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










                 COMPULSORY VIDEO LICENSES OF 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

                             SECOND SESSION

                               __________

                              MAY 8, 2014

                               __________

                           Serial No. 113-89

                               __________

         Printed for the use of the Committee on the Judiciary




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





      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                   ZOE LOFGREN, California
SPENCER BACHUS, Alabama              SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina       DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]

           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.,         JERROLD NADLER, New York
Wisconsin                            JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas                   JUDY CHU, California
STEVE CHABOT, Ohio                   TED DEUTCH, Florida
DARRELL E. ISSA, California          KAREN BASS, California
TED POE, Texas                       CEDRIC RICHMOND, Louisiana
JASON CHAFFETZ, Utah                 SUZAN DelBENE, Washington
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina       DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                ZOE LOFGREN, California
RON DeSANTIS, Florida                SHEILA JACKSON LEE, Texas
JASON T. SMITH, Missouri             STEVE COHEN, Tennessee
[Vacant]

                       Joe Keeley, Chief Counsel

                    Heather Sawyer, Minority Counsel

















                            C O N T E N T S

                              ----------                              

                              MAY 8, 2014

                                                                   Page

                           OPENING STATEMENTS

The Honorable Tom Marino, a Representative in Congress from the 
  State of Pennsylvania, and Vice-Chairman, Subcommittee on 
  Courts, Intellectual Property, and the Internet................     1
The Honorable Jerrold Nadler, a Representative in Congress from 
  the State of New York, 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    11
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.....................................    12

                               WITNESSES

William J. Roberts, Jr., Acting Associate Register of Copyrights 
  and Director of Public Information & Education
  Oral Testimony.................................................    15
  Prepared Statement.............................................    17
R. Stanton Dodge, Executive Vice President and General Counsel, 
  DISH Network L.L.C.
  Oral Testimony.................................................    23
  Prepared Statement.............................................    24
Marci Burdick, Senior Vice President of Broadcasting, Schurz 
  Communications, Inc., on behalf of the National Association of 
  Broadcasters
  Oral Testimony.................................................    50
  Prepared Statement.............................................    52
Matthew M. Polka, President and Chief Executive Officer, American 
  Cable Association
  Oral Testimony.................................................    62
  Prepared Statement.............................................    64

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Jerrold Nadler, a 
  Representative in Congress from the State of New York, and 
  Ranking Member, Subcommittee on Courts, Intellectual Property, 
  and the Internet...............................................     5

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of Sandra M. Aistars, Chief Executive Officer, 
  the Copyright Alliance.........................................    96
Prepared Statement of the Independent Film & Television Alliance 
  (IFTA).........................................................   104
Prepared Statement of the Motion Picture Association of America, 
  Inc............................................................   110
Letter from Brad Ramsey, President, Virginia Association of 
  Broadcasters, and President & General Manager, WVEC-TV.........   114

 
                 COMPULSORY VIDEO LICENSES OF TITLE 17

                              ----------                              


                         THURSDAY, MAY 8, 2014

                        House of Representatives

            Subcommittee on Courts, Intellectual Property, 
                            and the Internet

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 2:04 p.m., in 
room 2141, Rayburn Office Building, the Honorable Tom Marino 
(Vice-Chairman of the Subcommittee) presiding.
    Present: Representatives Marino, Goodlatte, Smith of Texas, 
Chabot, Chaffetz, Farenthold, Holding, Collins, Smith of 
Missouri, Nadler, Conyers, Chu, Richmond, DelBene, Jeffries, 
Cicilline, and Lofgren.
    Staff present: (Majority) Joe Keeley, Chief Counsel; Olivia 
Lee, Clerk; (Minority) Heather Sawyer, Counsel; Jason Everett, 
Counsel; and Rosalind Jackson, Professional Staff Member.
    Mr. Marino. The Subcommittee on Courts, Intellectual 
Property, and the Internet will come to order. Without 
objection, the Chair is authorized to declare recesses of the 
Subcommittee at any time.
    We welcome all of our witnesses here today. And just to 
give you a little heads up, we are going to be voting somewhere 
around the 2:30 mark. I apologize. It will be better than, I 
think, 30 minutes on the voting, maybe a little longer. I beg 
your indulgence. And we will get right back here as soon as 
votes are over.
    And I will now read my opening statement. Good afternoon, 
and welcome to today's Subcommittee hearing on the compulsory 
video licenses contained in Title 17 of the United States Code. 
Unfortunately, Mr. Coble has a conflicting schedule for today 
and is unable to join the hearing, and has graciously asked me 
to sit in his place. Big shoes to follow.
    Some of the more complex portions of Title 17 concern 
compulsory video licenses used by cable and satellite 
companies. Although these are very complex issues, make no 
mistake about it, all my constituents understand when a video 
licensing agreement has gone awry. This is, of course, the 
moment when one of their favorite stations suddenly goes dark 
and they are unable to watch the regularly scheduled content, 
such as football games, to which they have grown accustomed.
    I think I can speak for all Members of Congress when I say 
our constituents are very quick to call and demand answers when 
this happens. And although I empathize with them, their 
frustration, there is little I can do in those moments. And 
fact of the matter is that we Americans love our television 
just as much as baseball games and ice cream sundaes.
    Just as with any other product, consumers in this country 
want to have as many choices available at the lowest price. 
Fortunately, the number of choices available to consumers for 
content has exploded over the years. Some might say that this 
is due to the compulsory licenses we have today, while others 
might say this is the case in spite of these same licenses. 
Determining which view is correct may be an interesting 
academic exercise, but it overlooks an important issue: whether 
or not these licenses are still required today.
    Although one of the licenses expires in 8 months, the 
others are permanent. This Subcommittee would like to better 
understand whether these licenses still serve either their 
original purpose or some other important purposes today, and, 
therefore, whether Congress should reauthorize the Satellite 
Television Extension and Localism Act, otherwise known as 
STELA. With such a complex area of copyright law, I am pleased 
by our talented and qualified panel of witnesses who are 
participating in today's hearing, and I look forward to their 
testimony.
    With that, I recognize the distinguished gentleman from New 
York, Ranking Member Congressman Nadler.
    Mr. Nadler. Thank you, Mr. Chairman. Today we continue our 
examination of the cable and satellite compulsory licenses 
contained in the Copyright Act. Broadly speaking, these 
licenses permit cable and satellite providers to retransmit 
copyrighted broadcast content without having to negotiate with 
creators and content owners to do so.
    Of the three statutory licenses in Title 17, the satellite 
distant-into-local license contained in Section 119 is set to 
sunset on December 31 of this year unless reauthorized by 
Congress. Among other things, that license allows satellite 
carriers to provide an out-of-market station to customers who 
are not served by local television broadcasts. The other two 
licenses, Section 111 for cable providers and Section 122 for 
satellite retransmission of local broadcast programming in 
local markets, are permanent.
    Enacted in 1988--I am sorry--enacted in 1988 when the 
satellite industry was in its infancy, the Section 119 license 
was intended to foster competition with the cable industry and 
also to increase service to unserved households, those 
subscribers who had not received an over-the-air signal from a 
local network. In 2010, and as was the case on three prior 
occasions, Congress extended the Section 119 license for 
another 5 years as part of the Satellite Television Extension 
and Localism Act of 2010, STELA.
    STELA includes provisions of the Copyright Act, which fall 
within this Committee's jurisdiction, and broadcast signal 
retransmission consent provisions that fall under the 
Communications Act are within the jurisdiction of the Energy 
and Commerce Committee. Just today, Energy and Commerce marked 
up a bill reauthorizing the retransmission consent provisions 
of the Communications Act with some adjustments. I am 
interested in the views of our witnesses on how, if it all, the 
Energy and Commerce bill should impact our potential 
reauthorization of the Section 119 license.
    In granting cable and satellite providers their statutory 
right to retransmit copyrighted content at a government 
regulated rate, Congress created an exception to the general 
rule that creators have exclusive rights to their works, 
including the right to determine when and how to distribute 
them. This licensing signal replaces the free market, something 
we are generally reluctant to do. And when we did so for cable 
and satellite providers, these industries were just starting 
up, and the licenses were intended to encourage growth, foster 
competition, and enhance customer access.
    On these fronts, the system has been a tremendous success. 
It is estimated that nearly 90 percent of American households 
now subscribe to a pay TV service provided by multi-channel 
video programming distributors, in most cases cable or 
satellite operators, and nearly all households have a choice of 
at least three different providers. At the same time, broadcast 
TV continues to lead the way on programming content with 97 of 
the top 100 most watched shows in the recent television season 
aired on broadcast stations.
    The dramatic change in marketplace dynamics as well as 
technological advances that continue to revolutionize ways of 
distributing video programming content raise legitimate 
questions about whether the statutory licensing scheme in the 
Copyright Act is still needed. This is not a new question. 10 
years ago, we tasked the Copyright Office with reporting on 
whether the compulsory licensing scheme was still justified. 
The Office recommended that Congress move toward abolishing the 
licenses. As part of the 2010 reauthorization, we then asked 
for recommendations on how to phase out the statutory licensing 
scheme.
    In an August 2011 report, the Copyright Office suggested a 
range of licensing alternatives, including a sublicensing 
system to which broadcast stations would act as marketplace 
intermediaries between rights holders and cable and satellite 
providers. And in last September's Subcommittee hearings on 
satellite television laws in Title 17, Preston Padden, the 
former President of ABC Television Network and former Executive 
Vice President of Walt Disney Company, made an impassioned plea 
for repeal of the existing statutory licenses.
    One common refrain in the calls for repeal is the desire to 
allow the creators of program content, who may not receive 
compensation under the existing and limited royalty system, to 
develop marketplace licensing options and negotiate in the open 
market for the rights to their works. Whether we address the 
overarching licensing systems at this time, however, we must 
still decide whether to reauthorize the Section 119 distant-
into-local satellite license by the end of the year.
    The satellite industry estimates that approximately one and 
a half million customers, mostly in rural areas, would lose one 
or more of the four major network channels if Section 119 were 
not renewed. And both the cable and satellite industries seek 
additional changes as part of this reauthorization process to 
address blackouts of local channels during retransmission 
content consent disputes.
    On the other side of this equation, the broadcast industry 
and others, including the Writers Guild of America, the 
International Brotherhood of Electrical Workers, and the 
Teamsters Union, whose letters will be submitted for the 
record, have questioned the need to renew this particular 
license, and object to additional changes that are intended to 
impact retransmission consent negotiations.
    [The information referred to follows:]


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    Mr. Nadler. Under the Communications Act, retransmission 
consent rules require cable and satellite providers to 
negotiate with broadcasters in order to carry their broadcast 
signals. These are only a few of the broad policy questions 
that will arise as we continue to consider whether to 
reauthorize Section 119. As always, as we do so, our goal must 
be to try to ensure a framework within 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 who have very different views on how this marketplace 
works, how it has developed since our passage of STELA in 2010, 
and what should be done going forward. I look forward to their 
testimony and continuing this discussion in the future. I yield 
back the balance of my time.
    Mr. Marino. Thank you, Congressman Nadler. I now recognize 
the full Committee Chairman, the gentleman from Virginia, the 
distinguished Mr. Goodlatte, for his opening statement.
    Mr. Goodlatte. Thank you, Mr. Chairman. Since television 
was first invented, Americans have been large consumers of 
video content. While some Americans still rely on over-the-air 
antennas for watching video content from network channels, the 
majority of Americans today subscribe to satellite and cable 
services where they have access to the same network channels in 
addition to several hundred more channels of their choosing.
    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. Combined with the large 
number of channels carried by satellite and cable systems, 
these statistics reflect how the video marketplace has grown 
from the original three over-the-air channels from decades ago.
    In recent years, a growing number of Americans have also 
subscribed to services such as Amazon, Hulu, and RedBox to 
either supplement or replace their satellite and cable 
subscriptions. It also has resulted in the creation of two new 
terms--``cord shavers'' and ``cord cutters''--that are used to 
describe those who reduce or eliminate traditional 
subscriptions. There are three compulsory video licenses in 
Title 17, one of which expires at the end of this year. 
Although these licenses are important by themselves, we cannot 
overlook the fact that a television with no signal is simply a 
collection of components with minimal interest to consumers.
    It is the content displayed on a television that is of 
interest to subscribers. This content is created by copyright 
owners who depend upon licensing revenue to fund the creation 
of programs that are of interest to Americans. This Committee 
is always concerned about ensuring competition in the 
marketplace both for the content and the networks that deliver 
it. Consumers and intermediaries benefit where there is robust 
competition.
    This Committee held a hearing just this morning on a major 
merger in the video marketplace. And I might note that Mr. 
Polka has a rare distinction of testifying in two hearings in 1 
day in this Committee with two different Subcommittees. 
Congratulations. [Laughter.]
    Finally, I would note that several Members have market-
specific issues in which their constituents are unable to watch 
local channels due to what could best be described as line 
drawing exercises over designated market areas gone astray. In 
my own congressional district, my Page County constituents, who 
are satellite subscribers, watch Washington, D.C. channels when 
there are local channels in nearby Harrisonburg readily 
available and which provide local news and emergency 
information better tailored to that region.
    In fact, the over-the-air antenna used to broadcast the 
Harrisonburg channels is actually located in Page County. Under 
the current law, if satellite companies provide these local 
channels, royalties would be due to both the Washington, D.C. 
and Harrisonburg channels, even if my constituents only want to 
subscribe to Harrisonburg channels. I look forward to resolving 
these market-specific issues going forward as we determine 
whether the current video compulsory license system is working 
for the digital era. Thank you, Mr. Chairman. I yield back.
    Mr. Marino. Thank you, Mr. Chairman. I now recognize the 
full Committee Ranking Member, the distinguished gentleman from 
Michigan, Congressman Conyers, for his opening statement.
    Mr. Conyers. Thank you, Mr. Chairman, and welcome to our 
distinguished witnesses. The purpose of this hearing is to 
continue to examine the issues as we consider the reauthorizing 
and updating of the Satellite Television Extension and Localism 
Act. Should we repeal it, should we extend it, or should we let 
it expire? And I look to you for your candid comments based 
upon your knowledge and experience.
    The provisions that fall under the Copyright Act include 
Section 119, the Distant Signal Compulsory License that is set 
to expire at the end of this year. And it allows satellite 
carriers to provide an out-of-market station to consumers that 
are unserved by their local broadcaster. And so, we must ask 
whether Section 119 has outlived its purpose, whether we should 
extend it again, or how long it should be extended as well.
    And as we analyze these questions, we must ensure 
incentives remain in place to protect copyright. Copyright 
owners must be protected because it is their property that 
forms the basis for this entire system. Compulsory licenses are 
generally not favored by copyright owners because they distort 
the marketplace and result in big old market rates being paid 
to the content owners. Copyright owners assert that they would 
fare better in private marketplace negotiations, and that the 
licenses are no longer needed now that there is healthy 
competition in the cable and satellite industries. And I would 
like the witnesses to feel free to give me their best thoughts 
on that subject as well.
    Now, assuming we decide to extend Section 119 licenses, we 
should consider whether any other issues should be addressed. 
Among them is the impact that blackouts of local channels 
during disputed retransmission consent negotiations have on 
consumers, as well as the overall effectiveness and efficiency 
of the current statutory and regulatory system established in 
the Copyright and Communications Act. We have seen that 
blackouts of major television networks are affecting consumers, 
and they seem to be occurring with greater frequency. I would 
like to hear how they believe that this issue might be 
addressed with an eye toward ensuring adequate compensation for 
creativity and providing healthy competition.
    I would like to hear witnesses discuss the possible change 
to the law that would allow interim carriage authority which 
would temporarily permit a distant signal to be imported during 
a retransmission consent dispute. I believe that anything that 
we do must protect consumers and safeguard competition. 
Consumers generally benefit from increased competition because 
more competition produces lower prices and more variety and 
options. Consumers want to watch programming on their choice of 
television sets, phones, and tablets, no matter where they are.
    We should ask what, if anything, we should be doing with 
regard to the compulsory licenses that do not expire--Section 
111, cable license, and Section 122, satellite local into local 
license. Section 302 of STELA required the Copyright Office to 
deliver a report that considered alternatives to the statutory 
licensing provisions in Section 119, 111, and 122 of the 
Copyright Act. These sections govern the retransmission of 
distant and local television broadcast signals by cable 
operators as well as satellite carriers.
    The Copyright Office issued the 302-page report in August 
2011, and the report recommended replacement of the existing 
statutory regime with sublicensing, collective licensing, and/
or direct licensing as feasible alternatives to securing public 
performance rights necessary to retransmit copyrighted content. 
And I am sure our witness from the Copyright Office will speak 
about these market-based alternatives to statutory licensing, 
and I would be interested in hearing what other witnesses have 
to say about this issue as well.
    And as we consider these issues, we want to continue to 
support innovation and ensure that we increase consumer choice. 
We must focus on the principles of localism. There is still a 
high value placed on local news and sports, and the need for 
local channels to deliver community service and emergency 
information still exists. I also recognize that people who 
subscribe to cable or satellite television have so many 
programming options. There is never a shortage of something to 
watch on television, and we want these options to continue to 
grow.
    I know that there will be circumstances in which these 
principles, some of them, will conflict, and I look forward to 
working to ensure that the public interest can best be served 
through satellite carriage of broadcast television signals. And 
I will consider each of these options that will be discussed 
today by witnesses, and want to take a broad and expansive look 
at the different possibilities.
    I look forward to hearing from the witnesses today and 
continuing to work with all of you on this complex issue. I 
thank the Chairman.
    Mr. Marino. Thank you, Ranking Member Conyers. And without 
objection, other Members' opening statements will be made part 
of the record.
    We have a very high-recognized panel today, and we will 
begin by swearing in our witnesses before introducing them. And 
if you would please all rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Marino. Let the record reflect that the witnesses 
answered in the affirmative. And you may be seated.
    Each of the witnesses' written statements will be entered 
into the record in its entirety. I ask that each witness 
summarize his or her testimony in 5 minutes or less. We are on 
a very tight schedule today, and to help you stay within that 
time, there is a timing light on the table, several timing 
lights. When the light switches from green to yellow--and I 
have no idea what that is because I am color blind--you will 
have 1 minute to conclude your testimony. When the light turns 
red, it signals that the witness' time has expired. And since I 
cannot tell colors, I just know on your right when that light 
lights up, your time is up, and I will politely tap the hammer 
to see if you can conclude your testimony. And I thank you for 
that.
    Our first witness this morning is Mr. William Roberts, 
Acting Associate Register of Copyrights. He returned to the 
Office last year having served as Judge on the Copyright 
Royalty Board. Mr. Roberts has worked in the area of statutory 
licensing for 25 years and has actively participated in many of 
the reauthorizations of the statutory license for satellite 
television. He received his J.D. from the University of 
Virginia School of Law and his undergraduate degree from the 
College of the Holy Cross. Good afternoon.
    Our second witness is Mr. Stanton Dodge, Executive Vice 
President and General Counsel of DISH Network. In his position, 
Mr. Dodge is responsible for all legal and government affairs 
for DISH and its subsidiaries. He received his J.D. from 
Suffolk University Law School and his bachelor of science 
degree in accounting from the University of Vermont. It is a 
pleasure to have you here, sir.
    Our third witness is Ms. Marci Burdick--did I pronounce 
that right?
    Ms. Burdick. You did.
    Mr. Marino. Thank you. Senior Vice President of 
Broadcasting at Shurz Communications, testifying on behalf of 
the National Association of Broadcasters. In her position at 
Shurz Communications, Ms. Burdick is responsible for 13 radio 
stations, two cable companies, and eight television stations. 
Ms. Burdick received her degree from South Dakota School of 
Mines and Technology. It is good to see you.
    Our fourth and final witness today is Mr. Matthew Polka, 
President and Chief Executive Officer of the American Cable 
Association, an association of 850 independent and medium-sized 
cable businesses. Prior to joining ACA, Mr. Polka served as 
Vice President and General Counsel of Star Cable Associates. He 
received his J.D. from Duquesne University School of Law and 
his undergraduate degree in journalism from West Virginia 
University.
    Welcome to all, and we will start with you, Mr. Roberts, 
for your opening statement. And I have been notified that we 
are going to be called shortly, and we may be out over an hour 
for voting. So once again, I apologize for making you wait, but 
we will get right back. Mr. Roberts, please.

TESTIMONY OF WILLIAM J. ROBERTS, JR., ACTING ASSOCIATE REGISTER 
  OF COPYRIGHTS AND DIRECTOR OF PUBLIC INFORMATION & EDUCATION

    Mr. Roberts. Thank you, and I will try to go as fast as I 
can. Vice Chairman Marino, Ranking Member Nadler, and Members 
of the Subcommittee, I appreciate the opportunity to appear 
before you today and share some observations and 
recommendations of the United States Copyright Office regarding 
the future of the cable and satellite statutory licenses.
    As you may recall, in enacting the Satellite Television 
Extension and Localism Act of 2010, or as it commonly referred 
to as STELA, Congress directed the Copyright Office to prepare 
a report addressing possible mechanisms, methods, and 
recommendations for phasing out the statutory licenses set 
forth in Sections 111, 119, and 122 of the Copyright Office 
which are applicable to the retransmission of over-the-air 
broadcast stations by cable and satellite television providers.
    The Office delivered the report to this Subcommittee on 
August 29, 2011, after extensive input from and conversation 
with the stakeholders affected by the licenses, including the 
Federal Communications Commission. The purpose of the report 
was to inform your discussions and deliberations as you 
consider the expiration of STELA at the end of this year. In my 
brief statement today, I would like to highlight the key 
aspects of that report.
    First, although statutory licensing has ensured the 
efficient and cost effective delivery of television programming 
in the United States, starting over 38 years ago, it was 
created in an earlier era where evidence of marketplace failure 
was present. In the present time, copyright owners working with 
broadcasters, cable operators, satellite carriers, and other 
licensees should be permitted to develop marketplace licensing 
options to replace the provisions of Section 111, 119, and 122.
    Second, the Copyright Office recommends that Congress 
provide a date specific trigger for the phase-out and eventual 
repeal of the distant signal licenses contained in Sections 111 
and 119, but leave the repeal of the local signal licenses in 
Section 111 and 122 for a later time. This approach will 
provide stakeholders with an opportunity to test new business 
models with the least likelihood of disruption to consumers, 
and give Congress the advantage of drawing on that experience 
when considering how and when to address the licensing of local 
stations.
    Third, in determining a date specific trigger and 
transition period for the phase-out of the distant signal 
licenses, the Office recommends that Congress consider the 
circumstances and concerns of stakeholders who operate with 
limited resources in the broadcast programming distribution 
chain, such as small producers and small cable operators, and 
determine whether special accommodations are warranted.
    Finally, it is important to note that while the statutory 
licenses are codified in the copyright law, they do interact 
with equally complex provisions in the communications law and 
regulations, and attention must be paid. The Office, therefore, 
recommends that Congress consider and, as appropriate, address 
these provisions in tandem with the recommendations specified 
in our report to assure a harmonious regulatory scheme in the 
delivery of broadcast programming to consumers.
    Thank you for inviting me to testify today. We at the 
Copyright Office look forward to assisting the Committee as it 
continues this process of review. Thank you.
    [The prepared statement of Mr. Roberts follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                               __________



    Mr. Marino. Thank you, sir.
    Mr. Dodge, please?

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

    Mr. Dodge. Chairman Goodlatte, Vice Chairman Marino, 
Ranking Member Conyers and Nadler, and Members of the 
Committee, I appreciate the opportunity to testify today. My 
name is Stanton Dodge, and I am the Executive Vice President 
and General Counsel of DISH Network, the Nation's third largest 
pay TV provider, and the only provider of local television 
service in all 210 markets.
    Should STELA be authorized? Of course. If not, over 1.5 
million customers, mostly in rural areas, will lose one or more 
of the big four network channels. But just extending the act 
for another 5 years is not enough. A so-called clean 
reauthorization would ignore the number one problem facing 
consumers today: the increasing threat of blackouts. There were 
12 blackouts in 2010 and more than 10 times as many in 2013, a 
record breaking 127.
    We believe that there are at least two possible solutions 
to end blackouts and ensure that consumers have continuous 
access to network program from the pay TV provider of their 
choice. First, during the retransmission consent impasse, a 
mandatory standstill should be in place to ensure that 
broadcast signals stay up. If the parties are unable to agree 
upon carriage terms, they should proceed to so-called baseball 
arbitration where a neutral arbitrator chosen by the parties 
will evaluate each party's best offer and select the one that 
most accurately reflects a fair market price. In all cases, we 
suggest that the final rate would apply retroactively, ensuring 
that the broadcaster is fairly compensated. But most 
importantly, the consumer would remain unharmed.
    Second, a more limited solution would allow pay TV 
providers to import a distant network signal when the local 
network affiliate withholds its signal during a retransmission 
consent dispute. This solution would still leave consumers 
without access to certain local programming, including local 
news, sports, and weather, but at least it would provide 
network programming content during the dispute.
    As this Committee knows, the television landscape has 
changed dramatically from when the Cable Act of 1992 first 
established the current system of retransmission consent. In 
those early days, the broadcaster negotiated with a single 
cable company that was likely the only pay TV provider in the 
same market. Today, cable operators no longer enjoy local 
monopolies, and broadcasters pit multiple pay TV providers 
against one another, all to the customer's detriment. This is 
not free market.
    Meanwhile, mom and pop local broadcasters continue to 
disappear as broadcaster conglomeration accelerates. In 2013 
alone, there were three large broadcaster mergers. Not 
surprisingly, these market developments have led to a dramatic 
increase in local channel blackouts, but fortunately Congress 
can do something about it.
    On behalf of DISH's 22,000 employees and more than 14 
million subscribers across the Nation, I strongly encourage the 
Committee to seize this opportunity and update the law to 
reflect marketplace realities and better protect consumers. 
Thank you, and I look forward to answering any questions you 
may have.
    [The prepared statement of Mr. Dodge follows:]



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                               APPENDIX A



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                               __________

    Mr. Marino. Thank you, Mr. Dodge.
    Ms. Burdick?

     TESTIMONY OF MARCI BURDICK, SENIOR VICE PRESIDENT OF 
  BROADCASTING, SCHURZ COMMUNICATIONS, INC., ON BEHALF OF THE 
              NATIONAL ASSOCIATION OF BROADCASTERS

    Ms. Burdick. Thank you. Good afternoon, Chairman Marino and 
Goodlatte, Ranking Members Nadler and Conyers, and Members of 
the Subcommittee. I am Marci Burdick, Senior Vice President for 
Shurz Communications. A bit updated from the bio you have. We 
actually own 11 television stations, and we have operating 
partnerships with two others. I am a mom and pop broadcaster.
    I am testifying today on behalf of the National Association 
of Broadcasters and our more than 1,300 free local over-the-air 
television station members from across the country. While I am 
happy to answer questions on the video compulsory licenses in 
Title 17, my focus today is on the expiring distant signal 
satellite license, commonly referred to as STELA.
    NAB's position on the STELA reauthorization is simple. 
First, given the technological advancements and licensing 
alternatives, we ask that this Committee take a hard look at 
whether the distant signal license continues to benefit 
consumers and whether it should be allowed to sunset as 
originally intended. Second, should this Committee conclude 
that this satellite compulsory license is still warranted, NAB 
supports a narrow temporary reauthorization that does nothing 
to expand the scope of the license or undermine broadcasters' 
ability to be compensated for our programming or to serve our 
local communications.
    26 years ago at a time when Rain Man topped the box office 
and CDs outsold vinyl records for the first time ever, Congress 
created the distant signal satellite television compulsory 
license in the Satellite Home Viewer Act as a means to spur 
competition against the big incumbent cable monopolies. SHVA 
and successive extensions also aim to enhance localism by 
promoting the broad availability of locally focused broadcast 
television without undermining the viability of its unique free 
business model.
    It is clear this Committee's work was a success. The 
satellite companies have evolved into the country's second and 
third largest pay TV providers, and broadcast television is as 
popular as ever. 97 of the top 100 most watched primetime shows 
in the last TV season aired on our channels.
    Today, there are no technological reasons preventing any 
market from receiving local into local broadcast service, as 
DISH has demonstrated. More than 98 percent of all United 
States TV households can view their local network affiliates by 
satellite. This legal framework allows local TV stations to 
deliver high quality local news, weather, sports, and emergency 
services to communities across the country. In 2013, for 
example, our station, WDBJ in Roanoke, Virginia, added jobs and 
resources by investing in a new local news bureau in Forest, 
Virginia, just as it had done previously in Danville and will 
again this year in Martinsville. But Shurz is not alone. The 
local TV stations serving the Commonwealth of Virginia produced 
over 57,000 hours of original live local newscasts in 2013. 
That marked an increase for the fourth consecutive year.
    To encourage localism, this Committee should identify the 
precise number and nature of households that the distant 
satellite license continues to serve, and whether those 
households could be more effectively served by the local 
license. NAB is also attentive to the needs of viewers who 
reside in communities located in out-of-state designated market 
areas, or DMAs, but desire to receive in-State broadcast 
programming. NAB is committed to making in-State broadcast 
programming available through existing statutory remedies and 
to finding marketplace solutions for carriage of non-
duplicative in-State broadcast programming.
    We caution the Subcommittee against legislating new 
exceptions to copyright law when in many instances cable, and 
particularly satellite providers, are not taking full advantage 
of existing and available statutory or marketplace options. We 
also urge you to reject calls from pay TV seeking additional 
exceptions that would permit a satellite carrier to import a 
distant signal during a contractual impasse, not based on need, 
but based on a need to gain unfair market leverage in a 
retransmission consent negotiation. That would be contrary to 
decades of congressional policy aimed to promote localism.
    In conclusion, if this Committee decides to once again 
reauthorize the distant signal satellite license, that is an 
effort NAB supports. But with that support, we ask you to take 
a hard look at whether Section 119 continues to serve consumers 
and to reject calls from satellite providers to expand the 
scope of the compulsory 119 license to give them a leg up in 
market-based negotiations.
    Thank you for inviting me to testify today.
    [The prepared statement of Ms. Burdick follows:]


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                               __________

    Mr. Marino. Thank you, Ms. Burdick.
    Mr. Polka?

 TESTIMONY OF MATTHEW M. POLKA, PRESIDENT AND CHIEF EXECUTIVE 
              OFFICER, AMERICAN CABLE ASSOCIATION

    Mr. Polka. Thank you, Mr. Chairman. It is indeed an honor 
to be here again with you today, and thank you for having me. I 
am here today on behalf of the small- and medium-sized cable 
operators of the American Cable Association, who provide video, 
broadband, and voice services in local markets in 50 States to 
nearly 7 million video subscribers. ACA members serve several 
important functions in our communications markets and 
societies, such as providing broadband in rural areas, 
competition and choice in urban areas, services to communicate 
institutions and businesses in underserved areas.
    It has been too long since Congress conducted a 
comprehensive review of the laws governing the cable industry. 
If Congress were to conduct such a review, we would expect many 
laws to be preserved or slightly updated and others to be 
significantly updated or even eliminated. One set of rules and 
many that others believe should remain unchanged is the cable 
compulsory license. It continues to serve its goal in 
compensating copyright holders for the retransmission of their 
work. If Congress were to repeal this license, it would be 
extremely burdensome for operators to anticipate all of the 
copyrighted works that would need to be cleared before they 
aired on a broadcast station. Moreover, the repeal would create 
greater uncertainty in the marketplace for our members and our 
customers. Should Congress reach a different conclusion, 
changes to the existing license must coincide with reform to 
broadcast carriage rules, such as retransmission consent, 
because they are legally intertwined.
    Within the category of rules that need to be updated or 
eliminated, ACA would include retransmission consent rules. 
Modernization is needed to address three key areas. First, 
existing rules fail to protect consumers from broadcasters 
pulling their signals during negotiating impasses. Second, 
current rules do not prevent a broadcaster and its affiliated 
network from blocking access to their online content that is 
otherwise freely available to a pay TV provider's broadband 
subscribers while that pay TV provider and station are in a 
negotiation dispute. CBS did this to Time Warner Cable last 
year. Third, current rules require cable subscribers to 
purchase broadcast stations that elect retransmission consent, 
even if they do not want to receive those stations via their 
subscription service. Each issue can be addressed through 
narrowly-tailored amendments to existing rules, and we 
encourage Congress to act on these matters this year.
    Looking toward the future, with consumers increasingly 
watching video content online, and a growing number of 
consumers choosing online video over pay TV service, Congress 
needs to begin having a separate discussion about the future of 
online video. It is an important complex subject, and one that 
cannot be ignored.
    Currently, the online video marketplace is one in which 
online content and edge providers sell access to their content 
directly to consumers. Nearly all content and edge providers 
employ this business model. This model provides consumers with 
significant choice in the online video content they pay to 
receive. However, it is not pre-ordained that all content and 
edge providers will continue to sell their content in this way.
    The online video marketplace might develop into one 
resembling the current cable model where the content or edge 
provider receives fees directly from internet service 
providers, who impose the charge on all of their broadband 
customers, whether or not the customer wants to receive the 
content. This is not a hypothetical. ESPN 3 currently uses this 
model. Increasingly, other power online video content providers 
are testing the market by charging broadband providers rather 
than establishing a direct relationship with the consumers.
    For example, Viacom is currently blocking access to its 
websites by broadband internet subscribers who are served by 
dozens of smaller broadband internet service providers. Viacom 
is unwilling to allow these smaller providers and their 
customers to access its content unless the provider meets 
Viacom's financial demands. If the cableization of the internet 
sounds even a bit troublesome, and it does to us, ACA believes 
that Congress should review issues like whether content and 
edge providers should be able to block access to their freely 
available content on the internet to certain users.
    In conclusion, it is clear that there are a host of issues 
that need attention. Given the significant changes in the 
marketplace, I hope that the reforms to the retransmission 
consent rules that I discussed will be considered this year as 
part of Congress's reauthorization of the satellite TV license. 
Thank you again for this opportunity to testify.
    [The prepared statement of Mr. Polka follows:]


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                               __________

    Mr. Marino. Thank you, Mr. Polka. We will now proceed under 
the 5-minute rule with questions as is the practice. I will 
defer my questions and recognize the Chairman of the full 
Committee, Congressman Goodlatte. And I have just been advised 
that we are going to be in recess on the Floor until 3:30, and 
then we have four votes. The House--excuse me--will be in 
recess until 3:30, and so we will proceed, and we could finish 
before we vote. So, Chairman?
    Mr. Goodlatte. Thank you, Mr. Chairman. I would like to 
thank all of you for your testimony and welcome you here today. 
Ms. Burdick, I appreciated--I am sure it was totally random--
the shout out for WDBJ in Roanoke, Virginia, my hometown. They 
are a great television station and a very prominent one in our 
community, and we thank you for that.
    Ms. Burdick. Thank you.
    Mr. Goodlatte. I want to ask all of you about new video 
entrants that are bringing greater competition to the 
marketplace. What legislation, if any, should Congress consider 
to encourage the growth of such competition? We will start with 
you, Mr. Roberts.
    Mr. Roberts. Thank you. With respect to new services, it is 
certainly important to understand a little bit of the history 
of statutory licensing and the way that Congress has treated 
the cable industry and the satellite industry. Different 
services experience different regulatory regimes, and 
principally that is through the communications law so that the 
cable industry is regulated in a very different fashion than 
the satellite industry. And the statutory licenses for cable 
and satellite reflect those differences.
    With respect to new entrants, it is the position of the 
Copyright Office that great care should be given and 
examination to the special circumstances of those new services.
    Mr. Goodlatte. Let me interrupt you for a second. I am 
going to have two questions I am going to ask each of four 
people, so that is eight questions in 5 minutes. So you have 
got to sum it up.
    Mr. Roberts. Fair enough. And so, in other words, there 
should be careful examination of the differences between the 
different types of services before statutory licenses are 
extended to them.
    Mr. Goodlatte. Great, thank you. Mr. Dodge?
    Mr. Dodge. So we welcome competition. We view online video, 
for example, as an area we need to evolve and adapt. And our 
simplistic view of this is as we testified when we were helping 
the Copyright Office with their report, we favor a unitary type 
license where all competitors are treated roughly equally, 
recognizing that there are some differences that need to be 
recognized.
    Mr. Goodlatte. Thank you. Ms. Burdick?
    Ms. Burdick. Local broadcasters are working with our 
networks to explore new models to get content to as many 
consumers as possible. We also as a local broadcaster are 
developing mobile online resources for the rights to the 
content that we create ourselves, and that has been an emerging 
fast-growing line of business for us.
    Mr. Goodlatte. And does that rights issue contemplate any 
legislation on the part of the Congress?
    Ms. Burdick. I do not think we see any significant barriers 
in the marketplace today to the development of those new 
business models and trying to determine how they are monetized 
into the future.
    Mr. Goodlatte. Great. Mr. Polka
    Mr. Polka. Our members report that broadband usage is 
doubling every 2 years. Online video usage is exploding through 
Netflix, Hulu, Amazon, and others. And so, as a result, it is 
extremely important for this Committee to look ahead in 
addition to looking at current copyright licenses. As I 
mentioned in my testimony, we have to be mindful of how content 
is delivered and to ensure that consumers can receive the 
content that they want over the internet.
    Mr. Goodlatte. Thank you. As I mentioned in my opening 
statement, several Members have issues related to significantly 
reviewed stations in their districts. Mine is in Page County, 
Virginia, toward the northern end of my district. My 
constituents in Page County are better served with both local 
news and emergency information by the more local Harrisonburg 
station than the Washington, D.C. stations. Yet the satellite 
companies do not yet provide these more local Harrisonburg 
channels in Page County.
    So let me ask you each, what do you think is inhibiting the 
satellite companies and local station from making arrangements 
to provide these significantly viewed stations to consumers, 
and what solutions can you offer today, including possible 
changes to the law, to provide more incentives for these 
stations to be provided via satellite to consumers that happen 
to be just outside of the DMA for these stations? In Page 
County, cable and other alternatives are not often available, 
so satellite is a prime interest to them. Mr. Roberts?
    Mr. Roberts. Thank you. This was an issue that was 
presented when Congress considered and adopted STELA, and 
specific provisions were adopted to address that. The Office 
does not have a position as to whether further provisions are 
required, and I would defer to my colleagues on the panel for 
their opinions on that.
    Mr. Goodlatte. Thank you. Mr. Dodge?
    Mr. Dodge. So I would say they are significantly viewed as 
two significant flaws, if you will. One, it would require 
providers such as us to pay double retran. So you have to pay 
retrans to the market into which the signal is being imported 
and for the imported signal. A simple fix there----
    Mr. Goodlatte. That is the way it works under current law, 
right?
    Mr. Dodge. Yes, correct.
    Mr. Goodlatte. Okay.
    Mr. Dodge. And a simple fix for that might be that we pay a 
distant signal royalty for the station being imported. The 
second is the market into which the signal is being imported in 
many cases, our retransmission consent agreements do not allow 
us to import or require us to waive our right to import a 
significantly viewed station. And one suggestion we have for 
that is to abolish those types of provisions in retransmission 
consent agreements, or at least factor that into whether or not 
they have met their good faith standard under FCC rules.
    Mr. Goodlatte. So that would pass it right over to Ms. 
Burdick.
    Ms. Burdick. Well, I would commend, I think, in Page County 
specifically local broadcasters who are significantly viewed, 
have extended those rights and negotiated agreements with cable 
operators, who are also to be commended in Page County. 
Notoriously absent from any of those carriage solutions which 
exist today are DISH Network and largely, I think with the 
exception of one case, DirecTV, there is a fix today. They 
choose not to participate in that as a business or other 
reason. Cable has decided to do it to serve its customers 
better. So I would again defer back to Mr. Dodge as to why it 
is not a good business practice.
    Mr. Goodlatte. Does cable face the same issue they do about 
the double royalty issue?
    Ms. Burdick. The negotiation is the same. It is a 
negotiation, and as an example, I live in Michigan. My backyard 
is in Indiana. So I vote in Michigan, but I view South Bend 
television. We as a CBS affiliate have an agreement with the 
MSO in Michigan to allow the CBS affiliate in Michigan to carry 
unduplicated programming. And I imagine that is at either no 
fee or significantly less fee, although I am not privy to their 
business negotiations. The fact is, it is possible today.
    Mr. Goodlatte. Thank you. So you live in the Chairman of 
the other Committee's district who has an interest in this 
issue, Mr. Upton.
    Ms. Burdick. I do.
    Mr. Goodlatte. Mr. Polka?
    Mr. Polka. Thank you, sir. I would agree with Mr. Dodge as 
it relates to sometimes the difficulty of negotiating 
retransmission consent for either significantly viewed stations 
or even out-of-market stations, and this gets into some of the 
orphan DMA issues. We also encounter as cable operators, and 
your question was focused on satellite, but as cable operators, 
we also encounter the problems where in many cases our members 
are legally permitted under the law to carry an out-of-market 
station because they are far enough away from the local 
station. But provisions and network affiliation agreements 
prohibit the out-of-market station, which is actually the local 
in-State station from being carried. So there are lots of 
issues like that that prevent what the stations that viewers 
want to watch from being actually watched.
    Ms. Burdick. If I could correct, I do not think that is 
quite right. It prohibits the network content, not the local 
content.
    Mr. Polka. And that is true. And when you have 8 or 10 
hours of blank content, that is not what consumers want.
    Mr. Goodlatte. Okay. Thank you.
    Mr. Polka. Particularly when the law allows you to carry 
that signal.
    Mr. Goodlatte. My time has expired. Thank you, Mr. 
Chairman.
    Mr. Marino. Thank you, Chairman. The Chair now recognizes 
the gentleman from New York, Congressman Nadler.
    Mr. Nadler. Thank you, Mr. Chairman. I have a couple of 
questions for Mr. Dodge first. We obviously have to consider 
the necessity or a lack of necessity of renewing Section 119. 
And I want to put that into context and have you help define 
the scope of the problem. So first, you estimated that about a 
million and a half households could lose access to network 
broadcasting if the Section 119 license is not reauthorized, 
correct?
    Mr. Dodge. Yes, sir.
    Mr. Nadler. Okay. If that license were to expire, how many 
households could be brought in? How many of those one and a 
half million could be brought in through local retransmission 
because of advances in satellite capacities?
    Mr. Dodge. I must admit as I sit here today, I do not know 
the answer to that. That 1.5 million number is an aggregated 
number between us and DirecTV that we provided the data to our 
industry.
    Mr. Nadler. All right. Could you find that out and let us 
know after the hearing?
    Mr. Dodge. I can certainly look into it.
    But there are certain folks I would say who there is no fix 
for. There are folks in short market where there is no----
    Mr. Nadler. Yes. What we are trying to figure is how many 
of the one and a half million, how many would have no fix and 
how many could be handled some other way. If 98 percent could 
be handled in some other way, it is not a big problem. If 98 
percent could not, it is obviously a big problem.
    Can you give us a sense of how many households are 
grandfather subscribers, meaning customers who come under the 
Section 119 license for reasons other than being in unserved 
households that at least at the time the license was enacted, 
did not get local broadcasts?
    Mr. Dodge. DISH does not have any grandfathered 
subscribers, so I do not know the answer to that.
    Mr. Nadler. Okay. Does anybody else know the answer to 
that? [No response.]
    All right. I am doing pretty well so far. [Laughter.]
    With regard to grandfathered as opposed to unserved 
households, would those households also lose access to network 
broadcasting if Section 119 is not renewed?
    Mr. Dodge. That is something that I am going to have to 
look into in response to the first question. I do not know the 
answer.
    Mr. Nadler. Okay. And is there an opportunity, in your 
opinion, in the absence of a statutory license to simply cure 
the problem by negotiating with rights holders or possibly 
broadcasters as intermediaries to obtain the needed copyrighted 
content?
    Mr. Dodge. I don't think so. For example, the best example 
would be short markets where no one has stepped up to 
actually----
    Mr. Nadler. What do you mean by a ``short market?"
    Mr. Dodge. A short market is a market where there are one 
or more missing local affiliates. In those markets, no one has 
stepped up to actually take a broadcast license to broadcast 
the programming. So in order for someone in those markets, for 
example, to get the latest version of 24 and see Jack Bauer, we 
have to import a distant Fox for those people to watch the 
programming.
    Mr. Nadler. Does anybody disagree with that?
    Ms. Burdick. I would say, Congressman, it is a problem that 
decreases every year. With digital technology we now have 
digital sub-channels. Many of those short market problems are 
being taken care of with digital sub-channels.
    Mr. Nadler. What is a ``digital sub-channel?"
    Ms. Burdick. So you have your big network signal, and then 
you can transmit in the stream as many as two others 
technologically.
    Mr. Nadler. Oh, okay.
    Ms. Burdick. And so, where there is not an over-the-air 
station, you are seeing more cases of a network affiliate start 
to carry a second where it does not exist in that market.
    Mr. Dodge. And we do carry those digital subcarriers, but 
the fact remains that there are 18 of these markets across----
    Mr. Nadler. Eighteen what?
    Mr. Dodge. Eighteen of these short markets across the 
country today, and they are in the most rural areas. Without 
access to a distant signal----
    Mr. Nadler. There are only 18 short markets in the whole 
country?
    Mr. Dodge. Yes.
    Mr. Nadler. And how many people would you say? How many 
households are there?
    Mr. Dodge. That I do not know, but they are the most rural 
areas of the country where without this, they would have no 
access to that network programming without distant signals.
    Mr. Nadler. Okay. Mr. Roberts, you testified that the 
majority of stakeholders consulted by the Copyright Office for 
its 2011 report took the position that the existing statutory 
regime should remain in place.
    Mr. Roberts. Yes.
    Mr. Nadler. How has the landscape changed since then? And 
to the extent that key stakeholders are against the plan, how 
might we address their key concerns?
    Mr. Roberts. It would seem that the stakeholders are still 
of the same opinion that generally the licenses should stay in 
place. With respect to our 302 report, we were directed to 
consider to how to phase them out, and that is why we came up 
with the particular recommendations that we did. Specifically, 
our particular recommendation was sublicensing by the broadcast 
stations, but that that would have to be phased in over a 
period of time.
    Mr. Nadler. Okay. And lastly, because my time is about to 
run out, if we do not address the overall statutory licensing 
scheme or do not get to it by the end of the year, should we 
reauthorize, in your opinion, the Section 119 license or allow 
it to expire? And if we reauthorize it, should we do so for 
another 5 years, or would you recommend that we consider a 
different term?
    Mr. Roberts. Well, the Office does not have a position as 
to how many years it should be renewed. I would point out----
    Mr. Nadler. Do you think 5 is a good number or is too long, 
too short?
    Mr. Roberts. I would say that if phase-out is the intention 
of the Congress of the licenses, then perhaps something that is 
less than 5 years. And the reason in saying that is that this 
is the fifth time that the license has been up for 
reauthorization.
    Mr. Nadler. All right. The other half of the question is, 
if we do not get to the entire scheme this year, should we 
reauthorize Section 119 or allow it to expire?
    Mr. Roberts. We recommend that it be reauthorized, but 
phased out over a shorter term so that we would phase out the 
distant signal license, but retain the local license.
    Mr. Nadler. Even if we do not get to the entire question.
    Mr. Roberts. Even if you do not, yes, it would be to phase 
it out.
    Mr. Nadler. Thank you. My time has expired.
    Mr. Marino. Thank you, Congressman Nadler. The Chair 
recognizes the congressman from Ohio, Mr. Chabot.
    Mr. Chabot. Thank you, Mr. Chairman. And I appreciate the 
opportunity to discuss legislation that literally affects 
millions of Americans. TV enjoyment is very important to them.
    Just in my district, which is the 1st District of Ohio, 
Cincinnati and the Greater Cincinnati area, and north almost up 
to Dayton, there are over 64,000 satellite TV subscribers. The 
STELA legislation that is currently on the books has 
effectively facilitated the satellite television industry for a 
number of years. But as we look toward reauthorization, we 
should be realistic in understanding that the current law is 
old. It is outdated, and it needs to be changed in some manner 
certainly.
    The industry and the technology have experienced great 
change since the original law was passed. And while we need to 
do our job and pass STELA, we should use these discussions to 
move toward a more modern and free market approach to how 
Americans receive their television. We need to use these 
hearings and discussions to find a solution that protects the 
consumers, intellectual property, of course, as well as our 
local broadcasters and small market providers as the market 
becomes increasingly consolidated.
    And just a couple of questions. I will begin with you, if I 
could, Mr. Polka. There have been an increasing number of 
signal blackouts over the years--I believe 127 in 2013 compared 
to only 12 back in 2010. What has changed in the market that 
has caused a dramatic increase, and what should we do about it?
    Mr. Polka. It is the question as we consider STELA 
reauthorization and perhaps what the Committee can do. Let me 
say, too, just to start that none of us at the American Cable 
Association dispute that broadcast content is valuable. Where 
we have a problem is in the negotiation of retransmission 
consent, which was passed in 1992 at a much different time when 
only smaller broadcasters and a growing industry existed 
compared to the industry that we live in today with satellite 
companies, with Netflix, with Hulu, with AT&T, FiOS, U-verse, 
and the like.
    The marketplace has changed, but the rules have not, such 
as rules that grant broadcasters exclusivity in a market, but 
do not allow competition. And because of that inability to seek 
more competition for consumers, as well as the demand by 
networks who back in 1992 said they would never get involved in 
the retransmission consent process, we now have a reverse 
scheme of retransmission content where networks are demanding 
money from their affiliates in what is called reverse 
compensation, which in turn drives up the price demanded by the 
local broadcaster for retransmission consent.
    So what we have here is a fundamental shift in the 
marketplace where large corporate interests are looking for 
revenue for sports programming, for other programming, and the 
like. And consequently, what happens at the end of that is the 
price for that local broadcast station rises to the consumers. 
And with prices escalating like they are, cable operators and 
satellite providers across the country are saying, no, we are 
not going to raise our prices for our consumers to that extent.
    Mr. Chabot. Thank you. Ms. Burdick, let me turn to you 
next. Local broadcasters play a very important role, in 
Cincinnati, for example. Companies like yours make investments 
and are very active in the local community and provide a 
critical public service. How are local broadcasters adjusting 
to stay competitive with the increased competition in the 
marketplace? And do you think any dramatic changes to STELA 
could impact the investments that are made in the various 
communities around the country?
    Ms. Burdick. Thank you, Congressman, for your kind words 
about local broadcasters. Of all of the program providers that 
are out there today receiving compensation for their works, 
local broadcasters are the only ones reinvesting it back in 
local communities through local news, weather, sports, and 
public service. If this distant signal was expanded or is used 
more liberally, our concern is that that underpins all of the 
conversations about retransmission consent, and 85 to 90 
percent of our revenue still comes from advertising. And 
anything that divides our local market and creates a situation 
where I can generate less money means the only place I have to 
take it is out of local news, weather, or sports.
    If I could take a minute, I did want to address your 
comment about the blackouts unless you want to move on.
    Mr. Chabot. I will tell you what. Yes, I have one last 
question, and I would run out of time.
    Ms. Burdick. We can come back.
    Mr. Chabot. All right. Thank you very much. Smaller cable 
companies are at a decided disadvantage when it comes to 
programming negotiations, particularly when competing with one 
of the national companies due to size and scale. What 
accommodations could be made to recognize this competitive 
disadvantage? Mr. Polka, you might be in the best position, but 
if anybody else wanted to respond quickly, but I have only 
got----
    Mr. Polka. Sure. From a standpoint of broadcast carriage, I 
think we have to look at the consumer first. What consumers do 
not like, what no one likes, are blackouts, and we are seeing 
them at an increasing historical pace. So consequently, 
regardless of sometimes the business issue that occurs, the 
consumer has to be put first. So consequently, whether we are 
talking about considering an interim carriage rule, whether we 
are considering allowing consumers to choose, or whether they 
want to actually receive a broadcast signal rather than having 
it mandated in the local basic tier, giving consumers some more 
choice or even allowing in a dispute the signal to be carried 
while the parties continue to negotiate. What we have to focus 
on is not so much the business issue, but the consumer to 
ensure that we are eliminating blackouts.
    Mr. Chabot. Thank you. Mr. Chairman, I see my time has 
expired. Thank you.
    Mr. Marino. Thank you. The Chair recognizes the Ranking 
Member, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman. Let me, first of all, 
welcome Mr. Polka back. He has been in many Judiciary hearings 
as I have today. [Laughter.]
    And in both settings, we appreciated your comments very 
much, sir. Mr. Roberts, with regard to the replacement of the 
existing statutory system, which you say there is some 
controversy. The sublicensing model that has been recommended, 
what is the debate around that? Can you summarize it?
    Mr. Roberts. Certainly. Unfortunately, there is no perfect 
solution to this. The Office looked at sublicensing which is 
when the broadcaster would do the negotiations with the multi-
channel video provider. Also collective licensing and then 
direct licensing.
    With sublicensing, we recognize that there are certain 
concerns, particularly amongst non-commercial broadcast 
stations and some smaller broadcasters who do not have the 
resources to conduct effective negotiations. And some sort of 
consideration and accommodation for them is appropriate, and 
that is why we have recommended a phased-in period retaining 
the local statutory license component of both 111 and 122 to 
accommodate those concerns.
    Mr. Conyers. Has that received any support or approval from 
organizations?
    Mr. Roberts. It has. I believe the broadcasters, and I do 
not mean to presumptively speak for them, but I believe that 
the broadcasters are certainly in favor of eliminating the 
distant signal license, but retaining the local license on a 
going forward basis for the time being to address----
    Mr. Conyers. Did you want to comment on that, Ms. Burdick?
    Ms. Burdick. I absolutely agree with what he said.
    Mr. Conyers. All right. Thank you. Let us go to DISH. Mr. 
Dodge, why do you believe that Congress should fix local 
channel blackouts during retransmission disputes? There was a 
record-setting 127 last year, so how should we approach that 
from our point of view?
    Mr. Dodge. Well, it is an escalating problem, there is no 
question, from only 10 blackouts in 2010 to 140 last year. When 
I was preparing for this hearing, I did a little research, and 
as it turns out, 22 out of the 26 Members of the Subcommittee 
have had blackouts in their districts. 73 percent of those have 
had multiple blackouts in their districts. And only one Member 
of the Subcommittee has not had a blackout in their district or 
State--Congressman Chaffetz. So I think that speaks volumes to 
the fact that this is touching a lot of people, and it is 
getting worse every day.
    Mr. Conyers. So what is an approach that you would 
recommend for those who legislate?
    Mr. Dodge. So we have suggested two approaches, the first 
of which is the focus here should be on the consumers. The 
consumers have access to key network programming and are not 
used as pawns in negotiations. So the simple solution is keep 
the signals up during retransmission consent negotiations, and 
if the parties are not able to agree, they can appoint a party 
agreed and approved arbitrator to decide what a fair rate is 
based on baseball arbitration, which, as people know, each 
party has to come forth with their best number. Gives everyone 
an incentive to actually be reasonable.
    Mr. Conyers. Right.
    Mr. Dodge. The arbitrator has to pick between one of the 
two.
    Mr. Conyers. Let me ask Ms. Burdick. Would you have a 
comment on that?
    Ms. Burdick. Thank you. I absolutely would. Let us face 
reality for a second. I operate in seven television markets and 
have to compete against major MVPDs, like DISH Network. The top 
four MVPDs control 60 percent of the country. The top 10 
control 91 percent. The only leverage I have to get a deal done 
is to pull the signal. Now, at the end of the day, do I want to 
do that? Absolutely not. We have done it in one small case for 
a short period of time only as a last ditch effort.
    Of the outages that have occurred, 90 percent have happened 
with DISH, Direct, and Time Warner. 50 percent have happened 
with DISH alone. So I would suggest to you that perhaps there 
is a business strategy afoot here. At the end of the day, we 
share that customer and that consumer, and we do not want a 
disruption.
    And I would remind the Committee we are never off the air. 
We are always on the air. We may have a contractual dispute 
with DISH, and the only thing that prevents their customer from 
moving is their contracts that require significant early 
termination fees.
    So what could Congress do? Well, we should all do a better 
job about educating people about free over-the-air television, 
number one. Number two, we could do a better job of warning 
customers about the potential of a dispute. Third, early 
termination fees should go away if a customer wants to move, or 
they should get rebates if they are not getting all the 
channels they paid for.
    Mr. Conyers. Thanks so much. I yield back any time 
remaining, Mr. Chairman.
    Mr. Marino. Thank you, Congressman. The Chair recognizes 
the former U.S. attorney, Mr. Holding from North Carolina.
    Mr. Holding. Thank you, Mr. Chairman. You know, I am 
concerned about the blackouts. I have kindly been provided the 
precise number of DISH subscribers in my district, which is 
about 84,000, and there are about 1.3 million in North 
Carolina. And those folks, you know, they see a blackout, and 
they wonder why they are involved in it. You know, why have I 
gotten caught up in this? Mr. Dodge, you went through a number 
of proposed, I guess, negotiation arrangements, whether it is 
the baseball arbitration rubric.
    As far as the broadcasters are concerned, do any of those 
methods of negotiating provide an avenue where you are not 
giving up your ultimate leverage, where you maintain leverage 
in the negotiations, because I certainly understand what you 
are saying, that, you know, the signal is what you have got to 
negotiate with. Are there any of those rubrics that allow you 
to keep your leverage, allow fair negotiation without putting 
the consumer in the middle of it?
    Ms. Burdick. I think the context is important. I appreciate 
the question. 90 percent of the deals get done, and of those 
outages that have occurred, some are just a few hours, some are 
a couple of days. There have been one or two high profile that 
have been a longer period of time.
    I think the system is not broken. Disruptive on occasion, 
but not broken. The arbitration solution, if the goal, if the 
end game is to shorten the amount of time consumers are 
disrupted, that certainly will not accomplish that and, in 
fact, will lengthen it perhaps into months in every case.
    So I think the fact that 90 percent of the deals get done, 
and of those disruptions, they are rare and short. We are both 
motivated to get the deals done now because our collective 
consumer is disrupted.
    Mr. Holding. Mr. Dodge, do you want to respond to that 
briefly?
    Mr. Dodge. Sure. I would say one interruption is too many, 
and even an hour interruption is too long if it occurs during 
the course of the Super Bowl or some event that you truly care 
about. And the fact of the matter is that the concept that, you 
know, 90 percent of these are a result of DISH, DirecTV, and 
Time Warner, that may very well be true. But the reasons for 
that is folks, like Mr. Polka's members, Century Link, and 
others, have no negotiating leverage at all, and they are 
forced to take the broadcasters' offer whole cloth.
    Mr. Holding. Well, one of the reasons why the local 
broadcast is important, and, you know, all of my constituents 
rely on the local broadcast, whether it is in times of 
emergency. We have great ice storms down in North Carolina. We 
have got hurricanes in North Carolina, and last week we had 
tornados in North Carolina. Of course, what are you tuning 
into? But, you know, your local broadcast for me is WRAL or 
WTVD. And so, Ms. Burdick, if you could expound upon the 
concept of broadcast localism and why it is important in this 
STELA debate, and in your opinion what is the best policy to 
continue to engender localized content.
    Ms. Burdick. As NAB, we have been supportive of keeping the 
local cable and the local television compulsory licenses as a 
way to advance localism, and to look only narrowly at the 
distant signal importation as a piece of the compulsory license 
that could either sunset, as Congress intended, based on the 
fact that there is no need today, or do a narrow 
reauthorization of it.
    Mr. Holding. All right. Mr. Chairman, I am going to yield 
back the balance of my time.
    Mr. Marino. Thank you. The Chair recognizes the 
distinguished gentlewoman from California, Dr. Chu.
    Ms. Chu. Thank you, Mr. Chair. Consumers today have several 
options for how they view content, whether it be through pay TV 
carriers, their bunny ears, or through the internet. The way 
that a consumer can view content is constantly evolving. In 
fact, Mr. Polka, you said in your testimony that 52.8 million 
households view television shows or movies using the internet 
or over-the-air delivery. And take, for example, the Aereo 
model.
    The Supreme Court is trying to determine whether online 
streaming of live TV broadcasts constitutes an infringement of 
a copyright holder's exclusive right of public performance. 
Since the decision is looming, I would like for all the 
panelists to weigh in if they can, and what should members of 
this panel be thinking about while we wait for the Court's 
decision and we review existing statutory licenses for cable 
and satellite providers?
    Mr. Polka. Would you like me to start?
    Ms. Chu. Sure.
    Mr. Polka. I would be happy to. I think the key thing here 
for the Committee is that innovation is occurring whether we 
like it or not. It is happening. Whether it is Aereo or whether 
it is the next new disruptive technology--by the way, I love 
that term, ``disruptive technology'' because it is disrupting 
existing business models. And we had better get it, and we had 
better get with the consumer or else the consumers are going to 
pass us by. And frankly, that is one of the reasons why at the 
American Cable Association we supported Aereo because we 
believed that innovation in this marketplace is good.
    And so, as I mentioned even in my testimony, greater usage 
of broadband for online viewing is important, and frankly, it 
is where consumers are going. So that is why I think the 
Committee needs to be focused on it.
    Ms. Burdick. As broadcasters, we want as many people to get 
our signals on as many platforms as they can get them. I think 
Aereo is only innovative in that it is innovative in how it 
attempts to, in a group Goldberg way, avoid the law.
    The underpinning of what we believe is that in order to 
support local content and local news, weather, and sports, we 
have to have an economic model to do it. And we do not believe 
anyone should be able to take our content, package it, and 
resell it without that money being returned to us to help 
reinvest in local communities.
    Mr. Dodge. We, too, similar to Mr. Polka, respect Aereo's 
disruptive impacts on the market, and we, too, submitted a 
brief in support of them with the Supreme Court. And to answer 
your question, what I think Members of Congress should be 
thinking about is to be careful in drawing lines so as not to 
impact, unnecessarily, innovation.
    Mr. Roberts. And, Congresswoman, I would note that Aereo in 
their presentation before the Court specifically acknowledged 
that they were not a cable system, and, therefore, not 
qualified for the cable statutory license, therefore, 
suggesting that any license that they might wish to have in the 
future would have to be considered by the Congress.
    Ms. Chu. Mr. Roberts, I would like to ask you about your 
Section 302 report from the Copyright Office where you make 
recommendations on how we can phase out this statutory 
licensing in Title 17. The Office gathered comments on three 
possible marketplace alternatives to statutory licensing, and 
you stated that sublicensing holds the most promise.
    Under that structure, do you think there are enough 
incentives for the relevant parties to negotiate in good faith? 
In other words, is it a mechanism to help avoid negotiation 
impasses and blackouts that are harmful to consumers?
    Mr. Roberts. Well, we feel that in order to bring something 
like that about, there needs to be a trigger date, a date 
certain by where the statutory license, at least with respect 
to distant signals, would, in fact, come to an end so that 
market-based solutions could take a process and be put into 
place.
    Sublicensing does seem to be the best possible result of 
those marketplace negotiations. But in order for that to 
happen, it is going to have to be phased in over a period of 
time, and the communications law aspects really need to be 
considered because the statutory licenses have always marched 
according to how communications law regulates the various 
industries, so they cannot be separated. They need to move 
together.
    Ms. Chu. Does anybody else want to weigh in on that?
    Mr. Dodge. One thing I would just add is if there is an 
idea of a ramp down, I think there should be some required 
showing on behalf of the broadcasters that actually have the 
necessary right to engage in such sublicensing negotiations.
    Ms. Burdick. Well, I would agree with what Mr. Roberts 
said. But as a small broadcaster and a small cable operator who 
does not employ a phalanx of copyright attorneys and 
negotiators, I question how we are going to do that with the 
hundreds, maybe thousands, of pieces of copyrighted material. 
And then secondly, if you think about the ability of one to 
withhold carriage creates a blackout. So I have a lot of 
questions about the actual implementation.
    Mr. Polka. Thank you, Congresswoman. I actually agree with 
Ms. Burdick. We are very concerned about the application of the 
copyright license and allowing that to be used by smaller 
providers. It is efficient. It works very, very well to clear 
copyrights, and we are very concerned even in the nature of the 
suggestion to eliminate the distant license, that it would be 
heaping onto smaller providers dozens, if not hundreds, of 
separate negotiations with copyright holders, while at the same 
time small cable operators are also negotiating for 
retransmission consent, which is what we tried to indicate, is 
not really a functioning marketplace.
    Ms. Chu. Thank you. I yield back.
    Mr. Marino. Thank you, Dr. Chu. We are going to get through 
one more. The Chair recognizes the gentleman from Missouri, 
Congressman Smith.
    Mr. Smith of Missouri. Thank you, Mr. Chairman. Mr. Dodge, 
how many households need Section 119 because they truly cannot 
receive a local signal? And how many of the households are 
grandfathered in as a result of past satellite 
reauthorizations?
    Mr. Dodge. I answered that question earlier. I do not have 
that information off the top of my head, but we will look into 
providing that to you.
    Mr. Smith of Missouri. Okay. That would be good. Also 
speaking more broadly about the trends in the satellite 
marketplace, blackouts have clearly changed. We have seen 
significant increases in the last couple of years. In fact, 
DISH customers in my district last August faced blackouts. And 
as you know--well, you may not know, but in my district, August 
is an important time for Major League Baseball and the 
Cardinals. It was a pretty big deal. What changes to Section 
119 would you suggest to address this?
    Mr. Dodge. Quite simply, we think that programming should 
stay up during impasses, and that the parties, if they cannot 
reach a negotiated agreement on rates, should submit to binding 
baseball arbitration, which theoretically would produce a fair 
rate because each party has to put forth their best rate and be 
as fair as possible or risk losing.
    So in many cases, maybe it would not even get to the end of 
your arbitration because both parties, as they figured out what 
a fair rate was, would actually end up agreeing upon something. 
But worst case, you have one number from each party, and the 
arbitrator has to pick that number.
    Mr. Smith of Missouri. So would you not make any changes to 
Section 119 or what? I mean----
    Mr. Dodge. So we would. We would change the retransmission 
consent process, which actually is part of the Communications 
Act, to make it so that blackouts do not occur any longer, that 
the signal would stay up. And another proposal would be you 
could change 119 to allow the import of a distant network 
station if the broadcaster insists on taking their signal down. 
But we at DISH are always willing to keep the signal up while 
we negotiate, and then have any resulting rate apply 
retroactively.
    Mr. Smith of Missouri. It looks you might want to respond 
to that, Ms. Burdick.
    Ms. Burdick. Maybe. I said earlier that if the end game is 
to shorten the dispute, arbitration does not do it. It 
lengthens it perhaps by months in every circumstance because it 
creates a process and a burden. But as a small broadcaster, 
when I negotiate against someone like DISH, it is a last resort 
and often the only leverage that I have to get a deal done to 
be fairly compensated.
    And let us not forget the context. Broadcasters were 
allowed to negotiate starting in 1992 for payment for the most 
watched content on satellite and cable. It was not until 2006 
that broadcasters began to be paid, so we have only had a few 
cycles to negotiate those payments.
    And today, broadcasters are still the most watched. I have 
one market where my channel alone is watched by 40 percent of 
the customers on one cable system, yet I receive less than an 
estimated 2 percent of the revenue. So we have had a high hill 
against operators that have stated publicly we will never pay 
you. So these have been tough negotiations.
    Mr. Smith of Missouri. Mr. Polka?
    Mr. Polka. Thank you, sir. Let us be clear. Most 
broadcasters may not be like Ms. Burdick at Shurz 
Communications. In fact, they are not. They are major media 
conglomerates, like Sinclair Broadcasting, Nexstar 
Broadcasting, and others. And the nature of who our members are 
certainly are not the huge cable monopolies, but rather 
companies of 1,500 or below, such as Cablevision, which I 
mentioned this morning. So that kind of negotiation and the 
power of the cable operator, particularly in the smaller rural 
market, does not exist.
    And to really focus on a real life situation that is 
happening today, you need look no farther than Toledo, Ohio, 
where Sinclair Broadcasting, one of the major broadcasting 
groups in this country, has blacked out Buckeye Cablevision for 
5 months on NBC WNBO, which Sinclair acquired in late November 
and came in with a first demand of nearly a thousand percent 
increase in retransmission consent. That is why there are 
blackouts today. And frankly, I applaud the Buckeye people for 
not paying that kind of ransom.
    Mr. Smith of Missouri. Thank you, Mr. Chairman.
    Mr. Marino. Thank you. The Chair recognizes the 
distinguished woman from California, Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman. I will be brief 
because we do have votes pending on the House floor. But I 
remember when I was a freshman Member of this Committee and we 
had a markup on this bill, and we said at the time this was the 
last time we would do it, and here we are again. And I predict 
that we will proceed again because we're not really willing, I 
think, to face millions of consumers that are going to end up 
with no access, because that is what the result is going to be.
    So I just have two questions, one on the blackout bills. I 
am sure you are aware, Mr. Dodge, my colleague, Congresswoman 
Anna Eshoo, has introduced a bill on blackouts that I have co-
sponsored. I am interested in your take on that bill.
    Mr. Dodge. Yes, and we thank you for your co-sponsorship of 
that bill. We think it goes a long way to fixing, you know, a 
couple of the biggest problems, which are on joint negotiating 
agreements amongst unaffiliated broadcasters in a single market 
that further exacerbates the leverage that the broadcasters 
have in programming or retransmission consent negotiations. And 
two, also giving the FCC some ability to curb those abuses.
    Ms. Lofgren. I am going to ask not Ms. Burdick, because I 
know the broadcasters are opposed to it, and I am almost out of 
time. Mr. Polka, your take on the bill?
    Mr. Polka. Fully supportive. I totally agree with Mr. 
Dodge. The one point that I would also thank you for is the 
fact that your bill focuses on availability of content online. 
To focus on behavior where a broadcaster in a retransmission 
consent dispute unilaterally identifies IP addresses of 
consumers and denies access to content that is otherwise freely 
available online. Thank you for focusing on that.
    Ms. Lofgren. Yes. That is a net neutrality as well. Let me 
just ask one final question. Other than areas that cannot 
receive an over-the-air broadcast, from a legal or technical 
standpoint, or maybe a business standpoint, what would prevent 
either a satellite or cable provider from simply integrating an 
over-the-air antenna into their cable box to avoid some of 
these problems?
    Mr. Dodge. That is a great question, and it is in some 
instances possible. But one of the points that Ms. Burdick made 
earlier that I take complete issue with is this concept that 
local programming is always available free over the air. 
DirecTV did a recent study where they did 1,800 signal tests in 
three different markets. And it actually showed that in the Los 
Angeles DMA, only 67 percent of the folks who were predicted to 
receive an adequate signal actually received an adequate 
signal.
    Ms. Lofgren. Right.
    Mr. Dodge. Meaning 33 percent of the folks do not get over-
the-air broadcasts, and that is only within the area that the 
FCC predicts you would.
    Ms. Lofgren. I see. Mr. Polka?
    Mr. Polka. Completely agree with Mr. Dodge.
    Ms. Lofgren. I am going to yield back the rest of my time 
because I know that the Committee needs to go vote and not miss 
it. So thank you very much. This has been very helpful.
    Mr. Marino. Thank you, Ms. Lofgren. Mr. Collins needs to 
get to his questions. He is going to do it. I am going to stick 
around, and then when he is done, I am going to call a recess 
and go vote. I hope the Ranking Member does not oppose. All 
right. So the Chair recognizes Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. It is amazing what 
you hear when you are thinking you are going in one area, and 
then all of a sudden you get a curve ball thrown in. And, Mr. 
Polka, thank you for doing that. Frankly, from my opinion, 
anybody that has sat in this Committee long enough, they know 
that property rights are pretty important to me, and that 
includes intellectual property rights.
    And to describe Aereo as anything but a disruptive 
technology or a new and innovative technology is being very 
generous at best and dishonest at worst. That is not the way I 
say that, and I have issues with other things. And like I said, 
you see a lot of things in these hearings. That was just not 
one.
    But I want to thank the Chairman for doing this. I believe 
it is vitally important and appropriate for the Judiciary 
Committee to exercise its jurisdiction over the compulsory 
licenses in Title 17. And I hope the Committee moves forward to 
develop our own proposal regarding the expiring 119 license.
    Ms. Burdick, I have a question for you. It is pretty 
straightforward. You know, you are defending intellectual 
property, your own, and that you have your television broadcast 
programming. And you want protection of Federal copyright law 
to collect fees for your intellectual property. However, NAB in 
particular, when it comes to music licensing, your industry 
says that songwriters and composers do not have the right to 
receive the fair market value for their intellectual property.
    And under current law, cable operators are prohibited from 
taking down broadcast signal during the Nielsen sweeps period. 
However, there is no such prohibition for a TV broadcaster that 
pulls their signal during a retransmission consent dispute. Are 
these positions not inconsistent and really not being able to 
hold mutually in the same hand?
    Ms. Burdick. So let me start with the radio piece. 
Broadcasters pay $500 million a year to songwriters through the 
U.S. copyright rules. In terms of streaming, we pay an 
estimated $60 million more a year to performers and to the 
labels. We pay consideration in other ways in terms of free 
promotional value, averaging about $2 billion a year to the 
artists.
    Mr. Collins. Again, hold on right there, and we will leave 
you to more of this. You are getting into performance rights. I 
am not dealing with performance rights, and I am not dealing 
with artists. I am dealing with songwriters in the question. My 
simple question, and if you want to stick to the TV component 
as well, you can do that. They just seem to be inconsistent 
where you want your protection, which I do not blame you. I 
would want the protection, too. Cable wants theirs as well. I 
mean, it is just, I think, just an honest discussion as we are 
having this issue of reauthorization in the Committee.
    Ms. Burdick. Well, I guess the point I was trying to make 
in too long-winded of a way is the fact that we on the radio 
side do not take someone else's work, re-package it, and get 
real American dollars from someone that we put in our pocket.
    Mr. Collins. No, that is Aereo. [Laughter.]
    Ms. Burdick. I would agree with that. On the television 
side, that is what was happening to our signal. And in terms of 
the difficulty in negotiation of these signals, it is tough, 
whether you are a small broadcaster or a tough--and I think 
that was the second part of your question, the negotiation----
    Mr. Collins. Where you can pull out when you need to. They 
cannot pull out during sweeps. So I think it is just, and that 
is where I was getting. I appreciate your answer.
    Ms. Burdick. Could I just answer that real quickly?
    Mr. Collins. Yes, finish up.
    Ms. Burdick. The only reason that that was done is because 
there was a history and pattern and practice that Congress 
observed of some MVPDs, I am sure not represented at this 
table, but proactively pulling broadcaster signals to disrupt 
only 4 times a year when their economics are set to disrupt 
their economic model. And that is why that was created.
    Mr. Collins. And here is a big one for me. I have four 
orphan counties in my district, and many of these constituents 
in these counties only have access to satellite service, and 
these providers are not able to offer in-State local news and 
weather to residents in these counties. This is very important 
to me.
    To Mr. Dodge, I know there are larger reforms on both the 
copyright side and telecom side that this Committee should and 
will discuss in the weeks and months ahead. I have heard from 
too many Members whose constituents are facing similar 
situations. Localism is important, and the current DMA setup 
leaves my constituents feeling isolated and removed from their 
home State. We need to change that, and I need your help right 
now to assist my constituents to pursue larger reforms.
    Following up on sort of Mr. Goodlatte's position, if the 
broadcasters are willing to clear rights to local in-State news 
and weather, can you commit to me as you have done to other 
Members in the past to make the programming available to your 
subscribers in my orphan counties? And will you encourage other 
satellite providers to do the same?
    Mr. Dodge. Well, one, I am not sure that they actually have 
the necessary rights to----
    Mr. Collins. And I apologize. Let me restate my question. 
If broadcasters are willing to clear the rights to local in-
State news and weather, will you then transmit to my orphan 
counties?
    Mr. Dodge. It depends to an extent. We actually do not 
think just passing through the local content actually is what 
consumers want, nor does it scratch the bigger itch of when 
catastrophes happen, that people are typically watching 
national content and get the local----
    Mr. Collins. Mr. Dodge, I am going to stop you right there. 
My folks in Elberton, Stephens, Hart, and Franklin counties do 
not look to the national news service to determine. They look 
to the ones that they want to. And when you look at a disaster 
going on and I have four of my counties blanked out, frankly, 
that is a very disturbing answer.
    Ms. Burdick, I will give you the same question. I need your 
help to connect my constituents who are satellite subscribers 
with local in-State programming. Will you commit to clearing 
the rights working with the local stations for local news and 
weather in my orphan counties, so in addition DirecTV can 
provide the programming to my constituents?
    Ms. Burdick. Yes. And as we have in many cases across the 
country, and I believe in your specific case, cable and 
broadcasters have worked together to provide Atlanta broadcast 
into those counties. For some reason, satellite chooses not to 
do it.
    Mr. Collins. Right. You have brought up an issue, and, yes, 
it is. And I am a satellite user because of multiple reasons. 
This one is concerning me, and frankly, Mr. Dodge, that answer 
was very disturbing to me. In the light of other things where 
we could agree on, that answer is very disturbing because it 
highlights to me that there may not be a willingness on a 
financial reason, not a safety or a customer service need, 
because if you take the calls from district when I go in there, 
they are concerned about this. And so, it is disturbing. And 
with that, Mr. Chairman, I yield back.
    Mr. Marino. Thank you, Mr. Collins. It is past time for us 
to get to the Floor to vote. We have four votes. There is a 
good chance that we may be back here by 4. We will try. This 
hearing is now in recess.
    [Recess.]
    Mr. Marino. We will resume this hearing on intellectual 
property, and the gentleman from Texas, Congressman Farenthold, 
is up next.
    Mr. Farenthold. Thank you very much. Mr. Dodge, you 
testified earlier you had the number of days every 
congressional district had been blacked out. Just for 
curiosity, do I win that? It sure seems like it with the most 
days blacked out.
    Mr. Dodge. And I am sorry, I could not hear. Were you 
asking do I know the exact number?
    Mr. Farenthold. I mean, who won? You testified you looked 
at the numbers, and all but one had been blacked out. Do I win 
with the most days because it sure seems like it.
    Mr. Dodge. That I do not know, but it was Congressman 
Chaffetz who is the only Member of the Subcommittee whose State 
and district have not had a blackout.
    Mr. Farenthold. I feel like the district I represent has 
been at the forefront of it, and we have actually ended up 
having to try to broker deals between the TV and the cable 
companies out of my office.
    Let us go to Mrs. Burdick. What happened to the business 
model of broadcast TV as advertiser supported? Back in the 
early days of cable, you guys were begging to be on the cable 
systems for free. What happened to change?
    Ms. Burdick. Yes. Well, the largest thing that has happened 
is that it used to be just the three television stations, in 
essence, selling advertising, maybe only against newspaper and 
radio in that market. Now, we sell against cable or multiple 
cable systems, the internet, and that pool of advertising 
dollars has shrunk and shrunk and shrunk. So our ability to 
grow our business on advertising alone has diminished.
    Mr. Holding. And so, as far as local stations, I mean, a 
lot of what you get you can get on the internet. You can 
download even some of the network stuff now the day after it 
was aired. Where is the value in the future for local 
television stations? You know, I do not mean to be cruel about 
this. What are you offering that the internet cannot now?
    Ms. Burdick. You ask a really good question. We ask 
ourselves it every day. I do not know how the world is going to 
change in terms of the network affiliate model. What I do know 
that I can provide that is irreplaceable and to date not 
replicated by anyone is local news, weather, and sports. And in 
order to grow those businesses, and we have in our company been 
growing and investing in digital sub-channels that cater to 
local or new internet products that, as an example, cover only 
and every Kansas sports team. That takes people. It takes 
resources. And so, I have to think about what my future is 
going to be and how I monetize that.
    Mr. Holding. Okay. I am going to play devil's advocate here 
for Mr. Dodge. His proposal was an arbitration, and your 
response to that is it would lengthen the time to make a deal. 
Well, his proposal that during the term of arbitration, the 
satellite or cable carrier still has the network affiliate on 
the air and saves my constituents from losing access to, say, 
the Super Bowl or 24 or whatever they are watching. I mean, you 
kind of conveniently leave that out of your response there.
    Ms. Burdick. Yes. I guess I would say two things. First of 
all, and I always stress this because people seem to forget it. 
We never go off. We are always on the air----
    Mr. Holding. But in today's market, I mean, do rabbit ears 
really work during the blackouts? I tried rabbit ears. I had to 
climb up on my roof, mount an antenna, and string cable down to 
my house. Fortunately, I pre-wired for a lot of that, but it 
did take an afternoon.
    Ms. Burdick. I do not say it is easy or the disruptions, 
and I do not take lightly disruptions. It is a last resort for 
a broadcaster in a negotiation because those are our mutual 
customers, and we do want to disrupt them. But when I as a 
small broadcaster have to face someone with 14 million 
customers and $14 billion in revenue, it is often the only tool 
that I have to get a fair price.
    Mr. Holding. All right. And then, Mr. Dodge, does DISH have 
local affiliates for everywhere in the country, or are there 
still some smaller areas that you are not carrying the 
affiliates?
    Mr. Dodge. No, we carry local channels in all 210 DMAS.
    Mr. Holding. All right. So we had the Chairman doing some 
questions about how some of the areas that are orphan areas or 
short areas, how do we deal with those. It seems to me the 
solution to that is to allow the customer to pick which one 
they want. We had a ranch about halfway between San Antonio and 
Laredo as a child growing up, you know. Why could we not say, 
well, we kind of want the San Antonio stations or we want the 
Laredo stations? Why do we not leave that to the consumer?
    Mr. Dodge. In our proposal with respect to that, I believe 
we do exactly that.
    Mr. Holding. And would that be technically possible? I 
mean, your spot beams are not so tight that you do not have a 
little bleed there.
    Mr. Dodge. It depends on the particular markets because our 
satellites have been designed with the current DMAs. But for 
many of them, you know, let us use Southern Colorado, for 
example, which is in the Albuquerque DMA, we actually could 
provide Denver channels to those folks, and that is what we had 
suggested, that they would continue to receive Albuquerque, 
provide Denver on top of that, and ultimately let the 
consumer----
    Mr. Farenthold. Now, as an affiliate I might have a problem 
with multiple affiliates in there. But for the ones outside the 
DMA, it seems like you ought to be able to pick, and you can 
divide out whatever you pay the station, you know, based on a 
per subscriber base, and click it up a few bucks here, a few 
bucks there based on the subscribers. Would that work for the 
broadcasters, Ms. Burdick?
    Ms. Burdick. I think the first part of your question was 
really important. How many are there? There are, I think you 
said 18 markets. Those could be negotiated directly. What we 
are talking about today is the expansion of the distant signal 
license. If that license expired today, those 18 markets could 
be negotiated with the rights holders, whether it is a network 
or the local broadcaster.
    Mr. Farenthold. But it would be probably easier for the 
satellite companies to pick one station, you know, New York or 
LA, and do it for everybody. But if they have got the 
technological capability, I think you want to keep it as local 
as possible.
    Ms. Burdick. You absolutely do.
    Mr. Farenthold. Mr. Dodge, I am out of time, but if you 
want to comment, I will let you comment before I yield back.
    Mr. Dodge. For short markets we typically import an 
adjacent signal, so we do try to keep it as local as possible.
    Mr. Farenthold. All right. Thank you very much. I see I am 
out of time.
    Mr. Marino. If you have another question, go ahead. We are 
still possibly waiting for someone.
    Mr. Farenthold. I just have a general question. Why is it 
my bills keep going up when the technology keeps getting 
cheaper? Why does my cable bill always seem like it is going 
up? We will go to Mr. Polka.
    Mr. Polka. I will start. I will be happy to start. And we 
talked about it a little bit this morning at the Comcast 
hearing. As a result of companies that own content, the four or 
five major content companies control some 80 to 90 percent of 
all of the channels that we see on television today, and how 
that content is sold in bundles as opposed to in any way, 
shape, or form where a consumer has choice to either buy a 
channel separately or as part of a special package.
    Sports is a big driver of this. It is ironic nowadays, even 
though, you know, I am a sports fan and would be willing to pay 
for it that most of our subscribers, about 7 out of 10, would 
tell us I would not pay for it if I had the choice not to, but 
they do not have that choice.
    This is about the only marketplace I can think of where now 
you have more competitors, whether it is ESPN or whether it is 
FS One, Fox Sports One, or NBC Sports Network, where you 
actually have more sports competitors and the price goes up, 
not down, because the leagues are able to charge more in rights 
fees for TV rights.
    Mr. Farenthold. Well, I will tell you. If I could probably 
just get the news channels in my local affiliates in internet, 
that is probably about all I would buy. Anyway, I see my time 
has expired, and I think you are ready to move on, Mr. 
Chairman.
    Mr. Marino. Thank you. There are no other Members here. All 
the questions that I was going to ask have been asked. I want 
to thank the panel, and this concludes today's hearing. Thanks 
to all of our witnesses for attending. I apologize for the 
delay.
    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 is adjourned.
    [Whereupon, at 4:32 p.m., the Subcommittee was adjourned.]
















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