..............................   139

                               Witnesses

R. Stanton Dodge, Executive Vice President, General Counsel and 
  Secretary, DISH Network........................................    10
    Prepared statement...........................................    13
Derek Chang, Executive Vice President, Content Strategy and 
  Development, DIRECTV, Inc......................................    20
    Prepared statement...........................................    22
Mike Mountford, Chief Executive Officer, NPS LLC.................    36
    Prepared statement...........................................    38
Preston Padden, Executive Vice President, Worldwide Government 
  Relations, The Walt Disney Company.............................    87
    Prepared statement...........................................    89
Paul Karpowicz, President, Meredith Corporation..................   102
    Prepared statement...........................................   104

                           Submitted Material

Letter of June 15, 2009, from Fox Television Affiliates 
  Association to the Subcommittee, submitted by Mr. Boucher......   140

 
                     THE SATELLITE HOME VIEWER ACT

                              ----------                              


                         TUESDAY, JUNE 16, 2009

              House of Representatives,    
Subcommittee on Communications, Technology,
                                  and the Internet,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:07 a.m., in 
Room 2322 of the Rayburn House Office Building, Hon. Rick 
Boucher [chairman pf the subcommittee] presiding.
    Members present: Representatives Boucher, Markey, Eshoo, 
Weiner, Butterfield, Christensen, Space, McNerney, Stearns, 
Upton, Deal, Shimkus, Shadegg, Radanovich, Walden, Terry, and 
Barton (ex officio).
    Staff present: Amy Levine, Counsel; Tim Powderly, Counsel; 
Greg Guice, Counsel; Shawn Chang, Counsel; Roger Sherman, Chief 
Counsel; Pat Delgado, Chief of Staff; Sarah Fisher, Special 
Assistant (Waxman); Neil Fried, Minority Counsel; Amy Bender, 
Minority FCC Detailee; and Garrett Golding, Minority 
Legislative Analyst.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. Subcommittee will come to order.
    Today the subcommittee takes another step toward renewal of 
The Satellite Home Viewer Act which enables satellite carriers 
to retransmit distant television signals under certain 
circumstances. Some provisions of The Communications and 
Copyright Acts expire at the end of this year, making 
reauthorization of this measure a must-pass undertaking. At the 
subcommittee's oversight hearing in February, I indicated that 
Congress should proceed with the reauthorization in the most 
straightforward manner possible, and I believe today as I did 
then that we should avoid in this measure collateral matters 
such as retransmission consent reform that are relevant to all 
multi-channel video providers not just to satellite platforms.
    The discussion draft that we have under consideration today 
takes this straightforward approach. It renews for 5 years the 
provision allowing carriers to deliver a distant network 
station to homes under specified circumstances which otherwise 
would expire at the end of this year. It reauthorizes the good 
faith negotiation requirements in The Communications Act that 
also otherwise would expire at the end of this year. It 
provides needed clarification regarding the provision by 
satellite carriers of significantly viewed signals by stating 
that a significantly viewed signal may only be provided in 
high-definition format if the satellite carrier is passing 
through all of the high-definition programming of the 
corresponding local station, also in high-definition format. It 
directs the FCC to develop a predictive methodology for the 
reception of digital signals within six months in order to 
determine with accuracy which households are eligible to 
receive distant network signals. It makes technical changes to 
the Law to reflect the fact that after last Friday, full-power 
television stations are no longer broadcasting analog signals.
    In addition to these changes that are made by the 
discussion draft that is before us, there are additional 
matters that we could potentially address. One is developing 
appropriate incentives to encourage satellite carriers to 
provide local service in all 210 designated market areas 
nationwide. Today, DIRECTV offers local service in about 150 
markets while DISH will soon offer local service in 182 markets 
but that still leaves about 28 markets without any service at 
all. Most of the DMAs that lack local-into-local service today 
are in rural areas and many of these markets do not have a full 
complement of network affiliates within the local market. In 
our parlance they are referred to as short markets.
    While I understand that the numbers of subscribers in these 
unserved rural markets are small, their residents are highly 
vocal in expressing their views that they should have the same 
opportunities to receive local programming delivered by 
satellite as people who live in more densely populated regions. 
I am hopeful that ongoing discussions among the stakeholders 
will lead to an arrangement through which all 210 markets will 
receive local satellite delivered service.
    Another matter for possible discussion is whether residents 
in short markets should be able to receive the programming of 
networks missing in their local market from an adjacent local 
market within the State of their residence. While satellite 
carriers can today import distant signals from any market, they 
are hindered in their desire to do so by the so-called Grade B 
believed problem that prevents them from offering distant 
signals to those households that can receive the signal of an 
out-of-market network affiliate over the air. That problem as 
well as the larger short market concern could potentially be 
successfully addressed by the subcommittee. Stakeholders are 
currently discussing the short market and local 210 matters, 
and it is my hope that these conversations will lead to an 
arrangement whereby we will be able to address both of these 
concerns when we conduct our subcommittee's markup.
    I want to welcome our witnesses this morning and thank them 
for sharing their views with us. I also want to say thank you 
to our Republican colleagues, primarily our ranking Republican 
member from Florida, Mr. Stearns, and his very fine staff for 
their excellent cooperation and collaboration as we have 
assembled the bipartisan discussion draft which is before the 
subcommittee this morning.
    And that said, I am pleased to welcome Mr. Stearns for his 
opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Good morning and thank you, Mr. Chairman, and 
thank you, frankly, for including us in a bipartisan fashion so 
that we could be instrumental and helpful in developing this 
draft bill.
    I would point out in retrospect, the DTV transition went 
smoothly by most reports and many of my colleagues had been 
concerned about it. I think this smooth transition will help 
everybody realize that there is probably few issues we can talk 
about anymore about it because it is pretty much good news and 
we can forward. Some consumers simply need to have their 
converter boxes rescanned for stations that have moved or might 
need a different antenna, and some stations may need to 
increase their broadcast power but basically it appears that we 
could have saved some money, at least that is our position but 
the good news is that we can move forward.
    Turning to today's topic, I am glad that we have a 
discussion draft, legislation to reauthorize the satellite 
television act. The original satellite legislation in 1988 is 
credited with helping foster competitive video marketplace that 
we have today to the benefit of all of our consumers. Indeed, 
one of my district employees tells me how much he enjoys his 
satellite service and my sense is this sentiment is equally 
shared by lots of consumers across this country's satellite 
subscribers. That is why we have to reauthorize this 
legislation each time it comes up for renewal and that is why 
the discussion draft before us extends for another 5 years the 
authority of satellite operators to provide the signals of out-
of-market station to subscribers who cannot receive their local 
stations over the air.
    In addition, my colleagues, the draft makes clerical and 
substantive changes to the statute to reflect the end of analog 
broadcasting. In particular, it directs the FCC to update for 
digital broadcasting both the predictive model and on-location 
testing rules for determining whether a subscriber is eligible 
for a distant signal.
    The draft also rectifies the FCC's poor implementation of 
the ``significantly viewed'' provisions. These provisions added 
to the statute 5 years ago, allow a satellite operator to 
provide subscribers in a local market with signals from a 
network affiliate in a nearby market if that nearby affiliate 
is watched over the air by a significant number of consumers in 
the local market. The statute prohibited a satellite operator 
however from carrying the significantly viewed affiliate in 
high-definition format if it didn't also carry the local 
affiliate of the same network in high-definition format. The 
FCC construed that provision to prohibit carriage of the 
significantly viewed affiliate in high-definition at any moment 
of the day that the local station was not simply broadcasting 
in high-definition. Because satellite operators find it 
difficult to match the transmission formats of the two stations 
moment-by-moment, they usually choose not to carry 
significantly viewed stations at all. So to address that, the 
draft makes clear that a satellite operator may carry the 
significantly viewed affiliate in high-definition when the 
local affiliate is not broadcasting in high-definition so long 
as the satellite operator does carry the local affiliate at 
high-definition when it is simply available in that format.
    An issue not addressed but I am sure will come up today is 
what to do about consumers who cannot receive programming they 
truly consider local either because they are missing local 
affiliates from one or more networks in their market or because 
they have been assigned to a designated market area which is 
simply outside their State. My sense is there will be sympathy 
for such viewers. If we address this issue however, we must do 
so in a way that clears existing regulatory obstacles rather 
than creates a whole new set of rules. As I have already 
mentioned, the video market is robustly competitive. In that 
environment there should be less interference in the market, 
not more. Whatever we do, we should ensure that the satellite 
operator, the out-of-market station and the owners of the 
content are allowed to freely negotiate. That is the best way 
to ensure that consumers get as much desirable content as 
possible at simply the lowest rates. Anything else simply 
protects one company at the expense of another without really 
helping the consumers. And at bottom, this legislation is all 
about the consumers.
    So thank you, Mr. Chairman, for holding this hearing. 
Again, thank you for your allowing us to participate freely.
    Mr. Boucher. Thank you very much, Mr. Stearns.
    The gentleman from Massachusetts, Mr. Markey, former 
chairman of this subcommittee, is recognized for two minutes.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much and thank 
you for having this hearing.
    The Satellite Home Viewer Act is a Law that this 
subcommittee revisits every 5 years to both reauthorize certain 
aspects of it and to review the applicability of particular 
provisions in light of changes in the marketplace. For example, 
it was 10 years ago that I was able to successfully offer the 
so-called local-into-local amendment that permitted satellite 
video providers to carry local broadcast stations in local 
markets providing a major competitive boost to such satellite 
providers. 5 years ago, the subcommittee made other adjustments 
to the Law, including adding provisions for the carriage of 
significantly viewed stations. The issues of short markets and 
significantly viewed signals must be dealt with in a serious 
fashion this year and I look forward to working on them.
    Clearly, a major change that will need to be factored into 
this year's legislation is the conversion of the broadcast 
television industry to digital service. When I held the first 
Congressional hearing on high-definition TV in this room in 
September of 1987, and I never imagined that it would take 22 
years to reach this moment but it appears that the delay we 
enacted to move back the date from February resulted in over 
three million additional households that were able to receive 
greater education and awareness to occur and for those three 
million homes to be properly prepared. The fielding of hundreds 
of thousands of consumer calls was facilitated by the ramp-up 
in the last few months of critical call center operations.
    This is a government program that worked. We made the 
transition. We have been able to move from analog to digital, 
compress the amount of spectrum that was needed, auction off 
the remaining spectrum for $20 billion opening up a whole new 
area for entrepreneurial activity while giving a more flexible 
technology to consumers that in the years ahead will benefit 
them. So this has been a success and it proves that the 
government when it puts its mind to it can work for the benefit 
of consumers.
    I thank you, Mr. Chairman, for conducting this hearing.
    Mr. Boucher. Thank you very much, Mr. Markey.
    The gentleman from Michigan, Mr. Upton, is recognized for 
two minutes.
    Mr. Upton. Thank you, Mr. Chairman. I want to also commend 
you and Mr. Stearns and our staffs for working together.
    This has been a success and it is critical that we send the 
proper message to consumers and subscribers and providers that 
we are going to act in a timely way that will not let this 
legislation expire. I look forward to working with you as we 
have had a great relationship over the last number of years as 
we move this bill through the committee. This is one of the 
bills that our committee can take credit for in working in a 
bipartisan manner and I am glad that we continue that trend.
    And I yield back.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentleman from California, Mr. McNerney, is recognized 
for two minutes.
    Mr. McNerney. Thank you, Mr. Chairman, for convening this 
hearing to discuss the legislation to reauthorize The Satellite 
Home Viewer Extension and Reauthorization Act. I would like 
also to thank the witnesses for coming here today to share 
their inputs on the legislation.
    A tremendous amount of behind-the-scenes work is required 
every day to ensure that Americans are able to turn on their 
television sets any time to watch a program. The intricacies of 
how satellite providers and broadcasters interact are complex. 
Today's hearing should offer an opportunity to hear thoughtful 
evaluation of the proposed reforms.
    I am excited to be a part of the debate and I look forward 
to the hearing and the resulting legislation. Thank you, Mr. 
Chairman.
    Mr. Boucher. Thank you, Mr. McNerney.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
two minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman.
    I, too, want to kind of highlight the successful transition 
on Friday. I have only received, I think, four phone calls in 
my congressional office on the DTV transition and I have five 
DMAs that kind of cover my congressional district, a great 
success. Obviously, we have ushered the most significant 
revolution in television since the advent of color 
broadcasting. We have cleared 24 megahertz of spectrum for 
public safety use and that is what I have been focusing on for 
a long time of providing first-responders with a billion dollar 
grant program for interoperability. And another thing that has 
been critical in this whole transition, 84 megahertz of 
spectrum nationwide for advanced wireless broadband services 
and $20 billion in auction proceeds for the taxpayers.
    I also want to thank both government and industry for what 
they did in promoting this, the National Association of 
Broadcasters, the National Cable Telecommunications 
Association, the American Cable Association, DISH Network and 
DIRECTV, they are here today along with the NTIA and the FCC, 
because we informed the public and the public was able to 
respond as we hoped they would. It is important to note that if 
SHVERA were not reauthorized, there would be more Americans 
affected by changes to their television broadcast then during 
the DTV transition. That is the importance to this 
reauthorization. It is my hope that we will have a frank and 
open discussion and not move hastily with this important 
legislation.
    I appreciate both Chairman Boucher and Ranking Member 
Stearns for calling this hearing. I look forward to hearing 
from the witnesses and I yield back my time, Mr. Chairman.
    Mr. Boucher. Thank you, Mr. Shimkus.
    The gentleman from Georgia, Mr. Deal, is recognized for two 
minutes.
    Mr. Deal. Thank you, Mr. Chairman. I, too, appreciate you 
holding the hearing.
    If it does make the news, it is unfortunate that some of my 
folks in North Georgia will have to learn about it by watching 
Tennessee television.
    I have a statement for the record that I will submit and I 
yield back my time.
    [The prepared statement of Mr. Deal follows:]




    Mr. Boucher. Thank you very much, Mr. Deal, and your 
statement along with that of other members will be included in 
the record.
    The gentleman from California, Mr. Radanovich, is 
recognized for two minutes.

 OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Thank you, Mr. Chairman. I want to thank 
you and Mr. Stearns for holding this hearing to review the 
draft legislation reauthorizing The Satellite Television Act 
and I appreciate both your leadership and your efforts to 
reauthorize this bill continuing to provide satellite operators 
with the authority to provide the signals of out-of-market 
broadcast ability to subscribers who cannot receive their local 
affiliates over the air.
    My staff and I learned a few years ago when many in my 
district lost their access to distant signals. We have a large 
population of constituents who are very vocal satellite 
subscribers and while this problem has since been addressed, it 
illustrates the impact and importance of this legislation to me 
and my constituents, although there are still a few issues that 
we need to look out.
    I look forward to working with the committee in a 
bipartisan manner towards a product that reflects the best 
interests of all television viewers. And I want to thank the 
witnesses for being here today sharing your testimony and, Mr. 
Chairman, I yield back. Thank you.
    Mr. Boucher. Thank you very much, Mr. Radanovich.
    We are pleased now to turn to our panel of witnesses for 
this morning and I want to thank each of them again for taking 
the time to join us here and share their very thoughtful views 
and comments with us on our discussion draft. Mr. Stanton Dodge 
is executive vice president and general counsel and secretary 
for DISH Network. Mr. Derek Chang is the executive vice 
president for content strategy and development for DIRECTV. Mr. 
Mike Mountford is the chief executive officer of NPS, one of 
the companies that is in the business of delivering distant 
network signals to households that are unserved according to 
the law's definitions. Mr. Preston Padden is executive vice 
president for Worldwide Government Relations for the Walt 
Disney Company. Mr. Paul Karpowicz is the president of Meredith 
Corporation. He testifies today on behalf of the National 
Association of Broadcasters.
    Without objection, each of your prepared written statements 
will be made a part of the record. We would welcome your oral 
summaries and ask that you keep those summaries to 
approximately five minutes.
    Mr. Dodge, we will be pleased to begin with you.

   STATEMENTS OF R. STANTON DODGE, EXECUTIVE VICE PRESIDENT, 
   GENERAL COUNSEL AND SECRETARY, DISH NETWORK; DEREK CHANG, 
  EXECUTIVE VICE PRESIDENT, CONTENT STRATEGY AND DEVELOPMENT, 
  DIRECTV, INC.; MIKE MOUNTFORD, CHIEF EXECUTIVE OFFICER, NPS 
   LLC; PRESTON PADDEN, EXECUTIVE VICE PRESIDENT, WORLDWIDE 
    GOVERNMENT RELATIONS, THE WALT DISNEY COMPANY; AND PAUL 
           KARPOWICZ, PRESIDENT, MEREDITH CORPORATION

                 STATEMENT OF R. STANTON DODGE

    Mr. Dodge. Thank you for the opportunity to testify today 
regarding renewal of The Satellite Home Viewer Act.
    The subcommittee's discussion draft provides a foundation 
to help shape how satellite TV providers will offer broadcast 
stations in the digital world, a world that began in earnest 
over the weekend with the digital transition. For that 
transition, the Federal Government, Congress, broadcasters, 
satellite TV providers and other industry leaders came together 
in a coordinated fashion to further a key national objective. 
We hope that same spirit of cooperation can carry over to 
satellite TV's transition from analog to digital rules.
    The discussion draft provides a number of key provisions to 
help with that transition, however standing alone, we believe, 
it does not go far enough to provide consumers with the access 
to programming they desire. In each previous iteration of The 
Satellite Home Viewer Act, Congress has taken incremental and 
concrete steps to expand the ability of satellite TV providers 
to offer consumers the services they want while protecting the 
rights and interests of local broadcasters and content 
providers. At each juncture, satisfied consumers and enhanced 
video competition has been the result. Starting from the 
important building block that you have provided, we have the 
opportunity to again enhance competition and meet consumers' 
needs this year with additional reform in two key areas, 
designated market or DMA reform and serving all 210 markets.
    Mr. Chairman, members of Congress have noted that the need 
for DMA reform to ensure that all customers have access to in-
state broadcasters, yet in 43 States today, that is not the 
case. Similarly, it was provided for four markets in 2004 and 
importantly consumers benefited but I am not aware of any 
evidence of harm to broadcasters in those markets. We believe 
at a minimum, that a full national rollout of that program is 
now warranted so that all consumers can gain access to key in-
state news, information and other programming. This would be a 
necessary, incremental step but would not address our consumers 
concerns fully. Broader DMA reform that provides consumers with 
the ability to receive the local stations of their choosing 
should remain our long-term objective limited only by what 
technology allows.
    To date, broadcasters have failed to offer constructive DMA 
reform proposals and instead offer solutions that are consumer 
unfriendly and technically not possible. It should be 
highlighted that satellite TV providers and broadcasters have 
not been able to resolve this consumer issue through private 
contract arrangements in the decade since local-to-local 
service was introduced underscoring the need today for 
affirmative action by Congress to achieve this result now.
    The second area of reform we can achieve this year is 
serving all 210 markets. Mr. Chairman, you and others on the 
subcommittee have expressed a desire for satellite delivered 
local stations at all 210 DMAs. We believe that an incentive-
based structure to achieve this result can be accomplished if 
satellite TV providers and broadcasters are willing to 
compromise and contribute to serving these economically 
challenging markets. We pledge our willingness to work with 
DIRECTV and the broadcasters to find common ground and share 
your believe that this would be a pro-consumer result.
    We serve 178 local markets today by satellite which is more 
than any other pay TV provider in the nation. We are proud of 
that investment and are equally excited to report that DISH 
Network will maintain its leadership position for launching 
four additional markets in the next month, Marquette, Michigan, 
Bend, Oregon, Alexandria, Louisiana and Lima, Ohio. That brings 
the DISH Network total to 182 out of the 210 markets. The 
upcoming launch of these markets underscores our good faith 
commitment to continue to extend service to even more local 
communities provided certain conditions exist.
    Critically, each of these four new markets has a local 
affiliate of each of the big four networks. The vast majority 
of the remaining 23 markets, however, do not and we are unable 
to justify the substantial cost of investing in markets who not 
provide the means to offer a competitively viable service. That 
said, we are ready to provide service to the remaining markets 
assuming the broadcasters are willing to partner with DISH 
Network and DIRECTV to find a commonsense regulatory and 
financial framework for doing so and that we have successful 
satellite launches to enable us to do that.
    As an industry, DISH Network and DIRECTV have come together 
with a set of principals that should be included in any 
solution. First, all satellite providers should enter the 
digital world with the same set of rights so consumers have 
true choice across all 210 markets. The regulatory disparities 
should not dictate consumer choices. For example, in any market 
missing one or more network affiliate, all satellite TV 
providers should have the ability to import a missing network 
affiliate to that entire market regardless of whether there is 
bleed over from a nearby market.
    Second, the finite amount of satellite spectrum available 
for any video programming should be addressed heads on. As a 
national provider, DISH Network provides over 1,400 local 
broadcast stations today. If we move forward towards service in 
all 210 markets, realistic limits on the amount of local 
broadcast stations that can be shoehorned into our national 
satellite platform should be established. Similarly, 
broadcasters should be obligated to provide a minimum amount of 
local content to earn satellite carriage.
    Finally, making local stations available to all Americans 
for the first time on any platform is a noble but financially 
daunting undertaking. To achieve the same result for telephony, 
our nation has established a $7 billion a year universal 
service program and there is an ongoing national dialog on how 
to fund similar universal broadband coverage. Asking satellite 
carriers alone to expand to every market is a substantial 
burden, a burden that is not being asked of broadcaster, the 
cable industry or telecos. There should be clear financial 
commitments from broadcasters to share in the burden of getting 
local TV service to remote areas for the benefit of our mutual 
viewers.
    In conclusion, increasing the number of communities served 
by satellite TV providers and the number of households able to 
receive in-state broadcasters are obtainable and worthy public 
policy objectives for this year. The discussion draft provides 
a starting point to achieve these consumer goals but does not 
go far enough. We stand willing to work with this subcommittee, 
broadcasters, DIRECTV and the contact community to find the 
proper balance to accomplish both goals.
    Thank you again for inviting me to testify.
    [The prepared statement of Mr. Dodge follows:]




    Mr. Boucher. Thank you.

                    STATEMENT OF DEREK CHANG

    Mr. Chang. Is this all right?
    Mr. Boucher. That is pretty good.
    Mr. Chang. I apologize. I am neither an engineer nor an 
attorney so I may be at a severe disadvantage here.
    Chairman Boucher, Ranking Member Stearns and members of the 
subcommittee, thank you for inviting DIRECTV to testify today 
regarding the reauthorization of The Satellite Home Viewer Act.
    We support the straightforward approach of the 
subcommittee's draft bill which makes narrow but nonetheless 
important changes to the law for the delivery of broadcast 
stations in today's all-digital world. However, if the 
subcommittee chooses to broaden the draft bill to address other 
issues we offer the following suggestions. These include 
modifying the DMA system, allowing distant network stations to 
be delivered in DMAs with missing affiliates and further 
improving the significantly viewed rules. I would like to 
address each of these issues.
    First, I would like to discuss improving choice in local 
service. Throughout the country, viewers in so-called orphan 
counties on the edges of DMAs cannot receive local broadcast 
service from within their own State. The 2004 reauthorization 
allowed consumers in a handful of these orphan counties to gain 
access to in-state local content. The results have been 
heralded by consumers and public officials. Even broadcasters 
who originally opposed these changes found their areas of 
service expanded and gained revenue from the additional 
copyright payments. These pilot projects provide Congress with 
a roadmap for applying this concept nationally. Representative 
Ross has drafted legislation that seeks to do just that. We 
urge its adoption. The approach is simple. It would allow 
consumers in these orphan counties the opportunity to watch 
their home State programming.
    Second, we would ensure that all consumers have access to 
network programming. Today overall DMAs lack one or more local 
affiliates. Subscribers in such markets are ineligible for 
distant signals if they are predicted to receive even a faint 
signal from a neighboring, out-of-market station. This is known 
as the great D bleed problem. It prevents subscribers in those 
markets from getting any network service via satellite. We see 
no reason why out-of-market stations should deny consumers 
access to network programming. There is a simple solution. 
Subscribers should be able to receive distant signals unless 
they receive a sufficiently strong signal from an in-market 
station.
    Third, I would like to briefly address significantly viewed 
stations. We applaud your decision to remove the onerous 
equivalent bandwidth requirement. Yet satellite carriers face 
another obstacle in offering significantly viewed service, 
obtaining consent from broadcasters to offer stations outside 
their DMAs. Some broadcasters tell us that network affiliation 
agreements prohibit them from granting consent to satellite 
operators. Others have proven on interest sitting granting 
consent outside their DMAs even when they grant such consent to 
cable. We recommend that broadcasters be required to grant 
consent for significantly viewed carriage on equal terms and 
conditions to all distributors seeking such carriage. 
Alternatively, Congress could remove the retransmission consent 
requirement and instead compensate broadcasters under the 
distant signal regime.
    Last, Mr. Chairman, you and others have expressed an 
interest in satellite delivered locals in all 210 DMAs. While 
DIRECTV does not generally support a universal carriage 
mandate, we have worked constructively with DISH Network to 
develop a minimum set of requirements we believe are necessary 
for any such mandate to be imposed. By way of background, 
DIRECTV has spent billions of dollars to provide local service 
to 95 percent of the country. In 10 short years, the satellite 
industry has reached 98 percent of the country with local 
service. Broadcast and cable which have been in business since 
the 1920s and 1940s respectively, have still not reached those 
numbers. Cable still does not pass nearly four million 
households, a figure larger than homes and markets without 
satellite delivered locals. Additionally, there are over 50 
DMAs lacking one or more network affiliates leaving almost 
seven million households without a full complement of network 
programming.
    Universal carriage is a worthy public policy goal but it 
requires an enormous capital investment that would be difficult 
if not impossible for us to recoup and while the broadcasters 
would prefer that the entire burden be placed on satellite 
operators, this approach is neither economic nor fair to our 
subscribers who ultimately bear the cost of such mandates. If 
Congress is to pursue a universal carriage mandate, it must do 
so in a way that shares the burden more equitably among all 
parties and accounts for other critical factors in the 
marketplace. We developed with DISH Network the following set 
of minimum criteria for your consideration, applying a one-
third capacity cap similar to cable's, limiting carriage rights 
to those stations with local content, requiring broadcasters to 
shoulder their fair share of the financial burden for expansion 
of their over-the-air footprint, prohibiting broadcasters from 
increasing the already substantial cost of such a mandate 
through retransmission consent fees and as discussed above, 
addressing the missing affiliate problem and improving the 
significantly viewed rules.
    Mr. Chairman and members of the subcommittee, I thank you 
and your staff for all of your hard work. I am happy to take 
your questions.
    [The prepared statement of Mr. Chang follows:]




    Mr. Boucher. Thank you very much, Mr. Chang.
    Mr. Mountford.

                 STATEMENT OF MICHAEL MOUNTFORD

    Mr. Mountford. Chairman Boucher, Ranking Member Stearns and 
members of the subcommittee, I am Michael Mountford, CEO of 
National Programming Services LLC and we do business as 
AllAmericanDirect.com.
    Mr. Chairman, before I get started, I just want to mention 
that I have been in this industry for 26 years and no one has 
done more for satellite TV consumers, especially rural 
satellite TV consumers than you, so thank you.
    I am pleased to have the opportunity to testify here today 
on behalf of not only my company but also frustrated consumers 
everywhere. From my experience, consumers want their local 
stations first and foremost however thousands of people have 
come to our Web site to urge you, Congress, to allow them to 
purchase distant network signals without restrictions. They 
have several reasons. Maybe they have elderly parents who live 
in a different city. Maybe they have a child who goes to a 
school somewhere else in the country. Heck, you guys probably 
want to check in on your districts once in awhile, don't you? 
These customers don't understand and these consumers don't 
understand why they can't purchase this product like they can 
purchase the New York Times or a Chicago radio station, for 
example. This country was built on the principle of the freedom 
of information. Consumers want that freedom and they don't 
understand why Congress won't grant them those rights.
    I understand the concern about localism and I would like to 
suggest a simple solution, allow the consumers to purchase 
distant networks only after they purchase the local channel of 
the same network. This is allowed under the current legislation 
for significantly viewed stations from adjacent markets. Why 
not expand that?
    I urge Congress to take this bold step now and lift the 
restrictions on distant networks because if you don't, more and 
more constituents are going to be frustrated by these rules and 
they will be asking you, how could you have passed such a law. 
Hopefully, you will agree with me that lifting the restrictions 
is the best solution however please let me comment on the draft 
legislation. It calls for a predictive model which we agree is 
the best way to determine eligibility. The most important thing 
about a predictive model is viewability standard. The analog 
model right now calls for 90 percent viewability--that means 10 
percent non-viewability. This would allow for 12 30-second 
interruptions during an hour program and with digital the 
interruptions are outages, they are gone. Clearly, that is 
unacceptable while viewing the digital signal.
    We urge Congress to require the FCC to adopt a minimum 
viewability standard of 99 percent, better would be better. 
Even at that rate, it would allow for 12 3-second interruptions 
in an hour program. We urge the committee to ensure that no 
additional expense be required of the consumer to get their 
local networks. Congress did an excellent job with the digital 
conversion coupons. In the same spirit, we urge you to direct 
the FCC not to require additional equipment purchases by the 
consumer to get network programming. It just wouldn't be fair.
    The waiver system was put into the legislation because it 
is universally known a predicted model cannot be perfect and it 
will not be perfect. The waiver system as it exists today is 
broken and needs to be changed. Your constituents are being 
denied service without the proper appeal envisioned by the 
legislation. Thirty-four percent of all the stations we submit 
waivers to deny over 90 percent of those submittals. In 
essence, a third of the stations are denying all the waivers 
that come to them except for maybe a friend, a relative or 
after a call from a congressional office. That is not the 
spirit of the law. That is not fair to your constituents.
    Fortunately, the digital conversion allows for us a 
simpler, less expensive, more consumer-friendly waiver system 
that works in this way. A consumer who is denied by the 
predicted model can sign an affidavit under penalties of 
perjury and fines that they do not receive the signal. The 
provider can temporarily authorize that consumer and submit the 
consumer information to the broadcaster. The broadcaster can 
challenge by sending a clerical employee or a contractor to the 
home to view the signal for about 10 minutes. That is all it 
takes. With digital, the signal is either there or not there. 
It is not like analog where you see ghosting and artifacts. It 
is very simple.
    So in closing, I would urge you to listen to your 
constituents and lift the restrictions on distant networks 
signals. Require the FCC to adopt a 99 percent or better 
viewability standard in the predictive model, and fix the 
waiver system.
    Thank you very much.
    [The prepared statement of Mr. Mountford follows:]




    
    Mr. Boucher. Thank you, Mr. Mountford.
    Mr. Padden.

                  STATEMENT OF PRESTON PADDEN

    Mr. Padden. Thank you, Mr. Chairman and Ranking Member 
Stearns.
    I want to begin by thanking this committee for creating a 
competitive marketplace for subscription for television. It 
wasn't all that long ago that I was chatting with many of you 
about the problem that we only had one provider in the 
business, the local cable company. And when you think about 
what this committee has accomplished for the American people 
and for programmers like our company, it is really remarkable 
now the amount of competition that we have out there and I 
think the committee ought to take great pride in that.
    I also want to emphasize that we love our satellite 
customers over here at DIRECTV and DISH. Disney Channel and 
ESPN were two of the first channels that were willing to 
license their content to the satellite industry to help them 
get off the ground. They now carry many, many of our channels. 
They are excellent customers and we love them very much.
    We are appreciative to the committee for its 
straightforward discussion draft and particularly appreciative 
that the committee avoided collateral issues such as completely 
trying to revamp the system of free transmission consent in the 
context of this legislation. I want to talk just a minute about 
the underlying compulsory underwrite license. A compulsory 
license is just what it sounds like. It is a government act 
that takes private property, in this case our programming, from 
us and compels us to license it to certain customers designated 
by the government at a price set by the government.
    Now, I know that sounds like something that could only 
happen in Moscow or Tehran but it actually did happen here in 
the United States. How did that happen? The answer is that back 
in 1976, the Congress found that it would be impractical and 
unduly burdensome to require every cable system to negotiate 
with every copyright owner whose work was retransmitted by a 
cable system. A reasonable position back in 1976, and then the 
satellite industry came along and to be fair, Congress extended 
the same compulsory copyright license to the satellite 
industry. But when you extended it to satellite, you put a 6-
year sunset on it and you said this committee does not favor 
interference with workable marketplace relationships for the 
transfer of exhibition rights in programming. The committee 
expects that the marketplace and competition will eventually 
serve the needs of home satellite dish owners.
    Well, the good news is there now are workable marketplace 
mechanisms that can take the place of this government 
compulsory license. The industry created cable networks. This 
is after the compulsory license was first adopted and there are 
now about 500 cable networks, none of which are eligible for 
the compulsory copyright license which applies to broadcasting. 
And yet, without the help of the government, the owners of 
these cable networks managed to get them in front of virtually 
every man, woman and child in America.
    Just to give you one example, we have two networks at our 
company. One is called ABC and the other is called ABC Family. 
They actually carry some of the same programs. ABC Family is 
not eligible for a compulsory copyright license and yet we have 
signed agreements with these gentlemen at the end of the table 
to transmit that programming to the American people.
    We have a huge self-interest in wanting to get our 
programming, whether it is ABC or ABC Family in front of every 
eyeball in America and you can rely on that self-interest that 
we are going to get the product to everyone. The last time you 
extended The Satellite Home Viewer Act, you asked the copyright 
office to conduct a study of the underlying compulsory 
copyright license. They did that study. They released it last 
summer and they concluded that the Congress should begin to 
phase out the compulsory copyright license and associated 
regulations and we would urge that as this bill goes through 
the legislative process and all of the relevant committees of 
jurisdiction, that we take a look at trying to get out of this 
business of government licensing where it is not necessary.
    In the meantime, we urge that you not expand the scope of 
the compulsory license and in particular, don't adopt the 
proposal that has been discussed for adjacent markets. We are 
completely supportive of the idea of getting local in-state 
news and other local programming to consumers. It can be done 
today without a compulsory license. All it takes is an 
agreement between the station and either the cable operator or 
the satellite operator. There are many cable operators that 
today carry local news outside of the designated market area to 
other orphan counties they are called, in the State. For 
example, our Philadelphia station news is carried down in 
Harrisburg and recently two of the leading Little Rock local 
news stations sent letters to DIRECTV and DISH openly offering 
to sit down and work out arrangements to retransmit their local 
news in the Shreveport market.
    The problem with the adjacent market proposal is the 
proponents are talking about bringing the entire signal of the 
adjacent market station, not just the local programming. Our 
affiliation agreements with our affiliates give them exclusive 
rights to the network programming in their market. We have 220 
affiliates across the country. We only own 10 of those stations 
ourselves and we are here today to stand shoulder to shoulder 
with our affiliates for the exclusive rights we have granted 
them and say to you please do not abrogate our contracts. 
Please do not duplicate the programming of the local affiliate. 
It serves no public interest for consumers to be able to watch 
Desperate Housewives on two different channels at the same 
time.
    We are fully supportive of bringing in the local news and 
local programming. That can be done without expanding the 
compulsory license.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Padden follows:]




    
    Mr. Boucher. Thank you, Mr. Padden.
    Mr. Karpowicz.

                  STATEMENT OF PAUL KARPOWICZ

    Mr. Karpowicz. Chairman Boucher, Ranking Member Stearns and 
members of the subcommittee, thank you very much for having me 
here today.
    My name is Paul Karpowicz and I am president of the 
Meredith Broadcasting Group which operates 11 television 
stations in small, medium and large markets throughout the 
United States. I testify today in my new role as chairman of 
the NAB Television Board.
    Local broadcasters appreciate the opportunity to talk with 
you about the issues of importance for local television service 
we provide to our communities. Chairman Boucher, I want to 
especially thank you and the committee staff for all of your 
work on the draft bill. Broadcasters support the discussion 
draft and look forward to continuing to work with you and other 
members of the committee as we move forward.
    As we discuss the draft legislation today, it is imperative 
that two principles remain paramount, localism and the respect 
for relationships that cover the distribution of programming 
and that have been found by the government to serve the public 
interest. Meredith Broadcasting, along television stations 
across the country, works everyday to embody the spirit of 
localism which Congress has affirmed time and time again as a 
vital public policy goal. We don't charge our viewers to watch 
our programming. We rely on payments from advertisers to 
deliver a free service to your constituents. The draft we are 
discussing today is a positive step towards updating 
telecommunications law for the new era of digital broadcasting.
    Local broadcasters have stepped up and invested billions of 
dollars to complete the transition and we are excited about the 
benefits that digital broadcasting will bring to your 
constituents. We are particularly appreciative that the draft 
continues to recognize the value of the DMA structure. The DMA 
system which is updated every year enables broadcasters to 
serve every community with highly valuable local programming.
    Now for example, our company owns and operates WHNS in 
Greenville, South Carolina. Now 34 percent of the households in 
its DMA are located in North Carolina and four percent are in 
Georgia. WHNS provides locally attuned service to those North 
Carolina and Georgia communities everyday just as it does the 
South Carolina communities within its coverage area. The 
nearest North Carolina television market to these North 
Carolina counties is Charlotte which is 95 miles away while 
Greenville is only 25 miles away. These out-of-state 
communities all share with Greenville the same weather, 
topography and have very close economic and cultural ties. WHNS 
serves these communities everyday with the news stories of 
specific relevance to the region of service that cannot be 
matched by distant stations.
    Now the satellite industry wants to change the law so that 
they can bring in duplicative network and national syndicated 
programming. As a practical matter, let me explain what would 
happen if this were to occur. Our station in Greenville has 
exclusive rights from Fox and our syndicaters to air popular 
programming including American Idol, 24 and the Simpsons in its 
local market. If a satellite or cable operator could import the 
signal of a FOX station from Charlotte including the exact same 
primetime programming into the Greenville market, it would 
significantly reduce our viewership and thus our advertising 
revenues. As a result, we would have fewer resources to serve 
the viewers whether they are in South Carolina, North Carolina 
or Georgia with local programming including news, weather, 
emergency information and all these other local services our 
viewers have come to expect. In addition, a satellite or cable 
operator in a retransmission consent dispute could try to drop 
the viewers' local station in these North Carolina communities 
and instead a distant Fox affiliate thereby depriving viewers 
of local information.
    It is important to recognize that cable and satellite 
carriers can already import news and information into distant 
in-state counties today without changing the law. Finally, we 
appreciate the efforts of Congressman Stupak to make sure that 
no community is denied access to local programming by satellite 
carriers and we hope to work with the community to address this 
problem. As you consider reauthorization of SHVERA, I urge you 
to preserve our ability to serve every local community. We are 
very appreciative of the important steps reflected in this 
draft bill and believe the subcommittee is headed in the right 
direction.
    I thank you for your efforts so far and look forward to 
answering any questions.
    [The prepared statement of Mr. Karpowicz follows:]




    Mr. Boucher. Thank you very much, Mr. Karpowicz, and thanks 
to all of the witnesses for their testimony here this morning.
    I am going to ask unanimous consent that a variety of 
letters we have received addressing issues concerning the 
reauthorization of The Satellite Home Viewer Act be made a part 
of the record. These have been shared with Mr. Stearns and his 
staff. Without objection, they will be included.
    Mr. Chang, let me begin my questions with you. You had 
noted in your testimony that in order for service to be 
provided in the markets that do not have local-into-local 
service today, those approximately 30 markets across the 
country that the carrier would have to find a means of getting 
the broadcast station's signal to its uplink facility and the 
uplink facility for some of these very rural markets could be 
hundreds if not more than 1,000 miles away, I would assume. On 
the other hand, the law as of several years ago required that 
for every market in which local-into-local services provided 
that the satellite carrier have a local receive facility within 
that market in order to receive the signal from the local 
broadcasters. Why would it not be sufficient to simply take the 
backhaul to take that local broadcast signal from the unserved 
market to a nearby market, perhaps an adjacent market where a 
local receive facility by the satellite carrier would be 
located? Why would that not be sufficient?
    Mr. Chang. As I said earlier, I am not an engineer so I 
don't know the details but my understanding is the cost of 
build out the facilities within each of the markets that we are 
not serving in addition to the transmission costs.
    Mr. Boucher. Well, I will grant you that there are costs 
associated with it but the cost of getting it to something as 
close as an adjacent market where a receive facility is already 
in place would be substantially less than the cost of having to 
take that signal hundreds if not more than a thousand miles to 
one of the satellite carriers' uplink facilities. So let us 
assume for the sake of the question that getting it to a 
receive facility would be satisfactory, Mr. Dodge, would you 
confirm that it is? Is that a means of getting it to your 
uplink facility?
    Mr. Dodge. I would say that is a constructive suggestion 
towards reducing the cost but you still have to pay for the 
fiber from, if you will, the adjacent receive facility back to 
our uplink facility.
    Mr. Boucher. Back to your uplink facility?
    Mr. Dodge. Right, back to our uplink facility.
    Mr. Boucher. Well, doesn't that already exist because the 
purpose of that local receive facility is for you to receive 
the signal in that market of the local broadcaster and then 
take that over your already in-place infrastructure back to 
your uplink.
    Mr. Dodge. Correct and we use either we backhaul via 
satellite or via fiber and the question would be you would need 
additional fiber or a satellite capacity to uplink it to bring 
it back to the uplink facility.
    Mr. Boucher. So you are saying that the existing 
infrastructure by which you are taking the signals of the 
broadcaster in that adjacent market back to you uplink would 
not be sufficient in and of themselves to enable you to carry 
the signals from broadcasters in the unserved market next door.
    Mr. Dodge. I believe so.
    Mr. Boucher. OK. Let us check this. Let me ask both of you 
if you would go back and examine this and maybe talk to some of 
the engineers.
    Mr. Dodge. Sure.
    Mr. Boucher. We occasionally do accept testimony from 
engineers here, it is not always lawyers, and give us an answer 
as to whether or not, A. we are right in saying that providing 
that signal to the receive facility nearby is a possible means 
of lowering that backhaul cost and if it is, would the 
infrastructures that typically are already in place to take the 
signal from that receive facility back to your uplink, be 
satisfactory for this purpose?
    Let me on the same issue, slightly different aspect of it, 
ask Mr. Karpowicz and Mr. Padden a question. I have heard it 
estimated that the cost of backhaul for all 210 unserved 
markets, the new capacity by whatever means would have to be 
added, would be about $30 million collectively and the 
broadcasters have a tremendous interest in getting all 210 
markets served. It is their signal that would then be 
disseminated to a broader group of viewers in a way the viewers 
would like to have that signal, and among the suggestions made 
by DIRECTV and DISH in their offering to you in terms of how 
they would be willing to serve these 210 markets, was a 
suggestion that on some terms broadcasters be willing to help 
share in that cost, given the benefits that inure to you if 
those markets are served. So, Mr. Karpowicz and Mr. Padden, 
your companies own some television stations, what is your 
answer to that? Is there a possibility that you would be 
willing to help them in some measure share in that cost?
    Mr. Karpowicz. I think what we have heard are a lot of 
different numbers relative to what that cost might be and at 
the NAB we have established a subcommittee that consists of 
technical people, real engineers and members of our board that 
are from small markets that would have a very real stake in 
this, you know, in this type of a decision. So we would stand 
very ready to work with the committee and work with the 
satellite operators to continue discussions about exactly how 
that would work, whether it be fiber, additional satellite, 
whatever but I think there is still not enough information 
relative to what the real costs might be for us to make a 
determination as to what our level of participation might be.
    Mr. Boucher. The broadcast industry has had this proposal 
from the two satellite carriers now for more than a week and I 
know you have a committee that is looking at it. Do you have a 
timeframe within which you intend to have a response?
    Mr. Karpowicz. We actually have had one committee meeting 
already and it would be my hope that we could get back to you 
very shortly. I don't have the specific days in my mind yet but 
it would be our intent to get back with you very quickly.
    Mr. Boucher. OK. I am going to pursue one other question 
and the chair will be lenient with other members in taking time 
to ask their questions. These are important matters.
    The current law contains a curious legal consequence that 
with the digital television transition and the termination of 
analog television broadcasts by the full-power television 
stations, virtually every viewer in America today is classified 
as being in a white area and therefore being eligible to 
receive distant network signals. Now of course, that was never 
the intent of the law and the old law, well the current law 
says that the standard for eligibility is determined over 
whether or not the viewer can receive by means of an outdoor 
antenna an analog signal of Grade B intensity and of course 
then when the analog signals were turned off nobody was getting 
analog signals and so no one could get analog signals of Grade 
B intensity. Therefore, under current law you have got this 
curious consequence that technically everyone if eligible to 
get a distant network signal.
    Realizing that problem, last year I asked the satellite 
carriers to refrain from offering distant network signals until 
we had an opportunity in this reauthorization to address that 
problem and correct it, and commendably all of the carriers 
responded favorably and sent letters indicating their 
restraint, and so far no one has taken advantage of this 
existing loophole in the law. But I just want to ask Mr. Dodge, 
Mr. Chang and Mr. Mountford for your statement of continued 
adherence to that pledge not to utilize that loophole in the 
law. There was some discussion last week about whether that 
might change and given that little bit of confusion I though it 
appropriate to get on the record a statement from all three of 
you that you would not seek to utilize that loophole while we 
are in the process of changing the law to say that it is 
digital signals that are in question here not analog signals. 
Mr. Mountford, can we get that pledge from you?
    Mr. Mountford. We currently are using the existing analog 
model because the digital model which we have ordered is not 
ready yet so as soon as that becomes available we will be using 
that. In the interim, we are telling customers who get rejected 
by the analog model that we will rerun them once we get a 
digital model and we will continue to use that digital model, 
and we will be testing those consumers. As I said in my 
testimony, there is an easy way to test consumers so we will be 
testing consumers who get rejected under the digital model and 
depending upon those tests we will go forward.
    Mr. Boucher. OK. I think that means yes, you are going to 
continue to restrain and not utilize the law.
    Mr. Mountford. That means yes unless we are 
disenfranchising a bunch of consumers and then we may come talk 
to you.
    Mr. Boucher. Well, Mr. Mountford, we are rewriting the law 
in such a way just as to contain a clarification of this issue 
and use the word digital instead of analog, and I would assume 
until that happens you would continue to abide by the terms of 
the letter that you sent last year and not seek to utilize that 
loophole in order to serve those customers, is that correct?
    Mr. Mountford. We will never seek to use that loophole.
    Mr. Boucher. Thank you, Mr. Mountford. Mr. Chang, I would 
like to hear from you as briefly as possible. This could be 
just one word, a yes would do but if you want to elaborate, 
that is fine.
    Mr. Chang. Yes, we will.
    Mr. Boucher. Thank you. Mr. Dodge, I know you are not 
delivering distant network signals but if something happens 
that should enable you under some circumstances to do that 
would you agree to this pledge?
    Mr. Dodge. We would.
    Mr. Boucher. Thank you, Mr. Dodge. That was a good answer. 
That was right to the point. Thank you.
    My time has expired. The gentleman from Florida is 
recognized for five minutes.
    Mr. Stearns. Thank you, Mr. Chairman, and I think we on 
this committee should feel blessed because you serve on 
judiciary and I know judiciary has had a hearing and they will 
have a referral on this. I don't think the Senate had a hearing 
yet but when they go into the right to carry signal and the 
copyright protection you will be right there protecting us and 
perhaps the nuance of this bill will be protected. But my 
feeling is just overall that the bill has to move forward and I 
am not sure many of us on this side or either side want to hold 
this bill up to solve this problem which seems a little bit 
complicated. Just as a observation, Mr. Padden mentioned how 
cable is solving the problem so I would ask Mr. Mountford, the 
solution to which cable is doing this problem is that something 
that could be as a paradigm or something that we could work off 
in this bill?
    Mr. Mountford. I am not sure if I understand the question.
    Mr. Stearns. The missing affiliates problem that Mr. Padden 
mentioned so basically he is saying that the local broadcasters 
have been solved through the cable and he described how they 
did it. I don't know. Do you remember what he said?
    Mr. Padden. I think you are referring to my reference to 
the fact that some cable operators are carrying local news and 
other local programming.
    Mr. Stearns. Right.
    Mr. Padden. From an adjacent market station today.
    Mr. Stearns. Right.
    Mr. Padden. And there is no reason that we are aware of why 
a satellite distributor couldn't make the same?
    Mr. Stearns. Right, that is my question and I will let 
each, Mr. Dodge and Mr. Chang, yes.
    Mr. Mountford. That would be something we would have to 
look into, something that I haven't even considered or we 
haven't even thought about yet but it sounds interesting.
    Mr. Stearns. OK. Mr. Chang.
    Mr. Chang. Can you hear me OK?
    Mr. Stearns. Yes, sure.
    Mr. Chang. From DIRECTV's perspective, we do blackouts as 
Mr. Padden suggested but they are difficult to implement and we 
do them on an irregular basis, mostly for sports product which 
is kind of mandated by various sports leagues and teams and 
such and to be quite honest with you, it is a very difficult 
process to implement from an operational perspective for us. We 
do it because we are forced to. Our customers do not like it. 
To do what Mr. Padden has suggested would in essence be the 
reverse of that which is really, literally to blackout probably 
90 percent of a channel from an adjacent market to just then 
show the local news that they are allowed to pass through to 
the adjacent market and I think to do that, you know, across 
the country itself would be difficult. It would compound 
incredibly our operational issues. I think also from a customer 
perspective, to sit there and have to see a black screen for 
kind of 90 percent of the time in order to see local news 
doesn't make a lot of sense. It is not a customer-friendly 
proposition.
    Mr. Stearns. Mr. Dodge?
    Mr. Dodge. I guess I would just reiterate what Mr. Chang 
said. I mean we really look at it as a three-fold issue which 
is at the top of the list we agree with you, Ranking Member 
Stearns, that this is all about the consumers and quite frankly 
to reiterate what Mr. Chang said they don't want their screen 
black 90 percent of the day, let alone paying for that 
privilege. And additionally, while the screen is black, they 
will miss important emergency weather alerts because they won't 
see the crawls that would be coming through on the programming 
from that broadcaster. Additionally, there are substantial 
technical difference between satellite and cable where they 
have people generally in all their local areas monitoring. They 
can monitor these signals 24/7. We have a single staff who is, 
as I said earlier, is monitoring about 1,400 different channels 
which is basically impossible for us to monitor in blackout 
programming at all. And finally, from legal perspective we are 
not quite sure that the broadcasters have all the necessary 
rights to do what they are saying. For example, they have the 
rights to the copyrights to send through the national 
programming clips that they include in their broadcast and 
advertising. And similarly while the cable folks are able to 
splice in alternate programming, we don't have the similar 
provision in our statutory license that would allow us to do 
it, so we couldn't do it even if it was technically feasible.
    Mr. Stearns. So you are saying right now it is not 
technically feasible in your mind?
    Mr. Dodge. It is not.
    Mr. Stearns. And that is what you are saying, Mr. Chang, 
that it is not technically feasible to do this, and forget the 
idea that you're blacking out. I mean that could be worked 
through but you are saying it is not even technically feasible?
    Mr. Chang. I don't know if strictly it is technically 
infeasible. It would be very difficult to implement. I know 
that.
    Mr. Stearns. Thank you. Mr. Padden.
    Mr. Padden. I think Mr. Dodge said he wasn't sure it was 
lawful under his statutory license but we are talking about is 
simply an arms length marketplace negotiated license where the 
local station says as the two Little Rock stations have said in 
their letters that are in the record to both DIRECTV and to 
DISH we, the local station, would like to license you in a 
normal contractual license arrangement, our local news to carry 
to these in-state viewers and I believe that all of the 
satellite operators are required to dedicate a certain 
percentage of their channels for public service programming. 
And maybe one thing you might think about is rather than worry 
about a blackout, simply license the local news and carry it on 
one of those public service channels that you are obligated to 
transmit anyway. I think it would be a tremendous service to 
your customers and it might help attract customers.
    Mr. Stearns. Anyone else on this question? Do you have 
anything?
    Mr. Karpowicz. I guess my only thought would be the beauty 
of our six o'clock news and our eleven o'clock news, it runs at 
six o'clock every night and eleven o'clock every night.
    Mr. Stearns. Right.
    Mr. Karpowicz. So compared to trying to schedule around a 
blackout of a sports event which is a live, fluid event that 
there is no timeframe, our six o'clock news runs 30 minutes 
every night and I would think that with server technology 
available as it is today that it would not be that difficult to 
set up a system like that.
    Mr. Stearns. OK.
    Mr. Padden. All the networks I am told and certainly our 
network has given their affiliates the necessary clearance for 
the national news that is included in these local newscasts so 
there is no legal impediment in that regard.
    Mr. Stearns. I am just going to ask one more question, Mr. 
Chairman. The bill as such is we are trying to get the FCC to 
update the predictive model and the on-location test for 
digital broadcasting. Mr. Chang, what would be your advice to 
the FCC and then I will ask Mr. Padden. What would be your 
advice to the FCC?
    Mr. Chang. I think we said we are willing to adhere to the 
FCC's digital predictive model.
    Mr. Stearns. So the predictive model that they have now, 
you could adhere to?
    Mr. Chang. We would adhere to, yes.
    Mr. Stearns. OK. Yes?
    Mr. Karpowicz. Again, I am not an expert relative to what 
that would entail but my sense would be that we continue to 
look at it but I don't think we have any major objections.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Stearns.
    The gentlelady from California, Ms. Eshoo, is recognized 
for five minutes.
    Ms. Eshoo. Good morning, Mr. Chairman, and thank you for 
holding this hearing. To all of the witnesses, thank you for 
being here and providing your testimony.
    I have two questions. The first of Mr. Dodge, as a longtime 
supporter of public television, I am concerned with the 
disparate treatment that DISH is affording our nation's local 
public television stations. As you probably know, I have 
reintroduced in this Congress the Satellite Consumers' Access 
to Public Television Digital Programming Act to address DISH's 
refusal to negotiate meaningfully on the carriage of local 
multi-cast public broadcast programming. It has been brought to 
my attention that DISH is carrying the HD signal of the big 
four stations in 85 markets and yet to date, you haven't 
carried the HD signal of public television stations anywhere 
except in Alaska and Hawaii where you are legally obligated to 
do so.
    In my district, for example, DISH is carrying the big four 
networks and KRON in HD but not in my local public television 
station, KQED. It seems to me that DISH is engaging in a 
pattern of discriminatory behavior against public television 
stations. Stations which are funded get some funding from 
Congress annually because of the quality of their 
noncommercial, educational programming that they deliver to the 
American public. I think that this behavior is reminiscent of 
past discriminatory actions including the practice of placing 
public television stations and Spanish language stations on a 
second satellite receiver.
    So my question to you is why is DISH almost alone in 
refusing to negotiate a carriage agreement with public TV that 
provides for nondiscriminatory carriage in HD and at least some 
multi-casting. I think if there is a market failure here, 
Congress should address it and I will continue to pursue that. 
Now, what is really deeply disturbing to me is that it has been 
reported that DISH has targeted the Hispanic caucus members and 
telling them that if my bill were to pass, DISH would be forced 
to stop carrying Spanish language channels. You know and I know 
and many of us know that this is really completely false. My 
bill does not prevent satellite carriers from carrying any 
program. It merely mandates the carriage of all digital PBS 
programming, and I know that I have heard the argument before 
that you don't have enough room, enough space and that you 
would have to drop some. And I would suggest that you drop some 
of your pay-per-view channels that carry soft porn. I would 
take PBS any day over soft porn so would you address yourself 
to the question as to why you refuse to negotiate a carriage 
agreement with public TV that provides for nondiscriminatory 
carriage in HD?
    Mr. Dodge. I would be happy to.
    Ms. Eshoo. I don't know about happy but if you can explain 
it, yes. I really can't, I mean I ask this every time we have a 
hearing on this subject matter and others have negotiated an 
agreement, you haven't. What is the sticking point here?
    Mr. Dodge. Well, I guess first and foremost I believe we 
have for years engaged in good faith negotiations with the 
public broadcasters and during that process the FCC actually 
had a proceeding to determine how best to implement HD must-
carry, that the public broadcasters fully participated in that 
hearing.
    Ms. Eshoo. What was the most recent discussion you have had 
with the FCC?
    Mr. Dodge. On that issue.
    Ms. Eshoo. I mean with public broadcasting people. What is 
the most recent meeting you have had with them?
    Mr. Dodge. I do not know the answer to that question.
    Ms. Eshoo. Well you can get that back to us.
    Mr. Dodge. I definitely can.
    Ms. Eshoo. I really think that there shouldn't have to be 
legislation for you to get to do this and it seems to me that 
you have stayed in a place where I don't really think 
distinguishes you and you should look for ways to distinguish 
yourself. I mean you do other things that are good but this is 
you are cheating I think or holding back on the consumer 
because PBS is important in the life of the American people and 
I think what they do has already been set down and is a gold 
standard and this business of not having room and can't, you 
have got these pay-per-view things. You can make some room 
there. So I would like you to get that information back to me.
    To Mr. Karpowicz, I know that Mr. Ross, a member of this 
subcommittee, is raising a very important interstate issue. I 
think I have an important intrastate issue. I have constituents 
in the southern portion of my congressional district that would 
prefer to view the local news of San Francisco or San Jose but 
they are in the Monterey-Salinas DMA. Now, I mean there is a 
lot to be said obviously about localism and it is best served 
when the consumer has the choice to receive the broadcast 
signals of the community that they identify with. I don't know 
if you can appreciate the geography of the district but the 
identification is in the very southern part and not with San 
Francisco that it might as well be 500 miles away. That is not 
what they identify with and I know that these issues are 
politically sensitive but for many consumers in my district, 
these distinctions defy logic. How do you think localism and 
consumer choice are balanced correctly in the new digital age?
    Mr. Karpowicz. I think.
    Ms. Eshoo. It seems to me that we have got some kind of 
blurred old line dictating this.
    Mr. Karpowicz. Well, I don't know if the lines are old to 
the extent that the DMA lines are changed every year and are up 
to variability and every year.
    Ms. Eshoo. How about old looking?
    Mr. Karpowicz. But to answer your question relative to your 
constituents in Salinas-Monterey, if in fact the cable systems 
down there wanted to make a deal with the broadcast stations in 
San Francisco to get those newscasts that can happen today. 
There is no reason to change the law. Where the broadcasters 
have said we have a problem with what Congressman Ross was 
proposing was the ability for the viewers in Salinas-Monterey 
to get two Wheels of Fortune, to get two Desperate Housewives. 
We don't think that is necessary but if in fact there is 
interest in the community to get local news out of San 
Francisco that can happen now without any change in the law.
    Ms. Eshoo. All right. Well, we may follow up with you on 
that but I appreciate your answer and, Mr. Dodge, I would like 
you to get back to us and I wish that we didn't have to use the 
hammer of legislation to get these negotiations done and done 
well and out of the way. I just would really urge you--I mean 
you said that you have negotiated in good faith. I don't know 
when that was. I don't know if it was 5 years ago, 2 years ago 
so I am asking the date but I would use this hearing to once 
again urge you to come to the table and really take care of 
this. For you to be leaving out public broadcasting and 
carrying some of this other stuff, it just square off with 
consumers so thank you.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you, Ms. Eshoo.
    Mr. Dodge. If I could address one of the issues you brought 
out.
    Mr. Boucher. Very briefly, Mr. Dodge.
    Mr. Dodge. Thank you. First, we are working with 
Congresswoman DeGette's office referring to the last hearing to 
set up another round of discussions with PBS.
    Ms. Eshoo. I am sorry. I didn't hear you.
    Mr. Dodge. I said we are working with Congresswoman 
DeGette's office to set up another round of discussions with 
the folks from PBS as we said we would at the last hearing.
    Ms. Eshoo. Well, I would like to be included in those if I 
might. I think that I can bring something to that. You may not 
think so but I think I can.
    Mr. Dodge. I have no reason to believe you wouldn't.
    Mr. Boucher. OK. Thanks very much, Ms. Eshoo.
    Mr. Mountford. Mr. Chairman.
    Mr. Boucher. Mr. Mountford, we are going to move on to the 
next member now who is going to be asking questions.
    The gentleman from Georgia, Mr. Deal, is recognized for 
five minutes.
    Mr. Deal. Thank you, Mr. Chairman.
    I have this mental picture that we are all standing on the 
loading dock of a train station. Some of us are holding the 
hands of some people that we call orphans. Some of them are 
wiping their eyes and they are sniffling and people are sitting 
in those railcars that are saying come on over, we would like 
to adopt you. And we are being told as we hold their hands and 
saying, well, Congress has said you don't belong to them, we 
have let you be adopted by somebody else. And the only answer 
that I have heard today is to say to those orphans, well, we 
will let you go to their house and you can watch the local news 
but as soon as the news goes off, we are going to turn that 
television off and you got to come home because you belong to 
us. Congress has let us adopt you and by the way, you got to 
pay us because we have adopted you. Now, that just doesn't make 
a whole lot of sense to me and the question I guess that comes 
up is why is that fair, and if we are not going to deal with it 
today what other piece of legislation and what timeframe is 
going to be appropriate to deal with that issue? And I will 
just let you all talk.
    Mr. Dodge. Well, I would say it is fair and there is more 
than that, there is a precedent for it. As Mr. Chang and I both 
said in our testimony, this issue was recognized in 2004 and 
was fixed for four communities to great success for the 
consumers and as far as I can tell, to no harm to the 
broadcasters. And the reason I say that is because if there was 
some harm I think we would be hearing about it for the last 
four years and I haven't heard a peep so I think it is unfair.
    Mr. Chang. I would reiterate what Mr. Dodge has said, I 
think that we feel there is a solution and it has been proposed 
and we want to support it. I think that what is difficult for 
us is what these folks have suggested in terms of and what you 
reiterated which is having it only be able to watch the news 
and then getting sent home and that is difficult for us to 
implement.
    Mr. Mountford. I agree and it is not only just the orphan 
next door. It is the orphan anywhere else in the country. My 
wife has a sister who lives in a different city and her sister 
calls her up when she is watching a different program and sees 
a commercial that she wants my wife to see. That wouldn't 
happen if we were only showing the news. So and it doesn't 
happen obviously but there is one other quick point I would 
like to make about the predicted model. This sheet tells you 
got in my written testimony, it shows the mathematical formula 
on a predicted model and how much outage is predicted and I 
also have a disc for you, a DVD that shows you a 30-second 
outage, 7\1/2\ second outage and other outages which we can 
supply to you now or later. Thank you.
    Mr. Padden. Mr. Deal, the rationale that has been 
articulated to us for Mr. Ross' adjacent market proposal is to 
get in-state news and other in-state local programming to 
viewers and we are just here to explain that that can happen 
today. It does happen today as I said in my testimony. We own a 
TV station in Philadelphia. Our cable operator is in Harrisburg 
who believe their customers have an interest in seeing our 
Philadelphia newscast and they provide it to their customers 
today. And we got the two leading local news stations in Little 
Rock to send letters to DISH and to DIRECTV saying we are ready 
to sit down with you and make arrangements for you to carry out 
Little Rock news into these Arkansas counties in the Shreveport 
market. To date, I don't believe the local stations have even 
gotten a response from DISH or DIRECTV.
    Mr. Deal. Is your answer that they have to turn it off 
after the news goes off and go home?
    Mr. Padden. No, my answer is that in our free market 
society, it is wrong for the Congress to abrogate free market 
negotiated exclusive licenses just so people can watch 
Desperate Housewives on two channels at the same time. That is 
wrong.
    Mr. Deal. I understand your concern for your affiliates but 
I don't understand why you would take your programming and put 
it on ABC.com and totally bypass your affiliates if that is 
your concern.
    Mr. Padden. Well, actually we don't totally bypass our 
affiliates. We have included our affiliates in that operation. 
We use a geo-location service. There are four commercial 
positions in each program on ABC.com and the local affiliate 
gets to sell the ad in one of the four, very similar to the 
shared advertising arrangement we have on our network. We are 
also concerned about local advertisers who the local station 
says would you like your ad to run in Desperate Housewives, 
well yes I would and I am going to pay you a lot of money to 
run it in Desperate Housewives but if you bring in a second 
Desperate Housewives at the same time, some portion of the 
audience that that local advertiser expected to reach is not 
going to see his ad because they are watching the out-of-market 
signal. We are completely sympathetic.
    Mr. Deal. Even if that advertiser has to try to attract 
that audience from across State lines which doesn't make a 
whole lot of sense to me, quite frankly. Yes, sir.
    Mr. Karpowicz. I guess I would say that given the example 
that I gave in my testimony about our station in Greenville, we 
would be challenged to continue to produce six hours of live, 
local news everyday if in fact our advertisers were being 
whittled away by other signals coming into our market. I mean 
if Mr. Mountford's sister-in-law was watching a commercial 
coming in from Indianapolis versus the commercial that I ran in 
Greenville, that is a viewer that I have lost.
    Mr. Deal. Well and you say you got four percent in North 
Georgia and I use to be in that four percent area and had to 
buy television in Greenville to reach four percent of your 
market. Got a lot of votes in South Carolina by running 
political ads in Greenville, but they realistically could not 
vote for me. Those four percent in that northeast Georgia area 
that are having to be tied into your Greenville station, I 
think in many instances would prefer to be tied into the State 
of Georgia where they live and I just I do not see why we allow 
these artificial negotiated arrangements to interfere with that 
and or why there can't be some realistic accommodation to it 
other than going dark or going blank or having to duplicate.
    Mr. Boucher. Thank you very much.
    Mr. Deal. Who in the world would like to have two versions 
of Desperate Housewives is beyond me.
    Mr. Boucher. Thank you very much, Mr. Deal.
    The gentleman from North Carolina, Mr. Butterfield, is 
recognized for five minutes.
    Mr. Butterfield. Thank you very much, Mr. Chairman, for 
convening this hearing today and I particularly want to thank 
the five witnesses who have come forward. I am sorry I missed 
your testimonies. I have a written copy of your testimony in my 
binder and when I get a chance I will try to scan most of 
those.
    Mr. Chairman, as you know, I am relatively new to this 
committee and so this subject matter is new and so I am trying 
as best I can to learn it and get up to speed on it. When I 
first got appointed to this committee, the broadcasters in my 
State came to my office and very painfully and carefully worked 
with me in trying to understand SHVERA and I am still 
struggling to get the detail and so this hearing today is 
certainly very helpful. I am going to ask unanimous consent, 
Mr. Chairman, that my opening statement that I was not able to 
give be included in the record.
    Mr. Boucher. Without objection.
    Mr. Butterfield. I had two questions that I brought to the 
committee and, Mr. Chairman, you asked one of those two 
questions and so I only have one that I would like to very 
briefly ask if I can find it but it has escaped me. Here it is. 
It deals with the terrestrial loophole and I want to address 
this again to Mr. Chang and to Mr. Dodge and the terrestrial 
loophole permits vertically integrated cable operators to deny 
programming to certain multi-channel video programming 
distributors when such programming is not transmitted by way of 
satellite. What can you tell me about the terrestrial loophole 
and any harm to customers who might not be able to get this 
programming?
    Mr. Dodge. I think I would let Mr. Chang take that because 
of the programming expert.
    Mr. Chang. We do believe we are at a disadvantage to the 
cable operators on account of the terrestrial loophole in the 
areas that this exists particularly in the Philadelphia market. 
We do see penetration rates in terms of our subscribers take 
lower than in other areas and I mean it is due to the lack of 
local sports programming. I think that simply put it is we are 
at a disadvantage because we don't have that program to share 
with our customers.
    Mr. Butterfield. Do you concur with that, Mr. Dodge?
    Mr. Dodge. We do and I don't see why the method of 
distribution is relevant to whether or not we have access to 
the programming.
    Mr. Butterfield. All right. Thank you and I yield back, Mr. 
Chairman.
    Mr. Boucher. Thank you very much, Mr. Butterfield.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
five minutes.
    Mr. Shimkus. Thank you, Mr. Chairman.
    My first question will be to Mr. Karpowicz. I know there 
has been talk on the regional aspects and crossing State lines. 
In my opening statement I mentioned that I had five DMAs that 
cover my congressional district so depending upon the intensity 
of the campaign you make choices and you eventually buy. You 
guys like it. We have to buy all even though the broadcast 
sector of who we are going to hit could be very, very limited. 
If the Ross bill, how would the Ross bill affect smaller 
broadcasters? If in my five DMAs, if they all had to compete 
with St. Louis how would they affect, you know, the other four 
or really the other four probably would be competing with maybe 
Indianapolis and maybe Memphis and so maybe you would have a 
sector there that would be challenged. What is your response to 
how they affect the smaller broadcasters?
    Mr. Karpowicz. Effectively, what would happen in those 
smaller DMAs with a St. Louis or an Indianapolis station coming 
in over the top not only with local news but with additional 
NBC programming or CBS programming or Fox programming and 
additional syndicated product, I think it would put a 
tremendous challenge on those broadcasters in the smaller DMAs 
to have the same resources available to them to continue to 
provide the services that they provide today because their 
audience would be splintered, quite frankly, so that instead of 
having all of the audience for 60 minutes, you may have, you 
know, audience coming in from KMOV in St. Louis would be coming 
in over the top. That is the risk that we run that the small 
broadcasters and this is a very difficult time for small 
broadcasters. I have a station in Flint, Michigan that is going 
through an incredibly difficult time right now and to put this 
burden on those broadcasters whereby they would have additional 
signals coming in over the top, I think it would really hinder 
their ability to serve their local communities.
    Mr. Shimkus. So it is not just the news aspect. I mean I 
think that is where a lot of members come. It would be, you 
know, if it was broadcasting in but there is the basic 
programming would in essence compete with the local 
broadcasters paired programming.
    Mr. Karpowicz. I think we have tried to be--we are 
sensitive to the fact that, you know, these out-of-state 
stations or I guess in-state stations out of DMA stations that 
may want to come in and that constituents in those areas, those 
counties may want to see their news from the capital, for 
example. We understand that but we think that if that is 
limited to local news that that should be adequate to serve 
their needs but we don't see any need for duplicative 
programming to come in over the top of those smaller 
broadcasters.
    Mr. Shimkus. What about the issue of emergency service 
broadcasting for the elements that may be occurring?
    Mr. Karpowicz. Well as I indicated in my testimony, in most 
cases as we have looked at these, in most cases the severe 
weather would be closer to their DMA base so in the case of 
Greenville that I had given in my testimony, if Greenville is 
only 25 miles away, they are certainly going to be responding 
to severe weather that is happening up in North Carolina more 
quickly than Charlotte would be which is 95 miles away. And 
beyond that, I think every broadcaster understands it is their 
responsibility to make sure that they cover everyone in their 
DMA with emergency services, weather updates and so forth. So 
whether it is at the far northern end of your DMA or the far 
southern end, it is our responsibility to cover that.
    Mr. Shimkus. Yes, I would tell you in just about a month 
ago, maybe 5 weeks ago we had what was called an inland 
hurricane in southern Illinois which in essence wouldn't have 
been covered by St. Louis just on the periphery. It would be 
covered by Carbondale. It would have been covered by Marion. It 
would have been covered by maybe Paducah, maybe Cape Girardeau 
but it was a major, major event that the public really had to 
be concerned about.
    Mr. Padden, if you could wave the magic wand and eliminate 
all statutory and FCC video regulations so that Disney could 
negotiate directly with any entity that wants to distribute 
Disney programming to anyone that wants to watch it, would you?
    Mr. Padden. Absolutely. We negotiate with every program 
distributor today for all of our networks and programs except 
ABC because ABC is covered by the compulsory license. If the 
compulsory license and the related regulations went away, we 
would be working 24 hours a day to see that ABC was in front of 
every set of eyeballs in America because that is how we make 
our money, and the more rules that the government layers on top 
of this compulsory license, the more mixed-up the market gets.
    Mr. Shimkus. Do you think that approach would lower cost?
    Mr. Padden. Yes.
    Mr. Shimkus. Thank you, Mr. Chairman. I yield back.
    Mr. Boucher. Thank you very much, Mr. Shimkus.
    The gentlelady from the Virgin Islands, Ms. Christensen, is 
recognized for five minutes.
    Ms. Christensen. Thank you. I am similarly situated to my 
colleague here from North Carolina being new and new to some of 
the issues so some of my questions may be very basic but one 
question to Mr. Padden. On the issue of securing so-called 
orphan counties with in-state local programming, you testified 
that the satellite carriers can today cut deals with local 
stations to retransmit those signals. Do your affiliation 
agreements prevent your affiliates from granting retransmission 
consent to send the signal outside of that station's DMA?
    Mr. Padden. There is nothing in our affiliation agreement 
that prevents our local affiliate from making an arrangement 
for their local news and other local programming to be 
distributed by anyone they want.
    Ms. Christensen. On the issue of the DMAs from listening to 
Mr. Karpowicz and looking at your testimony you think that it 
is fine the way it was. We don't need to change it because that 
has come up in several hearings and I would like to just know 
what all of the panelists feel if we can work within the DMAs 
as they exist today or do we need to change them?
    Mr. Karpowicz. I believe we can.
    Ms. Christensen. Because it would seem to me that--I mean I 
come from a small community so I can't even use mine--but if 
say the southern part of North Carolina was in with South 
Carolina and might be much more similar to the northern part of 
North Carolina, so DMAs should work. Does everybody agree or do 
we need to change how the DMAs are configured.
    Mr. Karpowicz. The DMA is determined by the Nielsen Rating 
Company and it is a measure of to which city is most of the 
viewing from this county directed, so it is a living definition 
that changes every year based on to which television market the 
people in that county are directing most of their viewing. So 
by definition it reflects consumer preferences.
    Ms. Christensen. And we can address all of the emergency--
the situation that Mr. Shimkus talked about is kind of scary if 
they can't get the information because they are based out of 
St. Louis.
    Mr. Karpowicz. Right, I think as a practical matter what we 
have found is that the information coming from the DMA that 
those so-called orphan counties are in is certainly more 
relevant and closer to those counties than the information that 
would be coming from a distant DMA.
    Mr. Mountford. Congresswoman Christensen, thanks for the 
question.
    The DMA system works and people do want their local station 
however, how do I respond--and I have to respond to this about 
five times a day now--to a consumer who says how come I can't 
get your channel from San Francisco or from New York and my 
only response is because that is the law. People know that that 
channel is up there and that it is on their DISH Network system 
and they want to receive it. Why can't they.
    Ms. Christensen. Mr. Chang?
    Mr. Chang. From DIRECTV, we believe that the current DMA 
system is not perfect. It is also probably not wildly broken. I 
think we highlighted earlier in my earlier testimony some of 
the simple fixes we would probably make to the extent that this 
became part of a broader discussion including dealing with the 
orphan counties, the significantly viewed issue, the Grade B, 
and all that sort of stuff.
    Mr. Dodge. I think it is not surprising we do favor DMA 
reform because I guess in the broadest sense we think as 
technology evolves and the current market in which we live 
where contents are free on the Internet, a consumer should be 
able to decide what is local for them, and for every case where 
there might be an example where you are in an out-of-state DMA 
and that is actually closer to your home, there is probably a 
case where it is not true. For example, in Wyoming there are 
many people in the Denver DMA where Denver is actually about 
300 miles from their house. And similarly, although there is a 
parade of horribles that gets rolled out every time the concept 
is floated, we do have examples today of the four markets where 
this was approved in 2004. And if you look at Vermont, I don't 
think you hear the Albany broadcasters or the Boston 
broadcasters complaining that the folks in southern Vermont 
have access to Burlington signals.
    Ms. Christensen. OK. The committee staff had mentioned in 
the briefing that satellite carriers and I guess I would direct 
this at Mr. Chang and Mr. Dodge, had problems with the 
interpretation of Section 340 of equivalent bandwidth as being 
too restrictive and therefore limiting the practical utility of 
it for satellite carriers. Could you explain what concerns you 
might have with that or are there no concerns with the 
interpretation of equivalent bandwidth as being too 
restrictive?
    Mr. Chang. I think in the prior bill and I believe it is 
being or in the current draft it has been changed to the 
language that we think is fine in terms of the equivalent 
bandwidth?
    Ms. Christensen. OK.
    Mr. Dodge. We agree.
    Ms. Christensen. Thank you. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Ms. Christensen.
    The gentleman from Oregon, Mr. Walden, is recognized for 
five minutes.
    Mr. Walden. Thank you very much, Mr. Chairman. I appreciate 
the panel and the testimony today and I wanted to thank DISH 
Network, Mr. Dodge, thank you for your opening statement 
announcing you are going to be in the Bend market, local-into-
local by July 9. We appreciate that in the Bend market. I was 
down at another hearing that is going on in the O and I 
Committee so I wasn't here for the openings. I am a big fan of 
local-into-local and I would certainly encourage you to 
continue on down the rankings until all communities that have 
television have that ability and the viewers have that ability 
to see their local stations on their satellite system.
    I want to talk a little bit about this notion of the evils 
of blacking out the rest of the duplicative programming and the 
effect that has on viewers. I have before me a channel changing 
device and it seems to be that during the course of any day, 
people pick and choose programs on different channels whether 
it is over-the-air broadcast, or cable, or satellite. And it 
seems to me that if I want to watch an out-of-market local 
program, I have the ability to push this button. I won't 
because God only knows what I will do to this monitor but I 
will never get it back. But I would have that ability wouldn't 
I? I mean this happens on your systems, right? People change 
channels.
    Mr. Dodge. You certainly would.
    Mr. Walden. They do that with pay-per-view, right? The pay 
program ends, they are done. It goes blue screen to the next 
pay program until they buy, right?
    Mr. Dodge. That is true for pay-per-view. I mean I think 
the general concept is as you are scrolling through people 
don't want to see a black screen 90 percent of the day.
    Mr. Walden. But they might see a blue screen with a pay-
per-view sales pitch, right? So I mean you do that.
    Mr. Dodge. Well but, you know, quite frankly if you are 
watching the news and you don't want to change the channel, you 
want to just roll on to the next program.
    Mr. Walden. Can you get that mike a little closer, too.
    Mr. Dodge. If you are watching the news and it is rolling 
into your next favorite program, you know, why should you have 
to change the channel when you could otherwise?
    Mr. Walden. Well, yes but I think viewer habits are such 
that people do watch the local news and I know this will be 
sacrilegious to those in the networks but they may choose a 
different network newscast then the one that--I mean they 
change, right? They make those choices. Let me--so it seems to 
me that you have a legal way to do non-duplicative programming 
a customer wants to see by it can be offered to cable and 
satellite customers without a change in the law, correct, if 
you negotiate it for their local content?
    Mr. Dodge. We are actually not. I am not certain of that. 
Mr. Padden said that ABC has granted the right to all of its 
affiliates to broadcast.
    Mr. Walden. Well, you would have to negotiate it. It is 
their local programming but you would have under the current 
law you are allowed to do that?
    Mr. Dodge. Included in their local programming are 
advertisements for which they may not own the copyright and 
therefore have the rights to allow us to broadcast it because 
it is out of their DMA.
    Mr. Walden. Well, correct.
    Mr. Dodge. And their national content as well although Mr. 
Padden says.
    Mr. Walden. Right but they would have to order. That would 
be their responsibility.
    Mr. Dodge. It would.
    Mr. Walden. To make sure they are offering you something 
they are legally allowed to offer, right?
    Mr. Dodge. It would, correct.
    Mr. Walden. And that doesn't require a change in the law?
    Mr. Dodge. If they have those rights, it would not.
    Mr. Walden. Right, that is all I am talking about. I am not 
talking about selling you the Brooklyn Bridge, you know. If 
they have the rights to sell it they should be able to sell it. 
Mr. Padden, isn't that correct?
    Mr. Padden. That is absolutely correct and it is being done 
today by cable operators.
    Mr. Walden. Mr. Karpowicz.
    Mr. Karpowicz. And in addition to ABC, we also know for a 
fact that CBS and NBC have agreed that any content of theirs 
that would end up in our local newscast, we would have the 
right to move that forward to a provider.
    Mr. Walden. And I serve in a district of 70,000 square 
miles with all kinds of media markets surrounding. I am not 
unsympathetic to my constituents certainly who would like to 
see Oregon news. If you are out on the Idaho border and 360 or 
400 miles from Portland, I still have people out there who say 
I would like to see the Oregon news but what I am hearing in 
this hearing is there is a way to do that within the law to get 
that product because they don't say I want to see, pick your 
show. They are really talking about how they get that local 
news and that seems to me it can be done now. And I know that 
you raised a technical issue of how you would go in and out of 
that local programming that would come up to your satellite 
systems. Now, I confess I spent almost 22 years in the radio 
business and actually have been on the cool end of a soldering 
iron a number of times wiring in those satellite receiver 
systems to pick up different programming, and they are pretty 
sophisticated yet simple if I was able to make it work, systems 
of switching, and couldn't the local stations as you do your 
uplink simply have a coded digital switching, Mr. Karpowicz? 
Isn't that the way it works?
    Mr. Karpowicz. Yes, you would build in a tone and the tone 
would trigger a switch at their head end which would then 
trigger the programming.
    Mr. Walden. I mean this happens all the time so I think 
that is important for the committee to know. It is not--this is 
sort of normal backroom stuff and the engineers do all the 
time. And I guess my final question would be to Mr. Mountford 
because you said how many interruptions should be allowed per 
hour in terms of this digital programming I think you meant. 
Don't you face that problem with satellite distribution, you 
know, especially during the sort of sun cycles in the spring 
and the fall? Don't you have interruptions, as well, and 
storms?
    Mr. Mountford. Absolutely.
    Mr. Walden. And I am not picking on satellite.
    Mr. Mountford. No, no, no.
    Mr. Walden. You get your share of digital interruptions, so 
does cable and so does broadcast now.
    Mr. Mountford. There is rain fade and there is sun 
interruptions but in the predictive model what you are saying 
to a rural consumer is that if you are saying it is 90 percent 
viewability, you are saying that 10 percent of the time we are 
going to allow your signal to be totally unviewable. Now, 
mathematically that would work out to as I said before, 12 30-
second interruptions which is totally unacceptable or even six 
1-minute interruptions in an hour program. I truly believe that 
the FCC has to tighten that standard because it is digital, 
because an analog interruption is twice as bad.
    Mr. Walden. Is much different. Much different, I agree. Mr. 
Padden, Mr. Karpowicz, do you have any?
    Mr. Padden. We favor the Congress adopting the noise-
limited signal intensity standard in Section 72.622(e)(1) of 
the FCC's rules.
    Mr. Walden. And you were just reading that again this 
morning, I bet, that whole rule.
    Mr. Padden. It is fascinating. You know, if I could make 
one point. I have just met Mr. Mountford. He is a wonderful 
man, a great advocate. He is in the business of selling ABC to 
people. Now, how does that happen? We have no contract with 
him. We spent billions of dollars a year creating this 
programming. He is selling it to people by satellite. He 
neither owns the network nor a satellite system. This is 
entirely a creation of the Congress and it helped get the 
satellite industry launched but the existence of 500 other 
networks that we manage to get out to satellite customers 
without government intervention strongly suggests as the 
copyright office found, that we ought to be looking at how to 
phase out of what we have got here because I just think the 
existence of someone who is selling something that is not 
theirs through transmission facilities that are not theirs, 
suggests that there is something wrong here.
    Mr. Mountford. We pay for that programming. It is called 
the copyright fee and so we do pay for it. We also pay for all 
of our transmission facilities, our backhauls through a lease 
agreement. Thank you.
    Mr. Padden. My point only is you are paying a price set by 
the government rather than through a negotiation with the 
people whose programming you are distributing.
    Mr. Mountford. And the government has chosen to set that 
price as a fair price.
    Mr. Boucher. Thank you very much. Thank you, Mr. Walden and 
gentlemen.
    The gentleman from New York, Mr. Weiner, is recognized for 
five minutes.
    Mr. Weiner. Do you guys want us to leave while you keep 
doing this?
    Mr. Chang, does DIRECTV produce content in the classic 
sense? Does it produce programming?
    Mr. Chang. We do produce a limited amount of programming.
    Mr. Weiner. I mean I don't mean like what is on TV at eight 
o'clock, nine o'clock and ten o'clock but that is not your 
primary model here, is it?
    Mr. Chang. No, our primary model is the distribution of 
programming content.
    Mr. Weiner. I just think it is worth us taking a step back 
here as a group and recognizing that consumers do have, in your 
term, an interest in wanting to choose from moment to moment 
what is on their screen but there is also a higher imperative 
that Congress has always endeavored to protect to make sure 
that content in the general sense was incentivized by the 
marketplace and that we figure out how we get people a rich 
amount of content distributed in a way that they want to get 
it.
    Now, that latter part, how they want to get it, is changing 
every single day but one of the things that we try to do and I 
think that Mr. Boucher's draft does, is it protects the idea 
that yes you naturally want to be able to go out and distribute 
Mr. Padden's content any which way you want but we need to 
figure out a way to incentivize Mr. Padden's company to produce 
it and that is ultimately in the long term interest of our 
constituents, as well. If you--you know, you are not going to 
have Desperate Housewives getting produced at all if we don't 
have a model that allows Disney or ABC to produce the content, 
negotiate for how it is distributed in the marketplace. So I 
think we have to be careful not to say yes, why shouldn't 
someone be able to get five or six or eight Desperate 
Housewives because that is a model that would have guaranteed 
them in a very short time of being able to get none.
    That also--now I don't know in Mr. Deal's metaphor which I 
frankly lost track of--I don't know who is holding the hand and 
whose hand was being held or who was on the train or who was 
driving the train or what the next stop was but I do know that 
if we look at the interests of consumers, we can't only look at 
the near term decision that they may want to make to see 
content. We also have to figure out a model that works that 
incentivizes creation. Now, sometimes the industry is going to 
have to work that out and they did it woefully badly in the 
music business but sometimes government is going to have to 
help by saying that we are going to be much tougher and making 
sure people can't copy or pirate information. So we strike that 
balance here and I think that Mr. Boucher's bill does that 
fairly well. If there seem to be kind of shotgun relationships 
between your companies, it is because we are trying to find the 
way to ensure that we incentivize content being produced.
    It is not in Mr. Chang's job description to be all that 
concerned about it. You are trying to figure out a way to get 
consumers as much choice as you can, zapping it all over the 
place and I can tell you as someone who represents New York 
City, I probably would benefit. My, you know, when Mr. Shimkus 
says probably the opposite for me. I probably could run 
statewide just advertising in New York on New York City because 
the guys in Albany wouldn't have a chance to compete against 
the resources of a New York market. So I just think we have to 
remind ourselves that the interest of the consumer is not a 
near term thing, it is also a larger framework that we invoke 
going back to the Cable Act in the '80s, we have tried to 
balance. Maybe we don't get it exactly right. Mr. Chang, do you 
want to respond to that?
    Mr. Chang. Sure. I don't disagree with you. I think that it 
is in the interest of the consumers long term to deliver as 
much content as possible that they want to see. I think that 
where you talk about incentives for the content producers to 
make sure that they can invest in their content, similarly I 
think we need to talk about not having disincentives for folks 
like us on the distribution side who provide a very valuable 
service to customers, not having to invest in unnecessary 
technologies or capital investments such as potentially 
duplicating signals and thereby wasting valuable bandwidth in 
terms of having to black out for instance, programming that is 
not the local news. When, in fact, we think the impact of what 
we are talking about here is limited in nature and I think in 
the limited areas where it has been done in the past, we don't 
believe that there has been a significant impact. So I don't 
think there is a huge disincentive from a content producer's 
standpoint and for folks like Disney, who also own multiple 
other content sources, I think it is up to them to decide how 
they want to divvy up there own internal resources and whether 
they put it on ABC.
    Mr. Weiner. But it is also under their control to decide 
when they are making contractual arrangements of how and when 
their product is going to be distributed in local markets to 
not have the specter of you guys hanging over and say we will 
just drop in someone else here. I think that is the problem. 
The problem is they have a right to some control over their 
content and I think you agree with that and you say that well 
in some selective cases they should lose that control and I 
think that is where you and I part company. I mean I think that 
if we both agree, you know, Mr. Padden says that his solution 
and Mr. Karpowicz says their solution for getting local 
content, they say it is a relatively small thing. You say your 
solution is a relatively small thing. The problem is your 
relatively small thing would have a rather dramatic structural 
problem in those communities that you are seeking to serve, 
meaning essentially Mr. Padden would lose the right to make 
exclusive arrangements, essentially.
    Mr. Chang. Right but I would ask a question. I mean how big 
or what percentage of the population are you talking about and 
how would that really impact the programming cost.
    Mr. Padden. I just come back to you want to abrogate our 
contracts for the purpose of the customer being able to watch 
the same show on two channels. I just don't see the public 
benefit.
    Mr. Chang. No, we are trying to respond to Congressman Ross 
and his desire to have his constituents as well as several of 
the other congressmen, have their constituents be able to watch 
relevant programming and try to do it in a fashion that is not 
a huge burden to any one of us from an economic standpoint.
    Mr. Weiner. Well, can I interrupt this conversation and ask 
this question, Mr. Chang. Do you agree that you shouldn't be in 
a position to offer Desperate Housewives on two different 
stations in the same market?
    Mr. Chang. What I would agree with is that we are trying to 
deliver relevant programming to customers.
    Mr. Weiner. Understood. But would you answer, take a stab 
at my question. Do you agree that you shouldn't have it in your 
rights to distribute two Desperate Housewives not the 
housewives but the show, two Desperate Housewives?
    Mr. Chang. That I would agree with.
    Mr. Weiner. To the same customers?
    Mr. Chang. Listen, I think that when you take into account 
the law and the various contracts, it is what it is in terms of 
what we are allowed to do. All we are asking for is to try to 
be responsive to various members and their requests that their 
customers can see, their constituents can see relevant 
programming.
    Mr. Weiner. Well, I have already gone well over my time and 
I thank you, Mr. Boucher, but I think that if we can reach one 
conclusion that the answer is no, they shouldn't be able to 
because that severely undermines Mr. Padden's ability to 
negotiate a contract and therefore by extension, to produce the 
content. And I think we are at a foundation where Mr. Boucher 
starts us which is let us try to solve the other problem and I 
think then I think you will find broad agreement here and I 
think we want to solve Mr. Ross' problems but I don't think 
that what your solution is, is a real structural undermining, 
at least in those communities there is structural undermining 
of the thing that makes Desperate Housewives available once, 
let alone twice but I thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Weiner.
    The gentleman from Arizona, Mr. Shadegg, is recognized for 
five minutes.
    Mr. Shadegg. Thank you, Mr. Chairman.
    As I sit here and listen to this debate and review the 
issue, I have got to tell you that it drives into my mind the 
issue of our inability to discern reasonable requests from 
unreasonable requests. Mr. Chang, you just struggled mightily 
to try to answer Mr. Weiner's question about whether or not 
people should be able to see Desperate Housewives two times. I 
guess you would have the same problem with people demanding to 
see it 20 times on the same TV station in one town. And the 
problem with that is that Mr. Padden's constituents, the people 
he represents, have to have the capital to make attractive 
programming and if you are allowed to sell that programming in 
one particular area two times, five times, eight times, each 
time it gets sold or made available in the same area and you 
say they are demanding this, I don't particularly see that 
demand. I don't see--I am not sure I know why anybody watches 
Desperate Housewives but I don't know why you have to be able 
to watch it twice at once. And I guess it seems to me that with 
regard to local news or with regard to sports, I can understand 
some issue but how do you deal with the fact that Mr. Padden 
has right now a certain level of exclusivity that lets him 
market that product in a way that creates enough economic value 
that he can produce something that is worth watching. And how 
is Mr. Ross' problem not solved by what is currently available?
    Mr. Chang. Again, I don't know specifically how many people 
we are talking about and what sort of overlap we are talking 
about whereby people would get duplicative programming such as 
Desperate Housewives and what that would do to his advertising.
    Mr. Shadegg. Well, let me stop you right there. If we don't 
know how big a problem this is, why are we struggling here in 
this hearing so mightily to overcome it?
    Mr. Chang. Well, we don't think it is a large problem. I 
don't know the specific number I guess is a better 
characterization. And I guess the question that I would have 
back to these folks, is if we end up having to duplicate 
signals and thereby investing a lot more in terms of our 
satellite infrastructure and our maintenance infrastructure, is 
that our burden to bear alone to solve this problem or are they 
going to pay for that?
    Mr. Shadegg. Well, why don't you ask the customers to pay 
for it? If the customers really want that local thing, why 
don't you make that pay-per-view? Mr. Padden, let me ask you, 
have I accurately expressed your concern with regard to having 
the same show made available multiple times in one market or 
otherwise destroying the economic value of what you produce?
    Mr. Padden. Yes, you have captured it precisely and let me 
give Derek an example. Under Mr. Ross' proposal, the satellite 
operators would be able to bring the Richmond stations to every 
household in northern Virginia in the Washington, D.C. 
television market. They represent about a third of the market. 
You would be duplicating the exclusive network programming in a 
third of the market. It would have a devastating impact on the 
Washington station. On the other hand, if what we are trying to 
do is get Richmond news to folks in northern Virginia, there is 
absolutely no bar under current law for you to negotiate a deal 
with the Richmond station to carry their news to your northern 
Virginia customers and we would encourage you to do that.
    Mr. Shadegg. Mr. Mountford, you said that the only thing 
that stops this from happening right now is the law. I guess I 
would say to you that is right. It is the law of copyrights. 
Mr. Padden has a property right to the program he produces. If 
you diminish that property right, you can destroy the value of 
the program he produces and we will have nothing worth 
watching. It seems to me that nobody here is looking at the 
choices people make. If somebody chooses to live in some 
backwater town in Idaho or Montana or Wyoming and they say but 
I want to be able to watch the Miami local news station in 
Miami because my sister lives in Miami and I want to look at 
the news she is watching, maybe you should make that available 
to her for a price and let her pay in Wyoming to watch the news 
programming in Miami, Florida but I don't see how you should do 
it in a way that costs Mr. Padden his business.
    Mr. Mountford. That is exactly what we want to do, is offer 
it to the person in Wyoming at a price.
    Mr. Shadegg. So she can buy the second right to watch 
Desperate Housewives.
    Mr. Mountford. Well, it wouldn't be Desperate Housewives.
    Mr. Shadeeg. You would compensate Mr. Padden for the 
diminution in the value of Desperate Housewives in that 
marketplace?
    Mr. Mountford. We would pay what, you know, either a 
negotiated agreement or a set copyright fee to the providers. 
That is what we do today, for people in Wyoming, for example 
and a lot of the rural customers, it wouldn't be a duplicative 
program because they don't get it. They don't get their 
station. That is why I am advocating the 99 percent viewability 
standard because at 90 percent it is going to say you get your 
station but 10 percent of the time it is not there but Congress 
says you get it, so that is the law. That is not right.
    Mr. Shadegg. I think he is now saying, Mr. Padden, he is 
willing to pay you but I don't see that in the legislation 
before us.
    Mr. Padden. No, if the government wasn't involved we would 
have every economic incentive to meet with and license our 
content to anybody that can get us additional eyeballs because 
that is in our self-interest.
    Mr. Shadegg. That is the copyright you are selling. Thank 
you.
    Mr. Boucher. Mr. Shadegg, thank you very much.
    All of the members present have been recognized for 
questions. We want to thank our witnesses very much for your 
testimony here today. This subject is always interesting. Every 
five years we address it again and it seems to get even more 
interesting over time, so thanks to all of you for excellent 
testimony today.
    And with that this hearing is adjourned.
    [Whereupon, at 12:15 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]




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