[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                          THE FUTURE OF VIDEO

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 27, 2012

                               __________

                           Serial No. 112-155


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire       MIKE ROSS, Arkansas
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey            Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 7_____

             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois               MICHAEL F. DOYLE, Pennsylvania
MARY BONO MACK, California           DORIS O. MATSUI, California
MIKE ROGERS, Michigan                JOHN BARROW, Georgia
MARSHA BLACKBURN, Tennessee          DONNA M. CHRISTENSEN, Virgin 
BRIAN P. BILBRAY, California             Islands
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
PHIL GINGREY, Georgia                FRANK PALLONE, Jr., New Jersey
STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
ROBERT E. LATTA, Ohio                DIANA DeGETTE, Colorado
BRETT GUTHRIE, Kentucky              JOHN D. DINGELL, Michigan (ex 
ADAM KINZINGER, Illinois                 officio)
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     4
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     5
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     9
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................    13
    Prepared statement...........................................    15
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................    16
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    16
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    16

                               Witnesses

Robert W. Johnson, Chief Executive Officer, Sky Angel U.S., LLC..    18
    Prepared statement...........................................    21
Gigi B. Sohn, President, Public Knowledge........................    33
    Prepared statement...........................................    35
    Answers to submitted questions...............................   155
David Hyman, General Counsel, Netflix, Inc.......................    53
    Prepared statement...........................................    56
    Answers to submitted questions...............................   157
Jim Funk, Vice President, Product Management, Roku, Inc..........    61
    Prepared statement...........................................    63
Michael K. Powell, President and Chief Executive Officer, 
  National Cable and Telecommunications Association..............    66
    Prepared statement...........................................    69
    Answers to submitted questions...............................   160
David Barrett, President and Chief Executive Officer, Hearst 
  Television, Inc................................................    83
    Prepared statement...........................................    86
    Answers to submitted questions...............................   169
Charlie Ergen, Chairman, DISH Network, and Chairman, EchoStar....   111
    Prepared statement...........................................   113
    Answers to submitted questions...............................   174
Michael P. O'Leary, Senior Executive Vice President, Global 
  Policy and External Affairs, Motion Picture Association of 
  America, Inc...................................................   117
    Prepared statement...........................................   120
    Answers to submitted questions...............................   175

                           Submitted Material

Letter, dated June 26, 2012, from Gary Shapiro, President and 
  Chief Executive Officer, Consumer Electronics Association, to 
  Mr. Walden and Ms. Eshoo, submitted by Mr. Terry...............     6
Report, dated June 13, 2012, ``Broadcaster Retrans Blackouts 
  2010--2012,'' provided by American Television Alliance, 
  submitted by Ms. Eshoo.........................................    10
Letter, dated June 25, 2012, from Paul Porter, Co-Founder, 
  Industry Ears, et al., to Julius Genachowski, Chairman, Federal 
  Communications Commission, submitted by Mr. Rush...............   149
Report, dated March 3, 2011, ``Section 257 Triennial Report to 
  Congress Identifying and Eliminating Market Entry Barriers For 
  Entrepreneurs and Other Small Businesses,'' Federal 
  Communications Commission, submitted by Mr. Rush \1\

----------
\1\ Internet link to the report is on page 152.


                          THE FUTURE OF VIDEO

                              ----------                              


                        WEDNESDAY, JUNE 27, 2012

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:06 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Terry, Stearns, 
Shimkus, Bono Mack, Blackburn, Bilbray, Bass, Scalise, Guthrie, 
Kinzinger, Barton, Upton (ex officio), Eshoo, Markey, Doyle, 
Matsui, Barrow, Christensen, Rush, DeGette, Dingell (ex 
officio), and Waxman (ex officio).
    Staff present: Gary Andres, Staff Director; Ray Baum, 
Senior Policy Advisor/Director of Coalitions; Sean Bonyun, 
Communications Director; Andy Duberstein, Deputy Press 
Secretary; Neil Fried, Chief Counsel, Communications and 
Technology; Debbee Keller, Press Secretary; Peter Kielty, 
Associate Counsel; Nika Nour, NewMedia Specialist; Katie 
Novaria, Legislative Clerk; David Redl, Counsel, Communications 
and Technology; Charlotte Savercool, Executive Assistant; Tim 
Torres, Deputy IT Director; Lyn Walker, Coordinator, Admin/
Human Services; Jean Woodrow, Director, Information Technology; 
Phil Barnett, Democratic Staff Director; Shawn Chang, 
Democratic Senior Counsel; Margaret McCarthy, Democratic 
Professional Staff; Roger Sherman, Democratic Chief Counsel; 
David Strickland, Democratic Counsel and FCC Detailee; and Kara 
van Stralen, Democratic Special Assistant.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. I call to order the Subcommittee on 
Communications and Technology, and certainly welcome our 
panelists, witnesses who are here today. We very much 
appreciate your willingness to come and share your thoughts on 
the future of video. This is one of a series of hearings that 
we have organized, the first being future of audio and now 
future of video, and I imagine we will do future of data as 
well, and later in July we will have all five FCC commissioners 
here now that it is up to full functioning status, and so we 
look forward to that hearing as well as we look at these 
various rules and laws that have been on the books for a long 
time, and in an era when the marketplace continues to evolve 
and change dynamically and in a very rapid way.
    The FCC regulates traditional video providers based on a 
bygone era. When Congress passed the 1992 Cable Act, for 
example, cable operators controlled 98 percent of the pay TV 
distribution market and were affiliated with 53 percent of the 
national program networks.
    That law was meant to spur competition. It worked. 
Nationwide satellite TV providers DISH and DirecTV now control 
approximately one-third of the market and are the second- and 
third-largest providers. Only 15 percent of national program 
networks are vertically integrated with a cable operator. 
Broadcast stations are going mobile and wireless carriers are 
streaming video. Programmers and pay-TV providers are filling 
smartphone and tablet screens with their content and services 
as fast as viewers are clamoring for them.
    At the same time, new entities are flocking to the market. 
Within the last 10 years, YouTube, iTunes, Netflix, Amazon, 
Hulu, Roku, Sky Angel and many others have leapt to provide 
video over the Internet. Currently, the Communications Act does 
not apply to these players.
    We therefore have some decisions to make. One option is to 
recognize the competitive landscape and start deregulating 
cable, satellite, and broadcast companies. The other is to 
expand the Communications Act to apply to the new technologies 
and services. I, for one, do not believe we should be expanding 
video regulation. Internet-distributed video is growing at a 
remarkable pace in the absence of regulation. Video represented 
more than half of global Internet traffic by 2011, according to 
Cisco. Video delivered over the Internet specifically to 
televisions doubled in 2011 and will increase six-fold by 2016, 
representing 11 percent of consumer Internet video traffic. By 
2016, 1.2 million minutes of video will cross the network every 
second and it would take more than 6 million years to watch the 
amount of video that will cross global IP networks each month.
    Existing cable, satellite, and broadcast providers and 
programmers are experimenting with Internet distribution. 
Internet-only providers and programmers are also springing up. 
Regulation is not only unnecessary in such a vibrant 
environment, it can harm this nascent competition. The creative 
chaos in the marketplace frankly is healthy as parties fight to 
out-innovate each other and win viewers. A vibrant marketplace 
benefits consumers and it generates new jobs. The last thing we 
want is to shackle everyone's entrepreneurial spirit with one-
size fits all rules designed for another time.
    And if we are not going to apply the old regime to the new 
participants, we must recognize the inequity of continuing to 
apply it to the traditional players. The rules were premised on 
a lack of video competition that just isn't the reality 
anymore. To impose the regulations in a disparate fashion is 
neither technologically nor competitively neutral. This is not 
only unfair to the parties, it does viewers a disservice. Cable 
operators, satellite providers and broadcasters should be 
allowed just as much flexibility to respond to competition from 
the Internet players as we would like the Internet players to 
have to respond to competition from the traditional players. 
This is how we will spur innovation.
    [The prepared statement of Mr. Walden follows:]

    [GRAPHIC] [TIFF OMITTED] T2325.001
    
    Mr. Walden. With that, I yield the balance of my time to 
the vice chair of the committee, Mr. Terry.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Terry. Thank you, Mr. Chairman.
    A lot has changed in the video marketplace over the last 20 
years. Content, distribution and consumers' preferences have 
all evolved. We are a society that wants what we want, when we 
want it, wherever we want it, and because of this, the 
communication sector has spent billions over the last two 
decades in order to meet that consumer appetite.
    As we engage in discussions about the current stage of the 
video marketplace and get bogged down in the granule details of 
disputes and issues, it is imperative that we always keep one 
thing in mind: the consumer is and will always remain the most 
important component of the discussion.
    It is appropriate to ask questions about whether the 
regulations of decades past are in fact still appropriate 
today. Do they inhibit competition or spur it? Do they create 
regulatory parity or uneven playing fields? And most 
importantly, do we still work to the betterment of the consumer 
or are consumers now caught in the middle? Consumers need to 
benefit from the great expansion in technologies and mobility 
of technology.
    With that, I would like to submit for the record a CEA 
letter written to us in regards to the technology.
    Mr. Walden. Without objection.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T2325.002
    
    [GRAPHIC] [TIFF OMITTED] T2325.003
    
    [GRAPHIC] [TIFF OMITTED] T2325.004
    
    Mr. Terry. I thank my friend from Oregon and yield back.
    Mr. Walden. The gentleman yields back the balance of his 
time.
    The chair now recognizes the ranking member of the 
subcommittee, my friend from California, Ms. Eshoo.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman, and good morning to the 
witnesses, and thank you for being here, and thank you, Mr. 
Chairman, for having this hearing. I think it is a very 
important one, and certainly, when we look at the line outside, 
there is a great deal of interest.
    Over the past 20 years, the video market has undergone a 
remarkable transformation. Today, consumers have access to more 
programming choices than ever before and have increasing 
control over where and when they watch these programs thanks to 
the DVR, to the Internet and to mobile devices like smartphones 
and tablets. While we have advanced in so many ways, there are 
also several key barriers that I am concerned have or could in 
the future curtail the exciting innovation that defines the 
next generation of video.
    First, when Congress passed the 1996 Act, we required the 
FCC to establish rules to increase consumer choice and 
competition in the set box market. While we may never have 
imagined the benefits of Internet-connected devices like Roku 
and Boxee, consumers continue to have limited options when it 
comes to finding devices with features equivalent to the cable 
company-issued set-top box.
    Second, consumers should not be held hostage when 
retransmission disputes break down. Since 2010, 10 different 
multichannel video programming distributors have experienced at 
least 34 blackouts in at least 76 media markets. Among the most 
high-profile disputes, which I think all of us recall, was a 
blackout that prevented millions of households from watching 
the first two games of the 2010 World Series.
    And I would like to ask for unanimous consent to submit for 
the record, Mr. Chairman, the Broadcaster Retrans Blackouts 
2010-2012.
    Mr. Walden. Without objection.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T2325.005
    
    [GRAPHIC] [TIFF OMITTED] T2325.006
    
    [GRAPHIC] [TIFF OMITTED] T2325.007
    
    Ms. Eshoo. Thank you.
    Third, I am concerned about the potential impact of data 
caps on the growth of the streaming video market. Just 2 weeks 
ago, it was widely reported that the Department of Justice had 
begun looking into whether data caps unfairly limit online 
video competition. While we don't know the extent of this 
inquiry, it falls on this subcommittee to thoroughly examine 
the issue and ensure future innovation is not curtailed.
    Finally, there are joint agreements involving Verizon and 
several of the Nation's largest cable companies that are an 
example of the changing video landscape. Last week, I once 
again called for the subcommittee to have a hearing to review 
the proposed transaction, and I hope Chairmen Upton and Walden 
will agree to this request. I haven't taken a position on these 
proposed changes or what's in the works but I do think that we 
would all benefit from an examination of them.
    I want to welcome again all of our witnesses that are here 
this morning, and most especially to the two that have traveled 
probably the farthest that are Silicon Valley constituent 
companies, Netflix of Los Gatos and Roku of Saratoga.
    So thank you again, Mr. Chairman, and I yield back the 
balance of my time.
    Mr. Walden. The gentlelady yields back the balance of her 
time.
    The chair recognizes the full committee chairman, the 
gentleman from Michigan, Mr. Upton.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    The beauty of the free market is that it harnesses the laws 
of economics to spur competition. Especially in the 
communications sector, if you are not using technology to offer 
new services or cheaper prices, you are not going to last very 
long.
    Unlike the laws of Congress, the laws of economics are 
exceedingly nimble. If new technologies or new competitors 
arise, the marketplace begins to adjust almost immediately. 
Legislators and regulators, by contrast, operate at a glacial 
pace relative to the speed of technology. Even the FCC's data 
on video competition is 6 years out of date, let alone the 
regulations.
    The laws of economics also encourage diversity. Companies 
that can't provide the same services or content at cheaper 
prices strive to offer different services or content. That is 
what we call innovation.
    Many regs, by contrast, drive everything to the lowest 
common denominator. If everyone is entitled to whatever content 
is popular at the moment, why would anyone risk investing in 
something brand new? And if everyone is entitled to the fruits 
of your labor, whether that is your distribution platform or 
your content, you are less likely to invest as much. Indeed, 
differentiation is often a leading driver of competition. So 
for example, many attribute the exclusive availability of the 
Football Sunday Ticket on DirecTV as a prime source of that 
satellite TV provider's growth. This in turn forces other 
players to invest in different content, develop better 
services, or lower prices.
    Regulations in that space will only decrease economic 
activity. If particular behavior were economic, there would be 
no need to compel it. While such mandates might be warranted in 
a world of only three broadcast networks or where cable 
operators serve close to 100 percent of the pay-TV market, that 
is not the world that we live in anymore. Cable share of the 
subscription TV market has dropped from 98 percent at the time 
Congress passed the 1992 Cable Act to 68 percent in 2006, and 
it is probably about 55 percent today. That means almost one 
out of every home gets their programming from some other 
source, like a satellite operator or a phone company. The 
number of national program networks grew from 106 in 1994 to 
565 in 2006, and the percentage of networks affiliated with a 
cable operator has shrunk from 53 percent when the Cable Act 
passed to 15 percent in 2006.
    So if we want to spur investment, innovation and jobs, the 
time may have come to pull back on the laws of Congress and let 
the laws of economics do more of the work. Viewers across the 
country, not to mention our economy, would be better for it.
    I yield to Mr. Stearns.
    [The prepared statement of Mr. Upton follows:]

    [GRAPHIC] [TIFF OMITTED] T2325.008
    
    Mr. Walden. Yes, we have three on our side I think would 
like time. Mr. Stearns.

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

    Mr. Stearns. Thank you, Mr. Chairman, and I think, as Ms. 
Eshoo pointed out, a little nudge from this committee with 
legislation will create a nudge of billions of dollars out 
there in the audience.
    I think, as you pointed out, the 1992 Cable Act, Mr. 
Chairman, when it was passed, everything has changed 
dramatically since then. I hope today is the first step towards 
all of us coming together with a process to modernize the 1992 
Cable Act, and as you pointed out, Cisco recently released a 
study revealing that in 2016, over two-thirds, 68 percent of 
the U.S. mobile data traffic will be video. The current rollout 
of mobile DTV by broadcasters and dish push to enter into the 
wireless market are important examples of industry that are 
simply responding to consumer demand.
    As many of our witnesses know who will testify today, 
consumers have access to more content, higher quality 
programming and a greater variety of devices than perhaps ever 
before. So I look forward to learning what is working and what 
the government can do to advance the future of video even 
further.
    Mr. Walden. I now recognize the gentlelady from Tennessee, 
Ms. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman.
    Welcome to all of our witnesses today. I think that from 
the opening statements, you can see we can agree that the 
constant in the video arena is change, change in innovation, 
and I was thinking through my nearly 20 years of work in both 
the private and public sector on this issue and going from big 
box TVs to home theaters and then watching the analog to 
digital. Now you can carry pretty much whatever you want on an 
iPad and plug it into a screen and there you go.
    Going forward, I hope we are going to focus on end use. I 
think consumers are the best at deciding what they want in 
content and also in their delivery mechanisms, so I look 
forward to the discussion we are going to have about how we 
insert free-market principles into the good work and innovation 
you do. Yield back.
    Mr. Walden. The gentlelady yields back.
    I recognize the ranking member of the full committee, Mr. 
Waxman, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Chairman Walden, for holding this 
hearing to examine the future of video, and I want to thank you 
for working with us to assemble an interesting and diverse 
panel of witnesses.
    Digital technology and broadband Internet access are 
dramatically altering how video content is produced, delivered 
and consumed, promising more choices and greater value for 
consumers and new avenues for the creative community to 
distribute its work. Our challenge is to ensure a diversity of 
voices, robust competition, and greater access to these new 
platforms.
    The panel of witnesses before us illustrates the many ways 
Americans can access video programming today: free over-the-air 
broadcasting, pay-television service from cable, satellite, and 
even traditional telephone companies, or video delivered 
through a broadband connection. Video programming is no longer 
the exclusive province of the television set. Consumers can now 
use tablets and smartphones to watch their preferred content. 
Innovative products and services are increasingly putting 
viewers in control of what, when, where and how they watch 
video.
    Even as we marvel at the incredible advances in technology, 
we must be mindful that policy choices we make today will 
impact the video landscape we see tomorrow. We should examine 
whether the legal framework created 20 years ago still works 
for a video market filled with choices that did not exist even 
2 or 3 years ago. And we should remember that old challenges 
can persist in the face of new opportunities. Competitors need 
a fair shot at gaining access to content, and independent 
creators need rules that prevent discrimination against 
carriage of their programming.
    Two decades ago, the actions of this committee and others 
in Congress helped once-nascent industries like cable and 
satellite to offer new choices to consumers. Today, we must 
continue to ensure innovation in the video marketplace can 
continue to flourish. As consumers increasingly watch video 
through broadband, an open Internet that is accessible to all 
becomes even more important. We need to carefully examine 
whether practices like broadband data usage caps are 
restricting consumer choice or being employed in an anti-
competitive manner.
    Also deserving of our scrutiny is whether major providers 
of video and broadband services will continue to have the 
incentives to compete in light of joint agreements and 
consolidation in the marketplace, and I join Ranking Member 
Eshoo in requesting hearings to examine the proposed 
transactions between Verizon and four of the Nation's largest 
cable companies, including an examination of the joint 
marketing agreements that would allow the companies to cross-
market each others' services. I hope the committee will convene 
a hearing so that members can consider the impact of these 
deals not only on the video and broadband markets, but also on 
wireless competition.
    I appreciate all the witnesses for participating in today's 
hearing. I look forward to your testimony, and I want to yield 
time to Ms. DeGette.
    Ms. DeGette. Thank you very much, Mr. Waxman.
    I just want to add my greetings to my constituent, Charlie 
Ergen from DISH Network, who came almost as far as Ms. Eshoo's 
constituents to be with us today. Thank you for coming.
    I yield back.
    Mr. Waxman. I join you in welcoming Mr. Ergen and all of 
our panelists, whether they came all the way from California or 
down the street from K Street. Welcome to you all.
    I yield back my time.
    Mr. Walden. The gentleman yields back the balance of his 
time.
    We will get on with our witnesses now, and again, thank you 
all for being here. We are going to start with Mr. Robert 
Johnson, the CEO of Sky Angel U.S. LLC. Mr. Johnson, thank you 
for being here. We appreciate reading through your testimony 
and look forward to your comments.
    Just for all the panelists, if you haven't used these 
microphones, you really need to get pretty close to them, and 
make sure the light is on.

 STATEMENTS OF ROBERT W. JOHNSON, CHIEF EXECUTIVE OFFICER, SKY 
  ANGEL U.S., LLC; GIGI B. SOHN, PRESIDENT, PUBLIC KNOWLEDGE; 
  DAVID HYMAN, GENERAL COUNSEL, NETFLIX, INC.; JIM FUNK, VICE 
    PRESIDENT, PRODUCT MANAGEMENT, ROKU; MICHAEL K. POWELL, 
   PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL CABLE AND 
 TELECOMMUNICATIONS ASSOCIATION; DAVID BARRETT, PRESIDENT AND 
   CHIEF EXECUTIVE OFFICER, HEARST TELEVISION, INC.; CHARLIE 
  ERGEN, CHAIRMAN, DISH NETWORK, AND CHAIRMAN, ECHOSTAR; AND 
  MICHAEL P. O'LEARY, SENIOR EXECUTIVE VICE PRESIDENT, GLOBAL 
  POLICY AND EXTERNAL AFFAIRS, MOTION PICTURE ASSOCIATION OF 
                         AMERICA, INC.

                 STATEMENT OF ROBERT W. JOHNSON

    Mr. Johnson. Chairman Walden, Ranking Member Eshoo and 
members of the Subcommittee on Communications and Technology, 
it is my pleasure to have this opportunity to testify at your 
hearing today on the Future of Video, and thank you for 
inviting me to participate. My name is Rob Johnson. I am one of 
the founders of Sky Angel and its Chief Executive Officer.
    Sky Angel was founded for the purpose of providing American 
families with a high-quality and affordable video distribution 
service in their homes that would offer exclusively family-
friendly programming. Today it offers more than 80 channels 
that are live, linear programming networks, many of which are 
familiar in American households such as the Hallmark Channel, 
Fox News, the NFL Channel, Bloomberg and the Weather Channel, 
to name a few. Also, we will be adding a new African American 
family channel started by Magic Johnson.
    Sky Angel was the first American video-programming 
distributor to provide a service which uses Internet Protocol 
Television technology, or IPTV, and a set-top box. Subscribers 
cannot access Sky Angel's encrypted programming without a set-
top box, which has broadband Internet inputs including home 
wireless router access and video outputs that connect directly 
to their television sets. Sky Angel is not a web-based service 
and no external computer is needed to subscribe to or receive 
Sky Angel programming. All any American family needs for Sky 
Angel is a television set and a broadband Internet service of 
modest capability. Our set-top boxes look and act just like the 
ones that consumers ordinarily use at home. Here is one of 
them. A Sky Angel subscriber selects programming with the use 
of a typical remote control. A subscriber simply uses our 
remote to scroll up and down the screens of live channel 
choices and then clicks on the selection he or she wants to 
watch.
    From the consumer's perspective, the Sky Angel service is 
functionally identical to typical cable or satellite video 
distribution. Sky Angel offers consumers a competitive 
alternative to other MVPD systems at affordable rates. 
Currently, our complete package of more than 80 live video and 
audio programming channels costs $32.99 a month and includes 
unlimited access to a large VOD library of movies, which are 
also family friendly. We have recently rebranded the package as 
FAVE TV. We have a less expensive inspirational package of 
programming, which is also available to the iPad.
    Our goal is to offer a safe haven for families and children 
to enjoy as large a selection as possible of live video and 
audio programming and recorded video programming without fear 
of exposure to graphic sexual or other highly objectionable 
content. We are the proud recipient of the seal of approval 
from the Parents Television Council.
    American families can have Sky Angel in their homes as an 
exclusive source of wholesome video entertainment, or they can 
subscribe and have Sky Angel in addition to another MVPD. The 
choice is theirs.
    Our business model is not complicated. We enter into 
written agreements with programmers for distribution of 
programming to Sky Angel subscribers via our IPTV system. We 
pay the programmers monthly fees for a Sky Angel subscriber, 
who receives a programmer's channel. Sky Angel enters into 
subscription relationships with consumers for multiple live, 
linear channels of programming. We downlink our channels at our 
state-of-the-art facility located outside of Chattanooga. We 
provide our subscribers with set-top boxes which are necessary 
to receive the programming from Sky Angel, and we directly and 
remotely control the programming to the set-top box at all 
times.
    Unfortunately, we have been faced with significant problems 
in obtaining access to family-friendly programming channels. 
One shocking example is C-SPAN, which is supposed to be a 
public service but C-SPAN refuses to deal with us. About 3 
years ago, C-SPAN entered into an agreement with us for 
distribution of C-SPAN channels on the Sky Angel system. 
However, C-SPAN cut its service off only 3 days after we 
started carrying it, and we had a signed contract. C-SPAN 
officials told us that they ``made a mistake'' in permitting 
Sky Angel to carry its channels without any other explanation. 
As everyone knows, C-SPAN is offered on the Internet as a free 
public service to all, but as perhaps fewer people know, C-SPAN 
is controlled by the cable television industry.
    In addition to the shocking decision of C-SPAN to cut us 
off, a number of large programmers have refused to deal with 
Sky Angel for the distribution of must-have family-oriented 
programming saying or implying that they want to avoid 
conflicts with the big players in the video distribution 
industry, and unlike C-SPAN, which is supposed to be a public 
service, commercial programmers that refuse to deal with us are 
passing up the higher subscriber rates Sky Angel typically pays 
because we are too small to have any real bargaining power.
    Discovery Communications is the most obvious example of a 
large programmer that refuses a lucrative distribution 
agreement with Sky Angel in order to stifle competition. My 
written statement describes our problems with Discovery in some 
detail, but basically, Discovery cut us off from receiving 
their channels 2 years into a 7-year distribution agreement. 
Discovery has never offered a coherent explanation for its 
actions, which did not make economic sense. We are positive 
that it was anti-competitive in nature trying to deter a new 
startup company using IPTV technology.
    Trying to right a wrong, we filed a program access 
complaint with the FCC against Discovery in March of 2010. To 
date, the FCC has never made a substantive ruling on that case 
even though the FCC's own decisions say that they will decide 
program access complaints within 5 months, and the DC Circuit 
Court of Appeals is scrutinizing the FCC's delay in acting on 
our program access complaint. Nonetheless, 27 months have 
passed without substantive action by the FCC, so tiny Sky Angel 
remains injured by the unfair programming decisions of 
multibillion-dollar Discovery Communication and its affiliated 
program distribution interest.
    We believe that our experience with starting and operating 
an innovative new family-oriented video distribution shows that 
there is anti-competitive conduct in the industry and 
significant problems with the manner in which the FCC is 
failing to enforce program access laws and regulations so that 
a valuable new competitive interest is facing unfair 
discrimination. The program access requirements under the 1992 
Cable Act require fair treatment of competitors such as Sky 
Angel but those requirements are not being enforced.
    The will of Congress is being ignored and competition by 
Sky Angel and likely others is being stifled. We believe that 
the public interest in supporting competition in video 
distribution, expanded use of the Internet, diversity in 
programming sources and affordable choices for American 
families requires the attention of the Congress to ensure that 
the existing legal framework is fairly and properly enforced.
    Thank you again for the opportunity to testify, and I would 
be pleased to answer any questions that you may have or provide 
you with any additional information.
    [The prepared statement of Mr. Johnson follows:]

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    Mr. Walden. Mr. Johnson, thank you for your testimony. We 
look forward to following up with some questions.
    We will now turn to Gigi Sohn, the President and CEO of 
Public Knowledge. Gigi, we are delighted to have you here 
today. We look forward to your comments as well.

                   STATEMENT OF GIGI B. SOHN

    Ms. Sohn. Chairman Walden, Ranking Member Eshoo, members of 
the subcommittee, thank you for inviting me to talk about the 
future of video.
    There is widespread agreement that we are currently living 
in the golden age of television, but despite all the great 
programming and groundbreaking devices, Americans are still 
locked into a TV business model that limits competition and 
choice, keeps prices high for video, and limits technology and 
online video from achieving their full potential. This business 
model was made possible largely by an outdated regulatory 
structure created by incumbents to gain competitive advantage. 
It is time for policymakers to revamp this regulatory structure 
so that new video competition can thrive, giving consumers 
greater options and the ability to watch video whenever they 
want and on the device of their choosing. This will result in 
lower prices, better services and more flexibility and control 
for consumers.
    The Internet is changing the video marketplace just as it 
changed the market for music, books and other forms of media. 
Consumers are attempting to drive this change by demanding that 
more content be provided to them through the Internet. One 
grassroots campaign by consumers called ``Take My Money HBO'' 
advocates for HBO content, which is only available if you 
subscribe to cable or satellite TV service, to be available for 
purchase on the Internet. More than 60,000 visited the petition 
Web site within 12 hours of its launch, leading many of them to 
express over Twitter their willingness to pay money directly to 
HBO only if it were available on the Internet.
    Despite this level of excitement for Internet video 
distribution, it is not a foregone conclusion that the Internet 
will disrupt the video marketplace. Dominant players in the 
market today control both the content their online competitors 
need for their service and the pipes they must use to reach 
consumers. As a result, much high-value programming is not 
available to online video providers. They also have to contend 
with artificially and arbitrarily low data caps and other 
discriminatory practices that keep them from reaching their 
full potential.
    So while it is inevitable that IP technologies and the 
Internet will play an ever-larger part of video delivery, it is 
not inevitable that the market will reach its full competitive 
potential. That is why policymakers should extend policies that 
ensure that new competitors like Sky Angel can access high-
value content at reasonable prices. If they do this while at 
the same time protecting Internet openness, they can ensure 
that the video marketplace normalizes and becomes truly 
competitive.
    There are other regulations that permeate the video 
marketplace that should be repealed today. The network non-
duplication, syndicated exclusivity and sports blackout rules 
do little more than preserve old business models. If these 
protectionist rules ever made any sense in the pre-Internet 
era, they certainly don't today.
    Representative Scalise and Senator DeMint are on the right 
track with their bill that would clear away much of the 
regulatory underbrush that holds back the evolution of the 
video marketplace although the bill does go too far by 
eliminating media ownership restrictions. Other rules like 
retransmission consent, the compulsory copyright license and 
must-carry are also outdated but they are part of an interwoven 
fabric of regulatory and business expectations. They should be 
reformed but cautiously and eventually eliminated. And 
copyright law is also regulation that is often misused to hold 
back innovation. Witness the lawsuits against Aereo and DISH's 
AutoHop service.
    By taking these simple steps, policymakers will be able to 
facilitate the development of competitive online video and 
subsequently disengage from regulations that were designed to 
counter the effects of bottleneck control. If they fail to do 
this, it is likely that incumbents will continue to shape the 
development of the video market and extend their current 
dominance indefinitely.
    While the Internet provides grounds for hope that the 
future of video will be much better for consumers, a lot of 
work remains for this hope to become reality.
    Thank you. I look forward to your questions.
    [The prepared statement of Ms. Sohn follows:]

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    Mr. Walden. Ms. Sohn, thank you for being here. We 
appreciate your testimony on this very important set of issues.
    Now we will welcome David Hyman, the General Counsel for 
Netflix. Mr. Hyman, thank you for being here. We look forward 
to your testimony.

                    STATEMENT OF DAVID HYMAN

    Mr. Hyman. Good morning. Netflix helped pioneer streaming 
movies and TV shows over the Internet. In 2008, we began to 
deliver instant streaming video to televisions through the use 
of a handful of Internet-connected devices. Today, over 23 
million consumers in the United States use the Netflix 
streaming service on more than 900 different types of devices 
including game consoles, mobile phones and tablets. In fact, 
Netflix delivers close to a billion hours of streaming movies 
and TV shows to its members every month.
    The Internet delivery of video provides consumers with 
unprecedented freedom and control over what video programming 
they can watch as well as when and where they can watch it. 
This is the future of video. Increased demand for Internet 
video is driving consumer adoption of broadband. It is spurring 
a wave of innovation in the consumer electronics industry with 
virtually all new devices being Internet connected. Innovation 
leaders like Netflix are developing new methods for delivering 
the petabytes of video data traversing the Internet. Just a few 
weeks ago, we announced the rollout of our open connect 
network, a single-purpose content-delivery network focused on 
the efficient distribution of large media files. Our goal here 
is to help make a faster and less expensive Internet for all, 
and to this end, we are connecting to ISPs free of charge and 
making our hardware design and open-source software components 
publicly available.
    User interfaces, or UIs, through which consumers discover 
and engage with video, are likely evolving. The typical linear 
channel selection grid that uses the up-down left-right remote 
to access content will likely be replaced with intuitive and 
visually stimulating UIs that use motion, touch and voice as 
means of control. Over the next few years, UIs will evolve in 
amazing ways. A decade from now, choosing a linear feed from a 
broadcast grid of 200 channels will feel as odd as using a 
television dial to change channels does today.
    The Internet is helping to reconceptualize how content is 
made and consumed. Last year, for example, Netflix announced it 
would be offering several original television series to its 
members. This is really the first time that such high-quality 
productions will be debuted through the Internet. Our first 
show will be House of Cards, a political thriller set right 
here in Washington, DC. The series stars Kevin Spacey and Robin 
Wright and is directed by David Fincher. We will be 
experimenting with how our programs are released, likely 
offering multiple episodes or perhaps even whole seasons at one 
time. In doing so, Netflix is giving arts like Mr. Fincher 
greater latitude to create compelling stories while giving our 
members the freedom to watch world-class content in a way that 
suits their individual preferences.
    Video services like Netflix are leveraging the power of the 
Internet to help consumers discover content they will love. 
Using recommendation and merchandising technology, Netflix is 
helping to expand the reach and popularity of video content. 
For example, the availability on Netflix of all four prior 
seasons of the series Mad Men helped drive a 20 percent 
increase in those watching this season's opening episode. By 
combining technology with consumer choice, we were able to find 
an untapped audience of more than a million viewers for a show 
in its fifth season. This is just one example of how 
traditional and emerging video distribution platforms can 
complement one another.
    All this change, however, has led to speculation about the 
demise of traditional video distribution platforms and 
networks. It is our belief that these platforms and networks 
will also adapt to today's shifting video landscape. We see the 
beginnings of this with various authenticated Internet video 
offerings commonly referred to as ``TV Everywhere.'' These 
offers provide cable subscribers on-demand access to a variety 
of content through Internet-connected devices like the iPod, 
the iPad and the Xbox. In this way, cable subscribers are 
afforded many of the benefits of Internet video within the 
bundled offering of their cable service.
    To get a good feel for this implementation, I would 
recommend that you take a look at Comcast Streampix, HBO GO or 
Showtime's TV Everywhere offering. These implementations will 
likely grow in popularity, and consumers will increasingly view 
traditional cable networks on devices connected to the 
Internet.
    At Netflix, especially as we focus on streaming and begin 
to offer original content, we are often asked if we are not 
becoming more like a traditional network such as HBO. The fact, 
however, is that these networks are becoming more like Netflix. 
As traditional platforms and networks move to distribute their 
programming in an on-demand fashion over the Internet, they are 
beginning to compete more directly with pure play or over-the-
top Internet video providers like Netflix. As this trend 
continues, issues such as discriminatory data caps and IP 
interconnection must be examined with a much more discerning 
eye. When you couple limited broadband competition with a 
strong desire to protect legacy video businesses, you have both 
the means and the motivation to engage in anticompetitive 
behavior. Add to this mix a regulatory and legislative 
framework largely crafted before the modern Internet era and 
you have the makings for confusion and gamesmanship.
    Competition certainly leads to innovation and growing 
consumer choice. In large part because of innovation from 
Internet players like Netflix, traditional platforms and 
networks are changing their longstanding ways of doing 
business. In adapting to this changing landscape, these 
platforms and networks should not be permitted to unfairly 
leverage their data delivery networks or content distribution 
relationships to stifle unaffiliated video providers.
    I encourage this committee to examine closely the evolving 
competitive environment for Internet-delivered video. Netflix 
stands ready to work with you and others in the industry to 
explore various regulatory modifications or other changes that 
will help assure a competitive and innovative video marketplace 
for years to come.
    Thank you for the opportunity to appear before you today, 
and I look forward to your questions.
    [The prepared statement of Mr. Hyman follows:]

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    Mr. Walden. Mr. Hyman, thank you for your testimony and 
your participation.
    We will now go to Mr. Jim Funk. He is the Senior Vice 
President of Product Management for Roku. Mr. Funk, thank you 
for being here. We look forward to your testimony.

                     STATEMENT OF JIM FUNK

    Mr. Funk. Good morning, Chairman Walden, Ranking Member 
Eshoo and members of the subcommittee. Thank you for inviting 
me here to testify today about the future of video. My name is 
Jim Funk and I am the Senior Vice President of Product 
Management at Roku.
    Roku was founded 10 years in Silicon Valley. We are a 
rapidly growing company with less than 200 employees, still 
small by comparison with other companies represented at this 
hearing. The company's founder, Anthony Wood, is a serial 
entrepreneur who, among many accomplishments, started ReplayTV 
and is considered the inventor of the DVR. While the DVR is now 
among the most popular entertainment devices, Roku is betting 
on the Internet as the future of television.
    Four years ago, Roku introduced a small Internet connected 
set-top box that allowed consumers to stream movies from 
Netflix over the Internet and watch them in high quality on 
their TVs without needing a computer. The combination of a $99 
Roku player and Netflix streaming was a revolutionary offering. 
Now, 4 years later, there are hundreds of models of TVs, Blu-
Ray players, game consoles and set-top boxes offering this 
streaming video capability. These products can be found today 
at Best Buy, Walmart, Target and Amazon.com marketed by well-
known brands such as Apple, Microsoft, Sony and Samsung.
    Since the launch of the Roku player, we have sold more than 
3 million boxes in the United States and now offer a range of 
very affordable products from $49 to $99. Roku has grown beyond 
a set-top box and has become an open streaming platform that 
allows content providers to create applications, which we call 
channels. Roku now features more than 500 channels that are 
available to the millions of households which have purchased 
our streaming players. Most Roku users have a cable or 
satellite subscription service in addition to their Roku 
player, and Roku provides both new entertainment choices, as 
well as ways to get more value out of a cable or satellite 
television service.
    In addition to Netflix, Roku users can now enjoy tens of 
thousands of TV episodes and movies on demand from services 
such as Hulu Plus, Amazon Instant Video, Crackle, HBO and EPIX. 
We offer sports packages from Major League Baseball, the NBA, 
the NHL and Major League Soccer, and there is news from NBC, 
Fox News, the Wall Street Journal and CNBC.
    Beyond video, Roku users can enjoy streaming music services 
like Pandora, Internet radio from around the world, photo 
sharing, and popular games like Angry Birds.
    Roku is becoming an alternative way to reach consumers for 
existing video distributors too. We recently announced a 
partnership with DISH Network to stream their international 
programming to consumers who may not be able to install a 
satellite dish. Customers of Time Warner Cable, Verizon, Dish 
and other MVPDs can now enjoy on-demand movies and shows from 
HBO and EPIX on Roku.
    Local broadcasters have even begun to experiment with 
reaching their audiences on Roku. Today you can watch local 
news on demand from broadcast stations located in Madison, 
Wisconsin, Las Vegas, and Indianapolis.
    Roku is also a means for content producers who do not have 
traditional cable or satellite distribution to reach the living 
room TV via the Internet. For example, we have over 75 faith-
based channels, representing everything from individual 
congregations to Catholic and Mormon Church broadcasts. We even 
have a channel created by the House Oversight and Government 
Reform committee where video of hearings like this are 
available on demand.
    We believe that devices like Roku are part of the future of 
television because of what we already see. The average Roku 
user streams over 10 hours of video per week, which is almost 
one-third the number of hours that the average American watches 
traditional TV. Consumers like the new technology of Internet 
streaming because it combines all the new content choices with 
convenience and value. With the widespread adoption of DVRs, 
consumers now expect on-demand viewing, and the Internet 
provides virtually unlimited capacity for delivery of on-demand 
content. In addition, the combination of inexpensive Internet-
connected devices and the expanding selection of Internet video 
services offer an excellent entertainment value for cost-
conscious consumers.
    I did not come here today to advocate for specific 
legislation. Our point of view is that devices such as Roku 
represent an area of exciting innovation in entertainment and 
information delivery that are finding a home in the living 
rooms of millions of consumers. These devices are being 
embraced by all segments of the entertainment industry as a 
means to expand the business opportunities for legitimate 
content distribution. They are also driving the adoption of 
high-speed broadband connections, to the benefit of ISPs.
    Our interest here, and we believe this is also the 
consumer's interest, is that there continue to be an open 
marketplace for competition in this space. That includes not 
only open competition between device manufacturers, but also 
open competition between video services, both traditional and 
new, as well as competition between Internet service providers. 
The widespread availability of affordable high-speed Internet 
open to all video sources is essential to continued growth and 
innovation in this market.
    Thank you for your time today. I look forward to your 
questions.
    [The prepared statement of Mr. Funk follows:]

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    Mr. Walden. Mr. Funk, thank you for your testimony. It is 
most helpful.
    We will now go to Mr. Michael Powell, President and CEO of 
the National Cable and Telecommunications Association. Mr. 
Powell, we are delighted to have you here. Please go ahead with 
your testimony.

                 STATEMENT OF MICHAEL K. POWELL

    Mr. Powell. Thank you, Mr. Chairman and Ranking Member 
Eshoo. It is always a great honor and privilege to appear 
before this committee. I have done it many times and I am proud 
to be here again.
    I am also proud to be here as a representative of America's 
great success story, the cable operators and cable programmers 
of the United States, to talk about the future of video for one 
reason only. This is an industry through its own investment, 
technological innovation has contributed to the glimmering 
present that we are currently enjoying and has every intention 
of contributing to a more glorious future in the area of video.
    It is important as a quick reminder to remember that cable 
industry when it was first pioneered was all about making TV 
better. We brought television to rural America and urban areas 
that couldn't be reached by traditional broadcast programming. 
We ultimately developed original programming that led to the 
iconic brand that most Americans associate with television 
today: CNN, ESPN, C-SPAN, Discovery, the History Channel. These 
were all creations of the artists and creators of the cable 
industry working in cooperation with the production community.
    We were the first to bring about anytime, anyplace shifting 
through video on demand and through DVR, and in 1996 when 
Congress called on the communications space to introduce 
telephone competition, it was the cable industry that most 
significantly made an impact representing almost 25 percent of 
all telephone service today. And then there is broadband. Truly 
the cable industry stepped up and led to the mass deployment of 
cable broadband in the United States, now reaching 93 percent 
of all homes in America.
    So we are experiencing, in my judgment, a truly golden age 
of television. By almost any metric used, particularly those 
used by the government and FCC, we are experiencing the best we 
ever have. First and foremost, there is simply more content. We 
have gone from a 1950s world of three channels to one in which 
there were 100 channels back in 1992 to over 900 programming 
channel sources today, and that continues to expand and explode 
at a rapid rate. And is it any good? I would submit that TV is 
producing the finest content that it has in its entire history. 
The critically acclaimed programs of The Sopranos or Mad Men or 
Homeland or comedies like Modern Family are truly capturing the 
imagination of the American public, and I think the industry 
and content producers and distributors have a great deal to be 
proud of in terms of the quality.
    When I was at the FCC, I remember one of our central goals, 
and I heard it mentioned earlier in the opening statement, is 
the diversity of content. We don't want all the same stuff, and 
we are experiencing a period in which we hit on a model that 
allows true diversity of niche programming to smaller audiences 
by definition but ones that are passionate about the things 
they believe in. Put simply, if you fish, love music, crave 
sports, gorge on politics, want your native language or reflect 
your community on television or if you oddly have a fetish for 
Jersey Shore, it is all out there and available to you. We 
should be proud of what we have achieved in diversity.
    We also have more competitive sources for content than ever 
before. I would fully admit that 20 years ago in 1992 when the 
Cable Act was passed, the cable industry was a monopoly. It had 
98 percent of multichannel video distribution in this country. 
Today, it enjoys 57 percent. And since the mid to late 1990s, 
its share has remained flat or declined in the face of 
competitive threat. Today Americans can choose between cable 
companies, the satellite companies that rank second and third 
in subscribership, telecos, you can go buy DVDs at Best Buy, or 
why not walk down to your corner store and pay $1.20 for a DVD 
at a Redbox distribution machine. It is an exciting opportunity 
for the American citizen.
    But then we haven't seen enough. Then the Internet finally 
began to produce the realization of its promise. We now are 
looking at extraordinary amounts of Internet content and video 
by a whole host of companies, some represented today. There has 
been an 80 percent increase in video streaming since 2008, and 
by some estimates, 62 percent of traffic at prime time on the 
Internet is video content, and as we have heard, they are 
producing original content and more and more on every 
conceivable device that can be dreamed up in Apple's magic 
factory or anyone else. That is an exciting place.
    But this golden age is set against a regulatory environment 
that is tarnished. I am a big believer that law is premised on 
certain factual predicates about markets, economics and 
technology. Simply put, today's regulatory regime is built on a 
foundation that crumbled long ago. I will submit my full 
testimony for then-and-now analysis, but you can quickly see 
cable once owned 98 percent of the market, owns 57 percent 
today. Cable once owned 54 percent of the cable channels that 
you see today. Today they only own 14 percent. Back in 1992, a 
majority of Americans would watch television over the air. 
Today that is down to 14 percent. This is not to suggest that 
one industry is better than the other, but the predicates on 
which the law are built long ago crumbled into the sand and it 
is high time that they be reevaluated.
    Finally, I would like to conclude by simply taking head on 
the conjecture and speculation and active suggestion that 
somehow the cable industry is actively involved in an effort to 
destroy or eliminate over-the-top emerging competition. It is 
just flatly wrong and belied by the facts.
    First and foremost, we have seen a breathtaking explosion 
of video streaming content, as I said, an 80 percent growth. 
Netflix, who sits next to me, is the largest provider of 
subscription video in the country, not cable and not satellite. 
That growth has occurred in the current marketplace. Our 
policies, caps and pricing have in no way thwarted a consumer's 
ability to watch video streamed content by any measure, and we 
are expanding to meet demand consistently, having increased 
broadband speeds 900 percent in the last decade, and recently 
announced plans for startling speeds by the end of the decade.
    And finally, I would say, Mr. Chairman, remember, we sell 
broadband, and as the testimonies of the CEO of Roku and the 
General Counsel at Netflix made clear, their services help 
stimulate demand for services we sell. I assure you, many 
members of our board are very proud and appreciative of some of 
those services and what they have done for our business.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Powell follows:]

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    Mr. Walden. Mr. Powell, thank you, and we will look forward 
to asking a few questions of you and the other panelists.
    We will now go to the President and CEO of Hearst 
Television Inc., Mr. David Barrett. Mr. Barrett, thank you for 
being here. We look forward to your testimony.

                   STATEMENT OF DAVID BARRETT

    Mr. Barrett. Good morning, Chairman Walden, Ranking Member 
Eshoo and members of the subcommittee. My name is David 
Barrett. I am the President and CEO of Hearst Television. Our 
company owns 29 TV stations across the country, a number of 
which are in your home markets. I have traveled here today from 
New York City on behalf of the National Association of 
Broadcasters.
    You can tell from the makeup of this panel that the future 
of video is very bright, very diverse and more inclusive than 
ever before. Each of us here today plays an important role in 
the video ecosystem but what differentiates television 
broadcasters from every other entity at this table is our 
unique commitment to serve our local communities and to operate 
in the public interest. Localism is our mandate, and we breathe 
it every day, and we supplement our logical programming with 
the most popular national entertainment, news, sports programs 
to provide viewers with a variety and quality of content that 
is unmatched by any other media.
    Certainly, we cannot discuss the future of video without 
talking about spectrum, the oxygen of our delivery for over-
the-air signals. With concerns over spectrum use intensifying, 
it is broadcast television that uniquely offers the most 
efficient use of spectrum to transmit video. The genius of 
television broadcasting is its one-to-many architecture. For 
high-demand programming like the Super Bowl and the upcoming 
Olympics, there is no limit to how many viewers can tune into 
these games and events. With wireless one-to-one architecture, 
there is simply not enough spectrum on the planet to allow 
every viewer to watch the events simultaneously on smartphones 
or tablet devices. There should be no doubt that we need to 
focus on the most efficient ways to deliver video to our 
consumers today and into the future in order to optimize the 
video experience.
    To meet the demands for mobility, our industry is today 
launching broadcast mobile television. New mobile DTV devices 
and adapters will enable reception of full-motion digital 
broadcast without the need for additional spectrum, and because 
broadcast mobile TV relies on our existing over-the-air 
transmission, we can offer high-quality video without running 
up expensive consumer costs or exhausting data caps Internet 
providers impose on their customers.
    Other innovations on the horizon such as 3D, 4K and ultra-
high definition are down the road and around the corner. These 
innovations will highlight how creatively broadcasters are 
using their digital spectrum now and will be doing so in the 
future. As incentive auctions and broadcast repacking is 
initiated, it is imperative that the FCC policy determinations 
not jeopardize the opportunity to bring these new and exciting 
services to life. Our industry recognizes that consumers expect 
to view our programming on a variety of devices large and 
small. In order to make that a reality and preserve our 
business viability, content producers will need assurance that 
programming will only be transmitted with prior consent and 
agreed-upon compensation.
    In the current television context, retransmission consent 
allows broadcasters and cable and settlement companies to 
negotiate in the free market for the value of the broadcast 
signal. These negotiations are successful because both sides of 
the deal have skin in the game. We have a mutuality of 
interest. Broadcasters benefit from the exposure that cable and 
satellite provides, and likewise these video operators benefit 
from reselling our incredibly popular content.
    It has been suggested by some in the cable industry that 
cable bills are rising because of the costs of broadcast 
programming. There is a chart on the screen that would indicate 
that the data does not support that assertion. As you can see, 
cable price increases have consistently outpaced inflation for 
11 of the last 12 years. In actuality, it is the cable networks 
that have been collecting the vast majority of carriage fees.
    This next chart from Kagen shows the differential and the 
disparity in fees paid to basic cable networks compared to the 
total fees paid to broadcasters both on a trailing basis and as 
projected into the future. In 2012, it is estimated that cable 
will pay broadcasters approximately $2 billion in retrans fees 
while paying basic-cable networks almost $29 billion. This does 
not give effect to the value of the inventory exchange that 
goes on from cable networks to the cable MSOs but that amount 
of money in no way equalizes a $27 million disparity.
    This is even more confounding when you consider broadcast 
ratings are many times higher than cable in so many cases. In 
fact, approximately 95 of the top 100 shows in the recently 
concluded television season aired on broadcast television both 
in the demographic of 18-49 and in the demographic of 25-54 as 
measured by Nielson. In truth, retrans payments are not the 
driver of increasing cable bills, and the money is not 
following the audience in terms of what is actually viewed on 
television in this country.
    So how do we ensure that our broadcast content is 
successful beyond these traditional platforms to the new video 
technologies evolving at a breakneck speed? I will observe that 
I think Congress got it right in 1992 when it noted that 
broadcasters must be allowed to control the use of their 
signals by anyone engaged in retransmission by whatever means. 
New companies like Sky Angel are now part of the video 
marketplace but it appears to be unclear as to how the law will 
apply to them and other new entrants. The FCC is currently 
considering the question of what is a multichannel video 
program distributor. These seemingly simple questions have far-
reaching implications. Who has program access? Who pays 
retransmission consent fees? We believe it only makes good 
sense for the existing retrans consent and exclusivity rules to 
be applied to all new entrants.
    As an industry that creates content or acquires the right 
to content, it is imperative that we have the right to 
negotiate over how our content is distributed. Congress should 
reject any erosion of the bedrock principles of retransmission 
consent and market exclusivity because they are essential to 
our uniquely local system of broadcasting. Broadcast television 
is an indispensably important part of today and tomorrow's 
video ecosystem. As evidenced by our recent multibillion-dollar 
investment throughout the digital transition, American 
broadcasters are prepared to play a major role in the 
advancement of video services as we look down the road.
    I look forward to answering your questions when the remarks 
have been concluded.
    [The prepared statement of Mr. Barrett follows:]

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    Mr. Walden. Thank you, Mr. Barrett. We appreciate your 
testimony.
    Our next witness is the Chairman of DISH Network, Mr. 
Charlie Ergen. Mr. Ergen, thank you for being here before the 
subcommittee. We look forward to your testimony.

                   STATEMENT OF CHARLIE ERGEN

    Mr. Ergen. Chairman Walden, Ranking Member Eshoo and 
members of the subcommittee, thank you for the opportunity to 
testify about the future of video. My name is Charlie Ergen and 
I am Cofounder and Chairman of DISH Network, the third-largest 
pay-TV provider in the United States. We serve approximately 14 
million subscribers and employ over 27,000 people.
    I believe that understanding the future of video goes hand 
in hand with two simple rules: first, always try to understand 
what the customer wants, and second, change is inevitable; 
embrace it.
    What do customers want? They want to be able to watch 
programming on their TV sets, on their phones and on their 
tablets, no matter where they are. They also want to be able to 
surf the web or make a phone call, again, no matter where they 
are. DISH plans to offer consumers the chance to get all of 
these services from one company.
    At DISH today, we do a good job of efficiently providing 
fixed video to the home. But customers increasingly want more 
than just home video. They want mobile video. They want mobile 
voice and they want mobile data. So when we look at the future 
of video, we need to be able to provide all of those 
communications services to every one of our customers, anywhere 
and anytime.
    Our company is moving in that direction. With innovations 
like Sling, our customers can use a wireless smartphone or 
tablet from any location to enjoy the video content that they 
have already paid for. We recently purchased Blockbuster and 
are integrating their video content holdings to enhance our on-
demand offerings. We are a leading distributor of DVR 
technology and continue to innovate so our customers can watch 
the programming they have paid for whenever, wherever and 
however they want.
    Our new Prime Time Any Time and AutoHop technology takes 
the DVR to a new level, giving consumers the choice to more 
easily view their preferred programming when they want, while 
skipping what they do not want to see. This means that allowing 
your kids to watch TV doesn't have to mean they have no choice 
but to see commercials for junk food and alcohol. Through 
AutoHop, DISH did nothing more than improve upon existing, 
legally accepted, and widely available technologies that give 
consumers the ability to record their television shows for 
playback at home a more convenient time, when they are able to 
fast-forward through or skip over commercials. These are some 
of the ways we have responded to our customers' changing needs 
but we have to go further.
    In the past, we haven't shrunk from betting the company, so 
to speak, in order to stay competitive. We went from selling 
big dishes to launching our own small dish, DBS business. To 
give customers what they want, including mobile video, voice 
and data, we will have to take a significant risk once again.
    Last year, we invested billions of dollars to acquire two 
bankrupt satellite companies with the aim of transforming those 
assets into a next-generation mobile broadband service. We want 
to provide consumers with the choice in services and providers 
that they seek. If we are successful, we will fuel billions of 
dollars in investment and create tens of thousands of new jobs 
in the United States.
    And this brings me to my second point: foster change; don't 
ignore it or be afraid of it.
    We are prepared to leverage our experience and financial 
strength to drive communications and entertainment forward and 
make them more mobile and dynamic than ever before. We can't 
get started, however, until the FCC releases updated rules 
governing how our satellite licenses can be used for 
terrestrial mobile broadband. Given the overwhelming support of 
the comments received to date, we hope that the FCC will act, 
and finalize the new rules by the end of the summer. We want to 
build the most advanced wireless network in the United States 
to compete against the well-established incumbents, but we need 
to begin as soon as possible to have a chance.
    And just as wireless rules must be modernized to keep up 
with consumers and technology, the rules governing how 
broadcasters and pay-TV providers reach retransmission 
agreements are outdated and in need of change. Twenty years 
ago, when Congress first adopted the retransmission consent 
process in the 1992 Cable Act, there was typically only one 
cable operator in any given market negotiating with one 
broadcaster. Today, there are multiple pay-TV providers in each 
market, including satellite, telco, small local cable and large 
regional cable providers. Then, of course, there are also the 
new over-the-top video providers like Netflix, Aereo, and 
others. The broadcaster still maintains a government-sanctioned 
monopoly on the network programming in his market, while pay-TV 
providers face stiff competition from one another. The result 
is almost always bad for consumers and the free market.
    Broadcasters play the pay-TV providers against one another. 
They cut off the most popular sports and entertainment 
programming if their demands for drastically higher rate 
increases are not met. Consumers lose because they cannot see 
the programming they paid for, they end up paying higher rates, 
or both. And the problem is only getting worse with more 
blackouts and more broadcaster abuses. From where we sit, the 
broadcasters cling to the status quo instead of meeting 
consumer demand and embracing new technologies and business 
models.
    The retransmission consent regime is a prime example of an 
outdated government policy in need of an overhaul by Congress 
and/or the FCC. It is incredible to see how much has changed 
since 1992. Likely, there are a few of us who used the Internet 
back then, or had a cell phone. The idea of streaming movies or 
TV shows to a smartphone was science fiction.
    Just as businesses must foster change in a rapidly evolving 
video marketplace to keep pace with what the consumer wants, 
government should work to ensure its regulations mirror today's 
competitive realities, consumer expectations, and advances in 
technology.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Ergen follows:]

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    Mr. Walden. Mr. Ergen, thank you for your testimony.
    And now our final witness, Michael O'Leary, who is the 
Senior Executive Vice President for Global Policy and External 
Affairs of the Motion Picture Association of America. Mr. 
O'Leary, thank you for being here today. We look forward to 
your comments.

                STATEMENT OF MICHAEL P. O'LEARY

    Mr. O'Leary. Thank you, Chairman Walden, Ranking Member 
Eshoo and members of the committee. I want to thank you all for 
the opportunity to testify on behalf of the Motion Picture 
Association and its member companies today. I also want to 
acknowledge and thank my colleagues on the panel. I am honored 
to be with such distinguished group here this morning.
    Whether you are at a theater, at home, on the road or 
choose to download and view when you want, content creators, 
consumer electronics companies and content distributors are 
working together to provide new, innovative options for 
audiences to easily access high-quality content. We welcome 
this opportunity to testify and work with this subcommittee as 
you consider appropriate policies for the future of video. This 
is an important discussion, and we are pleased to be a part of 
it.
    Like all successful business, we are driven by the desire 
to create and meet consumer demand for the products that we 
produce. We are listening to our audiences. We are attuned to 
their desires, and every day we are developing innovative new 
ways to give viewers the experiences that they want. Audiences 
today want to enjoy movies on multiple platforms from the big 
screen to televisions of all sizes to computers and tablets and 
even on their phones. We are partnering with companies of all 
stripes from around the globe including YouTube, Facebook, 
Netflix and Roku and soon with others that are no doubt some 
other new platform which exists only in the mind of some 
inventive young person out there. All of these exciting 
innovations and distribution benefit both the consumers who 
receive the high-quality viewing experiences that they want and 
the creators, who take the risk and invest in these productions 
in the first instance.
    For many people all around the world, there is no 
substitute for the theater-going experience. The big screen is 
the foundation of the American movie industry. Creating 
wonderful movies that people can watch in movie theaters is an 
important part of America's rich history but is equally part of 
the present and the future of video. In addition to utilizing 
cutting edge and sophisticated visual and special effects in 
our productions, our companies have embraced 3D, IMAX and 
brilliant sound that has enhanced and transformed the movie 
theater experience. The theater will continue to play a 
significant role in the future of how people around the globe 
are entertained.
    But our member companies are not just making movies 
available for the big screen. For decades now, people have 
watched movies on television, but that experience is changing 
and improving too with each passing today. Today our programs 
are being delivered to television screens by over-the-air 
digital broadcasts and through an astonishing range of channel 
choices enabled by our distribution partners in the cable and 
satellite business. Audiences are able to watch these programs 
at the time of the original airing or at the time of their 
choosing, either through the DVR or through an increasing array 
of video demand options.
    In addition, with the advent of interactive television, 
Blu-Ray players, Roku boxes, Microsoft's Xbox 360, the Sony 
PlayStation, Nintendo's Wii and Apple TV, just to name a few, 
consumers can watch HD movies and TV shows streamed across the 
Internet in their home through services like Netflix, VUDU, 
Hulu or other services too many to list.
    Audiences now find entertainment on their mobile devices as 
well. All of the major motion picture studios distribute full-
length films and television shows directly to consumer mobile 
devices through major mobile operators such as AT&T, Sprint and 
Verizon. The ability to access high-quality content is also, as 
you have heard this morning, thriving online where competitors 
for consumers' attention are providing new offerings every 
week.
    In just a few short years, the quality of video delivery 
has improved tremendously, and with it, literally hundreds of 
licensed online services have sprung up around the world. Among 
them is HBO GO, which adds significant value to existing 
subscribers by providing online access to HBO programming, and 
that is not simply the programming that is available on TV 
today, that is basically all of their catalog in the past as 
well. Netflix, as you heard, is not only delivering a 
staggering number of movies online but is also moving into the 
production of online content--original content, rather. YouTube 
and Facebook are entering into agreements to distribute movies 
as well.
    Online services today cater to every matter of consumer 
viewing model including rental, download to own, subscriptions 
and ad-supported viewing. They are provided by every 
conceivable type of commercial entity including technology 
companies like Apple's iTunes, broadcast television networks 
like ABC, CBS, Fox and NBC, cable networks like the Comedy 
Channel, TBS and USA, pay-television channels like HBO and 
EPIX, telecommunications, cable and satellite providers like 
AT&T, DISH and Comcast, retailers and rentailers like Amazon, 
Best Buy, Blockbuster, Netflix and Walmart, and gaming systems 
as I mentioned like PlayStation and Xbox, and new ventures 
devoted entirely to delivering great content seamlessly such as 
Crackle and Hulu.
    Finally, Mr. Chairman, a word about portability. Simply 
put, today audiences want the convenience to access the content 
they purchased on a variety of devices without having to buy 
the same thing twice, and we are delivering to that promise. 
This began a few years ago as our companies started to include 
with many DVD and Blu-Ray disc titles a transferable or 
downloadable digital copy for consumers to use on their 
computers or their portable devices. Now there are a variety of 
ways to buy once and play everywhere.
    One exciting innovation comes from the Digital 
Entertainment Content Ecosystem, which is a consortium of more 
than 60 studios, retail stores and technology firms that has 
created UltraViolet, which is a cloud-based digital storage 
locker for consumer content. It works like this. When a 
consumer purchases UltraViolet media such as a Blu-Ray or DVD 
or Internet download, the consumer receives the enduring right 
to access that content on any UltraViolet device registered to 
their household and to enjoy that content via streaming through 
the devices at home or on the go. Presently, over 5,000 titles 
are available through UltraViolet and over 3 million consumers 
have set up accounts in less than one year. This spring, 
Walmart began offering consumers the ability to convert their 
current DVD and Blu-Ray collections to digital UltraViolet 
copies that can both download and stream. Walmart estimates 
that the average user of this service brings about seven discs 
to the store, and each conversion takes approximately a minute. 
Other complementary digital initiatives are also being 
developed such as Disney Studio All Access, which will provide 
consumers with easy access to Disney content across multiple 
digital and video services and devices.
    In closing, Mr. Chairman, we are relentlessly innovating to 
keep pace with the evolving demands of our audience and to give 
them more choices on how they view our content. We are 
committed to that. As this committee considers the appropriate 
policies for the future of video, we hope that you will 
continue to recognize that as promising as these new forms of 
distribution are, they all need content to reach their full 
potential. A video streaming site, satellite television 
company, a broadcaster, they are all terrific technologies, but 
without the content that consumers want, they simply don't 
reach their full potential. Make no mistake, we will always 
have an incentive to seek our new ways for our content to be 
distributed but we must be allowed to be compensated for it and 
we must be a part of the discussions on how it is distributed. 
The topic today is an important one, and we are pleased to be a 
part of this dialog and we look forward to working with you in 
the weeks and months ago.
    Again, Chairman Walden, Ranking Member Eshoo, I want to 
thank you for your time this morning.
    [The prepared statement of Mr. O'Leary follows:]

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    Mr. Walden. Mr. O'Leary, thank you for your testimony and 
thanks to all of our witnesses for enlightening us on your 
views on these very important issues related to the world of 
video.
    I am going to start my questioning with Mr. Johnson. I 
appreciate your comments and the situation you face, and I want 
to just kind of get above your company per se but raise the 
issues that come up in this new world we are in. I understand 
why you would want the protections of the Communications Act 
that afford multichannel video program distributors, but are 
you prepared for the responsibilities? And so this probably 
goes to others as well. For example, are you willing to live 
under the must-carry rules, the rules requiring the competitive 
availability of set-top boxes, the network non-duplication and 
syndicated exclusivity rules and the closed-captioning 
emergency information requirements? So that is all the other 
cars attached to the Communications Act. Tell me what that 
means to your world.
    Mr. Johnson. Chairman Walden, we are currently already 
offering closed captioning. We currently offer the EAS service. 
As far as must-carry retransmission consent, we are not going 
to be carrying any type of local broadcasting. We have done a 
marketing agreement with a company called Antennas Direct, 
which sells over-the-air digital antennas, so that our 
subscribers that want to receive over-the-air programming can 
do that through them. So we will not be entering into any 
retransmission consent issues.
    Mr. Walden. But what if you were required to?
    Mr. Johnson. Well, we would have to look at that when it 
happens.
    Mr. Walden. I am going to ask the same of Mr. Hyman and Mr. 
Funk, given the world you are operating in now. Do you want 
everything that is in the Communications Act good and some 
might argue burdensome?
    Mr. Funk. I think our position is the current situation 
where there is a competitive environment to innovate is 
probably the right approach. There are some parts of the 
requirements that I think will naturally come to the markets 
such as closed captioning and other things that are a benefit 
to consumers but a lot of the regulations that have been 
written were really written for a different environment than 
exists today.
    Mr. Walden. Mr. Hyman?
    Mr. Hyman. I agree with Mr. Funk in the sense that I think 
this highlights some of the antiquated notions of the Cable Act 
with the definition of MVPD, and I also think that it is 
something that in connection with determining MVPD should be 
done on a broader scale than in a single regulatory filing.
    Mr. Walden. All right. Mr. Johnson, Mr. Hyman, Mr. Powell 
and Mr. Ergen, isn't it a little strange that a child could be 
watching the Sprout Channel's Caillou on the same television in 
the same living room but the way that programming got there may 
have been subject to different rules depending on whether it 
was provided by Sky Angel, Netflix, a cable company or DISH? 
Shouldn't the regulatory or non-regulatory treatment be the 
same? Mr. Johnson, I will start with you.
    Mr. Johnson. Well, we are asking for a level playing field 
that, you know, we have the same access to the programming that 
our competitors do, and because the definition of MVPD is up in 
question, we have not been able to have the access to that 
programming.
    Mr. Walden. Mr. Ergen?
    Mr. Ergen. Well, in general, I would say yes, the rules 
should be the same. To your earlier point, to the chairman's 
earlier point, if you are going to be an MVPD provider, you 
have all the rules or eliminate the rules for the current 
incumbents. Having said that, there are cases where things are 
a little bit different between the technologies and I think you 
have to look at it on a case-by-case basis. Cable is more of a 
local service. Satellite, for example, is a national service. 
It remains to be seen how the IP networks that Mr. Johnson and 
others are doing, whether it is going to be national or it is 
going to be local. So, you know, it depends on--there may be 
some differences because of that.
    Mr. Walden. Mr. Powell?
    Mr. Powell. Yes, Mr. Chairman. I largely agree with Mr. 
Ergen. I think what you are having is, this is just a continued 
evolution of the challenge of convergence in which technologies 
increasingly bring sameness to the way things are provided and 
distributed. But that said, I wouldn't make the hallmark of 
suggesting that things are insimilarly situated just because 
they can produce the same content, the same show. There are 
different business models, different terms, different 
technologies underlying it. The cable industry spends $186 
billion over a decade to build an infrastructure that is 
optimized for premium, high-quality, low-latency content. That 
is very different than the same content being sold on iTunes 
for $2.99 in a model largely designed to sell iPods more than 
it is designed to sell content. So as long as we are cognizant 
these different business models are often pursuing different 
central objectives, just because they have the same content 
doesn't necessarily make them identical. But as we look at a 
new statute, I do think there should be more sameness than 
there is today.
    Mr. Walden. My time is expired, but, really trying to get 
to the heart of the issue here. Everybody wants a little 
different deal, the other guy's deal, and so we are trying to 
sit here and figure out what is the right regulatory regime to 
really spur innovation and competition in a marketplace that 
functions, so your input is most valuable.
    With that, I will turn to my colleague from California, the 
woman who is proud to represent innovation and technology, Ms. 
Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. I think you have hit 
the nail on the head because I think that we all want to see an 
acceleration of innovation, that it not only be--you know, that 
we motivate things through, whatever it might be, a change of 
the law, whatever rules at the FCC, because this is really one 
of the more exciting areas relative to our national economy 
that holds so much promise, and there is an insatiable appetite 
on the part of consumers, and so I think this morning's hearing 
is really highly instructive but right below the surface there 
are all these different cases.
    I have four questions that I want to ask starting with Mr. 
Funk, Mr. Hyman and Ms. Sohn. We are very well aware of the 
consumer demand for innovative data-intensive video 
applications like Netflix, Amazon video and Hulu, they all 
continue to grow, while at the same time the wireless carriers 
are moving away from the unlimited data plans. There was a 
piece in the New York Times yesterday that talked about 
broadband moving to meters.
    First of all, do you think that this curtails innovation? 
And if so, how would you address it?
    Mr. Funk. Well, first of all, there have been speed-based 
tiers in Internet service for some time, so the idea of some 
different classes of service for Internet consumers is not new. 
I think the important thing is that as long as there is 
competition among Internet service providers, providers who 
give good value to consumers will get the business, and if the 
tiers become restrictive in a way that they disadvantage some 
services or restrict choice in a competitive market, companies 
that provide those services will not succeed. So I think the 
key here is really competition in order to ensure that we get 
the right outcome.
    Ms. Eshoo. Thank you. Let us go quickly.
    Mr. Hyman. There has been a lot of talk about the 
competition in the video marketplace.
    Ms. Eshoo. You traveled across the country and you have got 
30 seconds.
    Mr. Hyman. Thousands of video channels and it is the golden 
age of video. I think that is true. I think the one thing that 
we have to be mindful of and that I would suggest this 
committee to be mindful of is that Internet video, there is 
only one way to get Internet video and that is over an Internet 
pipe, and there are very few carriers that provide Internet 
video. In some places, there is only one carrier that people 
can access that, and the ability to have competition in that 
marketplace is something that you guys should be mindful as you 
go on and think about Internet video.
    And with respect to our issues out there, you know, the 
issue that we have been raised and been very public about, is 
the application of discriminatory data caps and the way in 
which the same content that is delivered over the----
    Ms. Eshoo. When are they discriminatory, and when are they 
not?
    Mr. Hyman. When are they, and when are they not?
    Ms. Eshoo. Right.
    Mr. Hyman. So the same content from Netflix or the same 
content from, for instance, Comcast over Streampix, one counts 
against a data cap and the other one doesn't. So from our 
standpoint, well, if you are going to implement data caps, 
there are innovation issues associated with data caps but they 
should be applied equally or not applied at all.
    Ms. Sohn. Let me give you an example. I agree with my 
colleagues to the left. So a perfect example of discriminatory 
data caps that we are concerned about is what Comcast is doing 
with the Xbox 360. So it is exempting its own Xfinity app from 
the data cap but Netflix and others are subject to the data 
cap. So while we don't think the data caps are inherently bad, 
when they are arbitrary, they can be abused, they can be 
anticompetitive. Remember, ISPs also own video services so 
there is an incentive and an ability to discriminate against 
online video competitors.
    And if I could just say one more thing. One of the things 
that really galls us is that we have been asking, Public 
Knowledge has been asking the FCC now for almost 2 years to 
look at data caps, not to regulate them, look at them, find out 
how they are evaluated, how they are raised or lowered so 
people can have an idea of what these caps are intended to do, 
and they have just refused.
    Ms. Eshoo. Thank you.
    Mr. Funk, it is my understanding that 20 percent of your 
customers have dropped their cable or satellite service. What 
factors do you think would leave more of your customers to 
consider Roku as an alternative rather than a traditional, you 
know, rather than a complement to traditional cable or 
satellite service?
    Mr. Funk. We do see a percentage of our users who have cut 
the cord, as it is called, and dropped their cable or satellite 
package. It is the minority, as you said. I think there is a 
variety of reasons for this. In some cases, it is cost, and in 
some cases it might be a living situation or just individual 
preferences on programming. I think what is interesting is that 
there are now choices that allow consumers that opportunity so 
things like Netflix and Hulu Plus give people who want 
potentially a different selection of video at a lower price the 
ability to get that. So I think increased choice of offerings 
is really the key to providing the right service for all 
consumers. I think we provide one method for doing that. I 
think you will see a lot more innovation in the coming months 
and years as to how to do that better. So we are optimistic 
that cord-cutting will lead to continued video consumption but 
just in different fashions.
    Ms. Eshoo. Thank you. I had four questions. I will submit 
the other two in writing. I want to thank all the witnesses 
because together you have made this not only an important but 
an instructive hearing on the future of video.
    Thank you.
    Mr. Terry [presiding]. Thank you.
    The chair recognizes Chairman Emeritus Mr. Barton.
    Mr. Barton. Thank you, Mr. Terry.
    I first want to take a little victory lap this morning. The 
college presidents announced yesterday we are going to have a 
non-BCS football playoff in college football, and I can take a 
little bit of credit because back when I was chairman of this 
committee, we had some hearings on that and we got the ball 
rolling and they announced a 2014 playoff, so I want to commend 
them but also take credit for this committee highlighting that 
issue several years ago. I don't think the 2014 playoff is the 
ultimate but it is a start in the right direction. When they 
get to eight or 16, I think they will have it.
    My first question is to the audience. I want somebody in 
the audience to tell me the original analog televisions, how 
many channels were on them. Anybody that is my age ought to 
know. I see one hand out there. How many? Somebody? No, not how 
many you got but how many were on the dial. There were 13. 
There were 2 to 13 but there was no number 1. I never 
understood why there was no number 1. But you could go up to 
13. As Mr. Powell just pointed out in his testimony, there is, 
like, 900 programs available now. We have gone from--my first 
TV, we got one channel on a good day, and now we have got 
thousands literally.
    I think it is time to review the telecommunication video 
market. I think Mr. Walden and Ms. Eshoo and Mr. Upton and Mr. 
Waxman are to be commended for agreeing to do this hearing. I 
think there are some principles that we need to remember as we 
look at this, and this is just my scratches so I don't claim 
this is the universe. But obviously in order to have a program, 
you have to have a creator. In this country, we have never 
regulated the creator of the programming. Then you have to have 
a producer, and to my knowledge, we have never regulated the 
producers. Now, there have been efforts at censorship but in 
terms of creativity and production, we basically let that be a 
free market operation.
    Once you have a program, you have to have somebody to 
package it and market it. You have to have somebody to transmit 
it and then obviously you have to have somebody to buy it, 
somebody to view it, somebody to consume it. When you get into 
the packaging and the transmission is where we had a role for 
government. I think it is a truism that form follows function, 
and our original regulatory format was based on the fact that 
where there was radio or television, there was a potential for 
a natural monopoly, and government either tries to prevent 
monopoly or regulate monopoly, and a lot of the rules that we 
are talking about here originated when the radio market and the 
early TV market was getting started. As Mr. Powell pointed out, 
the advent of the cable industry brought video to more people 
but it also brought additional regulation.
    I was the only member of the committee back in the 1980s 
that voted against the re-regulation of cable, the only one on 
either side of the aisle when the first President Bush was 
President, and I was at the White House when we deregulated 
cable. When we passed the telecommunications Act in 1996, there 
were at least four and maybe five or six witnesses at this 
table that their industry or their company did not exist, did 
not exist. I couldn't tell you today what Roku is, and I 
listened to the president of Roku try to explain what it is.
    So I think, Mr. Chairman, I know it is too late to do a 
major bill in this Congress but I hope in the next Congress we 
take this up and use original principles to review the market, 
and in general, I think we are better off having less 
regulation than more and more enterprise and more market 
competition than less. The role of government is to provide a 
level playing field to prevent a monopoly if possible, if we 
can't prevent a monopoly to try to prevent undue market share 
and be fair to all.
    So I think this is an excellent hearing, and I look forward 
to big things happening on this committee in the next Congress.
    The last thing I will say: If we are going to do big 
things, it has to be done no a bipartisan basis. This is not a 
partisan issue. It will go nowhere if it becomes R versus D. It 
has to be done in a bipartisan basis, and the good news is, 
with the leadership on both sides of this committee, that is a 
very doable deal.
    With that, I yield back, Mr. Chairman.
    Mr. Terry. I would agree.
    The gentlelady from California, you are now recognized for 
your 5 minutes.
    Ms. Matsui. Thank you very much, Mr. Chairman.
    First of all, I would like to welcome all the witnesses 
before us today, and I would just like to acknowledge the great 
work that a Hearst-owned station, KCRA, is doing for my 
constituents in Sacramento.
    You know, local news and weather as well as other local 
programming is important to all Americans, not just to my 
constituents, and I like to get a better understanding from our 
witnesses about the role of retransmission consent and 
preserving our shared commitment to localism.
    Mr. Ergen, I understand that retransmission consent 
payments are used by broadcasters to support local news and 
local weather. How would you respond to concerns that changes 
in the retransmission consent regime could undermine quality 
local programming?
    Mr. Ergen. Thank you for the question.
    First of all, retransmission consents--and maybe Mr. 
Barrett can give us a little bit more information on this--in 
my understanding generally goes some to the network. If it is 
changed where the network themselves, the major network may 
take some of that and a large part of retrans consents does not 
actually flow to the local broadcasters anymore. That is the 
way it started but now the national network will take a large 
portion of that. And then second, of course, the broadcast 
model is a two-prong model, the retransmission consent fees and 
also advertising fees so they get ad revenue from two sources.
    The troubling thing is that despite the fact that 
retransmission fees have gone up probably 200, 300, 400 percent 
since I started in this business, the actual localism and local 
level has actually gone down from a local news perspective in 
the sense that to cut costs and operate more efficiently, many 
broadcasters are sharing local news networks and so forth. In 
many cities today you will see that a network show, a news show 
will be on multiple networks or there will be sharing of 
resources, so very similar to what the newspaper industry did 
as well.
    Ms. Matsui. Sure. Mr. Barrett, would you like to comment on 
that?
    Mr. Barrett. Well, I disagree. The 21st century media 
company needs a dual revenue stream, and for years, the 
television industry operated with an advertising-only model. 
The cable industry was launched and helped us get our signal 
into rural areas but then built a significant business on the 
back of the most popular programming available to Americans in 
every community in this country, and that was local television. 
I would say to you that we are using as an industry the 
retransmission consent fees to invest in our local businesses. 
It helps support the investment we made in digital technology, 
which was multiple billions of dollars over the last decade. I 
think you have seen most local stations, many local stations go 
from producing 20 hours a week of programming to 40 hours of 
week of programming exclusively in the local news genre. We 
have added multi-cast channels on our signals now which are 
trying to get clearance on settlement and cable, so I would 
disagree with Mr. Ergen that that money is not being used in a 
constructive way to advance the business interest of local 
television.
    Ms. Matsui. Well, Mr. Barrett, how would you respond to 
concerns some parties have raised about the impact of broadcast 
stations' coordination and consolidation on retransmission 
consent negotiations?
    Mr. Barrett. Well, I think speaking for our company, we 
negotiate only on behalf of the owned stations of the Hearst 
Company. Other companies have pooled some of their 
retransmission consent negotiations, have created bundles, but 
I believe in most cases, in all cases, people have been smart 
enough to acknowledge that they have to break up a bundle. Mr. 
Ergen wants to buy a station where we have a duopoly separately 
from KCRA. If you would like to buy KQCA, I will sell him KQCA 
separately, I will sell him KCRA separately.
    Ms. Matsui. Mr. Ergen, your thoughts quickly.
    Mr. Ergen. Yes, I think the problem is, is that in 
retransmission consent, the local broadcaster is in fact a 
government-sponsored monopoly. In other words, nobody else can 
bring that signal into that marketplace today, so it is a 
little bit of an unfair fight, and what has happened is, I will 
give you one example. In Wyoming where one individual got the 
rights to negotiate for all three broadcast networks in 
Cheyenne, Wyoming, so there was either no local networks in 
Cheyenne or you had to pay whatever rate----
    Ms. Matsui. But would you say----
    Mr. Ergen. And so the signal actually had to come down and 
so consumers lost because of unfair bargaining between--it is 
one thing to be an unregulated monopoly, it is another thing 
then to band together and negotiate on behalf of multiple 
stations in the same market.
    Ms. Matsui. Would you say, though, this is not the same 
throughout the country? I mean, it appears that what Mr. 
Barrett in certain areas like where Sacramento may not be the 
same way as what you are talking about in Wyoming and other 
areas.
    Mr. Ergen. I would agree with Mr. Barrett that each 
broadcaster handles it differently so Mr. Barrett's company 
handles it in a very professional manner with just their 
networks. Other people utilize their market power and that 
mischief can happen, now, of course, legally sanctioned.
    Ms. Matsui. Well, I have run out of my time. I would like 
to submit some written questions.
    Mr. Terry. Absolutely. Thank you, Ms. Matsui.
    Now I recognize myself for 5 minutes, and I will spend most 
of my time with you, Mr. Powell. But first I want to just give 
a little anecdotal story. When I walked into my 17-year-old's 
room and, by the way, we got him a TV for his room for 
Christmas thinking that when he graduates, it will be a good 
thing for him to take to college. Hopefully he is going to 
college. But I walk into his room and he is on his iPhone and I 
said hey, what is going on; oh, just watching Netflix, on his 
iPhone, and there is a TV sitting right there, and that is the 
world we are living in. That is the people that are going to 
dominate the consumer products and video markets for the years 
to come. I think of turning on the TV; they don't.
    Mr. Hyman. Is the TV Internet connected?
    Mr. Terry. Good point. Yes, he has the Xbox 360. Yes, so he 
can do it that way as well but he just chose to do it on his 
phone.
    So Mr. Powell, it is interesting that you mentioned the 57 
percent. In 1992, Congress was concerned about the cable 
monopoly. That does not exist today if you are at 57 percent 
and the folks that are sitting on this panel. So what does that 
really mean to the cable industry? How is it evolving to be 
competitive? And in reference to the 1992 Act--let us try and 
not be redundant on Ms. Matsui's questions of retransmission--
but what other underbrush is there from 1992 that was just so 
focused on the cable industry? What do we need to do to clear 
out the brush? What specific things should Congress look at if 
we want to review the 1992 Act?
    Mr. Powell. Well, the first thing I would say is, the 
beauty of competitive dynamics is, you have to increase value 
for consumers, and you can do that through innovation, 
evolution of your service, and I think that the competition we 
face first and most formidably from the satellite companies 
increase both the quality of content that we are providing, the 
amount of content we are providing. It forced us to look at new 
businesses for revenue development to continue to be 
competitive, which is part of the dynamic that I think helped 
drive investment in broadband and ultimately brought that into 
the bundle of services we offer as well as telephony. If you 
look at the wonderful things that the over-the-top folks are 
doing, you see cable companies knowing they too have to be able 
to bring that value to your son to be able to allow him to 
watch what they are selling over iPads and Xboxs as well. So I 
think that dynamic has driven a lot of innovation.
    I would give you a more global answer about what to change, 
so I think that the 1992 Act had two core fundamental 
foundational elements. One, that we were a vertically 
integrated exclusive monopolist and a whole bunch of other 
rules that were premised on supporting and subsidizing 
broadcasting for the protection of the social compact that 
America supposedly wanted to advance in the context of 
broadcasting. I think vertical integration rules when an 
industry only has about 14 percent of its operators integrated 
with content, these would be rules like program access, program 
carriage and rules that are premised on the idea that you have 
to guard against incentives associated with both being a 
distributor and owner of content. I think when we have a 
dialog, those are the kinds of rules we should have to talk 
about.
    But to be fair and honest, I think you also have to sort of 
reevaluate elements of the social compact. You know, is it 
still the policy of the United States that the cable industry 
should continue to forcefully subsidize the broadcasting model 
through must-carry, retransmission consent and other elements. 
I am not prepared to answer them.
    Mr. Terry. Well, one last question and then hopefully we 
can have time for the broadcaster, Mr. Barrett, to rebut that. 
We are getting calls in our office about cable rates going up, 
and I think this goes to the vertical integration model that 
was thought of as cable then but you are not the content 
provider today. Could you explain very quickly in 26 seconds 
how that it is impacting the business model and what we should 
be telling our constituents?
    Mr. Powell. So price is two things. One, I think any 
industry in this day and age under economic stress who is not 
sensitive to affordability of the American consumer is acting 
at its peril, and I think our industry is very focused and 
looking for ways to do that. You are seeing companies 
experimenting with smaller and lower priced packages. You are 
seeing basic packages being offered for one. Secondly, I think 
it is very difficult to compare prices over time because there 
is so much more that is in the suite of bundled services that 
consumer are buying--DVR, more channels. I would leave you with 
one statistic. On an hourly basis, cable is about 21 cents per 
hour. That is cheaper than even Netflix subscription and most 
other entertainment products in the market.
    Mr. Terry. Is that viewing hours or 24 hours in a day?
    Mr. Powell. Viewing hours, 8 hours a day.
    Mr. Terry. Thank you.
    At this time the chair recognizes the gentlelady from the 
Virgin Islands, Ms. Donna Christensen.
    Ms. Christensen. Thank you, Mr. Chairman, and welcome to 
all of the panelists this morning. Thank you for holding this 
hearing. I have a couple of questions. I probably won't use up 
all of my time.
    Ms. Sohn, you advocate for eliminating the broadcast must-
carry rule but you also note on the other hand the importance 
of protecting the public and non-commercial stations. So what 
policies would protect this programming without a must-carry 
rule?
    Ms. Sohn. I think we would be comfortable with preserving 
must-carry for public stations but, you know, as far as 
commercial stations are concerned, my feeling, our feeling is 
that if local broadcasters are indeed providing good local 
programming, cable casters will want to carry them because 
their customers will demand it, but I don't think they need the 
protection of must-carry.
    Ms. Christensen. And Mr. Barrett, I know one of the 
concerns is advertising revenues, so how are broadcasters 
looking to respond to the pressures on advertising revenues 
from the new technologies and services?
    Mr. Barrett. Well, one of our challenges has been an 
accurate measurement from Nielsen. It has been a challenge as 
to we have moved to a time-shifted world of viewing for Nielsen 
to capture that television viewing, and that has had downward 
pressure on commercial pricing. Retransmission consent has been 
a new revenue stream as we have referenced. The multi-cast 
business has been a new revenue stream for us and we are 
optimistic that mobile television as it rolls out over the next 
several years will be a new revenue opportunity for local 
stations as well, and that will help offset some of the 
downward pressure on ad rev.
    Mr. Terry. Is your mic on?
    Mr. Barrett. Now it is on. I am a TV broadcaster. I should 
know that.
    Ms. Christensen. Mr. Powell, you and all of the other----
    Mr. Terry. Could he answer that again and we will stop the 
time?
    Ms. Christensen. Sure.
    Mr. Barrett. Our challenge as broadcasters has been to be 
sure that Nielsen captures the viewing that has occurred on 
time-shifted--on the television experience that is time-shifted 
on DVRs and the like, and very briefly, the new revenue 
opportunities we have with retransmission consent, multi-cast 
and, in the future, mobile television, the extent that those ad 
revenues will help replace and support some of the downward 
pressure on ad revenues against our core video product.
    Ms. Christensen. Thank you.
    Thank you, Mr. Chairman.
    And Mr. Powell, you and all of the other panelists have 
pointed out the way the competitive environment and technology 
has changed and is continuing to change, and you recommended 
re-examining a lot of the rules, the regulatory rules, program 
access, content carriage obligations as well as must-carry 
transmission content and non-duplication rights. So some would 
say that if we were to weaken any of those rules, it would give 
cable an unfair competitive advantage. Given the wide choices 
that are available today, how would you respond to that?
    Mr. Powell. That is a great question. I think the way I 
would characterize it is, I don't think the cable industry's 
position is we are just looking for a wild, abandoned 
deregulation. I think we are looking for a more rationalized 
regulatory model that more properly reflects the reality of the 
market. We think a lot of the rules that we are currently 
living under, if you accept the way they are premised, would 
fall under a standard by today's measurements.
    Now, I am perfectly willing to entertain that somebody 
could conceive of a different basis or a different reason for 
some sort of regulatory rule but I think that the obligation, 
the burden should be to prove that from a zero base, meaning 
giving the reality of today, not the legacy of yesterday, why 
do you still need this rule or why do you need some new 
proposed rule? So I really wouldn't say that I think we are a 
cooperative partner in trying to make sure the policy is right 
as opposed to just some random, get rid of everything because 
it is stupid but we do think it should be justified based on 
what we are seeing in the market, and given all the wonderful 
things you have heard, we think on balance, that would be a 
dramatically lighter regulatory regime.
    Ms. Christensen. Thank you.
    Mr. Chairman, I will yield back the balance of my time.
    Mr. Terry. Thank you.
    Ms. Christensen. Thank you.
    Mr. Terry. At this time we recognize Mr. Stearns for 5 
minutes.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Barrett, you have been getting all the questions. I 
have a little delicate question, which is more or less confined 
to my Congressional district. I represent the University of 
Florida in Gainesville, and it appears there is a dispute 
between DirecTV and the ABC affiliate, WCJB, over transmission 
consent fees. You are probably not familiar with that.
    Mr. Barrett. I am not familiar with that. We own the NBC 
affiliate in nearby Orlando.
    Mr. Stearns. I don't necessarily want to get involved with 
this business dispute, but some have suggested that because now 
Gainesville and Alachua County, they have DirecTV, they can't 
even get ABC now. It is sort of a blackout. And I guess in your 
opinion, are these blackouts becoming more frequent?
    Mr. Barrett. I think they are very infrequent. Cox happens 
to own the ABC station in Orlando. We own the NBC affiliate 
WESH in Orlando, and over the past several years or so, there 
has been a new NBC affiliate licensed to Gainesville to that 
marketplace, and you may infer that we stood aside and did not 
challenge that NBC affiliate that went into that marketplace.
    Mr. Stearns. Mr. Ergen, what is your reply to that? Are 
these blackouts becoming more frequent? Are they a problem for 
DirecTV?
    Mr. Ergen. They are becoming more frequent. I can speak for 
DISH Network.
    Mr. Stearns. Mr. Chairman, we have a clear difference of 
opinion here between----
    Mr. Ergen. And perhaps we can get the committee to----
    Mr. Stearns. But your position is, they are becoming more 
frequent?
    Mr. Ergen. Yes. I can speak for DISH Network. We had six 
blackouts last year. We have had nine already this year.
    Mr. Stearns. So if you have had nine this year, and let us 
take Gainesville, for example, and they can't get ABC so they 
call you up and say why can't we get ABC, what do you say?
    Mr. Ergen. You basically say you are working with the 
broadcasters to negotiate a fair rate for them. You know, what 
happens is, it is bit of an unfair food fight because the 
broadcaster--because everyone has a choice to switch to another 
video provider, A, and B, they only get--their sweeps ratings 
only happen four times a year so they only get measured four 
times a year by Nielsen, which affects their advertising rates 
except by law, is my understanding, cable companies can't take 
down a network during a sweeps rating. So it is just not a fair 
fight out there today and it is become more prevalent.
    Mr. Stearns. What do you think a solution should be? Is 
there a solution? It seems like----
    Mr. Ergen. I think there are some fairly easy solutions. I 
mean, as an example, if we are going to make it a market 
determinant, I am all for that, but that means that we should 
be able to--if you don't have the Gainesville ABC station, then 
you would have to go to a stand-still arbitration or you have 
to have the right to import an ABC station from Orlando, for 
example, so the customer doesn't do without the ABC network 
while the dispute is going on. Then you get a free-market 
system working where it is more of a fair fight between the 
broadcaster and the distributor.
    Mr. Stearns. I don't necessarily want to get involved with 
this dispute, so I mean----
    Mr. Barrett. You have opened Pandora's box here.
    Mr. Stearns. I know.
    Mr. Barrett. We would strongly resist the----
    Mr. Stearns. Well, I have given you a chance to speak and I 
have given him, so I don't know, because he will want to speak 
after.
    Mr. Barrett, I understand that broadcasters are poised to 
deploy mobile DTV services to allow viewers to watch live local 
news, emergency alerts and other programming on the go. What 
are the differences between broadband mobile DTV and video over 
broadband that is currently available on cell phones and can 
mobile DTV help alleviate some of the pressure on the wireless 
bands?
    Mr. Barrett. The architecture of the broadcast as a single-
point, a multi-point distribution is the superior distribution 
system. It doesn't run into broadband congestion. If I invited 
you to a Yankee game in New York City and we wanted to go 
online, you would have trouble in Yankee Stadium on any given 
weekend connecting with a broadband supplier that didn't buffer 
and didn't have real signal limitations. An over-the-air 
broadcast signal could touch everyone in that stadium 
simultaneously and there would be no signal degradation at all. 
It is a vastly superior distribution system of the signal
    Mr. Stearns. OK. My last question, Mr. Ergen, I think we 
all understand the need for more spectrum. I think the FCC is 
moving forward on a rule regarding the S band spectrum DISH 
recently acquired in order to build out a wireless network. 
What is the status of this item and when will the FCC issue its 
final order on this proceeding, in your opinion?
    Mr. Ergen. Well, we first went through a waiver process 
last year and ultimately were denied that waiver by the FCC. 
Then we went into a rulemaking process, which is now complete 
in the sense that all the comments are in from all the parties 
who might be affected either in a positive or negative way by 
our entering into the wireless business and now it is just in 
front--the rulemaking now just has to be decided by the full 
commission, the five commissioners, to make a decision. We are 
hopeful that they can do that by the end of the summer. Other 
than time--we realize the FCC has a lot of other things on 
their plate, as Michael Powell can speak to when he was there. 
Other than time, they have all the facts in to approve it, so 
we are hopeful they will do it by the end of the summer, and 
then that unleashes 40 megahertz of spectrum and of course 
obviously a huge investment in this industry and jobs at a time 
when, you know, a lot of companies are hoarding their cash 
because of an uncertainty out there. We are certainly hoarding 
our cash because we are waiting on the FCC uncertainty that 
they can alleviate that problem. So it is a case where business 
and government can work together to do the right thing for 
consumers and also unleash productivity and investment in the 
United States.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Terry. Thank you.
    The chair now recognizes the gentlelady from Colorado, Ms. 
DeGette.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Sitting here listening to this testimony reinforces my view 
that this retransmission consent issue is a very messy issue 
and there is not a one-size solution. Most people would like to 
see agreements reached that are fair to consumers and I think 
one thing almost everybody could agree with is Congress 
shouldn't put too heavy of a finger on that scale. We should 
really try to allow the market to come to a solution.
    I believe that we need access to free and diverse and local 
news and local programming and information in an emergency. I 
was just looking at some of my local news on these wildfires in 
Colorado and there is a good example of how consumers in 
Boulder or in Colorado Springs or Fort Collins need to be able 
to get access to local news. And so that is a balancing that we 
have to have, and also several members of the panel talked 
about mobile TV and how much promise that that has. But the 
strong argument supporting the value of broadcasting to 
consumers doesn't necessarily equate to a justification for 
pulling a signal from cable or from satellite viewers if 
retransmission consent negotiations fail, and I am thinking 
about this from the standpoint of my constituents who work all 
day, who barely have time to sit down in front of the 
television, who want to turn on the first game of the World 
Series with hope the Rockies might be in it, although maybe not 
this year, but they can't get the programming they want because 
we have had failed retransmission consent talks.
    And so my first question is a simple question, and if 
preferable, I would like to have a yes or no, and that question 
is, do you think blackouts as a result of the failure of these 
agreements are fair to consumers no matter how rare or how 
often they might be? Mr. Powell, I will start with you.
    Mr. Powell. No.
    Ms. DeGette. Mr. Barrett?
    Mr. Barrett. No.
    Ms. DeGette. Ms. Sohn?
    Ms. Sohn. No.
    Ms. DeGette. And Mr. Ergen?
    Mr. Ergen. No.
    Ms. DeGette. OK. Thank you.
    Now, Mr. Ergen, I have a question for you about this 
AutoHop issue. As you testified in your statement, and I think 
everybody knows, the AutoHop technology lets consumers skip 
over commercials or other things that they don't want to watch, 
and as you said, that would mean that when kids are watching 
TV, they wouldn't have to see junk food and alcohol 
commercials. I would submit that as the fall approaches, many 
viewers would skip over the shock-and-awe TV commercials that 
everybody is going to be treated to in the campaign this fall. 
And so it--I am sorry?
    Ms. Sohn. And the volume too.
    Ms. DeGette. Yes, and the volume too. So I think the volume 
is the issue.
    But if people had AutoHop, it would let them decide what 
they wanted to see. Now, I know that this is in the courts 
right now, but talking not about the legal issues but consumer 
choice and innovation in the free marketplace, doesn't AutoHop 
simply improve on technology that is already available from the 
DVR to what is possible through the DVR?
    Mr. Ergen. Yes. I think it was settled legally 28 years ago 
in the betamax case but the AutoHop does what everybody in the 
pay-TV business does with DVRs which is, allows a customer with 
the push of a button to record a channel or series of channels 
and it allows customers with the push of a button to skip ahead 
through a commercial. What AutoHop does it make it more 
convenient for customers to do it. When I woke up this morning, 
my alarm went off at 6 o'clock in the morning as it does every 
morning, and I don't have to reset it every morning for 6 
o'clock even if I'm in a different time zone. So AutoHop allows 
you then when you choose to watch a prime-time show, you can 
make the choice to AutoHop through the commercial with the push 
of a button. And so it is--just as we regulated--I've sat 
through regulation of, we have to have a rating system for our 
TV shows so that parents can block them out, we now have 
regulations to turn the volume down for commercials. It is 
amazing we had to do that. It is amazing that commercials could 
be that loud. And I think that we certainly don't need 
regulation that prevents a customer, as I understand the 
broadcasters' point, it is that consumers do not have the right 
to skip a commercial and do not have the right to record a 
show, and I think that, you know, we will fight the good fight 
for the consumer.
    Ms. DeGette. You know, I have to say, from the standpoint 
of the broadcasters, I understand their business plan and their 
revenue concerns but I think we have to balance the consumer 
decision of what they want to see versus that business plan. We 
need to work something out. I think we can all agree on that.
    Mr. Barrett is eager to make a point
    Mr. Barrett. I think if this committee is interested in 
protecting localism, if you are interested in having your local 
station cover the wildfires in Fort Collins, the AutoHopper and 
that technology will be damaging to the local business model 
and you will lose local stations' ability to provide the kind 
of coverage that is important to you and your district.
    Ms. DeGette. And that is why I am saying, I think for the 
local broadcasters, I am sympathetic to the business model, but 
we need to balance that plus the consumers wanting a choice. It 
is not DISH that wants to have that choice, it is the consumer. 
So I think we are going to have to work that out.
    Thank you very much, Mr. Chairman.
    Mr. Scalise [presiding]. The gentlelady's time has expired 
and now the gentlelady from Tennessee, Ms. Blackburn, is 
recognized for 5 minutes.
    Mrs. Blackburn. Thank you so much.
    I just have a couple of questions that I want to get to 
today but I do thank all of you for your patience, for your 
diligence in continuing to work on this issue.
    Ms. Sohn, since you are the only female on the panel 
today--I see seven guys and you--there is a lot I could say, 
right? We need more women down there.
    Let me go to something you said previously. You basically 
endorsed having usage-based billing at one point by saying the 
ISPs should charge a flat rate for a certain amount of 
bandwidth and then charge a per-bit metered rate for usage that 
goes beyond that limit. So what I wanted to see was if you 
still agreed with that. And let us say if somebody is a Netflix 
subscriber and they are using a large portion of capacity as 
opposed to someone who just checks email and does a little bit 
of surfing every day, should they be paying the same amount? So 
where are you on that one?
    Ms. Sohn. We don't endorse usage-based billing or data 
caps. I mean, basically what we say is, data caps are not 
inherently bad, but they can be abused and they can be used 
anti-competitively to discourage people from using online video 
to disadvantage competitors, so we are very, very concerned 
about that.
    One of the problems here is what is the rationale for 
usage-based billing or data caps? Former Chairman Powell says 
in his testimony and he said yesterday in response to questions 
about the DOJ investigation well, we have to deal with 
congestion on our networks. Well, data caps is a very blunt 
instrument to deal with congestion because congestion only 
happens at one point in time, right? So if I am backing up my 
data at 3 o'clock in the morning, I am not causing congestion, 
but that goes against my data cap. So I want to reemphasize 
that it is really, really important for Congress and the FCC to 
know how data caps are set, how they are evaluated, how they 
are moved over time. I mean, Comcast just raised its data cap 
for the first time in 4 years from 250 gigabytes to 300. Why 
did it take so long with the explosion of video? So no, we 
are--you know, we don't think usage-based billing is inherently 
bad but it can be abused and it is very, very important to know 
how they are used.
    Mrs. Blackburn. OK. Mr. Powell, let me come to you. You 
might want to respond to that. Then I want to ask you also to 
talk a little bit about MFN and Most Favored Nation status, and 
looking at that plus the alternate distribution method clauses 
that are there in cable carriage contracts. You know, in 
Nashville with a lot of the entertainers, they understand an 
MFN approach when they are doing shows. And so with a lot of 
our content producers and people that are pushing content 
forward, we have got some questions about the MFN and the ADM 
approach, so if you want to respond to what Ms. Sohn had to say 
and then answer the second question, that would be great.
    Mr. Powell. Sure. First, I would like to highlight 
something she did say and by the way has been echoed by the 
country's leading regulations, both the chairman of the Federal 
Communication Commission and the chairman of the Federal Trade 
Commission. There is nothing inherently wrong with usage-based 
pricing just like there isn't--if you run your air conditioning 
all day long at the lowest temperature and your neighbor 
chooses to open the windows and have the breeze blow in, you 
are going to pay more money than your neighbor is as a 
consequence of your use. So inherently usage-based pricing is 
about price fairness, that you are being allocated a portion of 
the cost consistent with your use, and that is a very well 
established economic principle and we don't think just because 
you can condemn it in words makes it so.
    The other thing I would say about caps, first of all, let 
us be clear. Caps are not the industry standard. In fact, as 
far as I know, after Comcast's recent change, there is not a 
cable company that employs a cap that penalizes a consumer 
after they exceed that cap. They are able to move to other 
pricing bundles or increased capacity. So, you know, this idea 
that we are all uniformly applying caps as a way of creating 
artificial scarcity is not factually accurate. And I do think 
there is an economically defensible reason for usage-based 
pricing and threshold models and it is not about congestion 
management, as Gigi suggested. It is about how do you fairly 
monetize a very high fixed cost network? You have to dig up the 
ground, put this thing in and you have to charge your end 
users. And also I might note because of net neutrality, we are 
not allowed to charge other corporations. We have to charge end 
users alone. And how to do that fairly is the question that 
cable companies are experimenting with.
    On MFN, Congresswoman, honestly, I am not that much of an 
expert on the specifics of these contracts. They have been 
around a long time. I would note that in the DOJ supposed 
investigation that is underway, DOJ looked at these MFNs in the 
context of the Comcast/NBC merger and other merger-specific 
deals and didn't find antitrust violations in those cases in 
passing on them. So to be honest, they are contract specific. I 
am not usually privy to the contours of them. I think they can 
serve a beneficial purpose. I also think they can be harmful, 
but that is what we rely on honest examination for.
    Mrs. Blackburn. Thanks. I appreciate that.
    My time is expired, Mr. Chairman. I will yield back.
    Mr. Scalise. The gentlelady yields back.
    Now the gentleman from Pennsylvania, Mr. Doyle, is 
recognized for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Barrett, I want to thank you for joining us today. I 
know my constituents in Pittsburgh appreciate the Hearst 
station that you have there. I just want you to elaborate more 
on Mr. Ergen's comments about the hopper service.
    My understanding is, there is a fair-use exemption for DVR 
recordings. Can you explain to me why you believe that the 
hopper service is so different than regular DVR service?
    Mr. Barrett. I believe it goes beyond the contemplated 
fair-use parameters. I think it is a copyright issue. It is a 
matter that is in the court right now, and I will be anxious to 
see how the court adjudicates that. It remains a threat to the 
local broadcasting system and, you know, one of the best 
qualities of the American society is that we have a local 
broadcasting system that is in place in 210 markets, and in all 
the determinations that you will make, there is going to be a 
prioritization and a tradeoff of things, and I am here on 
behalf of people who are committed to local communities and I 
think there has go to be a high prioritization for preserving 
that localism that these stations provide.
    Mr. Doyle. Thank you.
    Ms. Sohn?
    Ms. Sohn. It is absolutely not a copyright issue, and to 
me, this is a perfect example about how copyright is misstated 
and misused, you know, to stop innovation. I mean, the Sony 
versus Universal case, as Mr. Ergen said, is absolutely clear. 
The public has the right to record what they want to record off 
of TV, whether it be a VCR or DVR. That was 1984. That was a 
long time ago.
    Look, people have been skipping commercials for 50 years 
since the guy who just died invented the remote control. This 
is about consumer choice. I remember it was about 10 years ago 
when Jamie Kellner from Fox said it was OK for people to go to 
the bathroom to skip commercials. So what Mr. Ergen's AutoHop 
service is doing is just turning three steps with a remote 
control into one, and consumers should have the right to do 
that.
    Mr. Doyle. Thank you.
    Mr. O'Leary, in your testimony you spoke about your 
UltraViolet service. My understanding is that it is basically a 
new way for consumers to be able to watch movies through the 
Internet rather than having to purchase a DVD that they can 
only watch on a DVD player. I find the service very 
interesting. I have some questions.
    On the UltraViolet Web site, you indicate that customers 
can stream content on almost any Internet-connected device and 
that they can also download digital copies when they don't have 
good Internet access. Can UltraViolet customers download a 
digital copy of a film onto any device or just certain 
compatible devices?
    Mr. O'Leary. My understanding, Congressman, is that it has 
to be a device that is registered with UltraViolet service, and 
that downloading is a component of it. I think in the first 
phase, the emphasis, as your question highlighted, is in 
streaming but they will have the ability to download it onto 
different devices as long as they were registered.
    Mr. Doyle. I just thought it was unclear on the Web site. 
Based on the advertising, it kind of seemed like to me that I 
could download the content onto any device of my choosing, and 
I noticed some similar confusion from some other UltraViolet 
users who thought they were going to get a digital copy of a 
movie to watch anywhere. Can you explain what some of the 
approved devices are that I can download my films to? What 
would be an approved device, for instance?
    Mr. O'Leary. Well, you could download it, for example, onto 
your laptop, onto, you know, a tablet, onto different things 
like that. I would have to get back to you with a specific list 
of the types of devices, a complete list of the types of 
devices that----
    Mr. Doyle. Yes, I am just curious what these UltraViolet-
compatible devices are. I think it just might be easier for 
consumers, you know, when you look at that Web site to 
understand what actually they can use and what they can't use.
    Mr. O'Leary. Absolutely.
    Mr. Doyle. And just to follow up to that, does your service 
give customers any guarantee that they will always have access 
to the purchase they made? You know, I have my old DVD. You 
know, some of them might be scratched up but I can still go 
into the closet and pull out that DVD any time I want because I 
know they are always there. Is there a guarantee that people 
will always have access to a purchase they make?
    Mr. O'Leary. Yes, Congressman, it is my understanding that 
there is a perpetual agreement between the consumer and the 
producer in that they will have access to those, yes.
    Mr. Doyle. Thank you.
    Mr. Chairman, with that I will yield back.
    Mr. Scalise. Thank you.
    The chair will now recognize himself for 5 minutes. When we 
look at the video marketplace today, it is drastically 
different than it was in 1992 when Congress passed the Cable 
Act yet the laws and regulations written then still apply today 
as if a monopoly power exists and as if innovation has come to 
a screeching halt. I think it is important for us to go back, 
you know, because we take for granted that technology--you 
know, I can look on my video device and watch Swamp People 
episodes on this video device and yet the laws that we have on 
the books today were written when we had these devices for 
telephones. So while I can do things today we all take for 
granted, just remember, the law was written when this device 
was your communications device. And so I think when we start 
this conversation, it is real important to remember that 
technology has changed dramatically yet the law hasn't changed 
at all and so we have got a process today where if you have a 
disagreement with the law, you have to go to the FCC and maybe 
they rule your way one day, maybe they rule against you one 
day, but shouldn't we have this open discussion.
    Traditional distributors remain subject to archaic 
regulations while new entrants operate virtually free from the 
heavy of government but are constantly threatened by the 
possible extension of these same obsolete rules. Since Congress 
created the problem decades ago, it has a responsibility to 
review and fix them today.
    The current unfair system forces people to turn to the FCC 
for relief and encourages new entrants to cherry-pick 
regulations that benefit their platforms. I also question the 
wisdom of regulating new startups and innovative services as 
traditional video providers. They are not recipes for 
encouraging the utmost innovation, investment and ultimately 
competition benefiting consumers.
    Modernizing this decades-old regulatory framework should 
instead focus on providing relief to all stakeholders by 
repealing the intertwined 1976 and 1988 compulsory copyright 
licenses as well as the 1992 cable Act. Sweeping away these 
government intrusions altogether will actually level the 
playing field for content creators and video distributors 
alike. Negotiations for broadcast content will then look much 
like it does for cable programming where compensation is paid 
for the issuance of traditional copyright licenses.
    It is time we recognize the dramatic transformation that 
has occurred in the video marketplace by getting the government 
out of negotiations that should be strictly left up to the 
private sector. I think I know somebody in this subcommittee 
who has actually got legislation to do just that.
    I am going to ask some of our panelists some questions 
about this. First, if we can just go across the board and a yes 
or no question. Do you believe the current video marketplace 
allows consumers sufficient choice over what, when, where and 
how they watch video programming? Yes or no, starting with Mr. 
Johnson.
    Mr. Johnson. Well, regarding our service, I would say no 
because of the lack of programming.
    Mr. Scalise. Thank you. Just yes or no.
    Ms. Sohn. No.
    Mr. Scalise. Mr. Hyman?
    Mr. Hyman. Getting there, yes.
    Mr. Scalise. Mr. Funk?
    Mr. Funk. I agree with Mr. Hyman.
    Mr. Scalise. Mr. Powell?
    Mr. Powell. Make that three, yes.
    Mr. Scalise. Mr. Barrett?
    Mr. Barrett. Yes.
    Mr. Scalise. Mr. Ergen?
    Mr. Ergen. No, not yet.
    Mr. Scalise. Mr. O'Leary?
    Mr. O'Leary. Yes.
    Mr. Scalise. OK. So we have got clearly a split amongst the 
panelists here.
    Mr. Barrett, I appreciate the work that WDSU-TV, the NBC 
affiliate in New Orleans, does. It is one of the Hearst 
affiliates. Do you currently have the legal rights to 
sublicense all broadcast programming transmitted over your 
signals to companies like Netflix and Sky Angel if so desired? 
Who do you not qualify for compulsory copyright licenses?
    Mr. Barrett. We have a limited right from our networks with 
respect to how we may transmit their signal to other 
distributors.
    Mr. Scalise. So limited rights?
    Mr. Barrett. Yes.
    Mr. Scalise. OK. Mr. Ergen, your company is opposed to 
paying for access to content?
    Mr. Ergen. No, we are not opposed to paying for content.
    Mr. Scalise. Mr. Johnson?
    Mr. Johnson. When you say content, do you mean local 
programming or cable channels?
    Mr. Scalise. Any content that you----
    Mr. Johnson. Well, no. We respect and have been paying for 
the content
    Mr. Scalise. Mr. Hyman?
    Mr. Hyman. All we do is pay for content.
    Mr. Scalise. Right. So this is something that already 
occurs.
    I want to ask Mr. Barrett, you all own a stake in A&E, the 
History Channel, Lifetime, other cable channels, correct?
    Mr. Barrett. That is correct.
    Mr. Scalise. Now, those negotiations when you are 
negotiating with different video distributors, is that a free 
market? Do you all just sit at a table? Are there any 
government-enforced compulsory copyright laws or retransmission 
consent agreements that have to happen?
    Mr. Barrett. We negotiate on behalf of Hearst Television 
for the retransmission consent rights and are not involved in 
any linked negotiations with Heart-owned cable assets.
    Mr. Scalise. OK. I want to ask you about some comments you 
made in your opening statement. On page 9 and 10, you made 
specific reference to the legislation I filed, H.R. 3675. In 
it, you say ``Cable and satellite providers''--you are 
referring to their content. You said, ``First, they would turn 
back the clock to a time when cable and satellite providers 
confiscated and resold broadcast signals to their subscribers 
without obtaining broadcasters' consent.'' I would first 
suggest to you that my legislation does not do that. I would 
hope you have read the sections that not only repeal compulsory 
copyright but also retransmission consent, which means we would 
revert to traditional copyright laws, and under the legislation 
that I filed that you referred to, a company would have to pay 
for the content that you would provide before they could 
distribute it, yet you refer to my bill and you say that 
providers could confiscate the content under my bill, which is 
a mischaracterization. I wonder, did you read the bill and have 
you re-looked at this statement?
    Mr. Barrett. I have read the bill. If you say that this is 
a mischaracterization, I will revisit that.
    Mr. Scalise. And on a final question, Ms. Sohn, you look at 
this industry. You have read the bill, too. Does this 
legislation that I filed allow for people to confiscate content 
and give it away or would they actually have to pay for it?
    Ms. Sohn. No, of course not. I think the thing that keeps 
getting lost in this conversation is that Mr. Barrett and his 
colleagues get their transmission, meaning spectrum, for free 
from the public, OK? They get it for free from the public. In 
exchange, they are supposed to make that signal available for 
free to the public. So this notion that they are somehow 
entitled to money for their signal, number one, that has only 
been the case for the last 20 years, so from the advent of 
television broadcasting in the 1950s until 1992, you know, 
other people were, quote, unquote, confiscating their signals. 
But again, that signal is supposed to be free. I don't know how 
you confiscate something----
    Mr. Scalise. But under my bill, if somebody retransmits it, 
they would have to actually pay and get an agreement with one 
of Mr. Barrett's companies, pay to get the copyright license.
    Ms. Sohn. Right, and that makes more sense. That eliminates 
the middleman.
    Mr. Scalise. So I would just ask if you could go back and 
look at the statement.
    Mr. Barrett. I will go back and look, but let me comment. I 
think the characterization that we get this for free is a 
mischaracterization. The public trustee model has been in place 
since the 1920s and the 1930s Communication Act and it 
acknowledges that the limited spectrum is a limited resource. 
It belongs to the public and those most capable of serving the 
public interest should be entrusted with that license, and I 
think the body of record would show that local broadcasters in 
this country have served the public interest very well and the 
notion of free is baloney.
    Mr. Scalise. Right. Well, that is referring to over the 
air. I was specifically asking about the bill that was filed 
and the copyright laws that would still be in effect if the 
bill were to pass, that nobody should retransmit your signal 
without first getting an agreement and compensation to you. All 
right. I appreciate it.
    Now Mr. Dingell, the gentleman from Michigan, is recognized 
for 5 minutes.
    Mr. Dingell. I thank you. I commend you for holding this 
hearing and welcome to our witnesses. I have a lot of questions 
to ask and too little time, so I hope you will help me by 
answering yes or no.
    This question to all witnesses, and I am going to make a 
statement and then I am going to ask if there is anyone that 
disagrees. We can all agree that consumers want innovative, 
informative and entertaining new content. Absent such content, 
new delivery methods won't matter much to consumers. Now, is 
there anyone that disagrees with the statement that content 
creators should be compensated fairly for the content which 
itself should be protected. Is there anyone that disagrees with 
that statement?
    Very well. Now, speaking of some content, there is some 
consternation, I understand--this question to Mr. Ergen--about 
your latest invention's effect on content distribution so I 
would like to explore this issue perhaps a bit more carefully.
    Now, Mr. Ergen, is DISH Network currently being sued for 
copyright infringement and breach of contract in Federal court 
over its new hopper service? Yes or no.
    Mr. Ergen. Yes. I would characterize it a little bit 
differently. We filed a declaratory ruling----
    Mr. Dingell. Thank you.
    Mr. Ergen [continuing]. In the State of New York based on--
--
    Mr. Dingell. Now, the next----
    Mr. Ergen. Just let me finish, please, because I want to 
make sure the record is clear. We filed a declaratory ruling 
because----
    Mr. Dingell. Mr. Chairman, may I have order, please?
    The next question, Mr. Ergen, is it true that hopper only 
automatically records and provides commercial skipping for 
programs on the local four network affiliations in the market? 
Yes or no.
    Mr. Ergen. No, it does not automatically record.
    Mr. Dingell. Thank you. Now, Mr. Ergen, is this so because 
the channels are the most popular channels on your system? Yes 
or no.
    Mr. Ergen. It has to do with a variety of factors.
    Mr. Dingell. Is that yes or no?
    Mr. Ergen. Well, it is not a yes or no answer on that one 
because----
    Mr. Dingell. I have got an election coming up like all of 
my colleagues here on the committee, and like every politician 
everywhere, and we all use political ads on local stations to 
reach our constituents, those who vote in the districts. The 
hopper potentially limits the ability of every member of this 
subcommittee and every one of our challengers to reach 
constituents with ads to help them to make up their minds on 
Election Day. Do you understand and appreciate the concern that 
the politicians up here on the dais and other politicians 
everywhere would feel in this matter? Yes or no.
    Mr. Ergen. I understand consumers very well. I am not a 
politician so I can't say that I understand your concerns on 
whether someone----
    Mr. Dingell. Very well. Thank you.
    Now, given all of this, Mr. Ergen, I hope you understand my 
skepticism when it comes to DISH's latest offering and its 
effect on the future of video.
    Now, I would like to use the rest of my time to learn a 
little bit more about how the cable industry is adapting to new 
Federal communications regulations to provide its subscribers 
with new types of content and ways to do this. Now, Mr. Powell, 
is it true that the cable industry supported the commission's 
Open Internet Order? Yes or no.
    Mr. Powell. Ultimately, yes.
    Mr. Dingell. Thank you. Mr. Powell, again, if you please. 
Help me remember, was use-based billing considered and allowed 
by the Open Internet Order? Yes or no.
    Mr. Powell. Yes.
    Mr. Dingell. Mr. Powell, were managed services also 
considered and allowed as part of the order? Yes or no.
    Mr. Powell. Yes.
    Mr. Dingell. Mr. Powell, I want to thank you for the way 
you are proceeding here. So are cable companies delivering 
products and services as well as practicing business models 
that comply with the Open Internet Order? Yes or no.
    Mr. Powell. Yes.
    Mr. Dingell. Mr. Powell, in other words, cable is complying 
with the order. Is that right?
    Mr. Powell. Yes, we believe we are.
    Mr. Dingell. Now, Mr. Powell, one last question, and I do 
want to commend you again. The FCC just sunsetted its 
Viewability Order. I think it is very important that cable 
subscribers be able to access local content by smaller 
broadcasters. Now, this is the question. What steps will NCTA's 
member companies take to ensure that their subscribers can 
still access local broadcast signals affected by the 
Viewability Order's sunset?
    Mr. Powell. Yes, we agree that it is important that they 
continue to receive those signals. Eighty percent of the 
consumers have already gone digital and they will not be 
affected. As to the remaining 20 percent, we have committed to 
low-cost boxes that would make that an affordable transition, 
similar to the boxes broadcasters used for the HDTV transition, 
and we have committed to providing adequate notice and a 
transition period that will allow that to happen smoothly.
    Mr. Dingell. Thank you, Mr. Powell.
    And Mr. Chairman, to you my thanks. To the panel, thank you 
for your assistance and your candor.
    I yield back the balance of my time.
    Mr. Scalise. The gentleman yields back.
    The gentleman from Illinois, Mr. Rush, is recognized for 5 
minutes.
    Mr. Rush. Thank you, Mr. Chairman, and I want to thank the 
witnesses also for their appearance before this subcommittee.
    I have a question for the panel regarding the legal 
construction of the MVPD definition that I will submit for the 
record or may get to ask if we go another round of questions. 
And if there is time remaining, Mr. Chairman, I would also like 
to hear some of the panelists' views regarding the consumer 
privacy matters. Privacy needs to be addressed as so many of 
your business models depend heavily on advertising and there 
are other emerging models not represented here today that are 
rolling out video offerings tied to social media platforms.
    But first, I would like to ask for the record questions 
that pertain to the importance of more diverse ownership of 
broadcasting, wireless, cable and information services 
licenses. Mr. Barrett, while I agree with you that we should 
lament the lack of diverse ownership and control of wireless 
services, I would like to look more into something that is 
written into your testimony. It says that, and I quote, ``The 
broadcast model permits diversity of ownership and control that 
does not exist in wireless services.'' Did you know, Mr. 
Barrett, for example, that minorities make up more than one-
third of the U.S. population yet only own an estimated 3 
percent of full-power commercial television stations and a 
little more than 7.5 percent of commercial radio stations? And 
I strongly suspect that minority cable system ownership numbers 
are not much better or much lower. Do these numbers suggest to 
you that there is sufficient diversity of ownership and 
offerings of diverse video content and should we be concerned 
that those levels could decrease even further following 
voluntary relocation of broadcasters during the lead-up to 
incentive auctions?
    Mr. Barrett. I think those numbers suggest that there is a 
sad limitation of the number of minorities that are involved in 
ownership. I think my comments and my remarks were meant to 
suggest that there are 1,700 or so TV stations across the 
country. There is an opportunity for more diverse ownership 
than there may be in a world where the national licensees and 
national providers of this content is the reality that we live 
with. I think the country is at risk in terms of less diversity 
and I would note that minority groups are very dependent on 
broadcast reception. Twenty-eight percent of Asian households, 
23 percent of African American households, 26 percent of Latino 
households are today receiving broadcast reception over the 
air.
    Mr. Rush. Thank you very much.
    Mr. Chairman, without objection, I would like to enter into 
the record a copy of a letter that was just filed with the FCC 
a couple days ago by a number of stakeholders asking the FCC to 
study the state of black radio ownership and programming 
diversity and to adopt rules that address these disparities. 
Even though the subject we are taking up today is video and not 
audio, these stated concerns and the state of minority 
ownership in the video marketplace is even more acute and 
troubling.
    Mr. Scalise. Without objection.
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    Mr. Rush. This is a question I have for both Mr. Barrett 
and Mr. Powell around the issue of tax certificates.
    In the past, Mr. Barrett, the association you are 
representing here today, the NAB, has strongly endorsed passage 
of legislation to establish a new communications tax 
certificate program. Is that still the NAB's position?
    Mr. Barrett. Yes, it is. The NAB would continue to support 
such a legislative initiative.
    Mr. Rush. And Mr. Powell, the association that you are 
representing here today, the NCTA, also previously endorsed 
passage of legislation for a new communications tax certificate 
program. Is that still the NCTA's position?
    Mr. Powell. Yes, Mr. Rush. In 2003, when Senator McCain 
introduced tax certificate, as chairman of the FCC, I was an 
enormous proponent and remain so.
    Mr. Rush. Thank you very much.
    Mr. Chairman, without objection, I would like to enter into 
the record the FCC's Section 257 report recommending that 
Congress reinstate a tax certificate policy. I will point out 
that the statement of former FCC Commissioner Michael J. Copps 
accompanying that order as being the source for the minority 
ownership percentages that I cited earlier.
    And with that, Mr. Chairman, I yield back the balance of my 
time.
    Mr. Scalise. The gentleman yields, and there is no 
objection to the gentleman's unanimous-consent motion, so that 
will be entered.
    [The information is available at http://www.fcc.gov/
document/section-257-triennial-report-congress-identifying-and-
eliminating-market-entry-barriers-ent.]
    Mr. Scalise. Now the gentleman from Massachusetts, Mr. 
Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Ms. Sohn, could you tell me what you believe the effect 
will be of the proposed deal between Verizon and spectrum 
companies on the telecommunications marketplace?
    Ms. Sohn. So the Verizon/spectrum co. deal will have 
several negative effects both for competition and consumers. 
One is, because there are these side agreements--OK, there is a 
spectrum sale and there is affiliated side agreements. Two of 
the side agreements, one is a marketing agreement, one is a 
reselling agreement, basically is an agreement between the 
cable companies and Verizon to lay down arms and no longer 
compete in the video or wireless marketplace. So Verizon and 
AT&T will get the wireless marketplace to themselves and the 
cable industry will get the wireline industry to themselves.
    But even worse than that, there is something called the 
Joint Operating Entity, or the JOE, and that is essentially an 
agreement between those five cable companies and Verizon to 
develop patents and technologies that would help to stream a 
video from wireless to wireline systems, and that has an 
enormous capability to be anticompetitive and used against, for 
example, Mr. Ergen's company. If he wants to use that 
technology, he would probably be charged, you know, very, very 
high licensing fees or he might be told I am sorry, you are not 
part of the club, you are not part of the cartel, you can't 
have this technology.
    Mr. Markey. Now, Mr. Ergen, are you afraid of that, that 
you might not be part of the club? I guess what Ms. Sohn is 
saying is that there is going to be cozy cooperation here that 
exists and you just might get walled out. Do you agree that 
that is a possibility?
    Mr. Ergen. Well, unfortunately, we have not seen the 
unredacted comments so I can't say specifically what they say, 
but we would certainly have a concern where two vicious 
competitors might get together to, A, not compete with each 
other, and B, exclude other people from competing with them.
    Mr. Markey. Yes. That has always been the beauty of the 
1992 and 1996 Telecom Act is that it created, you know, the 
conditions for Darwinian paranoia inducing competition, which, 
you know, ultimately results in innovation and more benefits 
for consumers. And so you always have to be wary, especially 
when people start talking about rewriting the 1992 and 1996 
Telecommunications Act, that somehow or other there is too much 
competition or too many players that out there, and maybe some 
of the smaller players don't need protection.
    So let me go to you, Mr. Powell. You just heard the two 
comments made by Ms. Sohn and Mr. Ergen. How would you comment?
    Mr. Powell. I will be limiting my comments, because as the 
head of the association, I am not really a party to the 
transaction and don't have the specifics, but the companies 
would in terms of their conversation. I would say that all 
deals like this deserve vigilance and that is why we have an 
antitrust process, and I think that we should rely on the 
confidence and the able skills of both the Federal 
Communications Commission, the Antitrust Division, to 
rigorously scrutinize the transaction for those purposes and to 
reach a conclusion in the public interest.
    I don't believe that it is intuitively clear that it is a 
capitulation, there wouldn't be continued competition among 
these companies, but I think that is why we have an antitrust 
process and I have a lot of faith in it.
    Mr. Markey. Let me ask you, Mr. Barrett, and you, Mr. 
O'Leary. July 1st is the deadline for the completion of kind of 
the rulemaking and the implementation of the provisions which I 
built into a 2010 law for video accessibility. Could you give 
us an update as to where your two industries are in terms of 
complying with that?
    Mr. Barrett. Speaking on behalf of Hearst Television, we 
are well in hand. Our implementation will be fully complete, 
and I am very pleased with how that has proceeded, and I think 
on behalf of the NAB member stations, the same thing can be 
said.
    Mr. Markey. Mr. O'Leary?
    Mr. O'Leary. Congressman Markey, I would say effectively 
the same thing in response to your question.
    Mr. Markey. And what was that?
    Mr. O'Leary. That we are working towards compliance and I 
am also pleased with the way the process has gone.
    Mr. Markey. I mean, it is so important that the deaf and 
the blind do have access in the 21st century, that they are 
able to use all their God-given abilities to fully participate, 
and so it is very, very important that we get the full 
cooperation, and we thank you for your positive comments about 
the process.
    I thank you, Mr. Chairman, and I yield back the balance of 
my time.
    Mr. Walden. The gentleman yields back the balance of his 
time.
    I believe that is the last member of subcommittee with 
time, so I want to thank all of the participants today. As you 
probably heard from some of our colleagues, they may have other 
questions that they would submit for the record, that if you 
can be responsive in your answers, it would really help us in 
our work. Your presence today certainly does that. These are 
consequential issues we are discussing at a policy level, and 
your input is really helpful in our process. So I thank you for 
participating, and with that, the hearing is adjourned.
    [Whereupon, at 12:40 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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