[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                 SATELLITE TELEVISION LAWS IN TITLE 17

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                     COURTS, INTELLECTUAL PROPERTY,

                            AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 10, 2013

                               __________

                           Serial No. 113-48

                               __________

         Printed for the use of the Committee on the Judiciary


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




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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama              ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania             KAREN BASS, California
TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Courts, Intellectual Property, and the Internet

                 HOWARD COBLE, North Carolina, Chairman

                TOM MARINO, Pennsylvania, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas                   HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE CHABOT, Ohio                     Georgia
DARRELL E. ISSA, California          JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 KAREN BASS, California
MARK AMODEI, Nevada                  CEDRIC RICHMOND, Louisiana
BLAKE FARENTHOLD, Texas              SUZAN DelBENE, Washington
GEORGE HOLDING, North Carolina       HAKEEM JEFFRIES, New York
DOUG COLLINS, Georgia                JERROLD NADLER, New York
RON DeSANTIS, Florida                ZOE LOFGREN, California
JASON T. SMITH, Missouri             SHEILA JACKSON LEE, Texas

                       Joe Keeley, Chief Counsel

                   Stephanie Moore, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 10, 2013

                                                                   Page

                           OPENING STATEMENTS

The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Chairman, Subcommittee on Courts, 
  Intellectual Property, and the Internet........................     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Courts, Intellectual Property, and the Internet.............     2
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on Courts, Intellectual 
  Property, and the Internet.....................................     4

                               WITNESSES

Paul Donato, Executive Vice President and Chief Research Officer, 
  The Nielsen Company
  Oral Testimony.................................................     6
  Prepared Statement.............................................     8
R. Stanton Dodge, Executive Vice President, General Counsel and 
  Secretary, DISH Network, L.L.C.
  Oral Testimony.................................................    10
  Prepared Statement.............................................    12
Gerard J. Waldron, Partner, Covington and Burling LLP, on behalf 
  of the National Association of Broadcasters
  Oral Testimony.................................................    25
  Prepared Statement.............................................    27
Earle A. MacKenzie, Executive Vice President and Chief Operating 
  Officer, Shentel Cable, on behalf of the American Cable 
  Association
  Oral Testimony.................................................    43
  Prepared Statement.............................................    45
James Campbell, Regional Vice President, Public Policy, 
  CenturyLink, Inc.
  Oral Testimony.................................................    56
  Prepared Statement.............................................    58
Robert Alan Garrett, Partner, Arnold & Porter LLP, on behalf of 
  Major League Baseball
  Oral Testimony.................................................    67
  Prepared Statement.............................................    68
Preston Padden, former President, ABC Television Network, former 
  Executive Vice President, The Walt Disney Company, testifying 
  on his own behalf
  Oral Testimony.................................................    70
  Prepared Statement.............................................    72

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Melvin L. Watt, a 
  Representative in Congress from the State of North Carolina, 
  and Ranking Member, Subcommittee on Courts, Intellectual 
  Property, and the Internet.....................................   109


                 SATELLITE TELEVISION LAWS IN TITLE 17

                              ----------                              


                      TUESDAY, SEPTEMBER 10, 2013

                        House of Representatives

            Subcommittee on Courts, Intellectual Property, 
                            and the Internet

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2141, Rayburn Office Building, the Honorable Howard Coble 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Coble, Goodlatte, Marino, 
Sensenbrenner, Smith (Texas), Chabot, Farenthold, Holding, 
Collins, DeSantis, Smith (Missouri), Watt, Conyers, Chu, 
Deutch, Bass, Richmond, DelBene, Jeffries, and Jackson Lee.
    Staff present: (Majority) Joe Keeley, Chief Counsel; Olivia 
Lee, Clerk; and (Minority) Stephanie Moore, Minority Counsel.
    Mr. Coble. Good morning, ladies and gentlemen. I appreciate 
the witnesses' presence today. We welcome you to the 
Subcommittee hearing on satellite television laws contained in 
Title 17 of the U.S. Code.
    Not unlike other copyright issues before Congress, the 
circumstances surrounding disputes over our satellite 
television laws are exceedingly complicated and important to 
every congressional district.
    When it comes to video, I believe there are some points on 
which we can all agree. Americans love to watch television and 
want to have as many choices available at the lowest possible 
price.
    This Committee has created three compulsory licenses to 
make content more available. While in some instances these 
licenses have served consumers and stakeholders efficiently and 
effectively, I believe it is safe to say that compulsory 
licenses are not without their shortcomings. The classic 
example is when a local sports competition or a popular show is 
suddenly unavailable. You go home looking forward to seeing 
that particular show involved and you are unable to get it. You 
are likely to turn off the television and call someone to 
complain. I think that is a natural result.
    Regardless of what perspective a Member of Congress has on 
licensing issues, we can all learn one truth. Our constituents 
are not shy about telling us to do something about problems in 
the marketplace that deprive them of their favorite shows.
    As we begin this review of the satellite licenses, one of 
our goals will be to find solutions to situations where the 
laws tend to benefit one party over the other. Throughout this 
discussion, our top priority will be to protect the interests 
of consumers. When there is a dispute and a resultant blackout, 
consumers are left with no recourse.
    Again, this is an extremely complex area of copyright law, 
and I am pleased by our highly talented and highly qualified 
panel of witnesses who are participating in today's hearing.
    I am now pleased to recognize the distinguished gentleman 
from North Carolina, the Ranking Member, Congressman Mel Watt, 
for his opening statement.
    Mr. Watt. Thank you, Mr. Chairman.
    Today is the first of what I suspect will be a series of 
hearings to consider the reauthorization of the Satellite 
Television Extension and Localism Act, or what we call STELA, 
which, among other things, extended the 119 license through 
December 31, 2014.
    Enacted in 1988, the Satellite Home Viewer Act created a 
copyright compulsory license for the benefit of the satellite 
industry to retransmit distant television signals to its 
subscribers. The license, codified in section 119 of the 
Copyright Act, was originally intended to ensure the 
availability of broadcast programming to satellite providers 
and to foster competition with the cable industry, which has 
enjoyed a permanent compulsory license to retransmit 
copyrighted content contained in both local and distant 
broadcast television signals since passage of the Copyright Act 
of 1976.
    The intent of providing compulsory copyright licenses was 
to facilitate investment in new, creative works by the 
satellite and cable industries by eliminating direct 
negotiation with the copyright owners for the use of distant 
signal programming.
    Although the 119 compulsory license is temporary and 
therefore the focus of the reauthorization we will be 
considering, it is part of a complex statutory and regulatory 
framework governing cable and satellite retransmission of 
broadcast signals, making it virtually impossible to consider 
whether to reauthorize the provision in a vacuum.
    For that reason, the Committee on Energy and Commerce, 
which has jurisdiction over key regulations and statutory 
provisions that govern the broadcast market, has held multiple 
hearings in this Congress on whether to repeal, revise, or 
reauthorize STELA.
    Four years ago, under the leadership of Chairman Conyers, 
the Judiciary Committee also grappled with a number of issues 
that had emerged in the marketplace in an effort to simplify 
and modernize what was largely perceived as an anachronistic 
regime for the provision of broadcast programming. Most 
immediately we addressed the impending transition from analog 
to digital television. Other issues the Committee considered at 
that time remain unresolved while new technologies have further 
disrupted the market with innovations that we could not foresee 
less than a decade ago.
    I believe we have a unique opportunity to tackle some of 
the big issues that will define the future of video. Compulsory 
licenses I think everyone will admit represent a departure from 
free market negotiations and are usually the last resort in the 
event of market failure. When the compulsory licenses were 
first enacted, the cable and satellite industries were in their 
embryonic stages. Today, however, it is estimated that over 90 
percent of American households subscribe to a pay TV service. 
So there are a myriad of issues that may be relevant for 
consideration.
    For example, are these licenses still necessary to foster 
competition or should they be phased out as the Copyright 
Office and others have recommended? How many consumers truly 
benefit from these licenses?
    On the other hand, is the current overlapping web of 
communications and copyright policy functioning in a way that 
meets the goals of national media policy? It cannot be denied 
or disregarded that marketplace incumbents, including 
broadcasters, cable, and satellite providers and content 
creators, have entrenched interests and investments in a 
complex framework created by law. Would an abrupt dismantling 
of this structure be unfair to those industries and harmful to 
consumers? Can current law keep pace with new technologies that 
seek to exploit ambiguities in the legal framework, for 
example, what constitutes a public performance for 
retransmission consent purposes?
    Recently the CBS/Time Warner Cable retransmission consent 
dispute resulted in a temporary blackout for some consumers. Is 
that dispute evidence of a broken system or does it reflect a 
robust free market?
    Also, how should we address or should we address the 
nascent online video distribution models that in the future may 
very well displace the traditional distribution methods 
altogether? Are these Internet-based video distribution models 
the new kids on the block entitled to comparable statutory 
imposed rights, obligations, and prohibitions? Or is the time 
for Government intervention over?
    These are only a few of the broad policy questions that I 
think are relevant in this space. I believe that we must 
determine whether the current regime is working to ensure that 
content providers and distributors, old and new, are 
appropriately compensated and incentivized in a way that 
provides a competitive environment for American consumers.
    We have an impressive and diverse group of expert witnesses 
today with very different views on how the marketplace works 
and how it has developed since STELA and most probably what the 
rules of the road should be moving forward. I look forward to 
the testimony today and to continuing this dialogue in the 
future.
    And, Mr. Chairman, I yield back and thank you for the time.
    Mr. Coble. I thank the gentleman for his opening statement.
    The Chair now recognizes the distinguished gentleman from 
Virginia, Mr. Bob Goodlatte, the Chairman of the Committee on 
the Judiciary, for his opening statement.
    Mr. Goodlatte. Well, thank you, Mr. Chairman. I appreciate 
your holding this hearing. I look forward to the testimony of 
the witnesses.
    For decades, the vast majority of Americans have relied 
upon satellite and cable services for access to a wide variety 
of video content ranging from nighttime entertainment for their 
families, educational shows for their children, local and 
national news with information that informs them, and public 
access channels that empower Americans to see their local, 
State, and Federal representatives in action.
    As the number of channels and sources of video content 
continue to increase, a growing number of Americans now 
subscribe to additional services such as Redbox, Amazon, and 
Hulu, some of which create their own content. Americans are 
embracing these additional services to such a degree that 
society has coined two new terms, ``cord shavers'' and ``cord 
cutters,'' for those who are reducing or eliminating 
traditional video subscriptions. According to the FCC's latest 
competition report, in addition to free over-the-air broadcast 
content, 100 percent of Americans have access to two satellite 
services. 98 percent have access to these two satellite 
services and one local alternative, and 35 percent have access 
to two satellite services and two local alternatives.
    Marketplace competition has grown significantly since the 
last major Committee activity in this area in 2010 when 
Congress enacted the Satellite Television Extension and 
Localism Act. There are three compulsory licenses in Title 17 
impacting this industry, one of which expires at the end of 
2014. This Committee will consider, over the next year, whether 
a reauthorization of this compulsory license is warranted.
    However, as the written testimony submitted for this 
hearing demonstrates, some interested parties are advocating 
for Congress to undertake more than a simple reauthorization 
and look at other matters surrounding the video marketplace and 
competition policies that appear to have become more prominent 
recently.
    One core factor that this Committee will weigh, as we 
consider these important issues, is ensuring that copyright 
owners maintain the right to distribute their intellectual 
property as they choose. This Committee has traditionally 
disfavored compulsory licenses, although there are three in 
effect today in this marketplace.
    Another core factor we will weigh is ensuring competition 
in the marketplace. Consumers and intermediaries benefit where 
there is robust competition. As the Committee of jurisdiction 
for competition policy, efforts that involve competition issues 
deserve this Committee's oversight and ongoing attention.
    The written testimony of the witnesses here this morning 
highlights the importance of both issues to the video 
marketplace. As this Committee continues its oversight and 
legislative activities in this area, I look forward to hearing 
from all interested parties about their perspectives and 
concerns.
    And I thank the Chairman and yield back.
    Mr. Coble. I thank you, Chairman Goodlatte.
    The Chair now recognizes the distinguished gentleman from 
Michigan, Mr. John Conyers, the Ranking Member of the Committee 
on the Judiciary, for his opening statement.
    Mr. Conyers. Thank you, Chairman.
    The Satellite Television Extension and Localism Act is full 
of options that we have witnesses to distinguish.
    I want to thank the Chairman for keeping the witness list 
down to seven. I understand we ran out of tables and we were 
not able to put on any more people than are here.
    I want to consider these options, and I look forward to the 
witnesses' testimony.
    Two considerations, one about copyright owners and the 
other about consumers. We must protect copyright owners because 
it is their property that forms the basis of the entire scheme. 
Compulsory licenses are generally not favored because they 
distort the marketplace and result in below-market rates being 
paid to content owners.
    Second, we must enact policies that protect consumers and 
safeguard competition. Consumers benefit from increased 
competition because more competition usually produces lower 
prices. And copyright owners do not benefit financially from 
retransmission consent agreements, which is at the heart of 
these disputes, despite the fact that the signal only has worth 
because of the programming contained on the signal.
    And so I think we must focus on principles of localism. 
People who subscribe to cable or satellite television have so 
many options. There is never a shortage of something to watch. 
But even with all these choices, people still highly value 
their local news, their local sports, and need local channels 
to deliver community service and emergency information. 
Localism and the traditional network affiliate relationship 
also benefits copyright owners by allowing their programming to 
be publicly performed in every market across the country.
    Now, I conclude by observing that there will be 
circumstances in which these principles will conflict. I look 
forward to working to ensure that the public interest can best 
be served through satellite carriage of broadcast television 
signals.
    And I thank the Chairman for allowing me to make these few 
brief remarks.
    Mr. Coble. Thank you, Mr. Conyers. I appreciate that.
    As indicated before, we have a very distinguished panel 
before us today, and I will begin by swearing in the witnesses. 
Gentlemen, if you would please rise.
    [Witnesses sworn.]
    Mr. Coble. Let the record show that all witnesses concur 
with that.
    And I will now introduce our panel. We appreciate 
everyone's attendance at this very important hearing.
    Our first witness today is Mr. Paul Donato, Executive Vice 
President and Chief Research Officer of the Nielsen Company. 
Mr. Donato is responsible for overseeing the development and 
evaluation of research while also serving as Nielsen's liaison 
to his clients and industry associations. He received his B.A. 
in psychology and sociology from the State University of New 
York at Stony Brook.
    Our second witness is Mr. Stanton Dodge, Executive Vice 
President, General Counsel, and Secretary for DISH Network. Mr. 
Dodge is responsible for all legal and government affairs for 
DISH-added subsidiaries. He received his B.S. in accounting 
from the University of Vermont.
    Our third witness is Mr. Gerard Waldron, partner at 
Covington and Burling, testifying today on behalf of the 
National Association of Broadcasters. With more than 25 years 
experience in law and public policy, his practice focuses on 
communication and technology. Mr. Waldron received his B.A. 
degree from the University of Virginia.
    Chairman Goodlatte has now asked permission to introduce 
our next witness.
    Mr. Goodlatte. Thank you, Mr. Chairman. It is my pleasure 
to welcome our fourth witness and my constituent, Mr. Earle 
MacKenzie, the Executive Vice President and Chief Operating 
Officer of Shentel Cable, testifying on behalf of the American 
Cable Association. With 35 years of telecom experience, Mr. 
MacKenzie is responsible for Shentel's daily operations of its 
many subsidiaries. He received his B.A. in accounting from the 
College of William and Mary. Earle, welcome. We are delighted 
to have your testimony today as well.
    Mr. Coble. I thank the Chairman.
    Our next witness is our fifth witness today, Mr. James 
Campbell, Vice President for Public Policy at CenturyLink. Mr. 
Campbell is responsible for the company's regulatory and 
legislative affairs and received his bachelor's degree from 
Santa Clara University.
    Our sixth witness is Mr. Robert Garrett, partner at Arnold 
& Porter, who is testifying today on behalf of Major League 
Baseball. Mr. Garrett joined Arnold & Porter in 1977 and has 
served as outside counsel to Major League Baseball on copyright 
and telecom issues for more than 35 years. Mr. Garrett attended 
the Northwestern University.
    Our seventh and final witness is Mr. Preston Padden, who is 
testifying on his own behalf today. With an extensive career in 
the media business, he served as former President of the ABC 
Television Network and former Executive Vice President of the 
Walt Disney Company. He received his B.A. from the University 
of Maryland.
    We welcome you all and we will start, Mr. Donato, with you. 
You will be the lead-off hitter today.
    Gentlemen, as is obvious to all, we have seven witnesses. 
This could take a long time. We try to apply the 5-minute rule. 
There is a timer before you. When that green light turns to 
amber, that is your signal that the time is running. The clock 
is running out. You have a minute to go. So at that point, we 
would appreciate if you would sort of wrap it up.
    We are trying to apply the 5-minute rule to us as well. So 
if you will respond tersely to our questions, that would be 
helpful as well.
    So, Mr. Donato, why don't you start us off?

 TESTIMONY OF PAUL DONATO, EXECUTIVE VICE PRESIDENT AND CHIEF 
             RESEARCH OFFICER, THE NIELSEN COMPANY

    Mr. Donato. Good morning, Chairman Coble, Ranking Member 
Watt, and Members of the Subcommittee. My name is Paul Donato 
and I am the Executive Vice President and Chief Research 
Officer for Nielsen. I thank you for the opportunity to join 
today's panel to discuss Nielsen's designated market area, 
commonly known as DMAs, and their role in satellite 
transmission statutes such as STELA.
    Nielsen is a global media and marketing research company 
that measures what people watch and buy in 100 countries 
worldwide. In the United States, we are widely known for our 
television audience measurement service, the Nielsen television 
ratings, which provide estimates of audiences for broadcast, 
cable, and satellite programs.
    Over the years, Nielsen has developed innovative 
technologies, allowing us to expand our measurement services to 
include computers, tablets, and smart phones. Through these 
technologies and our volunteer opt-in panelists, Nielsen has 
the capability to measure consumer Internet purchase habits, 
listening trends on terrestrial, Internet, and satellite radio, 
and how consumers utilize social media. Our audience 
measurement reports are relied on by a range of public and 
private sector stakeholders to facilitate business transactions 
and gauge consumer trends. Nielsen's DMAs are also used by the 
Federal Government to define markets in satellite television 
retransmission statutes.
    Most discussions of STELA and its predecessors begin with a 
conversation about Nielsen's DMAs, and that will be the focus 
of my testimony today.
    The designated market area is a collection of counties 
which share a predominance of viewing to broadcast stations 
licensed to operate within a given standard metropolitan 
statistical area as defined by the OMB. Predominance or 
dominance of viewing is defined here to indicate that ``for a 
particular county, homes may view broadcast stations licensed 
to operate from different but generally nearby metro areas. The 
DMA with the predominant viewing is that metro area whose 
broadcast stations have the highest share of audience for that 
county.''
    So we start with a metro area, such as New York or Los 
Angeles, and continue on through the 210 DMA markets in the 
United States.
    Each March, using tuning data collected from Nielsen homes 
over the last year, existing DMA regions are tested in order to 
verify that the dominant share of viewing from each DMA county 
continues to be from broadcast stations licensed to operate 
from within that same home metro. All assignments are based on 
share of household tuning between 6 a.m. and 2 a.m. Sunday 
through Saturday. While this is the basic premise behind the 
DMA, there are rules which Nielsen exercises when it appears 
that the predominance of viewing may be shifting. These rules 
try to balance the need for stability in television markets, 
but at the same time, they need to ensure that counties are 
assigned to the DMAs from where the highest share of broadcast 
viewing occurs.
    For example, if a larger share of viewing from a county 
shifts from its current DMA assignment to broadcast stations 
from another DMA, that shift must be statistically significant 
and occur for 2 consecutive years.
    Nielsen instituted the DMA system in the mid-1960's to 
measure the number of viewers in a particular area and, more 
specifically, to connect sellers and buyers of advertising.
    The DMA allowed for the creation of a market where buyers 
and sellers of local television advertising could do business 
with each other based on impartial information provided by a 
third party. Advertisers need to know that their ads are 
directed at audiences they want to serve. The TV Advertising 
Bureau estimates that in Q1 of this year, ad spending in the 
U.S. was almost $18 billion, with an estimate of $72 billion 
for the entire year. That is a market that fuels the great 
entertainment and news programs that this country produces and 
watches.
    With the emergence of cable and satellite television in the 
late 1980's and early 1990's, the landscape of the industry 
changed. The new technology allowed companies that carried 
television programming to expand their boundaries. 
Specifically, television stations were previously limited to 
being viewed within a local DMA and could not be seen outside 
of those boundaries. And while new technologies open up new 
horizons, they also create new problems for the television 
industry.
    The industry needed rules to determine which local stations 
could be carried in which local markets, and it turned to the 
Federal Government for help. In 1992, Congress and the FCC 
established rules governing which local television stations 
could be carried in which local markets. As part of that 
process, Nielsen's designated market areas were adopted as the 
guideline for determining which local stations could be 
carried. It should be noted that Nielsen did not recommend the 
use of the DMAs for this purpose nor were we asked for 
technical assistance on the use of the DMAs. It was a decision 
that was made entirely by Congress.
    Finally, as you work to learn more about the future trends 
in video use, we would be happy to assist you in any way we 
can. Thank you again for the opportunity to appear before you, 
and I look forward to your questions.
    [The prepared statement of Mr. Donato follows:]
    Prepared Statement of Paul Donato, Executive Vice President and 
                    Chief Research Officer, Nielsen
    Good morning Chairman Coble, Ranking Member Watt and members of the 
Subcommittee. My name is Paul Donato, and I am the Executive Vice 
President and Chief Research Officer for Nielsen. I thank you for the 
opportunity to join today's panel to discuss Nielsen's Designated 
Market Areas, commonly referred to as ``DMAs,'' and their role in 
satellite transmission statues such as the Satellite Television 
Extension and Localism Act (STELA).
    Nielsen is a global media and marketing research company that 
measures what people watch and buy in 100 countries worldwide. In the 
United States, we are widely known for our Television Audience 
Measurement Service, the Nielsen Television Ratings, which provide 
estimates of the audiences for broadcast cable and satellite programs. 
Over the years Nielsen has developed innovative technologies allowing 
us to expand our measurement services to include computers, tablets, 
and smartphones. Through these technologies and our volunteer 
panelists, Nielsen has the capability to measure consumers' Internet 
purchasing habits, listening trends on terrestrial, Internet and 
satellite radio, and also how consumers utilize social media. Our 
audience measurement reports are relied upon by a range of public and 
private sector stakeholders to facilitate business transactions and 
gauge consumer trends. Nielsen's DMAs are also used by the federal 
government to define markets in satellite television retransmission 
statutes.
            nielsen dmas & satellite retransmission statutes
    Most discussions of STELA and its predecessors begin with a 
conversation about Nielsen's DMAs, and that will be the focus of my 
testimony today.
The Designated Market Area
    The Designated Market Area is a collection of counties each of 
which shares a predominance of viewing to broadcast stations licensed 
to operate in a given Standard Metropolitan Statistical Area (SMSA) as 
defined by the Office of Management and Budget (OMB). Predominance or 
dominance of viewing is defined here to indicate that:

        for a particular county, homes may view broadcast stations 
        licensed to operate from different but generally nearby Metro 
        areas. The DMA with the predominant viewing is that Metro area 
        whose broadcast stations have the highest share of audience for 
        that county.

So we start with a Metro area such as the New York or Los Angeles SMSA 
and continue throughout the 210 DMA markets in the US.
    Each March, using tuning data collected from Nielsen homes over the 
last year, existing DMA regions are tested in order to verify that the 
dominant share of viewing from each DMA county continues to be from 
broadcast stations licensed to operate from within that same home Metro 
(SMSA). All assignments are based on share of household tuning between 
6 AM and 2 AM Sunday through Saturday. While this is the basic premise 
behind the DMA, there are rules which Nielsen exercises when it appears 
that the predominance of viewing may be shifting. These rules try to 
balance the need for stability in television market definitions and the 
need to ensure that counties are assigned to the DMAs from where the 
highest share of broadcast viewing occurs.
    For example, if the larger share of viewing from a county shifts 
from its current DMA assignment to broadcast stations from another DMA, 
that shift must be ``statistically significant'' and occur for two 
consecutive years.
    Nielsen instituted the DMA system in the mid-1960s to measure the 
number of viewers in a particular area and, more specifically, to 
connect the sellers and buyers of advertising.
    The DMA system allowed for the creation of a market where the 
buyers and sellers of local television advertising could do business 
with each other based on impartial information provided by a third 
party. Advertisers need to know that their ads are directed at the 
audience they want to serve. The Television Advertising Bureau 
estimates that Q1 2013 ad spending in the US was almost $18 billion, 
for an annual spending estimate of almost $72 billion for all TV, a 
market that fuels the great entertainment and news programs that this 
country produces and America watches.
    With the emergence of cable and satellite television in the late 
1980s and early 1990s, the landscape of the industry changed. The new 
technology allowed companies that carried television programming to 
expand their boundaries. Specifically, television stations that were 
previously limited to being viewed within a local DMA could be seen 
outside of those boundaries. And, while the new technologies open new 
horizons, they also created new problems for the television industry.
The DMA and Satellite Statutes
    The industry needed rules to determine which local stations could 
be carried in which local markets and it turned to the federal 
government for help. In 1992, the Congress and the Federal 
Communications Commission established rules governing which local 
television station could be carried in which local markets. As part of 
that process, Nielsen's Designated Market Areas were adopted as the 
guideline for determining which local stations could be carried in 
which local markets. It should be noted that Nielsen did not recommend 
the use of DMAs for this purpose, nor were we asked for technical 
assistance on the use of DMAs. This was a decision that was made by the 
Congress.
                               conclusion
    As you work to learn more about the future trends in video use, we 
would be happy to assist you in any way we can. Thank you again for the 
opportunity to appear before you and I look forward to your questions.
                               __________

    Mr. Coble. Thank you, Mr. Donato. Congratulations. You beat 
the illumination of the red light. Pressure on you, Mr. Dodge.
    Needless to say, gentlemen, your entire statements will be 
made part of the record.
    Mr. Dodge?

   TESTIMONY OF R. STANTON DODGE, EXECUTIVE VICE PRESIDENT, 
      GENERAL COUNSEL AND SECRETARY, DISH NETWORK, L.L.C.

    Mr. Dodge. Thank you. Chairman Goodlatte, Chairman Coble, 
Ranking Member Conyers, Ranking Member Watt, and Members of the 
Subcommittee, I appreciate the opportunity to testify today. My 
name is Stanton Dodge, and I am the General Counsel of DISH 
Network. DISH is the Nation's third largest pay TV provider 
with more than 14 million subscribers and over 25,000 
employees. We are the only provider for local television 
service in all 210 local DMAs.
    DISH's award-winning innovations include the Hopper DVR and 
TV Everywhere features that consumers can use to have greater 
choice and control over their viewing experience. DISH pays 
billions of dollars a year for the right to distribute 
programming to our subscribers and fully supports fair 
compensation to copyright holders.
    As the Subcommittee examines the video marketplace, we 
believe that outdated laws need to be updated comprehensively 
to reflect changes in the market and changes in how consumers 
view their content. Public policy should support the 
preservation and expansion of consumer video choices.
    Unfortunately, as distributors like DISH offer advances in 
technology, some programmers are again crying wolf, saying that 
this time the threat is real and they will not be able to 
survive the onslaught of innovation. The challenges to our 
Hopper DVR are a perfect example.
    We believe in consumer choice and to preserve and expand 
it, I want to make three points.
    First, we believe Congress should protect consumers against 
the growing problem of blackouts caused by retransmission 
consent disputes. The proof is in the numbers. In 2010, there 
were 12 blackouts. In 2011, there were 51. In 2012, the number 
soared to almost 100, and the pace has yet to level off. So far 
in 2013, we have had 84 blackouts which puts us on track for a 
record-setting year of 120.
    Making matters worse, the length of the blackouts and the 
number of consumers impacted are increasing. The consumers are 
the real victims of these one-sided negotiations. Their 
programming gets pulled by the broadcasters and their monthly 
bills go up. Of increasing concern, some broadcasters are 
coordinating their negotiations with each other and colluding 
rates that they demand from video distributors like DISH.
    The American Television Alliance, a coalition whose 
membership encompasses cable, satellite, and telco providers, 
independent programmers and public interest groups, and of 
which DISH is a member, is unified in calling for changes to 
the outdated retransmission consent rules as part of the STELA 
reauthorization. We and many others in the industry propose, 
among other things, that when a local network station is pulled 
from a consumer due to a retransmission consent dispute, the 
video distributor should be able to provide another market's 
network signal. The broadcaster whose signal is imported would 
be compensated under the established distant signal royalty 
rate. And this reform will at least allow consumers to keep 
their network programming while negotiations continue. If the 
broadcaster's local content is as valuable as they assert, then 
the imported distant network signal is a poor substitute, and 
both parties will continue to have every incentive to reach an 
agreement. Importing a distant signal during a blackout simply 
fills the void for network programming.
    Second, Americans living in remote, underserved areas have 
especially benefited from STELA and its predecessors. Among 
other things, STELA allows Americans residing in predominantly 
rural areas to receive distant network signals for any missing 
Big 4 stations in their market. The distant signal license 
sunsets at the end of 2014, and without reauthorization, 1.5 
million American households will be disenfranchised.
    Third, in the 3 years since the last reauthorization, the 
video industry has not been sitting still. Consumers can and 
increasingly want to watch news, sports, and entertainment on 
the go using increasingly high resolution screens available on 
their smart phones and tablets. Over the years, DISH has done 
much to respond to changing consumer preferences, and today 
DISH stands ready to make a significant investment in the 
wireless market to satiate consumers' growing demand for 
increased mobility and flexibility in consuming video.
    In summary, we believe the Government should work to ensure 
its laws mirror today's competitive realities, consumer 
expectations, and advances in technology.
    Thank you, and I look forward to answering any questions 
you may have.
    [The prepared statement of Mr. Dodge follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Dodge.
    Mr. Waldron?
    I commend you as well for beating the illuminating light, 
Mr. Dodge. Thank you. Pressure on you, Mr. Waldron.

TESTIMONY OF GERARD J. WALDRON, PARTNER, COVINGTON AND BURLING 
   LLP, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS

    Mr. Waldron. Good morning, Chairman Coble, Ranking Member 
Watt, Chairman Goodlatte, and Ranking Member Conyers, and 
Members of the Subcommittee. My name is Gerry Waldron. I am a 
partner with the law firm of Covington and Burling, and I am 
testifying here today on behalf of the more than 1,000 free, 
local, over-the-air television members of the National 
Association of Broadcasters.
    As the Committee begins its review of STELA, your broadcast 
constituents urge you to keep in mind two principles. First, 
free, locally focused broadcast television should remain 
available to American households. Second, your review of STELA 
should not be used to create new exceptions to copyright law 
that undermine those contractual relationships between 
broadcasters and satellite or cable companies that enable 
broadcasting's local focus.
    Why is localism so important? For broadcasters, localism is 
coverage of local news, severe weather and emergency alerts, 
school closings, high school sports, local elections, and 
public affairs. Localism is support for charities, civic 
organizations, and events that help create a sense of 
community. Our broadcast stations are also the way that local 
businesses educate and inform the public about the goods and 
services and, in turn, create jobs and support your economies.
    There is no doubt that viewers, your constituents, continue 
to rely on our service. Broadcast television remains unique 
because it is free, it is local, and it is always on even when 
other forms of communications may fail.
    As a threshold matter, the Subcommittee should ask whether 
the expiring section 119 distant signal license continues to 
promote localism and whether it is in the public interest. It 
could be argued that the distant signal license served its 
purpose in 1988 when the backyard satellite industry was just 
getting started and that it served its purpose again when DISH 
and DirecTV first launched their small receiver services in the 
mid-1990's. But in 2013, when DISH and DirecTV are two of the 
largest three pay TV providers in the country, the distant 
signal license is a vestige of a bygone era.
    Today over 98 percent of all U.S. television households can 
view their local network affiliates by satellite, and that 
number is growing all the time. No public policy justifies 
treating satellite subscribers in local markets as unserved, 
which would deprive viewers of the benefits of locally focused 
service. As DISH has demonstrated, there are no technical 
reasons for failing to serve all markets.
    Accordingly, the Subcommittee should continue to encourage 
localism and consider whether the section 119 license should 
expire.
    In reexamining STELA, you are likely to hear from those 
seeking enactment of new exceptions to the copyright laws that 
would undermine broadcasters' retransmission consent rights. 
Let me be clear. Arguments that broadcasters have too much 
leverage in the retransmission consent process or that 
retransmission fees are directly responsible for rising cable 
bills are wrong. Local broadcasters and pay TV providers both 
have an incentive to complete retransmission consent 
negotiations. And for that simple reason, they always do before 
any disruption to viewers occurs. There are exceptions but they 
are rare, and in fact, carriage disruptions from retransmission 
consent impasses represent 1 one-hundredth of 1 percent of all 
annual U.S. television viewing hours. Put that another way, 
consumers are 20 times more likely to lose television 
programming service because of a power outage than because of a 
retransmission consent impasse.
    Furthermore, in the small number of instances where these 
negotiations have resulted in disruptions to consumers, there 
is one distinct pattern: the involvement of Time Warner Cable, 
DirecTV, and DISH. Since 2012, these three companies alone have 
been party to 89 percent of all the disruptions nationwide.
    In contrast to what some suggest, NAB has demonstrated 
across numerous economic studies that retransmission consent 
payments are not responsible for high and rising pay TV prices. 
Just 2 cents of every cable bill dollar goes to broadcast 
retransmission fees, and that is true in spite of the fact that 
during the 2011 season, 96 of the top 100 most watched prime 
time programs were on broadcast television.
    Lastly, the Committee should understand that retransmission 
consent negotiations are about more than just fees. 
Increasingly, these negotiations include hard discussions about 
how we can distribute our content across a variety of new 
platforms such as Hulu that promote competition.
    In conclusion, your local broadcast constituents urge you 
to rebuff calls from the pay TV industry to expand the narrow 
examination of STELA solely to give them an unfair leverage in 
market-based negotiations.
    Thank you for your time. I look forward to your questions.
    [The prepared statement of Mr. Waldron follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Waldron.
    Mr. MacKenzie?

 TESTIMONY OF EARLE A. MacKENZIE, EXECUTIVE VICE PRESIDENT AND 
   CHIEF OPERATING OFFICER, SHENTEL CABLE, ON BEHALF OF THE 
                   AMERICAN CABLE ASSOCIATION

    Mr. MacKenzie. Good morning.
    Shentel offers wireline and wireless services to 
residential and business customers in smaller markets in rural 
areas in the mid-Atlantic region. As a smaller, rural provider, 
our costs per subscriber are greater. However, despite the 
higher costs, firms like Shentel still provide our customers 
with the same service enjoyed by urban customers.
    It is a challenge that is not made any easier by certain 
laws and rules that govern our business. For example, one of 
the simplest issues I would raise for the Committee today is 
the competitive disparity that stems from the fact that certain 
laws governing the satellite TV industry are reauthorized every 
5 years. The cable industry does not benefit from such a 
periodic review. In fact, Congress has not made a broad 
legislative change to the cable rules since the 1990's.
    If Congress wants to conduct such a review, one set of 
rules that has worked and should not be changed is the cable 
copyright license. It continues to serve its goal in 
compensating copyright holders for the retransmission of their 
work. Many stakeholders agree no significant change to the 
license is necessary.
    If Congress were to repeal the license, it would be very 
burdensome for the cable firms to anticipate all the 
copyrighted works that would need to be cleared before they are 
aired on broadcast stations. Moreover, the repeal would create 
uncertainty in the marketplace for us and our customers.
    Should Congress reach a different conclusion, any change to 
the existing license must coincide with reform to the broadcast 
carriage rules such as retransmission consent because they are 
legally intertwined.
    There are a number of specific problems related to the 
outdated rules and regulations governing the cable industry, 
particularly retransmission consent, that are covered in my 
written testimony. But with limited time, I will focus on just 
two that are of direct relevance to the Judiciary Committee.
    This Committee should be aware that there are dozens of 
instances where separately owned Big 4 broadcasters in the same 
market are colluding against the cable operator in their 
negotiation of retransmission consent. Typically this means 
that two broadcast stations with exclusive market rights that 
are protected by the Government use the same negotiator to 
conduct the negotiations. Available evidence shows this 
anticompetitive conduct by broadcasters raises fees between 22 
and 160 percent. In the end, these costs are passed on to the 
consumer.
    The practice of coordinating retransmission consent 
negotiations is widespread, occurring in at least 20 percent of 
the TV station markets, and it is increasing. This year, there 
has been a number of broadcast station mergers and acquisitions 
that could result in even more coordination of retransmission 
consent negotiations.
    If you share my concerns, please inform the Department of 
Justice.
    Another area we would like the Committee to consider are 
skyrocketing sport programming fees. It is amazing in the past 
few years sports leagues have extracted more than $110 billion 
from broadcast and cable TV networks, and there is no end in 
sight. These networks bid extraordinary amounts because they 
can pass those costs on to the pay TV providers and our 
customers. Not surprisingly, ESPN, regional sports networks, 
and the Big 4 broadcasters are aggressively hiking their fees. 
In the end, the consumer shoulders these costs.
    One part of the sports programming problem is rooted in a 
50-year-old Federal law giving an antitrust exemption to 
professional sports leagues when they are negotiating their TV 
programming deals. However, like retransmission consent, the 
sports programming market has changed significantly since JFK 
was President, but the rules have not. It may have made sense 
to give professional sports leagues a pass from the antitrust 
rules in 1961. Their dominant market power no longer justifies 
this exemption.
    Mr. Chairman, it is clear that there is a host of issues 
that need attention. Given the significant changes in the 
marketplace, I hope the issues I have raised here will be taken 
into consideration as part of the Committee's reauthorization 
of the satellite TV license.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. MacKenzie follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    



                               __________
    Mr. Coble. Thank you, Mr. MacKenzie.
    Mr. Campbell?

             TESTIMONY OF JAMES CAMPBELL, REGIONAL 
        VICE PRESIDENT, PUBLIC POLICY, CENTURYLINK, INC.

    Mr. Campbell. Thank you, Mr. Chairman, Ranking Member Watt, 
Chairman Goodlatte, and Ranking Member Conyers. I appreciate 
you giving CenturyLink the opportunity to testify before this 
Subcommittee as a relatively new entrant into the video 
marketplace.
    And I would echo Mr. Dodge's testimony that CenturyLink is 
certainly not seeking to avoid paying reasonable costs for 
acquisition of broadcast content. Rather, we seek a fair set of 
rules by which it cannot be unfairly leveraged against both 
consumers and new entrants like us.
    To give you a little background, CenturyLink is the third 
largest telecommunications company in the United States 
offering voice, video, and data at over 14 million homes in 37 
States and businesses in all 50 States and select international 
markets. We offer cybersecurity solutions to the Federal 
Government and multiple State and local governments, and as a 
result of our recent acquisition of Savvis, we are actually one 
of the largest cloud computing and hosting companies in the 
world.
    Only recently over the past 5 years have we gotten involved 
in the competitive video market, launching a fully digital IPTV 
product in multiple markets, including Orlando, Las Vegas, 
Phoenix, and central North Carolina. And I will tell you 
consumers benefit from robust competition in the form of better 
service quality, in the form of more innovation, more 
investment, and ultimately lower rates. But, unfortunately, the 
cost of obtaining broadcast content has threatened consumers' 
ability to get any of these benefits.
    The current regulatory regime was created in an environment 
where the Federal lawmakers were concerned about market abuse 
from monopoly incumbent cable operators. As a result, over the 
years lawmakers have kind of skewed the regulatory advantages 
toward broadcasters vis-a-vis their relationship with pay TV 
providers in multiple ways.
    For example, one, a local broadcaster, because of tie-down 
arrangements, can force feed unwanted content to providers 
regardless of consumer demand.
    Two, a provider has no other alternative to obtain this 
content in most of these markets.
    And third, the FCC's application and interpretation of the 
good faith standard has rendered really meaningless, giving de 
facto power to the broadcasters in retransmission consent 
negotiations.
    In addition, the regulatory regime, as has been stated, did 
not contemplate the explosion of video competition from a 
myriad of industries. Incumbent cable operators no longer have 
a monopoly in the market.
    While the current rules create problems for the larger 
companies, they impose additional burdens on new entrants like 
CenturyLink. Every customer we get had a relationship with 
another provider before they come to us. We have to win every 
single customer we sign up. That is capital intensive. It is 
tough sledding. And for that reason, we cannot simply just take 
whatever the broadcasters' demands are. In the case of a 
blackout--and I know that broadcasters have used this more 
frequently--there is little harm to the broadcasters if the 
signal is lost, but a tremendous amount of harm to a company 
like CenturyLink as we try and provide competitive service.
    And unfortunately, the retransmission consent fees are 
providing a windfall not to the local stations but to national 
networks. The original intent of these rules was to provide a 
safety net for true local stations. It is not the case anymore. 
SNL Kagan projects that retransmission fees will increase to 
$6.1 billion in 2018, up from $2.4 billion in 2012. That is a 
250 percent increase, and that is all at the expense of 
consumers.
    Congress has an opportunity as part of the STELA 
reauthorization to reform and rebalance the negotiation process 
regarding the retransmission consent marketplace. The reasons 
Congress conferred significant regulatory advantage to the 
broadcasters no longer exist. CenturyLink favors a deregulatory 
approach where our consumers could receive national content 
from adjacent or alternate markets during the pendency of 
negotiations, should they break down. This is good for two 
reasons. One, it rebalances the negotiation process where both 
parties have a little bit more leverage at the table, and two 
and most importantly, it does not punish consumers for two 
providers' failure to reach an agreement.
    At the end of the day, it is not about winners and losers. 
It is about protecting consumers who bear the biggest brunt of 
this regulatory problem and ensuring the future of a 
competitive marketplace in the video marketplace.
    Again, I thank you again for the opportunity testify. We 
look forward to working with the Committee and try and enact 
and enable consumer-oriented legislative reform. Thank you.
    [The prepared statement of Mr. Campbell follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Campbell.
    Mr. Garrett?

TESTIMONY OF ROBERT ALAN GARRETT, PARTNER, ARNOLD & PORTER LLP, 
               ON BEHALF OF MAJOR LEAGUE BASEBALL

    Mr. Garrett. Thank you, Chairman Coble, Ranking Member 
Watt. Thanks for the opportunity to testify on behalf of Major 
League Baseball this morning.
    Let me summarize that testimony with three brief points.
    First, baseball has a major stake in any revision of the 
copyright laws that affect television programming, including 
cable and satellite compulsory licenses. Baseball and its 
member clubs are copyright owners of a substantial amount of 
very entertaining, very valuable television programming. They 
now offer their fans access to approximately 5,000 copyrighted 
telecasts of Major League Baseball games each year. They do not 
believe that there is any single copyright owner that provides 
the American public with more television programming than Major 
League Baseball.
    Second, the vast, overwhelming majority of baseball's 
telecasts are provided to cable and satellite subscribers 
pursuant to licenses negotiated in a free marketplace and not 
pursuant to compulsory licensing. There is simply no reason 
that satellite carriers or cable systems or anyone else require 
a compulsory license to provide Major League Baseball telecasts 
or any other broadcast television programming. Satellite 
carriers and cable systems negotiate every day in the free 
marketplace to offer hundreds of channels, tens of thousands of 
hours of non-broadcast television programming. We believe that 
they can do the same to offer broadcast programming, including 
telecasts of baseball games.
    Third and finally, if Congress, nevertheless, chooses to 
reauthorize the section 119 compulsory license, baseball has 
one simple request, and that is adopt a mechanism to ensure 
that satellite carriers and cable systems at the very least pay 
fair market value for their compulsory licenses. According to 
the FCC, cable systems derive more than $67 billion in revenues 
by selling access to video programming. Compulsory licensing 
royalties amount to less than one-half of 1 percent of those 
revenues, one-half of 1 percent for what is undoubtedly the 
most valuable, the most watched of all the programming cable 
systems offer. Satellite carriers also pay less than one-half 
of 1 percent of their revenues for their compulsory license. 
Their video revenues amount to approximately $36 billion. Their 
compulsory licensing royalties in 2012 amounted to 
approximately $87 million or about $10 million less than when 
Congress last renewed the section 119 license. The current 
satellite royalty rate is, in fact, the same as the rate that 
an independent panel of arbitrators determined to be fair 
market value in 1997, 16 years ago.
    There is simply no justification for requiring copyright 
owners to subsidize with below-market royalty rates the major 
corporate entities that dominate the cable and satellite 
industries. Baseball believes that Congress should authorize 
the Copyright Board to set rates for the carriage of all 
broadcast programming under the cable and satellite compulsory 
licenses and that the Copyright Royalty Board also should be 
authorized to adjust those rates periodically so that they 
continue to provide fair market compensation to copyright 
owners.
    Thank you, Mr. Chairman, and baseball also looks forward to 
working with you and your Subcommittee on this important 
matter.
    [The prepared statement of Mr. Garrett follows:]
    Prepared Statement of Robert Alan Garrett, Arnold & Porter LLP, 
           Washington, DC, on Behalf of Major League Baseball
    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to testify, on behalf of Major League Baseball, concerning 
the Section 119 satellite compulsory license that is scheduled to 
expire at the end of next year. I have been Major League Baseball's 
outside counsel on copyright and telecommunications matters for more 
than thirty-five years. During that same period, I also have served as 
lead counsel in satellite and cable compulsory licensing proceedings 
for the Joint Sports Claimants, which consists of Baseball, the 
National Football League, National Basketball Association, National 
Hockey League and National Collegiate Athletic Association. While I am 
presenting this testimony solely on behalf of Baseball, all JSC members 
share a common interest in ensuring strong and effective copyright 
protection, and fair market compensation, for the telecasts of their 
games.
                    baseball's copyrighted telecasts
    When Congress comprehensively revised the copyright laws in 1976, 
and adopted the Section 111 cable compulsory license, the average 
sports fan had access to approximately 100 telecasts of Major League 
Baseball games each season. Much the same was true in 1988 when 
Congress enacted the satellite compulsory license by adding a new 
Section 119 to the Copyright Act. Today, however, the situation is very 
different.
    Baseball and its member clubs now offer their fans the ability to 
view virtually every one of the approximately 5,000 MLB game telecasts 
each year. Telecasts of MLB games are available on the FOX national 
broadcast television network; three national cable networks (ESPN, TBS, 
MLB Network); over-the-air broadcast stations throughout the country 
(e.g., WUSA-TV in Washington DC and ``superstation'' WGN-TV in 
Chicago); and more than two dozen regional sports networks (e.g., MASN, 
FOX Sports Net). In addition, Baseball's ``out-of-market'' satellite 
and cable package, MLB Extra Innings, provides each subscriber with 
virtually all Major League Baseball games not otherwise available from 
other licensed telecasters. Fans in Washington DC, for example, can 
view game telecasts of the Yankees, Red Sox, Cardinals, Pirates, Giants 
and a score of other teams. More than 67 million cable and satellite 
subscribers in the United States currently have access to MLB Extra 
Innings.
    The comparable out-of-market package for Internet-connected 
devices, MLB.TV, is available to subscribers through more than 350 such 
devices--including personal computers, smartphones (Apple, Blackberry 
and Android), tablets (iPad, Kindle Fire and Android) and a variety of 
consoles (Xbox360, Sony Playstation 3, Apple TV, Roku). In addition to 
receiving access to out-of-market games, MLB.TV subscribers can choose 
whether to listen to the radio or TV broadcast of the home or visiting 
club. MLB.TV also offers access to HD quality broadcasts of the games 
and provides DVR capabilities that allow fans to pause or rewind live 
telecasts. And those who utilize the MLB.com At Bat app to view games 
can take advantage of several additional features, including real-time 
statistical updates and analyses, video archive and a ``pitch-by-pitch 
widget'' that tracks the location, type, and speed of every pitch 
(including whether a pitch is a curve ball, slider, or knuckle-curve). 
The At Bat app has been downloaded more than 22 million times since its 
debut five years ago.
    All of the MLB game telecasts, whether they are accessible over-
the-air or via cable, satellite or Internet-connected devices, are 
copyrighted works. In the 1976 Copyright Act, Congress--at the urging 
of Baseball and other sports interests--clarified that telecasts of 
live sports events receive copyright protection, like any other 
audiovisual work, as long as they are recorded (``fixed'') 
simultaneously with their transmission. When entering into licensing 
agreements with its various rightsholders, Major League Baseball and 
its member clubs contractually ensure that the resulting telecasts are 
recorded and that either Baseball or one of its clubs will own the 
copyright in those telecasts. With approximately 5,000 MLB game 
telecasts each year, Major League Baseball is a major copyright owner 
and source of television programming. Baseball relies heavily upon the 
copyright laws to protect its substantial investment in (and incentive 
to create) that highly entertaining and valuable programming.
                          compulsory licensing
    The satellite compulsory license in Section 119 of the Copyright 
Act permits satellite carriers to retransmit to their paying 
subscribers, without the consent of copyright owners, out-of-market 
broadcast television programming. The retransmitted programming 
includes the telecasts of games that Major League Baseball and its 
clubs license to broadcast stations and the FOX broadcast network. A 
similar compulsory license, which applies to cable systems, exists in 
Section 111 of the Copyright Act. The effect of these licenses is to 
divest Baseball (as well as other copyright owners) of any ability to 
negotiate with satellite carriers and cable systems over the terms on 
which those services commercially exploit broadcasts of MLB games.
    These licenses are impediments to the operation of the free 
marketplace. They unfairly deprive all copyright owners, including 
Baseball, of the ability to control the distribution of their 
copyrighted works--as well as the right to receive fair market 
compensation and other license terms typically included in marketplace 
agreements. They also impose significant administrative costs upon 
Baseball and other copyright owners and substantially delay the receipt 
of compensation for the use of their programming. Baseball routinely 
negotiates in the marketplace with the cable and satellite industry 
concerning the carriage of Baseball telecasts; the vast majority of 
programming that cable systems and satellite carriers offer are the 
product of marketplace negotiations. There is no reason that similar 
negotiations should not be allowed to occur over the broadcast 
programming now covered by the compulsory licenses.
                        fair market compensation
    Some parties have taken the position that elimination of the 
compulsory licenses could be disruptive to the marketplace, because the 
licenses reflect the settled expectations of the licensees and at least 
some licensors. Baseball respectfully disagrees with that view. An 
inequitable and unjustifiable regulatory regime that supplants 
marketplace negotiations should not be perpetuated simply because some 
parties have become accustomed to it. However, Baseball understands the 
practical difficulties associated with elimination of the cable and 
satellite compulsory licenses.
    If the compulsory licenses are retained, Baseball urges Congress to 
ensure that both cable operators and satellite carriers pay fair market 
value for all programming they choose to carry pursuant to the 
compulsory licenses. Baseball believes the relevant evidence 
demonstrates that neither cable operators nor satellite carriers are 
paying fair market value under their compulsory licenses. Indeed, 
satellite carriers are currently paying a Section 119 royalty that is 
less than the royalty that three independent arbitrators considered to 
be fair market value in 1997--sixteen years ago. Moreover, the total 
Section 119 royalties have declined by approximately $10 million per 
year since Congress last reauthorized the Section 119 license. The 
Section 111 royalty paid by cable operators is comparably below fair 
market value. Indeed, when Congress adopted the Section 111 royalty 
rates nearly forty years ago, it explicitly noted that those rates 
would produce only a ``minimal'' royalty that had no economic basis. 
Cable operators pay less than one-half of one percent of their $66 
billion in video revenues (according to the FCC) for the Section 111 
compulsory license that allows them to offer some of their most 
valuable television programming.
    There is no justification for requiring copyright owners to 
subsidize, with below-market royalty rates, the major corporate 
entities that dominate the cable and satellite industries. Baseball 
believes Congress should, at the very least, authorize the Copyright 
Royalty Board to set market rates for the carriage of all programming 
under the cable and satellite compulsory licenses. The CRB also should 
be authorized periodically to adjust those rates so that they continue 
to provide fair market compensation to copyright owners.
    While Section 119(c) of the Copyright Act directs the Copyright 
Royalty Board to adopt fair market value rates for the satellite 
carrier license, that provision sets a series of procedural dates that 
focus upon 2010, when Congress last renewed the Section 119 license. 
Section 119(c) must be amended to permit the adjustment of royalty 
rates for whatever period, if any, Congress decides to continue the 
Section 119 compulsory license. Congress also should adopt a similar 
rate adjustment mechanism for the compulsory license of cable systems, 
which compete with satellite carriers in the delivery of broadcast 
television programming. Currently, the law allows adjustments in the 
cable royalty rates to account for inflation only.

                             *  *  *  *  *

    Thank you, Mr. Chairman and members of the Subcommittee, for the 
opportunity to express Baseball's views on the satellite compulsory 
license in Section 119 of the Copyright Act and the related cable 
compulsory license in Section 111 of the Act. Baseball looks forward to 
working with you and your Subcommittee to help ensure strong and 
effective copyright protection, including fair market compensation, for 
all copyrighted works.
                               __________

    Mr. Coble. Thank you, Mr. Garrett.
    Mr. Padden?

 TESTIMONY OF PRESTON PADDEN, FORMER PRESIDENT, ABC TELEVISION 
   NETWORK, FORMER EXECUTIVE VICE PRESIDENT, THE WALT DISNEY 
             COMPANY, TESTIFYING ON HIS OWN BEHALF

    Mr. Padden. Chairman Coble, Ranking Member Watt, Chairman 
Goodlatte, and Ranking Member Conyers, my name is Preston 
Padden. I appear today on my own behalf and sadly no one is 
paying me to be here. [Laughter.]
    I am so old that I am one of the few living souls who has 
been around for the entire history of this issue, and I am here 
today to implore you not to just kick the can down the road 
again. It is long past time to repeal the satellite and cable 
compulsory licenses and the Rube Goldberg-like statutory and 
regulatory system that surrounds them.
    As the former President of the ABC Television Network, I 
know how TV program rights are negotiated. I promise you that 
the earth will continue to spin, consumers will continue to 
have access to TV, and all TV industry sectors will continue to 
thrive without the compulsory licenses, without the associated 
FCC rules, and without retransmission consent.
    In 1976 when the cable TV industry was in its infancy, 
Congress granted cable an extraordinary exception to normal 
copyright principles: a compulsory copyright license to 
distribute the programs on broadcast TV channels. The FCC 
adopted rules, including network non-duplication and syndicated 
exclusivity, to limit the market disruption caused by the new 
compulsory license.
    In 1988, the compulsory license was extended to satellite.
    Then in 1992, Congress enacted retransmission consent 
requiring a marketplace negotiation between broadcast TV 
stations and cable and satellite distributors, a negotiation 
that is the functional equivalent of a negotiation that would 
have been required if the compulsory licenses had never been 
enacted in the first place.
    When others argue that the compulsory licenses are 
essential, please consider this. Every day hundreds of non-
broadcast TV channels, channels like Discovery, History 
Channel, USA Network, Bravo, and HBO, get distributed to nearly 
every man, woman, and child in America without any compulsory 
license and without retransmission consent. They get 
distributed because the channel owner and the cable and 
satellite systems have an old-fashioned, simple copyright 
negotiation. There is absolutely no reason why the broadcast 
channels cannot be distributed in exactly the same way.
    When the satellite license was adopted in 1988, you 
provided a sunset and expressed the expectation that the 
license would temporary and would be replaced by market 
negotiations. Instead, the license has been renewed four times.
    When you renewed it in 2004, you directed the Register of 
Copyrights to study the continued need for compulsory 
licensing. In 2008, the Register released that study, calling 
the cable and satellite compulsory licenses--and I quote--
arcane, antiquated, complicated, and dysfunctional. Not exactly 
a ringing endorsement.
    When you renewed the satellite license again in 2010, you 
directed the Register of Copyrights to prepare a more specific 
report to Congress, proposing mechanisms and methods for the 
phase-out and eventual repeal of the cable and satellite 
compulsory licenses. And you asked the Register to propose 
marketplace alternatives. The Register issued that report in 
2011, concluding that the compulsory licenses are--and I quote 
again--an artificial construct created in an earlier era. The 
Register further recommended that Congress set a date-specific 
trigger to phase out and ultimately repeal the licenses.
    I want to close with what I think are three simple truths. 
First, compulsory licensing is just not necessary in these 
markets. Second, broadcast channels like non-broadcast channels 
absolutely deserve to be paid by the cable and satellite 
distributors who want to sell their programming to consumers. 
And lastly, local broadcast channels are no more a monopoly 
than are the non-broadcast channels like AMC, Time Warner Cable 
SportsNet, Bravo, and Discovery.
    Thank you very much.
    [The prepared statement of Mr. Padden follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Mr. Padden.
    I want to thank the witnesses for your timely testimony, 
staying within the 5-minute rule. We try to apply the 5-minute 
rule to ourselves as well. So if you can be terse in your 
answers, we would be appreciative of that.
    Mr. Garrett, how is Major League Baseball working to make 
its content available to Americans in new ways with advanced 
technology?
    Mr. Garrett. Mr. Chairman, as I indicated in my testimony, 
Major League Baseball currently offers approximately 5,000 
telecasts of its games to consumers each season. That is 
virtually every single game that is played during the course of 
a season is made available to Major League Baseball's fans.
    They do it in a variety of ways. They have done it over 
national broadcast television networks such as Fox. They do it 
over a myriad of local broadcast stations and regional sports 
networks throughout the country. They do it over several cable 
networks, including ESPN, TBS, the Major League Baseball 
network. They make some of these programs available via their 
out-of-market packages that are carried by cable systems and 
satellite carriers to almost 67 million households across the 
United States. And finally, they also make it available via 
their very successful, award-winning MLB.TV app which makes all 
of these telecasts available to anyone with an Internet-
connected device, over 350 different devices.
    Mr. Coble. Thank you, sir.
    Mr. Dodge, for our constituents what issues should they be 
asking the Congress to place its focus upon?
    Mr. Dodge. If there is one issue that is top of mine for 
DISH is that the retransmission consent system today is broken. 
It is not a free market. In every local market around the 
country, in the old days when cable was in its infancy, you had 
one broadcaster who would negotiate with one cable company and 
there was somewhat a symbiotic relationship or mutual assured 
destruction, depending on how you looked at it, and today that 
one broadcaster plays three or four distributors off against 
each other and ultimately it is consumers who are caught in the 
crosshairs and are hurt by losing their signals and have their 
prices go up year after year.
    Mr. Coble. Thank you, sir.
    Mr. Padden, I think you have touched on this. In your 
opinion, what would be the result if the section 119 license 
simply expires, which I think is December of next year.
    Mr. Padden. My recommendation is that Congress provide a 
short transition period to allow the broadcast industry to get 
its rights in order and then repeal all of these licenses. And 
all that would happen is the broadcast programming would get 
distributed exactly the same way the non-broadcast programming 
is distributed today, through a simple negotiation between the 
cable and satellite companies on the one hand and the local 
station on the other hand, with the station acting as a rights 
aggregator just as the non-broadcast channels do today.
    Mr. Coble. I still have time. Anybody else want to weigh in 
on that?
    Mr. Dodge. Sure. I think what Mr. Padden suggests is very 
similar to a bill that has been proposed by Representative 
Scalise over at the Energy and Commerce Committee, and it is 
certainly one potential option very worthy of debate. We are 
just thrilled at DISH that there does appear to be a 
recognition that there is a problem and that there should be 
such a debate.
    Mr. Waldron. If I may add. I think the section 119 license 
expiring--this Committee could advance the debate by actually 
getting a number as to how many people would be affected. So I 
would suggest that the Committee ask the satellite carriers to 
submit a certified number as to how many people today are 
getting distant signal. In the past, we have heard 1 million. 
But we do not know what the number is. And I think if the 
Committee would get that information, then we could have a 
serious debate about is this distant signal license worthwhile 
to extend for this small number of people. There may be some 
hardship cases. There may be special circumstances which 
justify it. But right now we are all in a blind alley.
    Mr. Coble. Time for one more comment.
    Mr. Dodge. Well, in response to that, I would say that it 
is true that there are less and less folks who are actually 
availing themselves of the distant signal license today, but it 
is a very important group of rural and underserved Americans, 
for example, in short markets like Glendive, Montana that does 
not have an ABC or Fox affiliate, and what the distant signal 
license allows us to do is import those stations, the network 
programming, to those folks who otherwise would have no access 
to that.
    Mr. Waldron. And we would be happy to have a conversation 
about short markets and areas where there is a spot beam 
problem. But we just do not know what the nature of it is. And 
that would actually be a helpful step in promoting legislation.
    Mr. Coble. How many people use it, Mr. Dodge?
    Mr. Dodge. The estimates I have heard are 1 million to 1.5 
million consumers.
    Mr. Coble. I see my amber light appears. So I now recognize 
the distinguished gentleman from North Carolina, Mr. Watt, for 
his questioning.
    Mr. Watt. Thank you, Mr. Chairman. As has become my policy, 
I have decided to defer until the end of the process. So I will 
defer to Mr. Conyers and go last in the chain.
    Mr. Conyers. Thank you very much.
    Could I begin our discussion that I thank you for the 
variety of views presented? But do you believe, Mr. Dodge and 
Mr. Padden, that Congress should do more than simply 
reauthorize the distant signal license? Either one can start 
off.
    Mr. Padden. I am happy to go first.
    As I have said, I think this is one Government program that 
you can retire. These licenses were enacted before there were 
any non-broadcast channels. They only apply to the programming 
on the broadcast channels, and you now have hundreds of other 
channels distributed nationwide with no muss, no fuss through 
normal copyright negotiations, and I think that proves that you 
do not need these licenses anymore for the broadcast 
programming.
    Mr. Dodge. To address that specific point, I believe there 
is a difference between cable channels and the local 
broadcasters, the chief difference being the local broadcasters 
received at least initially billions of dollars of spectrum for 
free under the promise that they would be stewards of that 
spectrum and use it for the public good. And they are further 
propped up by rules such as must-carry, syndicated exclusivity, 
and network non-duplication that the cables do not have the 
benefit of.
    And to your specific question, Ranking Member Conyers, we 
think that the satellite act should be reauthorized so that the 
current beneficiaries are not disenfranchised.
    And further, we think there are two reasonable zones of 
expansion that should be considered, one of which is fixing the 
broken retransmission consent system as it stands today, and 
the other is fixing the orphan county that, at least in my 
case, every time around this year, the folks in two southwest 
counties in Colorado start asking the question of why they 
cannot watch the Broncos. And the reason is because they are in 
the Albuquerque DMA.
    Mr. Conyers. Well, Mr. Dodge and Mr. Padden, do I sense 
that there is a little space between both your responses? 
[Laughter.]
    Mr. Dodge. Yes, although we are good friends.
    Mr. Conyers. We are all friends here.
    Mr. Padden. Ranking Member Conyers, this Committee asked 
the expert agency, the Register of Copyrights, to study these 
licenses, and their report said--and again I will quote--that 
they are arcane, antiquated, complicated, and dysfunctional. I 
cannot imagine why you would want to continue such a program.
    Mr. Conyers. Now, I am going to give you another chance, 
Mr. Dodge. What are the targeted fixes that the American 
Television Alliance, ATVA, is calling for to the retransmission 
consent rules as part of the STELA reauthorization?
    Mr. Dodge. Principally there are two, the first of which is 
one that we favor, which is allowing video providers to import 
a distant signal on an interim basis during the pendency of 
retransmission disputes when the broadcaster takes down the 
programming. The other would be some form of standstill where 
the programming stays up and then the parties would enter 
binding baseball-style arbitration to reach a fair rate. But in 
each of those cases, the consumers would still have access to 
the programming and theoretically the broadcasters in the first 
instance would still have an incentive to negotiate, as would 
the TV provider because the distant signal is an imperfect 
solution.
    Mr. Conyers. Would you add to that, Mr. Waldron?
    Mr. Waldron. Absolutely. Thank you, sir.
    In terms of it, I think it is clear that there are 
thousands of cable systems in America. There are thousands of 
broadcasters in America. And the vast majority of time, the 
system works. There is a marketplace settlement. There are 
marketplace negotiations.
    The fact is, as I mentioned in my testimony, there has been 
an increase in disruptions, and they all involve three 
companies, DirecTV, DISH, and Time Warner. We see this, 
frankly, as a manufactured crisis. They are deliberately going 
and playing the game and, frankly, in order to get this 
Committee to pay attention to these issues.
    So we actually think in the vast majority of cases the 
system is working.
    And with respect to the suggestion of a standstill, well, 
there is another way of putting that. They get to take my 
copyright without my permission. That is what a standstill is. 
I do not want to give them my retransmission consent, but yet 
they get to take it because they were taking it before. And I 
do not want to give it to them anymore. That seems rather 
contrary to our copyright law tradition. So we think that 
actually would be not something that the Congress should 
endorse.
    Mr. Padden. Could I add one thing?
    Mr. Conyers. Yes.
    Mr. Padden. In evaluating the request being made by the 
cable and satellite industry for a standstill provision, I 
think you should consider the fact that the cable industry just 
went to court and successfully defeated a standstill agreement 
in program access disputes. So they went to court and got rid 
of the standstill when they did not want to continue to carry 
something, and now they are back here asking you to enact a 
standstill against the broadcasters.
    Mr. Conyers. Mr. Campbell, the last comment.
    Mr. Campbell. Thank you, Ranking Member Conyers.
    The companies that Mr. Waldron mentioned are very large. 
And we are a new entrant into the market. I would suggest that 
often these larger companies play the negotiations against 
smaller companies like CenturyLink trying to compete and win 
customers over. And without any leverage at all, we are the 
ones that are getting kind of swallowed up in this thing, and 
that is going to stifle competition, investment, and 
innovation.
    The other thing I would point out is while the broadcasters 
often threaten to black out, it is unlawful for any provider to 
not carry the signals during ``sweeps week,'' which is the week 
that broadcasters get their ratings and make their advertising 
money. That is the 1 week we cannot put it off.
    Mr. Conyers. Mr. Chairman, could I get 30 seconds more?
    Mr. Coble. 30 seconds will be granted.
    Mr. Dodge. Thank you. I just wanted to address one point 
made by Mr. Waldron, which is that 90 percent of the blackouts 
are caused by three entities, my company included. And I guess 
that is a bit in the eye of the beholder because we would, of 
course, take the view that 100 percent the blackouts are caused 
by four companies, ABC, NBC, CBS, and Fox and their affiliates. 
[Laughter.]
    But putting that aside for the moment, if you look at the 
facts, it is not surprising the DISH, DirecTV, and Time Warner 
Cable represent, as they assert, 90 percent of the blackouts 
because, one, we represent 50 percent of the marketplace for 
pay TV today. The other 25 percent is Comcast, which owns NBC, 
arguably is conflicted. And the remaining 25 percent is folks 
like Mr. Campbell. So in many ways, DISH, DirecTV, and Time 
Warner are the only folks who are actually able to negotiate 
effectively with the broadcasters, and thank goodness we are 
out there fighting for consumers to lower prices.
    Mr. Conyers. Thank you, Chairman Coble.
    Mr. Coble. You are welcome, Mr. Conyers.
    The distinguished from Virginia, Mr. Goodlatte, is 
recognized for 5 minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Donato, I want to ask you a question on behalf of my 
constituents. I have a number of them that I hear from who live 
usually in a rural area, a good distance from the market that 
they are in and a lot closer to another market that they would 
prefer to receive the broadcast signal from or the 
retransmission of that. And I wonder if you might just 
elaborate on that. These are lots of people but living in rural 
areas who are 75 miles from the D.C. market but 25 miles from 
the small Harrisonburg market and would rather have the 
Harrisonburg market.
    Mr. Donato. Generally each year there are a few markets in 
which that kind of a situation happens. The DMA is what it is. 
It was created to reflect the viewing of people in that county. 
So the particular counties that you are talking about, as I 
said in my testimony, the predominance of viewing is actually 
to the home market that it is currently in.
    Again, it was developed as a mechanism to define the 
geography in which television signals are viewed and therefore 
local advertisers would be able to use local television and 
support local television.
    Mr. Goodlatte. Should those lines be adjusted?
    Mr. Donato. We have an analysis process. Every year we go 
through and we evaluate the viewing for each county within the 
DMA. It is perhaps a little bit conservative in that you have 
got to have a statistically significant change 2 years in a row 
before we move the county over. But the reason for that is the 
need for stability in the marketplace overall in the 
advertisers' behalf.
    There are always better ways of doing things. We generally 
treat these situations on a case-by-case basis. We often meet 
with Congressmen when in their district there is an issue and 
we describe what the numbers are. So it is a system upon which 
almost $40 billion worth of advertising has been very 
successful for the last 50 years.
    Mr. Goodlatte. Let me interrupt you, and I want to ask a 
couple other questions that are of a broader nature.
    But before I do that, I want to ask Mr. Garrett if he wants 
to respond to Mr. MacKenzie's suggestion that the sports 
broadcast antitrust exemption should be eliminated.
    Mr. Garrett. Mr. Chairman, actually I do not have a 
response. There is nobody who comes to me and asks for advice 
on antitrust laws. My focus is on copyright law and what is 
good copyright policy.
    Mr. Goodlatte. Well, in light of that, I will cut you short 
then and ask if you work with and represent people who might 
have an opinion on that subject.
    Mr. Garrett. Absolutely.
    Mr. Goodlatte. And if they would submit that to the 
Chairman of the Committee in writing, I would be pleased if the 
Chairman would share that answer with me when it arrives.
    Mr. Garrett. Absolutely.
    Mr. Goodlatte. Let me ask all of the members of the panel 
what is the proper role for Congress in responding to 
marketplace disputes. In order to resolve disputes, should 
Congress set general guidelines for the marketplace to follow, 
or should it set detailed requirements that all participants 
must follow? And then as an adjunct to that, are there ways for 
business disputes to occur and be resolved without disrupting 
the consumers who rely upon satellite and cable services for 
access to video content?
    Mr. Donato I gave you a shot. I will start with Mr. Dodge 
and we will work our way down. If we have time, we will get 
back to you.
    Mr. Dodge. I will take your second question first, and I 
would say the ways to avoid consumers being disrupted are the 
two ways I said earlier, which is, one, allow us to import a 
distant signal during the pendency of these disputes or some 
mechanism for a standstill. I have to say I am not all that 
familiar with the niceties of what standstills have and have 
not been struck down over the time, but the fact of the matter 
is if the broadcasters are going to sit here and wrap 
themselves in localism as a justification for about 99 percent 
of what they are saying, why do they want to take the signal 
down and disenfranchise consumers at these times? Leave the 
signal up. We are not saying we are not going to pay during 
those periods. We gladly will. But do not disenfranchise the 
consumer.
    Mr. Goodlatte. We have just got to keep moving because of 
limited time.
    Mr. Waldron. Two points. One is that Congress actually, I 
think, wisely decided in 1992 to essentially have the 
marketplace settle these issues.
    And secondly, where there are problems, frankly, consumers 
should have more choice. So it is sometimes difficult to change 
your provider. There were news reports that people wanted to 
change from Time Warner, but nobody was answering the phone. 
And there are cancellation penalties and the like. So that 
actually would enhance the marketplace competition.
    Mr. Goodlatte. Mr. MacKenzie?
    Mr. MacKenzie. I think our position is general guidelines 
would be better than specific guidelines. Mr. Dodge has come up 
with two ideas, the distant signal and also kind of preventing 
the blackouts. A distant signal really does not work for the 
cable industry because we do not already have that content. The 
satellite industry already has that content and can quickly 
move it. For us, it would be building fiber and trying to get 
it off air, which would be impossible. So from our standpoint, 
preventing the blackout by leaving the signal on while we 
negotiate would be preferable.
    Mr. Goodlatte. Mr. Campbell?
    Mr. Campbell. Not to repeat what has been said, I agree 
with Mr. Dodge and Mr. MacKenzie.
    But to return the negotiations to actual free market 
negotiations, we hear a lot about the thumb on the scale in 
favor of one party over the other. We do not seek to have the 
thumb put on the scale in our favor. We would just rather have 
it removed from the other side so that the negotiations do 
become, once again, free market negotiations because the world 
has changed a lot since 1992.
    Mr. Goodlatte. Thank you.
    Mr. Garrett?
    Mr. Garrett. From Major League Baseball's standpoint, they 
license a great deal of programming that they want their 
consumers--they want their fans to see. And they are as 
frustrated as anyone either here in Congress or the fans 
themselves when that programming is not made available.
    Having said that, we also recognize that broadcasters have 
property rights in those signals, and we believe the best way 
to determine the value of those property rights is through free 
marketplace negotiations. And that is the objective that we in 
baseball have, is to have free marketplace negotiations or, at 
the very least, fair market value compensation for the 
programming that is being utilized.
    Mr. Goodlatte. Thank you.
    Mr. Padden?
    Mr. Coble. The gentleman's time has expired.
    Mr. Padden, you may respond.
    Mr. Padden. If I could, I would like to respond briefly to 
your question to Nielsen about the DMA. This is an example of 
the dysfunction that is built into the compulsory license and 
the associated FCC rules. In the free market, if you have 
constituents who want to see station A and station A would like 
constituents to see it and there is a distributor between them 
that would like to make money distributing it, they can figure 
it out. All the non-broadcast channels get distributed anywhere 
someone wants to see them.
    The problem is the compulsory license and the associated 
FCC rules actually enshrine Nielsen's rating data from 1972 as 
the basis for what signals can go where. They are still sitting 
in the FCC rules, 1972 ratings data. And if you would just get 
a big broom and sweep all of this stuff away, the free market 
could better serve your constituents.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Coble. Thank you. The gentlelady from California, Ms. 
Chu, is recognized for 5 minutes.
    Ms. Chu. Thank you, Mr. Chair.
    Mr. Dodge, I understand that--well, in fact, you said 
earlier that 1 million to 1.5 million households in the United 
States currently get their access to broadcast stations through 
the distant signal service. But it is clear that the number of 
households that are dependent on the distant signal decreases 
every time Congress looks into reauthorizing section 119.
    Can you tell us who these remaining 1 million to 1.5 
million households are and where they are located? Are they 
mostly located in rural areas, or are they concentrated in 
certain parts of the country?
    Mr. Dodge. Generally located in rural and underserved 
areas. And there is really four categories, if you will, of 
consumers: folks in short markets such as Glendive, Montana 
that is missing a Fox and an ABC where we are allowed those 
network affiliates into those markets; outside the spot beam of 
our satellites. So if you think of Utah, for example, which is 
a rectangle--our spot beams are generally round. The law allows 
us to provide distant signals to the folks that are not covered 
by our spot beams. Commercial trucks and RVs are covered by the 
distant signal license, and then DirecTV.
    We are an alternate in 10 markets so we do not actually 
make use of the, quote, traditional unserved household 
exception allowing a distant signal, but DirecTV does because I 
believe there are still 15 markets where they do not provide 
local service. And then they have some grandfathered 
subscribers as well I believe.
    Ms. Chu. And do we have that technology now to close the 
gap to them?
    Mr. Dodge. For example, the short market issue is just 
purely the fact that there are no affiliates of a particular 
network in those markets. And with respect to outside of the 
spot beam, it depends on whether or not the satellite beam is 
large enough to actually cover an entire DMA, which it is not 
in all cases, but it is very, very limited when it is not.
    Ms. Chu. Mr. Waldron, I am aware that today consumers have 
several options for how they will view video content. They can 
access the content through pay TV carriers or other options now 
through the Internet. There is no doubt that the online model 
will continue to grow in the coming years. To what extent 
should we consider these newer platforms as we are 
reauthorizing satellite TV laws? Should we consider them at 
all?
    Mr. Waldron. Well, I think they can inform the debate 
because they show how the TV market is evolving.
    And let me also say that, you know, we have talked earlier 
about the conflict between CBS and Time Warner Cable. A 
significant part of that dispute was about the ability for CBS 
to offer its programming to a competitor to Time Warner Cable. 
Now, I understand why Time Warner Cable does not want CBS to 
make its programming available to a Hulu or a Netflix or an 
Amazon Instant Video. But CBS actually is interested in doing 
that to give consumers choice. So you should be aware that that 
is actually increasingly a matter of the negotiations. It is 
not necessarily the fee which news reports said was a deal that 
was cut relatively early in the process, but in fact, enabling 
broadcasters to actually have--giving consumers choice across 
these different platforms.
    Ms. Chu. Well, in fact, the digital rights of content are 
playing a more important role in these retransmission 
negotiations. How do you think the issue of digital rights will 
impact future negotiations, and does Congress have a role in 
protecting consumers in this regard?
    Mr. Waldron. Well, I think Congress should actually say, as 
it has, that the copyright holders should be able to negotiate 
an agreement across all of their content. As I said, I think 
the CBS example is telling in that CBS wants to actually 
promote competition. So that is why they actually went about 
those negotiations. And we think that actually is a way that 
consumers can give choices.
    I do want to come back to a statement that Mr. Dodge said. 
We do not dispute that there are some hard cases out there such 
as the short market situation or the corners of spot beams. But 
what we do not know is how many there are. And Mr. Dodge is one 
of two. So he said earlier he has heard the 1.5 million. Well, 
he has half of the information that is needed and DirecTV has 
the other half. So it is not like you have to survey a thousand 
companies in order to get this data. And what we would like to 
do is to get what is the number and what is the context. How 
many are RVs, how many are in short markets, how many are spot 
beams problems. And as DISH has proven, there is now technology 
so that there should not be an unserved household. So DISH is 
in 100 percent of all the markets.
    Ms. Chu. And can you address the issue of localism, the 
principle that is embedded in our Nation's communications laws? 
Can you tell us how the law developed to focus on localism and 
some of the benefits of holding onto that principle?
    Mr. Waldron. So just quickly. So localism goes back to the 
original broadcast licenses. It is embedded in the 
Communications Act of 1934, and it is the notion that 
broadcasters should meet the needs of their local community. 
That makes American broadcasting unique around the world. There 
are national broadcast systems in Europe and in Asia. We have a 
locally focused broadcast system.
    The reason why we have concerns with the distant signal--it 
undermines that localism. That local broadcaster who is 
bringing the local car dealership, who is talking about the 
local high school sports or the tornado--if you are getting a 
signal in from New York or LA, you are not going to be aware in 
Moore, Oklahoma about the tornado that is coming. So localism 
is the heart of the broadcast and it also is at the heart of 
the satellite laws. And we think that that actually is a strong 
argument why the Committee should be skeptical that a distant 
signal license is still needed.
    Ms. Chu. Thank you. I yield back.
    Mr. Coble. I thank the gentlelady.
    The gentleman from Texas.
    Mr. Farenthold. Thank you very much.
    Having grown up as a broadcaster working in radio since I 
was 15 years old, I kind of grew up with the public interest, 
convenience, and necessity standard. And I certainly have a 
great deal of sympathy for the local broadcasters.
    I want to ask Mr. Dodge and maybe Mr. MacKenzie. If we take 
away or limit the local TV station's leverage with respect to 
negotiating a programming license by allowing distant signals, 
what leverage are they going to have in the negotiations?
    Mr. Dodge. Well, if you believe what they say and localism 
is as important as it is, then the distant signal is an 
imperfect solution. All it will do is ensure that folks 
continue to be able to watch American Idol, but they will not 
be getting their local news.
    Mr. Farenthold. I do think that that is important. And, Mr. 
Waldron, maybe you can tell me some of the benefits that we are 
getting. I cannot believe Jim Cantore is going to give me 
better hurricane information than the weathercaster we call 
``Dead Wrong Dale'' affectionately in Corpus Christi.
    Mr. Waldron. Actually that is exactly right. And look, we 
understand the market. We understand that people actually are 
tuning in on a daily basis for their American Idol or for their 
CBS or NBC hit show. But when the tornado comes, suddenly there 
will be an outcry. And I do not think you want to say where is 
that local station the day after the tornado hits. So that is 
the point, that localism is about being there and serving the 
community all the time. And yes, much of the viewing is tuning 
in for----
    Mr. Farenthold. Okay. I have got limited time.
    So, Mr. MacKenzie, can you tell me--go ahead. Did you want 
to answer this?
    Mr. MacKenzie. I would. The American Cable Association are 
primarily very small cable providers. Oftentimes we are at the 
edge of a DMA. So I will use my system as an example. We are in 
Shenandoah County, which is in the Washington, D.C. DMA. You 
cannot get off air in our area. We have to have that brought in 
by fiber to do so. So I can tell you there are no local sports. 
There are no local--but I can get that from a distant station 
which is only 30 miles away.
    Mr. Farenthold. All right. So let us talk about section 
119. And if we do away with the requirements--or the incentives 
for local stations to get on or the requirements, do we end up 
with network affiliate super stations where it is the station 
in New York or Chicago or LA that everyone gets? And then how 
does the local car dealer advertise or whatever business there 
is in the local community or a candidate for Congress?
    Mr. Waldron. Our view is that is absolutely what would 
happen, that the easiest thing for the carriers to do would be 
to make an arrangement with New York and Chicago and LA. So 
then we would have a national broadcast system, which is how 
some other countries are doing it. That is not the American 
system and it is not the case that actually would give a 
platform for the car dealers or the movie theaters----
    Mr. Farenthold. I am sorry. I have got limited time.
    Mr. Dodge----
    Mr. Dodge. Can I just say----
    Mr. Farenthold. Sure.
    Mr. Dodge. Why should consumers not be able to choose in 
that case? It sounds like Mr. Waldron is proving the point that 
perhaps localism is not that important. If a consumer is going 
to be satisfied with New York, shouldn't they make that----
    Mr. Farenthold. But isn't it much cheaper for you and uses 
less bandwidth and less resources for you on your satellite 
just to have one national? You do away with all the spot beams 
and all of that and you just have one station. And it is 
actually cheaper for you to broadcast one affiliate rather than 
several hundred?
    Mr. Dodge. It certainly would be, but the fact of the 
matter is today we broadcast locals in all 210 markets. We have 
made the decision that we want to be in there, and all we are 
saying is to protect consumers from takedowns, allow us to 
temporarily import a distant signal. That is not the end game.
    Mr. Farenthold. Would another option to the ones you 
suggested might be, all right, you stay up and you go under 
whatever agreement is eventually reached?
    Mr. Dodge. Of course.
    Mr. Farenthold. All right.
    Mr. Donato, we talk about these million or so----
    Mr. Donato. Designated market areas.
    Mr. Farenthold. Yes. Well, we talk about the million or so 
people who are not served by anybody. Is there a way we set it 
up where--and even with the DMAs, we set it up to the one that 
is most rationally close to them? Isn't there just a way to 
start over and do away with the 1972 stuff? If I had my choice 
of local affiliates in Washington, D.C. on DirecTV, I would 
pick the Corpus Christi local affiliate.
    Mr. Donato. So the 1972 stuff is--that is what existed at 
the time the law was written, and that is why it is in the 
appendix and no one has gone back to update it. We would be 
delighted to supply the Committee with updated information on 
it.
    Just so you understand what the implications are, pay 
penetration in 1972 was obviously less than 5 percent or the 
amount of viewing that went to pay was less than 5 percent. And 
right now the amount of viewing that goes to cable stations is 
about 60-65 percent. So there has been a shift.
    Typically the counties in which it feels like it is 
irrational because you cannot get the Broncos game are really 
large rural counties, and most of those people in those 
counties do, in fact, watch to the home market station. We do 
have split counties. We had split counties in the past.
    Mr. Farenthold. My time is up. I have now got to go 
research whether or not watching my Corpus Christi stations on 
my Slingbox is illegal. I am really concerned now.
    I yield back.
    Mr. Coble. I thank the gentleman.
    The distinguished gentleman from Florida, Mr. Deutch, is 
recognized for 5 minutes.
    Mr. Deutch. Thank you, Mr. Chairman.
    Mr. Padden, you have made an argument, a very compelling 
argument, that the current retransmission system that is in 
place is incredibly complex, comically complex I am sure you 
would say. But your solution is to walk away--for us to walk 
away from that process altogether, which would bring all of the 
broadcast stations into the free market, if I understand your 
proposal. And I appreciate your desire to take Congress out of 
this. And the full Committee's Chairman I think touched on this 
before. If you take Congress out of these business-to-business 
dealings, Congress is still going to be tipping the scales in 
favor of one party or the other either by keeping compulsory 
licenses or by striking them. Why is walking away altogether a 
fair solution?
    Mr. Padden. I think the best way to explain it is like 
this. First you gave cable--I will say cable and satellite a 
compulsory license for the programs on broadcast stations. Then 
as part of that deal, the FCC adopted rules that restrict cable 
and satellite's use of that compulsory license. And then in 
1992, Congress enacted retransmission consent which requires a 
marketplace negotiation between the station and the cable and 
satellite people. So you ended up at the same place you would 
be, namely in marketplace negotiation, if you had done nothing 
except you have got a bunch of regulatory warts that you 
developed along the way like the fact that the 1972 rules are 
still in the FCC's rules.
    All I am saying is it is a Rube Goldberg system. It is a 
complex way to do something simple, and it really is a chance 
for once to say here is a Government program that each little 
step made sense when we did it but the end result is 
nonsensical, so we are going to back out of it.
    Mr. Deutch. Mr. Dodge, let's talk about regulatory warts 
for a second. I assume that you would be in some disagreement 
with that proposal. But I am hoping you could walk us through 
the process that DISH undertakes to negotiate with local 
broadcasters. What makes that more difficult from your 
company's perspective than negotiating with the non-broadcast 
stations that Mr. Padden holds up as the model as to exactly 
how this should now work? As he points out, those negotiations 
all take place without any congressional interference at all. 
Why is there a difference? Is it more difficult and, if so, 
why?
    Mr. Dodge. It is more difficult because you have 210 small 
monopoly territories, if you will, where this one local 
broadcaster who, as Mr. Waldron asserts, has this valuable 
local content that is irreplaceable that no one else can 
recreate, and that one broadcaster gets to play three if not 
four distributors off each other. And oftentimes you get to a 
point in a negotiation where they are asking for 300-400 
percent increase, and they say, okay, I guess we are not going 
to get there. I am just going to take the signal down. I am 
going to call up your competitors and tell my consumers to go 
switch to them. And the problem is while the broadcaster might 
lose an eyeball for 30 days, DISH has lost a customer for 
eternity after the consumer goes through the headache of 
switching.
    Mr. Deutch. Mr. Dodge, can you just go through that in a 
little more detail, though? When you say they are playing 
several off of one another, can you give me some examples? How 
does that actually work? What is it that you would see happen?
    Mr. Dodge. So in some cases, the broadcasters literally 
start running advertisements in the paper saying--you know, 
putting into their signal that you are about to lose your 
signal from DISH network. Please call DirecTV or Comcast, 
whomever. They run advertisements in the local papers. And, you 
know, as Mr. Waldron says, maybe it is a smaller amount of 
these things that actually go to a takedown. What he does not 
account for is there are numbers of these where you do actually 
get to an 11th hour negotiation, but the consumers have been 
bombarded for weeks if not a month with all these 
advertisements and messages across the bottom of the screen 
saying the sky is falling, you better switch now. So there is a 
huge disenfranchisement of consumers even in cases where it 
does not actually go to a takedown.
    Mr. Deutch. Mr. Waldron?
    Mr. Waldron. Let's take Mr. Dodge's statement, read it 
back, and swap out the word HBO for broadcaster. HBO does not 
want to reach a deal with the local cable company. HBO is going 
to pull back its programming. HBO is going to run an 
advertising to say that, ``Oh, you want to watch HBO, you want 
to watch your favorite show? Go to DirecTV because DISH does 
not have HBO.'' What is so remarkable about this? These are 
marketplace negotiations. To your point, Congressman, what you 
started out with, what is different about this, as Mr. Padden 
said, with every other sort of broadcaster? And the answer is 
Congress depends on HBO and DISH and DirecTV to have serious 
negotiations and to deal with the marketplace. That is the same 
exact thing that is going on here.
    Mr. Dodge. And if I may.
    Mr. Deutch. Can I have 15 seconds just to hear the 
difference? Mr. Dodge?
    Mr. Dodge. So with respect to HBO, are there other movie 
channels out there? Yes, there are. Is there potential 
substitute programming? Yes, there is.
    Now let's substitute in what Mr. Waldron said. I guess 
localism is not that important. We should be able to import New 
York because it is just not that important what is actually 
going on in Denver. He cannot talk about of both sides of his 
mouth.
    Mr. Coble. The gentleman's time has expired.
    The distinguished gentleman from Florida?
    Mr. DeSantis. Mr. MacKenzie, if you wanted to chime in, go 
ahead.
    Mr. MacKenzie. I would. I think the big difference between 
DirecTV and DISH and members of the American Cable Association 
are relative size. We are very small providers, normally with, 
on average, less than 5,000 subscribers. When we start our 
retransmission discussions with the broadcasters, it is after 
they have already negotiated with the big company that is in 
the DMA. When we try to make a negotiation--and on numerous 
occasions I have asked, ``Could we have a most favored nations 
clause in our contract to make sure that we are being treated 
fairly compared to the others in the marketplace?'' And I have 
never been able to get that in. So I think there is a huge 
difference between the negotiations between a DirecTV and DISH 
and the broadcasters and the small cable operators and the 
broadcasters.
    Mr. DeSantis. Great. I just wanted to give you a chance.
    This is my first time going around with this. I am a 
freshman, but it is really interesting to see. I was listening 
to the Major League Baseball testimony, and I am one of the 
youngest Members of Congress, but yet I remember watching 100 
games about. We had TBS in Florida, TBS for the Braves, WGN for 
the Cubs, a little bit of White Sox. Then we did get WOR, so 
there were Mets games. So those were the people that I 
followed. When ESPN started covering cable, you started to get 
more, and then with the Internet--I remember when MLB.TV came 
out. You could actually watch games at work. And now you can do 
it on your devices. I mean, it is just unbelievable. And I 
think the technology is great. I wonder about the lost 
productivity in the American workforce, but I guess that is 
just a discussion for another time.
    So as someone who is new to this, I would just like you all 
to say--you know, we are here. A lot of people say, you know, 
Congress--they got to solve the problems of the American 
public, all that. And that is nice to say but it obscures the 
fact that we actually create a lot of problems here through the 
years. And I have seen it in other areas.
    And so as somebody who is new looking at this, what would 
you say as kind of something that Congress has created a 
problem with this that we should look to rectify? I probably 
know where Mr. Padden is going but can you start and then just 
give me a quick----
    Mr. Padden. Sure. One perfect example is the compulsory 
license that you enacted gives cable systems the right to carry 
stations that are deemed significantly viewed in their county 
based on a list of ratings from 1972 that is enshrined in the 
FCC rules. And if a station wants to get carried somewhere else 
and the constituents there want to see it, the station has to 
petition the FCC to amend the list of significantly viewed 
stations so they can be carried there. It is crazy. I mean, if 
you simply rely on the free market and there are people who 
want to see the station and the station wants to be seen, they 
will figure out how to get it done.
    Mr. DeSantis. Mr. Garrett?
    Mr. Garrett. Well, Congressman DeSantis, there are probably 
several answers I could give. The one I would focus on for 
Major League Baseball here is the fact that entities like Major 
League Baseball and other content owners are forced to 
subsidize essentially a $100 billion industry by providing them 
with below-market programming pursuant to the compulsory 
license.
    You mentioned the great variety, the wealth of programming, 
baseball programming that you can see now. The vast bulk of 
that programming is made available through negotiated licenses, 
through marketplace negotiations. And we think that the same 
can be true of the program that is now available during 
compulsory licensing, but if compulsory licenses continue, at 
the very least, we should have fair market value paid for that 
programming.
    Mr. DeSantis. You mentioned the industry. But what is the 
dollar loss to Major League Baseball? Have you looked----
    Mr. Garrett. I do not know the answer to that. It is not a 
question of harm here. It is a question of talking about what 
is fair and reasonable and that marketplace compensations, 
marketplace value is what we all live with in this industry.
    Mr. DeSantis. Thank you.
    Mr. Campbell?
    Mr. Campbell. Congressman DeSantis, thank you.
    Conceptually I think that the biggest problem is that the 
rules that are currently in place do not recognize what the 
marketplace looks like today and it is ever-changing and ever-
evolving. I think the biggest thing that Congress could do 
would make sure that rules are in place that encourage 
innovation and investment and competition because we are 
dealing with companies that have been there forever, and I 
think consumers benefit the most by having companies like 
CenturyLink go into a major market, invest the capital, and 
compete. And I think the rules in place would tend to stifle 
that. So I think conceptually that is what Congress should take 
a look at.
    Mr. DeSantis. Good.
    Mr. MacKenzie?
    Mr. MacKenzie. Small rural carriers are the ones who are 
bringing broadband to America which is, I know, a priority for 
everyone. But oftentimes the rules and regulations are one size 
fits all. And so I think one of the things we should look at is 
some changes in the rules or when the rules are being looked 
at, how it impacts the small providers.
    Mr. DeSantis. I am out of time, but if the rest of you 
gentlemen would like to submit something, I would certainly 
love to hear your views as well.
    So thank you for coming.
    Mr. Coble. I thank the gentleman from Florida.
    The distinguished lady from California.
    Ms. Bass. Thank you very much, Mr. Chairman.
    And our witnesses today--I appreciate your time. It has 
been helpful to me coming from Los Angeles and having just 
experienced the blackout which, again, I thought was specific 
to our area and did not really realize how widespread this was 
or why this happens.
    So I just had a couple of questions for you, one of which 
is do you worry that pulling consumers into these escalating 
negotiations between cable or satellite and broadcasters means 
that more people are going to opt out of pay TV and whether or 
not you think this would have a harmful effect on content 
creators whose shows are distributed on cable and satellite? 
And that is for anybody.
    Mr. Waldron. Can I make one point?
    Ms. Bass. Sure.
    Mr. Waldron. I want to emphasize that a broadcaster is a 
free over-the-air service. So during the so-called blackout, 
the service was available 100 percent of the time. I realize 
that some people might not have antennas or some people might 
have reception problems. But I do want to emphasize----
    Ms. Bass. I could have seen CBS?
    Mr. Waldron. I am sorry?
    Ms. Bass. I could have seen CBS if I had rabbit ears?
    Mr. Waldron. Yes, absolutely. It was available over the air 
during the entire time, and indeed, there were reports at least 
in the New York market that there was a run on antennas at 
Radio Shack. So I do want to emphasize that the signal is 
always on and always up. It may not be available on the cable 
system, and we realize that, but it was available during this 
whole time.
    Mr. Dodge. Well, I would take a bit of an issue with that 
as I do not think the broadcasters actually build out 
terrestrial signal to their entire DMA, certainly not in every 
DMA. So I think it depends where you lived in Los Angeles as to 
whether you could get an off-air signal.
    Ms. Bass. I see. I do not think people knew that, and I 
doubt whether there was a run on rabbit ears in LA.
    Mr. Dodge. Shame on broadcasters for not building out their 
entire DMAs.
    Ms. Bass. Okay.
    Mr. Campbell. And from a pay provider perspective, it is 
not free.
    Ms. Bass. Okay.
    The second question is many local broadcast stations play 
an important role in providing local news, weather and 
emergency information particular to the communities they serve. 
And I know that we all agree that viewers should not be 
deprived of local information, especially during emergencies. 
So specifically I wanted to ask what steps can Congress take to 
ensure that our constituents do not get caught in the middle of 
these commercial disputes, particularly when weather or other 
emergency information is at stake.
    Mr. Waldron. Well, one approach that we would have is that 
if there is a dispute, the consumers should be able to change 
providers. So there should not be a cancellation fee, and 
frankly there should be a rebate if they are denied service.
    Ms. Bass. That is not that easy to do.
    Mr. Waldron. I am sorry. Excuse me?
    Ms. Bass. That is not that easy to do. I mean, if you just 
want to cancel right in the middle of the dispute?
    Mr. Waldron. I understand it is not easy to do, but that is 
a choice that consumers can have in addition to getting the 
signal over the air. And by the way, it is free to anyone who 
has antennas. You can also pay for pay TV, but it is free to 
anyone who has an antenna.
    Ms. Bass. Okay, representing the antenna companies.
    Mr. Dodge. Could I address just the point about refunds and 
cancellation fees? I think, as is clear, our view of the world 
is today it is an unfair fight as it stands. You have got one 
broadcaster who plays all the distributors off against each 
other. With all due respect, Mr. Waldron is trying to actually 
make it even worse by saying now let's give another hammer to 
the broadcaster by saying you have to do refunds and waive 
termination fees in all these cases when, quite frankly, the 
fact that there are blackouts are the exact reason why our 
disclosures to our consumers in our contracts are crystal clear 
that programming is subject to change because we cannot ever 
guarantee that we are going to be able to provide any local 
broadcaster's signal because there is this constant threat of 
takedowns.
    Ms. Bass. Thank you.
    Would anybody else like to respond?
    Mr. MacKenzie. Yes. I think the proposal that we put 
forward that during these disputes the signal remains up while 
the negotiations are going on, therefore the consumer is not 
going to be harmed, and once the negotiations are completed, 
then the fees are paid retroactive. So no one really is 
disturbed or harmed by that, and it allows the consumer to 
continue to have service during that period of time.
    Ms. Bass. Anyone else? All right. Thank you. Oh, I am 
sorry.
    Mr. Padden. I would just repeat that Mr. MacKenzie's 
industry just went to court to defeat a standstill agreement in 
the context of the program access rules, and for them to now 
come in and say they would like it in this instance I think is 
unusually duplicitous even by Washington standards.
    Ms. Bass. Would you like to respond to that, Mr. MacKenzie?
    Mr. MacKenzie. My company and the companies of the ACA were 
not involved in that suit. The large cable operators maybe, but 
not the small cable operators.
    Ms. Bass. Okay, thank you.
    Mr. Coble. I thank the gentlelady.
    The distinguished gentleman from Louisiana.
    Mr. Richmond. Thank you, Mr. Chairman. I want to thank you 
for having the Committee meeting today.
    Let me just start with--I guess I will show a little 
favoritism and start with Mr. Campbell from CenturyLink. I 
guess my question to you would be looking at most of your new 
subscribers and the fact that they are probably new to the 
Internet and looking at the area where you all are located 
which, if you go right down the street toward Monroe Lake 
Providence, you are talking about one of the poorest places in 
the country. That has consistently been that way. The fact that 
your new customers and coming in and taking video along with 
Internet access, what kind of effect is that having in the 
area?
    Mr. Campbell. Congressman, thank you for the question. It 
has had a great effect not only for our subscribers that take 
the video product but for those who choose not to. As we 
upgrade the networks in these markets that we enter, we are 
offering broadband speeds that range from 25 to 40 megabits. So 
even those folks we cannot sign up to the video product that 
may not want it, everyone else is getting enhanced broadband 
speed. So really the benefit from the video perspective is 
great because it allows us to compete with the incumbent cable 
operator and offer a video product. But even from a broadband 
perspective, the effect is even greater.
    Mr. Richmond. From a price point, how are you all with the 
traditional video providers and cable providers?
    Mr. Campbell. Traditionally in the markets where we have 
entered, we obviously enter lower than they do. What we have 
seen is some slowdown in price increases from the incumbent 
cable operator although that has not--they slow down the 
increases. They still increase their prices and the content 
acquisition is still a problem, but generally our price point 
is lower.
    Mr. Richmond. Let me just say that many local broadcast 
stations play an important role in providing local news, 
weather, and emergency information to the communities they 
serve. However, nearly 90 percent of households today watch 
their local broadcaster through a pay TV subscription and 
therefore are dependent on cable, satellite, or other video 
provider to offer this program. And as we mark the anniversary 
of 9/11, I believe that we all agree that the U.S. should not 
be deprived of local information during emergencies regardless 
of how retransmission consent negotiation is proceeding. And I 
mentioned 9/11 but, of course, in Louisiana and in our area, we 
have to worry about hurricanes and tornados and other things.
    So I would be interested whether the panelists would 
comment on their views as to whether it is a fair negotiating 
tactic to threaten blackouts given viewers are then at the risk 
of missing emergency information. What steps can we take to 
ensure that our constituents do not get caught in the middle of 
that fight, particularly when weather and other disasters may 
play a part? And anyone can start.
    Mr. Dodge. Of course, we do not think it is fair for 
consumers to be put in that position, especially given that the 
broadcasters received at least initially billions of dollars of 
spectrum for free under the premise that they would be stewards 
of that spectrum for the public good.
    And with all due respect to Mr. Waldron, I do not think 
saying to folks, ``Hey, just go use an off-air antenna'' is a 
100 percent satisfactory solution because the broadcasters do 
not cover their entire DMAs with the free broadcast signal.
    Mr. Waldron. The vast majority--I do want to emphasize the 
vast majority of the thousands of broadcasters and the 
thousands of cable companies reach deals. So for your 
constituents and the vast majority of constituents, as I said 
in my opening statement, 1 one-hundredth of 1 percent of all 
viewing hours were lost to disruptions last year. You are 20 
times more likely to lose your service because of a power 
outage than you are because of retransmission consent impasse. 
So broadcasters have every commitment to reach the deals in the 
marketplace, and in the vast majority of times, those deals are 
reached and constituents continue to get their service.
    Mr. Campbell. Congressman, as you know, our company is 
steeped in a rich history of being a local rural communications 
provider, and we absolutely embrace localism. The issue from a 
video perspective is--I think Mr. Dodge mentioned this--
negotiations are not quite as local as they used to be. If we 
were dealing with a local station in the Colorado Springs 
market, then it might be a better negotiation process. We are 
dealing with syndicates that own 30, 40, 50 markets who play 
them against each other, who push these negotiations up to the 
national level and tie in all of this non-local content into 
the agreement and say take it or else. And so that is kind of 
the issue from the video perspective.
    In utopia, if they were local and it worked the way that 
Mr. Waldron said, I do not disagree, but it does not work that 
way.
    Mr. Richmond. I see that my time has expired, and Mr. 
Chairman, I yield back.
    Mr. Coble. The gentleman's time has expired. I thank the 
gentleman.
    The distinguished gentleman from Georgia.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here.
    This is one of those issues that my staff and others have 
said this is just a terribly complicated issue. And I began 
reading about this last week, and I felt like I was back in law 
school and, as I call, seminary ``cemetery'' and reading a 
paragraph and having to reread it four or five times and saying 
what exactly is being said here. Mr. Padden, you made a great 
point about that. This is just chaotic.
    And then I have been listening today, and what I come back 
to is--having the great joy of serving Georgia's 9th 
congressional district, which is northeast Georgia, the 
mountains, the start of the Appalachian Trail, very rural but 
also very urban in certain areas. Is what I hear lost here? The 
people who are not in this room paid to be here and that is my 
constituents back home who could really frankly care less about 
the complexity of it. They are wanting to be able to get their 
news, to watch new ideas and to watch new TV and to watch new 
programming. And sometimes the complacency of what I have seen 
here today is more fighting for our battles and our market 
share than ending up--the bottom line is the person that we 
actually serve. And this is some of the questions that I want 
to take up first.
    Mr. Donato, you answered a few minutes ago, and I am going 
to assume that it was sort of off the cuff. But you said, well, 
the DMA is what it is, almost implying like Nielsen--where we 
are because we are in a statute doing what we do. But you do 
not always have to be there. We can change that. I mean, there 
can be other ways to look at DMAs and going very conservatively 
and this kind of thing.
    So I would like for you to explain the process in which 
Nielsen decides current DMA boundaries and tell me whether or 
not northeast Georgia is under current consideration.
    Mr. Donato. Currently the process is annually. We go in and 
we evaluate the share of tuning to stations from the home 
market, and the market for a particular county which has the 
majority of the viewing or the larger share--it is to that home 
market that a county is assigned. In some cases very large or 
rural or counties which are on the sort of outskirts of the 
DMA, we will actually split counties and put one part of the 
county in one market and one part of the county in the other 
market.
    Mr. Collins. Does safety ever become an issue? I mean, you 
seem to talk about viewership, but I mean, we are talking about 
safety here. We talked about hurricanes, tornados. Does safety 
ever enter into what you are thinking about? Because by 
splitting a county--Elbert County is one of mine that is split. 
I was watching just a few months ago when we had an issue with 
ice. I did not even see four of my counties on the Atlanta 
area--which I am in Gainesville--even listed there. I mean, is 
there safety that ever comes into account of what you are 
talking about?
    Mr. Donato. The DMA is entirely based on viewing.
    Mr. Collins. Okay, and I appreciate that because we have 
something I want to cover here.
    So these gentlemen have talked about safety and localism 
and these kind of things, but yet, when we do the DMA, safety 
is not a consideration being taken into account. So the 
argument is really interesting here. We get them talking about 
localism and safety. We get you saying, well, we do not even 
take it into account for DMAs.
    Mr. Donato. I guess I would respond in this way. So the DMA 
is basically set up as a commercial entity so that buyers and 
sellers of advertising understand the geography associated with 
viewing audiences. It is the basis for literally hundreds of 
billions of dollars of commercial activity, and it really is 
the thing that has supported local television all along. It is 
objective. It is based on viewer preferences. It is not based 
on any rules. We frequently talk to Congressmen and women when 
there are issues that arise in terms of someone not seeing a 
signal and they go to their Congressman or woman.
    Mr. Collins. We are going to talk about that in just a 
second.
    Mr. Donato. Yes. We basically handle them one at a time and 
try to demonstrate why they are where they are. And we listen 
to them and sometimes this is the reason why we begin to split 
a county if it does appear as if a county really goes--part of 
a county goes to one market, part of a county goes to another 
market in terms of the viewer preferences.
    Mr. Collins. In one of my counties in particular, I think 
that is just a false distinction.
    But really I think what is happening here is we are talking 
on two different levels when we deal with this DMA issue. In 
one part, we are dealing with localism and the safety aspects 
and why we need local broadcasting and why the satellite and 
cable providers get in this market. And on your angle, you are 
not even discussing really what some of the arguments that are 
being made here. So that is a concern. I may submit more 
questions for the record for you at a later time.
    Mr. Waldron, how specifically are broadcasters willing to 
facilitate the availability? As I said before, I have four 
counties that are orphan counties. I would like a commitment 
from you to work with my office, and I know that they have 
already been working there to make sure that we get this 
question addressed because it came up in my town hall meetings. 
They understand this. They get it because we are really in a 
different dynamic in those four counties and really split 
between two smaller markets in the predominant Atlanta market 
in which most of them are participating. Can I get a commitment 
out of you continuing to work with me on those orphan counties 
that I have?
    Mr. Waldron. Absolutely.
    Mr. Collins. The other question here and this is sort of an 
overall question. I will leave this one open. It is not one 
that I had prepared but it came to me as I was listening to 
you. I am out of time, I believe, Mr. Chairman? So I guess I 
will have to submit it for the record. Can I have 30 seconds, 
Mr. Chairman?
    Mr. Coble. 30 seconds will be granted.
    Mr. Collins. Thank you, Mr. Chairman.
    I read the New York Times. I read the Washington Post. I 
read the Wall Street Journal. I read the Atlanta Journal. I 
read the Gainesville Times. I even read the Fannin News 
Observer. I get information from all over. Why couldn't I have 
my local broadcasting and the Los Angeles affiliate if I wanted 
to? And I am not setting myself up. So anybody in the audience 
says, ``Oh, he is for one side or the other.'' No. I am just 
asking an honest question with the way things are developed. 
Shouldn't the question be ``either/or''--not be ``either/or'' 
and be ``and?''
    Mr. Waldron. If I may answer.
    Mr. Coble. Your time has expired.
    You may answer.
    Mr. Waldron. I mean, I think the argument is that exclusive 
territories are very common in business, let's say a beer 
distributorship or a car dealership. Well, that is what a local 
broadcaster is. They are the CBS outlet, if you will, for a CBS 
affiliate in Gainesville or Atlanta. They are that outlet. If 
you are bringing in another CBS station, then you actually have 
defeated the exclusivity that the broadcaster negotiated for.
    Mr. Collins. We will talk about it.
    Mr. Coble. The gentleman's time has expired. I thank the 
gentleman.
    The gentlelady from Washington.
    Ms. DelBene. Thank you, Mr. Chair, and I just want to thank 
all of you for being here today and continuing as we have more 
questions.
    I wanted to start with Mr. Padden. You have not talked 
about localism at all and with your proposal how that would 
impact access to local information.
    Mr. Padden. Again, I am just suggesting to you that 
marketplace forces would be a better servant of consumers' 
interests. If there is programming they are interested in, 
whether it is local programming or something from somewhere 
else, and you leave it to the market and there is money to be 
made providing that program to them, they will get it. The 
overwhelming majority of the viewing is to local broadcast 
stations because of the overwhelming interest in the local news 
and weather and sports, and in a free market system, that would 
continue. There would be absolutely no diminution in that at 
all.
    Why you would want to continue a system that is based on 
the Nielsen ratings from 1972 to decide who gets to watch what 
I do not understand.
    Ms. DelBene. You know, with the new technology today, the 
Internet, people are getting a lot of local information even 
when they are not at home. Many of us when we are here are 
still staying connected at home and getting local information 
in other ways because we have people traveling around a lot and 
they are not always in their local area but they still want 
news that is happening from home.
    So given the development of new technologies and the 
different consumer behavior in terms of access to content and 
making sure that we--given that we have legislation from 1988 
and Nielsen ratings from earlier, how do we make sure that we 
put together a policy that does not inhibit innovation or 
change going forward as we look at what we should do here in 
the next step? And so that is kind of a broad question for 
everyone, but we want to make sure that whatever we do 
addresses issues that consumers have today but also does not 
block innovative new entrants that may also want to compete in 
this space.
    Mr. Donato?
    Mr. Donato. Yes, I would like to answer that actually.
    So we measure viewing of television online. We have made an 
announcement. It is a very complicated technical problem of 
measuring it through tablets. We have made an announcement that 
we have solved the technology, and starting the end of next 
year, viewership on tablets will also be included in the 
ratings.
    I suppose my point is we have got measurement solutions. 
The business relationships are very, very complicated, and I 
would not comment on them. I would leave it to my fellow 
panelists to comment on them. But we do have the measurement 
solutions worked out.
    Mr. Dodge. If I could comment on the 1972 Nielsen data 
point, I think one thing that is missing from the record is 
that although theoretically DMAs can change based on viewership 
and viewership is what is measured, if there is only one signal 
that is available in a DMA, when you check the viewership, you 
are going to get the same local affiliate over and over and 
over again. And in southwest Colorado, for example, which I 
mentioned is in the Albuquerque DMA, we have proposed to 
provide both Albuquerque and Denver to the folks in those two 
counties and let the consumers decide. So when Mr. Donato's 
firm calls them up, they can say I am watching Albuquerque and, 
lo and behold, maybe the broadcasters are right. People down 
there prefer to buy their Chevrolets from Albuquerque, but some 
people might say I am watching Denver. And ultimately it is a 
vote of the people to decide where those two counties should 
be.
    Mr. Donato. I said it before, but I do not understand the 
1972 comment. Every year we evaluate viewership and that is the 
basis on which DMAs are constructed.
    Ms. DelBene. So I was not just focused on 1972. I am kind 
of focused on the speed of legislation and the way people are 
viewing, the way the industry work changes more quickly 
sometimes than legislation does. So how do we make sure we put 
together legislation that does not inhibit that innovation?
    Mr. Waldron. If I could come back to your original question 
about technology, technology is very exciting for broadcasters 
because, as you are probably well aware, with Slingbox and 
other technologies, watchabc.com, you can actually use the 
Internet technologies to keep up with your local broadcaster 
even when you are in Washington, D.C. And with the CBS issue 
with Time Warner, an important part of that was the online 
digital rights so that CBS can make that programming available 
to Hulu or Netflix or Amazon Instant Video. So the technology 
is actually expanding opportunities to access your local 
broadcaster.
    Ms. DelBene. Yes, Mr. Padden.
    Mr. Padden. If I could respond just briefly. You are right. 
New technology is creating all kinds of wonderful 
opportunities. Unfortunately, the compulsory license that you 
have given to the cable industry and the satellite industry you 
have not given to the online industry. So, for example, you 
give the rights to broadcast programming, to Comcast and to 
DirecTV, but you do not give it to Netflix. I do not understand 
why. I am not advocating that you give it to Netflix. What I am 
advocating is you undo the license you have given to cable and 
satellite that currently puts online distributors at a 
disadvantage. The United States is a party to a number of 
international treaties that prohibit compulsory licensing of 
television programming to online providers. So the only way you 
can level the playing field is by repealing the license for 
cable and satellite.
    Ms. DelBene. My time has expired. So thank you, Mr. Chair. 
I yield back.
    Mr. Coble. I thank the gentlelady.
    The distinguished gentleman from Texas, Mr. Lamar Smith.
    Mr. Smith of Texas. Thank you, Mr. Chairman.
    First of all, let me apologize for being tardy as well as 
for having to leave early. This is one of those days where all 
of the three Committees on which I serve are meeting 
concurrently. So I am having to shift around.
    Also, I may be covering some subjects that have already 
been covered, and I apologize for that. But I would like to 
address a couple of questions to our panelists today.
    My first question I think would go to Mr. Dodge, Mr. 
Waldron, and Mr. MacKenzie, and it is this. The compulsory 
license has been extended innumerable times by Congress, and my 
question is how well is it working for television viewers? And 
do you feel that it ought to be reauthorized for another 5 
years? Mr. Dodge?
    Mr. Dodge. I would say it is working wonderfully. As a 
result of the last reauthorization, DISH is now providing local 
channels in all 210 DMAs.
    Mr. Smith of Texas. Okay. Thank you.
    Mr. Waldron?
    Mr. Waldron. With respect to the local channels, I might 
surprise you. I agree completely with Mr. Dodge. We think the 
local compulsory licenses actually do work. I disagree with my 
friend, Preston Padden, on that one. Broadcasters think the 
system is working.
    Mr. Smith of Texas. And Mr. MacKenzie?
    Mr. MacKenzie. We are going to go three in a row. I would 
agree.
    Mr. Smith of Texas. Okay. Thank you.
    The next question is for Mr. Garrett and Mr. Padden and Mr. 
Dodge, and it is this. What alternatives exist to the 
compulsory license? And would those alternatives adequately 
protect the rights of copyright holders? Mr. Garrett?
    Mr. Garrett. The Copyright Office addressed that very 
question in a report that they prepared for Congress here, and 
they talked about the different types of licensing, direct 
licensing, sub-licensing, and collective licensing. And the 
report lays it out in excellent detail here.
    The one thing I would mention is just the actual history 
here of what has happened with WTBS, for example. I have had 
the privilege of being present, I think, at every one of the 
hearings this Subcommittee has held on this issue since the 
late 1970's. And when I go back, I think about the years when 
people would debate about making WTBS available and it could 
only be done via compulsory licensing. And in fact, what 
happened in 1990 is WTBS converted to a cable network, and 
today it is available to virtually every cable subscriber, not 
pursuant to compulsory licensing, but pursuant to free 
marketplace negotiated agreements, including agreements that 
Major League Baseball has and has kept a package of programming 
on TBS for several years and will through the year 2021.
    Mr. Smith of Texas. Mr. Padden?
    Mr. Padden. There are plenty of marketplace alternatives 
that would be far more appropriate and fair to copyright owners 
than a Government system where Government boards set the rates.
    Mr. Smith of Texas. Thank you.
    And finally, Mr. Dodge.
    Mr. Dodge. We believe that the compulsory licenses do still 
continue to have utility, and part of the reason is what Mr. 
Padden noted in his written testimony, which is to this day the 
broadcasters still have not cleared copyrights through to the 
viewer in all instances. And that is the magic of a compulsory 
license actually.
    Mr. Smith of Texas. Thank you all for your testimony.
    Thank you, Mr. Chairman. I yield back.
    Mr. Coble. I thank the gentleman from Texas.
    The distinguished gentleman from New York.
    Mr. Jeffries. Thank you, Mr. Chairman, and I thank the 
distinguished Ranking Member as well.
    It seems to me that many of the disputes over the last 
several years that have, in some instances unfortunately, 
resulted in a temporary blackout and ability for consumers, 
some of whom I represent back home in Brooklyn and parts of 
Queens, to get content all seem to occur in and around 
significant sporting events. So most recently in the run-up to 
the start of the football season, there was a conflict that was 
resolved on the eve of the football season starting, 
thankfully. In the past back at home, there was a conflict that 
prevented some consumers from seeing part of the early Yankees 
run through a particular playoff season that wound up resolving 
itself. And there was a conflict at home that centered around 
the ability for some people to see MSG which broadcast cast the 
Knicks. The Knicks were off to a terrible start, so nobody 
cared. [Laughter.]
    And then Jeremy Lin came on the scene and it became a big 
problem. And it ultimately resolved itself.
    But there is a lot of conflicts, not all exclusively, but a 
lot that just seem to have interesting timing as it relates to 
major sporting events.
    And so I was very interested in Mr. MacKenzie's 
observations as it relates to sports licensing fees. I believe 
you testified that sort of these transmission fees have been 
skyrocketing in recent times. Is that correct?
    Mr. MacKenzie. True.
    Mr. Jeffries. And I think you also indicated that as a 
result, consumers are hurt as a result of the increase in the 
sports transmission fees. Is that right?
    Mr. MacKenzie. That is our opinion, yes.
    Mr. Jeffries. Now, could you elaborate on that opinion in 
terms of how exactly you think the consumers are hurt by an 
increase in licensing fees connected to ESPN or some of the 
other sports content?
    Mr. MacKenzie. Well, for instance, ESPN, as reported by SNL 
Kagan--the cost of that channel alone is $5.50, and that is a 
channel that is required to be carried at the basic tier. So 
whether you are a sports fan or not, you are having to pay for 
ESPN. So when you look at the sports programming that is on the 
cable channels and on the broadcast channels, the amount of the 
programming costs that can be attributed to sports--and I do 
not have an exact number, but the estimate is a third of the 
expense----
    Mr. Jeffries. Now, who requires ESPN to be carried at the 
basic tier?
    Mr. MacKenzie. That is part of the negotiations that you 
have with Disney. When you are negotiating with them, they will 
only allow you to carry ESPN if you put it on the lowest tier.
    Mr. Jeffries. Okay.
    You also mentioned in your testimony that you thought that 
the antitrust exemption that exists perhaps should be revisited 
because of the dominant market share that exists with the major 
sports leagues. Is that correct?
    Mr. MacKenzie. Yes.
    Mr. Jeffries. Now, in 1922, I believe there was an 
antitrust exemption granted blanket to Major League Baseball, 
and then you referenced legislation that this Congress passed 
in 1961. But if we were to revisit the antitrust exemption and 
adjustments were to be made, recognizing that there is a 
difference between baseball and the other major sports leagues, 
how do you think that that could impact the landscape in a 
manner that was favorable to our consumers?
    Mr. MacKenzie. Well, I think that what you have, rather 
than one entity negotiating on behalf of the entire league, you 
would have individual teams negotiating in their local market. 
I think that that would allow for more competition and probably 
lower costs.
    Mr. Jeffries. Could you comment on that, Mr. Garrett?
    Mr. Garrett. Congressman, as I indicated earlier, very few 
people want to hear what I have to say about antitrust policies 
and antitrust laws. My focus is on the copyright side.
    But what I will say is that with the Sports Broadcasting 
Act, it is, among other things, responsible for why you and the 
American public will be able to see the World Series on Fox 
this year. It is that law which gives the Commissioner of 
Baseball, gives the NFL and other leagues the ability to pull 
together rights and make available to the American public the 
kind of programming that is now made available. I think the law 
has worked well. It has not been abused, and it is one of the 
reasons why today I can come here and say to you that every one 
of the approximately 5,000 games played in Major League 
Baseball--I am sorry--5,000 telecasts of games in Major League 
Baseball is available in one fashion or another to your 
constituents and to all consumers.
    Mr. Jeffries. Thank you.
    Mr. Coble. Thank you. I thank the gentleman.
    The distinguished lady from Texas is recognized.
    Ms. Jackson Lee. Mr. Chairman, thank you. I think all of us 
are expressing our appreciation to our Chairman and to the 
Ranking Member and indicating that our calendars caused us to 
be delayed. In one instance, the Homeland Security Committee 
was discussing Syria, and I might add that the combination of 
gentlemen that are before us, content and the various 
providers, have helped to contribute to America's education and 
discourse on this very important issue. So we are here for more 
than just a separation of powers as to who has what, who is to 
be regulated, but to be able to thank you for how you 
contribute to the public discourse on some very vital issues.
    We are engaged in this regulatory discussion because 
Congress, in its wisdom, saw fit to regulate both the content 
and the providers in order to create more robust competition, 
which I think is vital, and particularly the responsibilities 
of the Judiciary Committee are on the issue of competition. And 
I might add that there is merit in everyone's position, as I 
have been able to glean, as I have sat here.
    And certainly to the National Association of Broadcasters, 
I want to just be historic in my reflection on the old days of 
the black and white television with that antenna where you did 
provide content of joy to those communities that could get a 
television. And all they had to do was to plug it into the 
socket. So we have come to a new posture that for many was a 
very difficult change because they had to now pay for something 
that they had been able to plug in and receive some form of 
content. But in the wisdom of the Congress and the 
innovativeness of technology, we have all come to live together 
with the new access that consumers have.
    In the course of that, I want to raise a number of 
questions. All of us I think or many Members have expressed 
certainly the concern of the issue of blackout and how it 
impacts not so much the two entities that are having a 
disagreement. I heard someone say that that is only a minute 
percentage that occurred, but if it occurs at all, it is a 
difficult challenge for many of us who deal with our 
constituents.
    With all due respect and reflection, the customer will be 
calling the satellite company or they will be calling the cable 
company, and they will not be calling the entity that has the 
content. And we have to find a balance with that because there 
are concerns that this would be a growing problem.
    So I am going to be posing a generic question to start out 
with, and I would appreciate those who would answer it could do 
so. And I might have missed. So this is just a plain, simple 
question. Do we expect to have these content conflicts coming 
up over and over again? And is there a way that the industry 
will look to solve those kinds of concerns? We know what the 
issues are. The issues I have, content. You are a provider. You 
want to get my content. You have to pay. But are there ways to 
handle that in a preferable way than to skew what Congress 
tried to regulate and balance to protect the content, rightly 
so, and also to give competition. That is one question.
    The other question is should the upcoming reauthorization 
include a discussion of other issues related to satellite, 
cable, and the Big 4 broadcasters? And what do you think they 
should be or do you think--and again, to those who would want 
to answer that--it should be simply a clean reauthorization? 
The Judiciary Committee has its jurisdiction and others have 
theirs.
    Specifically to Mr. Dodge on the DISH Network, are the cord 
cutters or cord shavers, those who do not subscribe to multi-
channel video programming distributor, reduce the scope of the 
MVP's ability--are they of concern to the DISH Network? And if 
Congress did not reauthorize section 119 compulsory license, 
how expensive or burdensome would that be for you? Now, that is 
specifically to you.
    Can you answer the other questions about getting a 
resolution on how you debate this question going forward and 
then the reauthorization question?
    Mr. Dodge. Sure.
    Ms. Jackson Lee. And this is for everyone, Mr. Dodge. Why 
don't you wait on the question I specifically asked you?
    Others on the comment please.
    Mr. Campbell. Yes, I think something can be done to resolve 
this. What we need to do is look at the rules that are 
currently in place that are slanted in favor of the 
broadcasters that were created at a time when the broadcasters 
were facing issues with the incumbent operators, and now the 
shield has turned into a sword. And so if some of those issues 
were removed, such as network non-duplication and syndicated 
exclusivity, then I think you would see a much more balanced 
negotiation process. We have incentive to get local channels, 
the local news channels to our consumers, and I think the 
broadcasters have the incentive as well. But the problem is 
that so much of a national content is tied to it. If we were 
able to carry that content, I think the negotiations would be 
more balanced.
    Ms. Jackson Lee. Mr. Dodge, on your question.
    Mr. Dodge. Oh, sure. I would say to answer your first 
question, is this problem going away, for lack of a better 
term, the proof is in the numbers. In 2010, there were 10 local 
blackouts. In 2011, there were roughly 50. Last year, there 
were roughly 100, and now we are on track to set a record with 
120, which is not a record I think any of us will be happy to 
hit.
    With respect to your question on whether cord cutters were 
a concern for DISH, the answer is no. We welcome the 
competition, and we need to find a way ourselves to actually 
evolve and participate in that.
    Ms. Jackson Lee. Thank you.
    Anyone else?
    Mr. Waldron. If I may,
    Mr. Coble. The gentlelady's time has expired. I will give 
you 1 more minute.
    Mr. Waldron. I was just going to say broadcasters support a 
clean reauthorization of STELA, and the vast majority of deals 
do get done.
    And with your opening comment, still today you can get a TV 
and an antenna and plug it in and you get TV for free.
    Ms. Jackson Lee. Thank you, Mr. Chairman, for your 
indulgence. And thank you. I look forward to talking with you 
all individually. Thank you very much.
    Mr. Coble. I thank the gentlelady.
    The distinguished gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman. And I want to thank the 
Chair for convening this hearing and all of the witnesses for 
participating. It has been a delightful, free-flowing 
discussion. It has been great to see Mr. Dodge and Mr. Waldron 
seated next to each other going toe to toe.
    I will always benefit, since I have started going last in 
the series of questioning on our side, from what has taken 
place because there is always one comment that kind of pops up 
in the whole discussion that hits my mind. And that comment 
today came from Mr. Dodge when he looked at Mr. Waldron and 
said you cannot talk out of both sides of your mouth. My 
thought was that most of us--in all of the industries is my 
experience--have talked out of both sides of their mouths 
depending on what is beneficial to their particular industry.
    But I did note that it was particularly applicable to the 
broadcasters because I have been a strong advocate for people 
being paid for their intellectual property, and for that 
reason, I have been a strong advocate of your ability to 
negotiate for payment for your products. I think that is very 
important.
    What I have not been able to reconcile, however, is how you 
apply a different standard to the people who provide 
copyrighted material on radio, the performers. And I just do 
not understand that dichotomy. And so I am hopeful that you all 
will maybe come around on the radio side to the same position 
that you hold on the--when you own the protected material, 
understand that there are performers out there that own the 
protected material that they produce, and they deserve to be 
paid also.
    So I am not going to belabor that, although I would note 
that it seems to me to be unfair for you all to take the 
position that there is some kind of performance tax when the 
Government gets no part of the performance rights revenue. Yet, 
there is no performance tax when you get paid for what you have 
the copyright to. So I hope you all will help me reconcile 
that. I will not do it here in public. But it is a concern that 
I have.
    I think these are inordinately difficult issues. I kind of 
come down closer probably to where Mr. Padden does than most 
people. We would probably be better off to get the Government 
out of the way not only in this context but in the performance 
rights context too.
    So it will not be a surprise to anybody because I announced 
it at a hearing right before the break that I was introducing a 
bill to do away with the compulsory license of music, but to 
make sure that if you play a performer's music that you 
compensate them and go and work out a deal with them if that is 
what you want to do. I am kind of free market on a lot of this 
stuff, Mr. Padden, and I was particularly appreciative that 
your testimony was the last testimony.
    So I thank all of you for being here. I will not 
necessarily ask a question unless Mr. Waldron wants to respond 
to what I did not intend to be a personal attack on NAB because 
I started out by saying we all are self-serving and talk out of 
both sides of our mouths. I think that is characteristic of all 
of us at one time or another. I just used your industry as an 
example, as Mr. Dodge did. I thought his comment was 
appropriate.
    Mr. Waldron. I was just going to say we look forward to 
further conversations with you. It probably is best in private. 
We do not accept all that you said, but we can continue those 
conversations.
    Mr. Watt. Well, we have continued those conversations on a 
local and national level, and they have always been cordial and 
congenial. So as you all said, you and Mr. Dodge and Mr. 
Waldron are good friends, and Mr. Dodge and Mr. Padden are good 
friends. All of us are good friends. We do not always agree on 
every issue.
    Mr. Chairman, before you close the record, the Motion 
Picture Association of America has requested that we submit 
this info-graphic illustrating the continued rapid growth of 
online viewing options for audiences for the record. So I would 
ask unanimous consent that we make this a part of the record. I 
am not even sure what it is. [Laughter.]
    But I am in complete agreement that anything that will help 
us make good decisions ought to be part of the record. I ask 
unanimous consent to submit it.
    Mr. Coble. Without objection. Now, if it ignites in my 
hands, Mr. Watt, I will not hold you harmless for that. But we 
will accept that without objection.
    [The information referred to follows:]
    
    
    
    


                               __________
    Mr. Coble. I thank the gentleman.
    I want to thank those of you who have been in attendance 
for the entire hearing. Obviously, your interest is more than 
just casual. And I particularly want to thank the witnesses. 
You have contributed significantly to a very complex and a very 
important issue. And we may meet again. But it has been a 
pleasure having you all with us.
    The hearing is now concluded.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing stands adjourned.
    [Whereupon, at 12:25 p.m., the Subcommittee was adjourned.]

                                 
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