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


                     REAUTHORIZATION OF THE SATELLITE 
                  TELEVISION EXTENSION AND LOCALISM ACT

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 12, 2014

                               __________

                           Serial No. 113-126
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
                        
                               _____________
                               
                        U.S. GOVERNMENT PUBLISHING OFFICE
89-765                       WASHINGTON : 2015                        
                    
________________________________________________________________________________________                    
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  
                    
                    
                    
                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania        BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                  ANNA G. ESHOO, California
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado               PETER WELCH, Vermont
MIKE POMPEO, Kansas                  BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois             PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia         JOHN A. YARMUTH, Kentucky7
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
ROBERT E. LATTA, Ohio                ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               MICHAEL F. DOYLE, Pennsylvania
LEE TERRY, Nebraska                  DORIS O. MATSUI, California
MIKE ROGERS, Michigan                BRUCE L. BRALEY, Iowa
MARSHA BLACKBURN, Tennessee          PETER WELCH, Vermont
STEVE SCALISE, Louisiana             BEN RAY LUJAN, New Mexico
LEONARD LANCE, New Jersey            JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky              FRANK PALLONE, Jr., New Jersey
CORY GARDNER, Colorado               BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  DIANA DeGETTE, Colorado
ADAM KINZINGER, Illinois             JIM MATHESON, Utah
BILLY LONG, Missouri                 G.K. BUTTERFIELD, North Carolina
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California, ex 
JOE BARTON, Texas                        officio
FRED UPTON, Michigan, ex officio
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     3
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     7
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     8

                               Witnesses

Mike Palkovic, Executive Vice President, Services and Operations, 
  DirecTV........................................................    10
    Prepared statement...........................................    12
    Answers to submitted questions...............................   122
Marci Burdick, Senior Vice President of Broadcasting, Schurz 
  Communications.................................................    23
    Prepared statement...........................................    25
    Answers to submitted questions...............................   124
Michael Powell, President and CEO, National Cable and 
  Telecommunications Association.................................    33
    Prepared statement...........................................    35
    Answers to submitted questions...............................   128
Matt Zinn, Senior Vice President, General Counsel and Chief 
  Privacy Officer, TiVo..........................................    44
    Prepared statement...........................................    46
Matt Wood, Policy Director, Free Press...........................    52
    Prepared statement...........................................    54

                           Submitted Material

Statement of the National Association of Broadcasters, submitted 
  by Mr. Walden..................................................   108
Statement of the National Cable and Telecommunications 
  Association, submitted by Mr. Walden...........................   109
Joint statement from Dish Network and DirecTV, submitted by Mr. 
  Walden.........................................................   110
Letters of support, submitted by Mr. Walden......................   111
Statement of the Computer and Communications Industry 
  Association, submitted by Ms. Eshoo............................   108
Statement of various organizations, submitted by Ms. Eshoo.......   115
Statement of the National Association of Black Journalists, 
  submitted by Ms. DeGette.......................................   117
Statement of the League of Rural Voters, submitted by Mr. Latta..   119
Op-ed entitled, ``The Feds Target a Black TV Station Owner,'' The 
  Wall Street Journal, March 9, 2014, submitted by Mr. Walden....   120

 
 REAUTHORIZATION OF THE SATELLITE TELEVISION EXTENSION AND LOCALISM ACT

                              ----------                              


                       WEDNESDAY, MARCH 12, 2014

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:39 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee] presiding.
    Members present: Representatives Walden, Latta, Terry, 
Blackburn, Scalise, Lance, Guthrie, Gardner, Pompeo, Kinzinger, 
Long, Ellmers, Barton, Upton (ex officio), Eshoo, Doyle, 
Matsui, Braley, Welch, Lujan, Pallone, DeGette, Matheson, 
Butterfield, and Waxman (ex officio).
    Staff present: Gary Andres, Staff Director; Ray Baum, 
Senior Policy Advisor/Director of Coalitions; Matt Bravo, 
Professional Staff Member; Andy Duberstein, Deputy Press 
Secretary; Gene Fullano, Detailee, Telecom; Kelsey Guyselman, 
Counsel, Telecom; Grace Koh, Counsel, Telecom; Alexa Marrero, 
Deputy Staff Director; David Redl, Chief Counsel, Telecom; 
Charlotte Savercool, Legislative Coordinator; Tom Wilbur, 
Digital Media Advisor; Phil Barnett, Staff Director; Shawn 
Chang, Chief Counsel for Communications and Technology 
Subcommittee; Margaret McCarthy, Professional Staff Member; 
Kara van Stralen, Policy Analyst; and Patrick Donovan, FCC 
Detailee.

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

    Mr. Walden. I will call to order the subcommittee on 
Communications and Technology, and welcome you all here this 
morning for our hearing. Today the subcommittee on 
Communications and Technology will consider draft legislation 
to reauthorize the Satellite Television Extension and Localism 
Act. That is the law that governs the provision of direct 
broadcast satellite service to millions of Americans.
    Today's hearing follows several previous hearings on the 
subject, multiple hearings on the communications marketplace, a 
bipartisan roundtable debate on the issue of the integration 
ban, and an incredible number of meetings with stakeholders by 
members of this committee on both sides of the aisle. It has 
taken an enormous amount of work, but this draft has earned the 
support of cable, broadcast, and satellite competitors. I 
especially want to thank Vice-Chairman Bob Latta, and my 
Democratic colleague from Texas, Gene Green, on their 
thoughtful bipartisan work on the integration ban repeal. It is 
important to note that this provision still requires cable 
companies to support Cards. It just gets an outdated, 
expensive, energy consuming provision of little or no value off 
the FCC's books. We believe in spurring innovation, not holding 
it back.
    The draft legislation responds to the concerns of members 
of both sides of the aisle regarding the joint service 
agreements and sweeps week provisions that seem to put a thumb 
on the scale. I have listened to those concerns, and propose 
eliminating sweeps week prohibition, which keeps cable 
operators, and not other pay TV providers, from dropping 
broadcast signals during sweeps weeks, the weeks when Nielsen 
runs its rating analyses. Further, the draft contains a 
provision that would limit joint retransmission consent 
negotiation by two or more independent broadcasters in a shared 
service agreement, unless the pay TV provider agrees to 
negotiate jointly with those broadcasters. I have no complaints 
with provisions that support fair negotiating tactics for all 
parties to an agreement.
    I am, however, very concerned by the FCC's recently 
announced plans to dump joint sales agreements into their local 
media ownership calculations, especially without first 
completing their statutorily required quadrennial review of the 
marketplace. Up in Fairbanks, Alaska, all four TV stations are 
operated from the same group of Quonset huts to share costs, 
and create efficiencies that allow the stations to provide a 
variety of news and entertainment to this city of a whopping 
32,000 people. Absent a JSA, it is unlikely the community could 
support four television stations. I would also draw the 
committee's attention to a recent ``Wall Street Journal'' op-ed 
that includes the community served by the nation's only 
African-American owned full power broadcast station, and I will 
introduce that into the record at the end, and by local 
broadcasters, like Bob Singer, the general manager of several 
local television stations in my district. There is a positive 
role for consumers in joint service agreements.
    Unfortunately, Chairman Wheeler is putting the JSA cart 
before the media ownership horse. The Federal Communications 
Commission is required by statute to review the entire set of 
media ownership laws every 4 years. It has consistently failed 
to follow the law. If a licensee of the FCC failed to follow 
the law, it would lose its license, or be subject to penalty. 
Chairman Wheeler is forging ahead to regulate JSAs, while 
leaving the commission's legal obligations for another day. 
This is why we have included in this draft a clear directive 
from the Congress to the FCC that it should do its job, and 
finish the quadrennial media ownership review before it tinkers 
with JSAs. But in the meantime, we bring fairness to the 
marketplace when it comes to the misuse of JSAs for 
retransmission consent negotiations. Our draft finds the right 
balance.
    Our work here is set against the backdrop of our larger 
effort to update the Communications Act and bring our 
communications laws in line with the innovation and dynamism of 
the communications marketplace. We hope that many government, 
industry, and consumer stakeholders in this complex discussion 
will engage in the comprehensive discussion of the Comm Act 
update. This will be a time consuming process, however, and as 
my colleague Mr. Shimkus explained to ``Politico'' last week, 
the Telecomm rewrite is not for sissies.
    The video marketplace is not a monolithic structure by any 
stretch of the imagination. Today's witnesses represent diverse 
parts of that ecosystem. The broadcasting, cable, direct 
broadcast, satellite, and retail set-top box industries are all 
well represented on our panel, as well as public interest 
community. I thank our witnesses being here today, I appreciate 
your counsel, and I yield the remaining time to the vice-chair 
of the committee, Mr. Latta.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Today the subcommittee on Communications and Technology 
will consider draft legislation to reauthorize the Satellite 
Television Extension and Localism Act, the law that governs the 
provision of direct broadcast satellite service to millions of 
Americans.
    Today's hearing follows several previous hearings on the 
subject, multiple hearings on the communications marketplace, a 
bipartisan roundtable debate on the issue of the integration 
ban, and an incredible number of meetings with stakeholders by 
members of this committee on both sides of the aisle. It's 
taken an enormous amount of work, but this draft has earned the 
support of cable, broadcast and satellite competitors.
    I especially want to thank Vice Chairman Bob Latta and my 
Democratic colleague from Texas Gene Green on their thoughtful, 
bipartisan work on the integration ban repeal. It's important 
to note that this provision still requires cable companies to 
support CableCARDs, it just gets an outdated, expensive, energy 
consuming provision of little or no value off the FCC's books. 
We believe in spurring innovation, not holding it back.
    The draft legislation responds to the concerns of members 
of both sides of the aisle regarding Joint Service Agreements 
and sweeps week provisions that seem to put a thumb on the 
scale. I have listened to those concerns and propose 
eliminating the sweeps week prohibition, which keeps cable 
operators from dropping broadcaster signals during ``sweeps'' 
weeks--the weeks when Nielsen runs its ratings analysis.
    Further, the draft contains a provision that would limit 
joint retransmission consent negotiation by two or more 
independent broadcasters in a shared service agreement, unless 
the pay-tv provider agrees to negotiate jointly with those 
broadcasters. I have no complaints with provisions that support 
fair negotiating tactics--for all parties to an agreement. I 
am, however, very concerned by the FCC's recently announced 
plans to dump Joint Sales Agreements into their local media 
ownership calculations, especially without first completing 
their statutorily required quadrennial review of the 
marketplace.
    In Fairbanks, Alaska, all four TV stations are operated 
from the same group of Quonset huts to share costs and create 
efficiencies that allowed the stations to provide a variety of 
news and entertainment to this city of about 32,000 people. 
Absent a JSA it's unlikely the community could support four 
television stations. I'd also draw the committee's attention to 
a recent Wall Street Journal op-ed that includes the community 
served by the nation's only African-American owned, full-power 
broadcast station. And by local broadcasters like Bob Singer, 
the general manager of several local television stations in my 
district. There's a positive role for consumers in Joint 
Service Agreements.
    Unfortunately, Chairman Wheeler is putting the JSA cart 
before the media ownership horse. The FCC is required by law to 
review the entire set of media ownership laws every 4 years. It 
has consistently failed to follow the law. If a licensee of the 
FCC failed to follow the law, it would lose its license or 
suffer some severe penalty.
    Chairman Wheeler is forging ahead to regulate JSAs while 
leaving the commission's legal obligations for another day. 
This is why we've included in this draft a clear directive to 
the FCC that it should do its job and finish the quadrennial 
media ownership review before it tinkers with JSAs. But in the 
meantime, we bring fairness to the marketplace when it comes to 
misuse of JSAs for retransmission negotiations. Our draft finds 
the right balance.
    Our work here is set against the backdrop of our larger 
effort to update the Communications Act and bring our 
communications laws in line with the innovation and dynamism of 
the communications marketplace. We hope that the many 
government, industry, and consumer stakeholders in this complex 
discussion will engage in the comprehensive discussion of the 
#CommActUpdate. This will be a time-consuming process, however, 
and as my colleague Mr. Shimkus explained to Politico last 
week, ``The telecom rewrite, that's not for sissies.''
    The video marketplace is not a monolithic structure by any 
stretch of the imagination. Today's witnesses represent diverse 
parts of that ecosystem. The broadcasting, cable, direct 
broadcast satellite, and retail set-top box industries are all 
well represented by our panel, as well as the public interest 
community. I thank our witnesses for being here today and for 
their counsel.

    Mr. Latta. Well, I thank the Chairman, and I also 
appreciate you holding today's hearing, and I also thank our 
panel of witnesses for testifying. Thank you very much for 
being here. Today we take another opportunity to examine the 
video marketplace in the context of the Satellite Television 
Extension and Localism Act reauthorization. We can all agree 
that there has been a tremendous amount of innovation and 
technological advancement in the video marketplace since the 
Satellite Home Viewer Act, which was enacted in 1988.
    Since the law was last reauthorized in 2010, we have been 
witness to an even greater innovation in modern developments. 
We have seen a proliferation of new entrants into the video 
market, which has spurred greater investment, job creation, 
increased competition among video distributors and content 
providers, and has offered consumers with greater choice and 
enhanced experiences that are closely aligned with their 
personal preferences and interests. It is incumbent upon this 
Congress, and this subcommittee in particular, to create and 
support policies that allow the video marketplace to continue 
to flourish and innovate, and empower market participants to 
the flexibility, and efficiently meet the ever evolving demands 
of consumers. To fully realize the promise and potential of 
this industry, we must be willing to remove outdated government 
regulations that are no longer justifiable, and will limit and 
stifle future progress and advancement if left in place.
    I want to thank Chairman Upton and Walden for acknowledging 
the work we have done with Congressman Gene Green on H.R. 3196, 
including the proposal to eliminate the integration ban on set-
top boxes as a provision in the first draft of the STELA 
reauthorization. This represents a positive forward step in 
updating policies to reflect today's competitive video 
marketplace, in eliminating a regulatory burden to innovation 
in consumer choice. I look forward to continuing to work with 
you, Mr. Chairman, Chairman Upton, Congressman Green, and other 
members of the subcommittee on moving this draft 
reauthorization package forward. I look forward to the 
testimony today, and I yield back.
    Mr. Walden. I thank the gentleman. I seek unanimous consent 
to enter into the record statements from National Association 
of Broadcasters, the National Cable and Telecommunications 
Associations, and a joint statement from Dish Network and 
DirecTV in support of the discussion draft, as well as letters 
of support for repeal of the cable card integration ban from 
the National Black Chamber of Commerce, the Latinos in 
Information Sciences and Technology Association, citing the 
cost of the integration ban to low income families. Without 
objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. I now recognize my friend and colleague from 
California, Ms. Eshoo.

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

    Ms. Eshoo. Thank you, Mr. Chairman, and welcome to all of 
the witnesses. We are pleased that you are here, and we know 
that we are going to learn a great deal from you.
    Over the past year and a half, the message, I think, from 
industry and consumer advocates to our subcommittee has been 
pretty clear. Our video laws are outdated, and in some cases, 
they are even being abused. In 2010 there were just 12 
broadcast television blackouts nationwide. In 2013, last year, 
there were 127. Similarly, re-trans fees are expected to more 
than double from $3.3 billion to $7 billion by 2018. I think 
that it is pretty clear who the losers are in all of this. It 
is consumers who will continue to see rising cable bills, and 
in most cases will not be compensated when their programming is 
blacked out.
    Some say that this is simply a manufactured crisis, but I 
would ask that the following questions be considered. Why is a 
law that was intended to promote localism being used to block 
national cable programming or content that is available free on 
the Internet? Why does the law prohibit cable operators from 
taking down a broadcast signal during a Nielsen's sweeps week, 
yet there is no such prohibition for a broadcaster that pulls 
their signal during a re-trans dispute? And why, when a 
consumer simply wants HBO, does the law require that they also 
pay for re-trans stations that are available free over the air?
    I think that these are some of the critical questions that 
led me to introduce the Video Choice Act in December, and a 
chorus of support, I might say strange political bedfellows, 
came together from constituents, to pay TV providers, to 
independent programmers, to think tanks, and to consumer 
groups, to undertake targeted video reforms, and do so as part 
of the re-authorization of STELA. I think we have to work 
together in a bipartisan way, just as Representative Scalise 
and I have done over the past several months.
    Unfortunately, several of the provisions in the discussion 
draft do not embody the bipartisan values that have been the 
cornerstone of previous reauthorizations. We have to be 
forward-thinking, both in our approach to legislating, and when 
we are going to dismantle something, where there is a provision 
in the draft that does so that has helped to ensure that 
consumers can buy cable set-top boxes from someone other than 
their local cable company, we have to have an eye on the 
future. Before we dismantle, we have to establish a framework 
for the future. And I think that this is something that we all 
need to think long and hard about.
    I am also concerned by a provision that would effectively 
bar the FCC from modifying its rules to close a loophole that 
broadcasters have been exploiting to circumvent the FCC's media 
ownership rules. I find it contradictory that while the draft 
bill appropriately recognizes the anti-competitive nature of 
joint retransmission consent negotiations, it also gives tacit 
approval for other forms of coordination among broadcasters, so 
long as it is not done at the expense of the cable and 
satellite operators. I think we can do better than this.
    In closing, Mr. Chairman, you know that I have said before, 
and I will continue to say, that we work together, not only 
with me, but with all of my colleagues on this side of the 
aisle, to eliminate or re-draft the provisions I have 
highlighted to support consumers, competition, and innovation 
across the video marketplace. And with that, I would like to 
ask unanimous consent to place into the record two letters: one 
from CCIA, and the other from Free Press, Consumer Action, 
Public Knowledge, Writers' Guild of America West, Tech Company 
Alliance, et cetera. It is a lot of good people. So, with that, 
I don't think I have any time left----
    Mr. Walden. Yes, you do.
    Ms. Eshoo [continuing]. Do I?
    Mr. Walden. Without objection, it will be entered into the 
record.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. All right. I do have 35 seconds, if there is 
anyone that would like to use the remainder of my time. Doris? 
You want to wait for someone else? OK. I will yield back, Mr. 
Chairman.
    Mr. Walden. Gentlelady----
    Ms. Eshoo. Thank you.
    Mr. Walden [continuing]. Yields back the balance of her 
time. I thank the gentlelady for her comments. I now recognize 
the Chairman of the full committee, the gentleman from 
Michigan, Mr. Upton.

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

    Mr. Upton. Thank you, Mr. Chairman. I want to thank all of 
our witnesses for coming today to discuss this draft of this 
must pass legislation. More than a million and a half satellite 
TV subscribers rely on the provisions of STELA that expire at 
the end of the year, and the draft legislation that is subject 
of our hearing will ensure that these subscribers continue to 
receive the services that, in fact, they have come to rely on.
    There has been a healthy debate, yes, there has, over what 
this reauthorization should and should not do, and we welcome 
continued input as the process moves forward. And we want to 
work to reauthorize STELA. It is important to remember that 
this is not the venue for comprehensive reform. As you know, 
the committee has embarked on a multi-year effort to update the 
Communications Act, and this process will be driven by a 
thorough and thoughtful review of all aspects of today's 
communications marketplace, with a goal of updating our laws to 
better reflect today's realities, while leaving the flexibility 
necessary to foster continued innovation and growth. And we 
hope and expect that you all will be very active participants 
in that process, as I know that you will want to do so. Thanks 
to the hard work of this subcommittee, and input from the 
public and industry stakeholders, Chairman Walden issued a 
discussion draft that offers practical and narrow reforms to 
the current video market, while properly leaving comprehensive 
reform to the #CommActUpdate.
    I strongly support this draft, and encourage others to do 
so as well. In addition to extending the expiring satellite 
provisions, today's draft also makes several targeted pro-
consumer reforms to video laws and regulations. It repeals 
costly FCC rules that require a cable card in set-top boxes 
leased by cable companies. It removes a government guarantee of 
sweeps week protection in retransmission disputes. And it takes 
action to ensure that the FCC meets its statutory obligation to 
review and deregulate media ownership rules before attempting 
to take additional regulatory actions against sharing 
agreements. The draft also helps to keep negotiations fair 
between broadcasters and pay TV providers for retransmission 
consent. So these are, I think, well considered deregulatory 
reforms, the type of intelligent reforms that the committee and 
this Congress should think about during the #CommActUpdate.
    I yield the balance of my time, 1 minute each to Mr. 
Scalise, Barton, and Blackburn.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    I want to thank our witnesses for coming today to discuss 
our draft of this must pass legislation. More than 1.5 million 
satellite television subscribers rely on the provisions of 
STELA that expire at the end of this year. The draft 
legislation that is the subject of our hearing will ensure that 
those subscribers continue to receive the service they have 
come to rely on.
    There has been a healthy debate over what this 
reauthorization should and should not do, and we welcome 
continued input as this process moves forward. As we work to 
reauthorize STELA, it is important to remember that this is not 
the venue for comprehensive reform. As you know, the committee 
has embarked on a multi-year effort to update the 
Communications Act. This process will be driven by a thorough 
and thoughtful review of all aspects of today's communications 
marketplace with the goal of updating our laws to better 
reflect today's realities while leaving the flexibility 
necessary to foster continued innovation and growth. We hope 
and expect you all will be active participants in that process.
    Thanks to the hard work of this subcommittee and input from 
the public and industry stakeholders, Chairman Walden has 
issued a discussion draft that offers practical, narrow reforms 
to the current video market while properly leaving 
comprehensive reform to the #CommActUpdate. I strongly support 
this draft and encourage others to do so as well.
    In addition to extending the expiring satellite provisions, 
today's draft also makes several targeted proconsumer reforms 
to video laws and regulations. It repeals costly FCC rules that 
require CableCARDs in set-top boxes leased by cable companies. 
It removes a government guarantee of ``sweeps week'' protection 
in retransmission disputes. And it takes action to ensure that 
the FCC meets its statutory obligation to review and deregulate 
media ownership rules, before attempting to take additional 
regulatory actions against broadcast sharing agreements. The 
draft also helps to keep negotiations fair between broadcasters 
and pay-TV providers for retransmission consent.
    These are well-considered, deregulatory reforms--the type 
of intelligent reforms that Congress should think about during 
the #CommActUpdate. We hope you'll join us over the next few 
years as we dig in to review the state of the law and the state 
of the communications industry. For now, let's not lose sight 
of the important goal today of reauthorizing STELA by the end 
of this year.

    Mr. Scalise. Thank you, Mr. Chairman. This very modest 
STELA draft we are reviewing today begins to address some of 
the outdated provisions shackling the video marketplace, but I 
think there is a lot more work to be tackled in this area 
before we can say that we got the public policy right, and that 
we leveled the playing field for our consumers back home.
    I know many in this city, on all sides of these issues, are 
fearful of what a marketplace based predominantly on copyright 
law would look like. But as long as we have this government-
manipulated market, with its compulsory licensing, carriage 
regulations, and consumer purchase mandates, it is completely 
reasonable to suggest, as Ranking Member Eshoo would also 
agree, that these outdated laws be updated over time. This is 
not a free market at work. It is a government creation. We 
should never stop championing the belief that consumers will 
stand to gain the most when we allow our nation's innovators, 
entrepreneurs, and risk takers to show Washington the way, not 
the other way around.
    I look forward to continuing to embrace this unique 
opportunity that brings together members from both sides of the 
aisle, and hopefully both sides of the Capitol, as we 
collectively work to modernize the decades-old laws and 
regulations that foreclose on the possibility of freedom for 
all market participants, and greater consumer choice. I look 
forward to hearing from our panelists, and I yield back.
    Mr. Barton. Mr. Chairman, there is nothing like renewing 
old acquaintances for members of this subcommittee than 
scheduling a legislative hearing. And as I look out in the 
audience, I see a number of my old friends who have called me, 
or made an attempt to touch base, and since you scheduled this 
hearing, we have got two former Congressmen of the 
subcommittee, Mr. Bass of New Hampshire and Ms. Myrick of North 
Carolina. We are glad to see them.
    I was here, Mr. Chairman, in 1988 when we passed the 
Satellite Home Viewer Act, and I have been here for all the 
reauthorizations. I think it is imperative that we reauthorize 
it again this year, since it expires at the end of December 
this year. And I think the discussion draft has received a lot 
of input, excuse me, and I think some of the changes that have 
resulted from that input are positive, and I look forward to 
the hearing with that.
    Mrs. Blackburn is not here, so I will yield back to the 
Chairman, unless the Chairman wishes to yield to one of the 
other members.
    Mr. Walden. Any other member want to use up the remaining 
34 seconds? If not, gentleman yields back the balance of this 
time. We will now turn to the ranking Democrat on the 
committee, the gentleman from California, Mr. Waxman, for 5 
minutes.

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

    Mr. Waxman. Thank you very much, Mr. Chairman. We are here 
today to discuss draft satellite television legislation 
released by Chairman Walden last week. I am not prepared to 
support the bill in its current version, but I am prepared to 
work with Chairman Walden, Chairman Upton, Ranking Member Eshoo 
to get a bill we could all stand behind. Last night the House 
unanimously passed the FCC Process Reform Act. It took work to 
get that bill in a shape that every member of the House could 
support. But if we were able to bridge differences in the FCC 
Process bill that were much bigger than we face today, I am 
hopeful that, with goodwill on both sides, we can reach the 
same result on this issue.
    My initial preference was for a clean reauthorization of 
the expiring provisions of the Satellite Television Extension 
and Localism Act, or STELA. Previous authorizations may not 
have been clean, but the new provisions that had been added 
were part and parcel of the purpose of the law, giving 
satellite subscribers access to local and network broadcast 
programming. Today we are considering a different kind of bill. 
It would make changes to the way retransmission consent 
negotiations may occur by altering the bargaining power between 
programmers and distributors. It would also hamstring the FCC's 
ability to address broadcaster coordination that could 
undermine the diversity of voices, and lead to job losses. And 
we would repeal set-top box regulations that don't even apply 
to satellite companies.
    Mr. Chairman, I can understand the draft bill prohibiting 
broadcasters coordination in retransmission consent with 
limited exemptions, while condoning similar coordination of 
broadcasters jointly sell ad time, or otherwise coordinate 
outside the retransmission consent process. That is what this 
bill would do, and I find the two approaches difficult to 
reconcile. I believe much of the bill passes the public 
interest test, but not every provision.
    I support FCC's tightening its attribution rules to address 
joint sales agreements between television stations. I don't 
understand why the same standard wouldn't apply that we are 
applying to anti-competitive behavior among broadcasters that 
results in consumer harm in retransmission consent negotiations 
to also apply to joint agreements that have a well-documented 
history of increasing prices, reducing competition, and 
otherwise undermining the public interest.
    The set-top box issue is also one we need to examine 
closely. Some energy experts believe the cable card requirement 
is preventing the design of more energy efficient set-top 
boxes. If that is a real concern, I would like to see it 
addressed. But at the same time, we need to make sure we are 
preserving competition and innovation in the market for set-top 
boxes.
    I think that the bill has been handled well, it is a bill 
we could work with, and I am hopeful that we can reach a full 
agreement on all the provisions. I want to close by thanking 
Chairman Walden for his efforts, and for this hearing today. I 
hope we can work together to develop a truly bipartisan 
Satellite Reauthorization Bill. And I want to yield at this 
time to my colleague from California, Ms. Matsui.
    Ms. Matsui. Thank you very much, Ranking Member Waxman, for 
yielding me time. Mr. Chairman, thank you for holding today's 
hearing, and I would like to thank the witnesses for being here 
today.
    I am pleased that we are beginning this legislative process 
to renew satellite television--and license. However, I am 
surprised that, unlike the past, our legislative starting point 
is not a bipartisan, narrowly tailored bill. Now that the bill 
has expanded, I do look forward to hearing more about the 
merits of the provisions relating to retransmission consent and 
set-top boxes. We know that technology is disrupting the video 
marketplace, with new and innovative ways to watch TV and 
stream movies and videos. As a result, we are seeing new 
players entering the marketplace, and we are seeing trends 
toward more consolidation.
    However, one thing is certain. Americans are tired of being 
caught in the middle of retransmission disputes. That is why, 
since the STELA proposal has expanded, I believe we should look 
at this bill through a filter, and that is, will it put the 
consumers in a better place? It is my hope that we can 
definitively answer that question. Moving forward, it is my 
hope that this subcommittee can work in a bipartisan manner to 
improve the bill and produce a bipartisan product. And I yield 
back the balance of my time.
    Mr. Walden. Gentlelady yields back the balance of her time. 
All time how now expired, and we will get on about hearing from 
our witnesses, and I want to thank them all for being here. And 
we are going to start with Mr. Mike Palkovic, did I say that 
right? Palkovic?
    Mr. Palkovic. Yes, you did.
    Mr. Walden. Executive Vice President, Services and 
Operations of DirecTV. Mr. Palkovic, thank you for being here 
today. We look forward to your testimony.

STATEMENTS OF MIKE PALKOVIC, EXECUTIVE VICE PRESIDENT, SERVICES 
 AND OPERATIONS, DIRECTV; MARCI BURDICK, SENIOR VICE PRESIDENT 
    OF BROADCASTING, SCHURZ COMMUNICATIONS; MICHAEL POWELL, 
   PRESIDENT AND CEO, NATIONAL CABLE AND TELECOMMUNICATIONS 
ASSOCIATION; MATT ZINN, SENIOR VICE PRESIDENT, GENERAL COUNSEL 
    AND CHIEF PRIVACY OFFICER, TIVO; AND MATT WOOD, POLICY 
                     DIRECTOR, FREE PRESS.

                   STATEMENT OF MIKE PALKOVIC

    Mr. Palkovic. Thank you. Good morning, Chairman Walden, 
Ranking Member Eshoo, and members of the subcommittee. My name 
is Mike Palkovic, and I am the Executive Vice President of 
Operations at DirecTV. Thank you for inviting me back to 
testify on STELA reauthorization. STELA reauthorization is 
critical to millions of your constituents who depend upon 
DirecTV. Without congressional action, key provisions expire 
this December. The committee and its staff have put many hours 
to produce the first discussion draft of legislation that would 
reauthorize these provisions, so my first and most important 
message is simple, thank you. DirecTV and our subscribers 
appreciate your hard work, and your willingness to address 
STELA reauthorization. You may have heard from some companies 
telling you what you should or should not have done with the 
discussion draft. Some may even be telling you to do nothing, 
or to simply change the expiration date in a ``clean'' 
reauthorization, something Congress has never done before. 
This, however, is the Satellite Home Viewer Act. I am here on 
behalf of the nation's leading satellite provider to say that 
we agree with the committee's approach.
    Does this discussion draft contain everything DirecTV 
thinks it should? Of course not, but it does two critically 
important things. First, it preserves service for millions of 
distant signal subscribers. With all of the other issues before 
this committee, it is sometimes easy to forget the key distant 
signal provisions are due to expire this December. Your 
constituents, however, have not forgotten about these 
provisions. More than a million and a half subscribers, many in 
the most rural areas of the country, receive at least one 
distant network signal from DirecTV or Dish. Were Congress to 
fail to reauthorize STELA, these subscribers would lose service 
that most Americans take for granted.
    Second, the draft bill addresses one particularly egregious 
abuse of the FCC's rules that is raising prices for consumers. 
Reasonable people can differ on the broader policy questions 
that divide broadcasters and pay TV providers. For example, 
broadcasters think our subscribers don't pay them enough for 
their programming, and we wish broadcasters would pay us for 
delivering their signals to millions of our subscribers who 
would never be able to get them over the air. Whatever one's 
views, however, most people agree that you shouldn't be able to 
evade FCC rules. Yet this is exactly what broadcasters are 
doing today, and this is exactly what the discussion draft 
would stop.
    Broadcasters increasingly negotiation retransmission 
consent jointly on behalf of two, three, or even four network 
affiliates in the same market. This leads to higher prices, as 
much as 161 percent higher, according to one estimate, and it 
leads to greater harm when blackouts occur. This is why the FCC 
appears poised to follow the advice of the Department of 
Justice, by restricting joint retransmission consent 
negotiations for non-commonly owned stations in the same 
market. The committee's discussion draft takes the same 
approach. We think is sensible and long overdue reform.
    So, on behalf of DirecTV's more than 20 million 
subscribers, I would like to thank the committee for its 
diligence and hard work on STELA reauthorization, particularly 
Chairman Walden, Congressman Scalise, and Congresswoman Eshoo. 
We look forward to continuing to work with Republican and 
Democratic members of this committee as we move forward. I 
would be happy to answer any questions the committee might 
have. Thank you.
    [The prepared statement of Mr. Palkovic follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Walden. Mr. Palkovic, thank you very much for your 
testimony. We will now go to Marci Burdick, Senior Vice 
President of Broadcasting for Schurz Communications, 
Incorporated. Ms. Burdick, it is good to have you back before 
the subcommittee. We look forward to your testimony. You just 
need to turn that microphone on.
    Ms. Burdick. You would think the broadcaster could get the 
microphone. Thank you.
    Mr. Walden. That is all right.

                   STATEMENT OF MARCI BURDICK

    Ms. Burdick. Good morning, Chairman Walden, Ranking Member 
Eshoo, and members of the subcommittee. I am Marci Burdick, 
Senior Vice President at Schurz Communications. I supervise 
radio, cable, and television stations in small and medium 
markets. I am testifying on behalf of the NAB, where I am the 
Television Board Chair, and pleased to be here this morning 
with the two Michaels and the two Matts.
    The STELA legislation that the committee is considering is, 
at its core, a satellite bill. Passed in 1988, this law was 
supposed to be a temporary fix to help satellite carriers 
better compete with cable by giving them permission to provide 
distant broadcast channels. Twenty-six years later, satellite 
is providing local broadcast channels in nearly every market, 
and is a thriving competitive alternative to cable. So while 
NAB questions the need for the bill at all, we can support the 
draft produced by Chairman Upton and Chairman Walden.
    Our primary interest in the legislation was to prevent the 
picking of marketplace winners and losers, which is why we have 
asked for a clean bill. We are happy to see that this STELA 
draft steers clear of these kind of provisions. While cable and 
satellite companies sought to use STELA to gain leverage over 
broadcasters in retransmission consent negotiations, we 
continue to believe that free market negotiations are the most 
appropriate place to establish price. As to any other broader 
changes to broadcasting rules, NAB firmly believes that those 
should be debated as part of the comprehensive Communications 
Act update recently launched by Chairman Upton and Walden.
    As you know, broadcasters may only operate with a license 
granted to us by the FCC, and we are by far its most regulated 
industry. It can be hard to flip a switch without getting 
permission from your regulator. And while our competitors are 
often large national companies with no ownership restrictions, 
we may not own, in most cases, more than one TV station in most 
markets. While our competitors may show provocative, cutting 
edge content at any time of the day, broadcasters live by 
decency rules dictating what we may air. Broadcasters are 
saddled with innumerable regulations that are by far more 
onerous than our cable and satellite competitors.
    For all of these regulations, there are some benefits that 
broadcasters receive because we do operate in the public 
interest. But if Congress opts to remove the benefits of being 
a broadcaster, then it should also remove the burdens. 
Deregulation should not be limited to one player in an 
industry. If your goal is regulatory parity between the various 
video platforms seated at this table, a comprehensive 
examination in the Communications Act update is the only way to 
achieve it.
    I would like to spend the remainder of my time addressing 
joint sales agreements, known as JSAs. These are agreements 
among broadcasters in a market for the joint sale of 
advertising. While often mischaracterized, these agreements 
benefit the public, particularly in small and medium markets, 
where Schurz operates. They result in additional local news, 
improved public service, and enhanced transmission facilities. 
For example, our JSA in Wichita, Kansas supports the only 
Spanish local newscast in the State of Kansas. In Springfield, 
Missouri our JSA helped take a struggling station to one that 
is winning national award for local news coverage.
    We strongly oppose the extraordinary regulatory path the 
FCC is taking to make JSAs attributable for the purpose of the 
broadcast ownership rules. The FCC's proposed rule will require 
broadcasters to unwind existing agreements, something 
unprecedented, and amazingly disruptive. This is yet another 
example of how broadcasters are forced to play by one set of 
rules, while the rest of the video industry plays by another.
    And the real issue here is competition for local 
advertising dollars. Television stations fiercely compete not 
just with each other, but with cable, Internet, and mobile. 
Although the FCC and DOJ have said that broadcasters dominate 
local advertising, you can see in this chart that we have put 
on the wall that we are seeing, and expecting, big gains from 
our competitors. The chart proves that today's local 
advertising market is by far more than just local TV, but, 
unfortunately, we are being regulated like it is 1960. And, 
importantly, for all of those entities taking revenue out of a 
community, local broadcasters are the only ones putting it back 
in through local news and community service.
    Strangely, the FCC apparently doesn't have the same sales 
concerns as it relates to cable. The same JSA-like agreements, 
called interconnects, are routine between cable, satellite, and 
telcos for the joint sale of advertising. What you have are 
cable companies selling local advertising for their direct 
competitors, yet they will continue unregulated.
    In conclusion, we strongly support the bill's language that 
prevents the FCC from enforcing rules without first collecting 
empirical data studying the real world impact of JSAs. In 
reality, these agreements better serve the public interest. To 
ignore the market pressures facing broadcasting would doom us 
to the fate of newspapers, and I hope this committee will take 
an honest fact-based look at the importance of these agreements 
to localism. We appreciate the hard work of this committee, and 
I look forward to your questions. Thank you.
    [The prepared statement of Ms. Burdick follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
           
    Mr. Walden. Ms. Burdick, pardon me, thank you for your 
presentation. We will now go to Mr. Michael Powell, President 
and CEO of the National Cable and Telecommunications 
Association. Mr. Powell, it is good to have you back before the 
committee. We look----
    Mr. Powell. Thank you----
    Mr. Walden [continuing]. Forward to your testimony.

                  STATEMENT OF MICHAEL POWELL

    Mr. Powell. Thank you, Chairman Walden, and thank you, 
Ranking Member Eshoo, and other members of the subcommittee. It 
is always a distinct pleasure to have the opportunity to come 
and testify before you today. I am pleased, on behalf of the 
National Cable and Telecom Association, representing America's 
cable companies, to support reauthorization of STELA, including 
the very important requirement for companies to negotiate 
broadcast carriage agreements in good faith. We are also 
specifically pleased to support the carefully selected video 
reforms that have been included in the discussion draft. All 
these reforms can be appreciated as both, one, directly 
benefiting consumers, and, two, restoring a modicum of 
competitive balance among companies. Both of these themes 
should always be touchstones of communications policy.
    Let me turn first to the question of the integration ban. 
Eliminating the integration ban, an effort led by Congressmen 
Latta and Green on a bipartisan basis, reverses an ill-
conceived FCC policy, while clearly preserving the statute, and 
its commendable objective of promoting consumer choice, 
innovation in competition in set-top boxes, something long 
championed by Congresswoman Eshoo. To implement the law, the 
FCC had to overcome a simple obstacle, giving third party boxes 
access to encrypted signals. Industry worked together to create 
a separate security module, the cable card, so boxes could be 
sold unlocked at retail and work in any cable market by simply 
acquiring the card. Cable card is now a fully realized 
solution.
    The FCC, however, stepped beyond the statute and imposed 
something called the integration ban. The ban forced cable 
companies to pry security functions out of their leased boxes, 
and rely instead on cable cards, despite there being no 
technical need to do so. The theory of the rules was 
behavioral, not technical, the belief that cable companies 
would now have an incentive to create, deploy, and support 
cable cards for third parties. The FCC also, in a bit of 
industrial engineering, hoped to push consumers toward third 
party boxes by eliminating a low cost choice from the cable 
company. This ill-fated policy should be reversed simply 
because its costs now clearly outweigh its speculative 
benefits.
    For one, the integration ban eliminated a low cost consumer 
choice, costing consumers nearly $1 billion in unnecessary 
expenses. According to FCC data, the integration ban adds over 
$55 of additional costs per box, while adding no additional 
functionality. Secondly, the ban is quite wasteful of energy, 
imposing on consumers the cost of hundreds of millions of 
unnecessary kilowatt hours per year. Third, the policy unfairly 
tilts the competitive playing field. As was mentioned by 
Chairman Waxman, the integration ban apply only to cable 
companies, despite them representing only about 50 percent of 
the market today, down from over 90 percent when the provision 
was passed. DirecTV and Dish, able competitors, are the second 
and third largest providers, and are free to innovate and 
develop lower cost alternatives, since they are not subject to 
the rules. The same is true of telcos, like AT&T. This 
incongruous application of the law has no defensible rationale, 
and it is impossible to believe a policy applied to barely half 
of a national market will have much impact on a national market 
for set-top boxes.
    And whatever the meritorious intentions of the integration 
ban were, the benefits are speculative at best. Today 44 
million cable customers have chosen leased cable boxes that use 
cable cards. In stark contrast, only 600,000 cable cards have 
been requested for third party devices. The explosion of 
unimagined video devices and content sources from the likes of 
Roku, Apple TV, Xbox, Chromecast, and a wrath of Apple iOS and 
Android devices, is exciting, and likely explains lessening 
interest in cable set-top box alternative, and points squarely 
to a market developing solutions to meet consumer preferences.
    Finally, a word about joint negotiations from broadcasters. 
We support the effort to rein in abuses of local broadcast 
stations that have intensified the use of so-called sidecar 
agreements to jointly negotiate carriage of their signals. 
Whatever the purported efficiencies of these arrangements are, 
and there may be some, they have no place invalidating the 
anti-competitive practice of competitors acting collectively to 
negotiate prices. As the Department of Justice has found, these 
practices harm consumers in the form of higher cable prices.
    Thank you, Mr. Chairman, and I look forward to your 
questions.
    [The prepared statement of Mr. Powell follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
           
    Mr. Walden. Mr. Powell, we appreciate your testimony, and 
we will now go to Mr. Matt Zinn, Senior Vice President, General 
Counsel, and Chief Privacy Officer for TiVo. Mr. Zinn, it is 
good to have you before the subcommittee. We look forward to 
your comments.

                     STATEMENT OF MATT ZINN

    Mr. Zinn. Chairman Walden, Ranking Member Eshoo, members of 
the subcommittee, my name is Matthew Zinn. I am the Senior Vice 
President for TiVo. TiVo developed the first commercially 
available digital video recorder, and we have over four million 
subscribers worldwide, including a million retail subscribers 
in the United States. I appreciate the invitation to testify 
before you today.
    Ordinarily TiVo would not be giving its opinion on 
legislation----
    Mr. Walden. Mr. Zinn, I wonder if you could pull your 
microphone up just a little closer?
    Mr. Zinn. Is this better?
    Mr. Walden. Much. Thank you.
    Mr. Zinn. Ordinarily TiVo would not be giving its opinion 
on legislation to reauthorize compulsory licenses governing the 
satellite industry. Our business has little to do with STELA. I 
am part of this panel only because of a completely unrelated 
provision that was attached to the STELA reauthorization 
legislation, pushed by a cable lobbying group to eliminate 
choice in how consumers watch cable programming. TiVo stands 
for consumers' choice. It is what we do. I am not here to 
criticize cable, but certain interests within the cable 
industry, like this guy, are trying to undermine competition 
and choice. The provision would appeal the pro-competitive 
requirement that operators use the same security standard in 
their boxes as they make available for retail.
    That is what this is about, the same security standard. 
Common reliance on the same security standard is a principle 
the FCC has repeatedly found is a necessary component for a 
retail market for set-top boxes to emerge. Seeking its repeal 
is an aberration of cable's generally pro-competitive policy 
approach. Cable originally provided competition to broadcast 
networks. Cable has provided competition to telephone networks, 
and to data networks, and cable did not oppose the original 
STELA legislation that enabled satellite competition to cable. 
This provision is also an aberration in terms of how all 
comparable industries are treated. Consumers should be able to 
use whatever device they choose to access video programming, 
just like they can use whatever computer, telephone, cell phone 
they want to use to utilize Internet or wireless networks. 
Video is no different.
    The Energy and Commerce Committee has been the catalyst for 
this competition no matter which party has been in control. In 
1996 this committee had the wisdom to include, in the landmark 
Telecommunications Act, a bipartisan provision to unlock 
devices through which cable subscribers can get their channels. 
The concept was simple, consumers should have the ability to 
purchase a set-top box at retail, and not have to rely on 
renting a box from their cable provider. This provision was 
intended to do for the video device market what the car phone 
decision did 45 years ago for the telephone industry, and what 
Congress is doing right now for consumers with wireless 
devices. Allowing consumer choice to be undermined stands in 
opposition to what this committee has stood for, purely because 
a lobbying group has asked for a provision to be attached for 
legislation.
    I am not here to defend the status quo, far from it. We 
share the cable industry's desire to move on to a new security 
standard, and we want to work with the industry to find the 
next generation answer. But passing legislation eliminating 
cable operators' incentive to support retail boxes without 
putting a replacement solution in place is the most twisted 
approach, given the heritage of the cable industry, and the 
heritage of this committee, in creating choice.
    My fellow witness, who is representing the industry here 
today, called TiVo God's machine because of the choice and 
control it gave the consumer. It is ironic that he is now 
leading the charge to kill this type of consumer choice, simply 
because he is wearing a different hat. TiVo is in no position 
to advise the committee on the length of the satellite 
compulsory license, or on retransmission consent. Rather, I am 
here to say today that a provision that will undermine the 
retail market for set-top boxes and deprive consumers of choice 
has no place in a bill originally enacted to give consumers 
choice in video providers. The committee should be focused on 
fostering competition, rather than undermining competition and 
choice.
    This committee has always stood for competition and choice, 
and for fostering free market solutions where those can 
suffice. This committee can play a strong role on this 
important pro-competition and consumer choice issue by 
supporting a process that puts in place a more efficient market 
solution worked out between the industries.
    There are already companies who have indicated they have a 
desire to work with us to do just that, but the 629 amendment 
will kill that process by taking away the incentive for the 
industry to work out that next generation solution. Such an 
amendment stands the very heritage of this committee on its 
head because of the lobbying efforts of a contingent of the 
cable industry, an industry that has also traditionally stood 
for competition and consumer choice, an industry that TiVo is 
helping lead the way to the next generation of television, and 
an industry now led by a man who, when he was the FCC chairman, 
made very clear how important TiVo was to the future of the 
video marketplace.
    I respectfully urge you to support innovation and consumer 
choice, and remove the amendment to Section 629 from the STELA 
reauthorization bill. Thank you very much.
    [The prepared statement of Mr. Zinn follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
        
    Mr. Walden. Thank you for your testimony, Mr. Zinn. I 
assume you are opposed to that amendment. Mr. Wood, Mr. Matt 
Wood, Policy Director at Free Press, we are delighted to have 
you back before the committee. Please go ahead with your 
testimony.

                     STATEMENT OF MATT WOOD

    Mr. Wood. Thank you, Chairman Walden, and Ranking Member 
Eshoo, and esteemed members of the subcommittee, and thank you 
for inviting me to testify today. My name is Matt Wood, and I 
am the policy director for Free Press, which is a non-partisan 
organization with more than 700,000 members across the country.
    Free Press works for policies that promote competing 
sources of news and journalism because they are so important 
for informing our Nation's democracy and powering our economy. 
Unfortunately, the discussion draft could contribute to the 
ongoing loss of such competition. My testimony focuses on 
Section 4 of that draft, which would keep the FCC from 
addressing undue media concentration, and removing entry 
barriers for broadcast businesses. I will also talk briefly 
about Section 6, which would keep the agency from following 
Congress's direction to increase the choices that people have 
for set-top boxes and other video devices.
    Our media should reflect the full range of experiences and 
ideas this country has to offer. It is essential to see 
different viewpoints and hear different voices on the dial, 
even if they disagree, or rather because they disagree, because 
robust debate and in-depth coverage keep our republic strong 
and free. This applies at the national level, and at the local 
level too, where broadcasting remains a vital source of 
information about our government and our culture.
    Television remains the dominant way that Americans get 
news. Seven in 10 people in the U.S. watch local TV news, 
almost double the number that watch cable news, or get news 
online. But the question is, what kind of news are they 
getting? The answer for too many Americans is they get two or 
more broadcasts produced by the same company. Sometimes this 
outsourced news comes from separate news teams, and more often 
stations have the same reporters air the same stories, and use 
the same scripts, on two or more channels. In either case, it 
is the same owner calling the shots.
    Some broadcasters say this type of sharing keeps multiple 
newscasts on the air. They claim, oddly enough, that they only 
way to have competing news is for stations to stop competing. 
Let us be clear, when you hear about synergies that make news 
more attractive to produce, there are just two ways to save 
money, cutting overhead, and cutting jobs, so one person's 
efficiency can be another's unemployment. And that is a 
hardship that affects us all when people losing their jobs are 
journalists we depend on to dig into the facts.
    Slashing newsroom jobs can happen slowly, as a broadcaster 
like Sinclair reduced its average number of employees per 
station by more than 20 percent. That was 55 per station in 
2001, down to just 43 today. Or it can be tonight's top story, 
in late 2010 the anchor at KMSB in Tucson took to the air to 
report the layoffs that hit him, and 50 of his colleagues. What 
makes it worse is this runaway consolidation happened right in 
front of the FCC for years, clearly violating its ownership 
limits.
    Section 4 of the draft refers to the local television 
multiple ownership rule, which permits direct or indirect 
control of more than one station per market only under certain 
circumstances. Yet in more than 100 markets, almost half of the 
TV markets in the whole country, broadcasters use these 
outsourcing arrangements to violate the letter and the spirit 
of this FCC safeguard. They do this with joint sales 
agreements, or JSAs, shared services agreements, and a litany 
of others. Combined, these management agreements often transfer 
control, and the bulk of the affected station's revenues, away 
from the supposed licensee.
    These outsourcing deals often prop up shell companies that 
take away opportunities for competing businesses. As a rule, 
the FCC shouldn't stand for them. Last month the Department of 
Justice told the FCC that such covert consolidation can harm 
competition. Last week FCC Chairman Tom Wheeler called for a 
vote to treat JSAs above a certain threshold as what they are, 
signs of ownership by the broadcasters who really run these 
stations. That would align the FCC with the Securities and 
Exchange Commission, which doesn't fall for the fiction that 
these are independent owners. Investors get the truth, and 
operating stations must treat their so-called sidecar companies 
as subsidiaries. Even that nickname, sidecar company, shows how 
much they are driven by conglomerates by NexStar, Raycom, 
Sinclair, and Tribune. Section 4 could keep the FCC from moving 
ahead with its plans to clean up this practice, and prevent 
unlawful transfers of control.
    Just a quick word on Section 6 as well, and I won't point 
to this guy, but I agree with much of what he said. Section 6 
could also reduce choices for viewers, and, as Mr. Zinn 
explained, the integration ban promotes competition for set-top 
boxes, which incumbents now charge you up to $20 a month just 
to rent. Cable customers, of course, should be free to take 
them up on that offer, but they should have other options too. 
And they shouldn't believe cable claims that blocking 
innovation by others is itself a form of innovation.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Mr. Wood follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
        
    Mr. Walden. Mr. Wood, thank you for your testimony. I will 
make a couple of comments, and then I have got some questions. 
I would just say, having been, no secret, in the broadcast 
business, having had a JSA, they can also be positive in the 
market too. We actually, as a result of one, in a purchase, 
were able to restore news. And I am trying to figure out how 
JSAs have gutted newspapers.
    There is something going on out in the marketplace out 
there with newspapers, they are not in a JSA situation, and 
newsroom after newsroom in the printed press is being gutted. 
And I am really frustrated with the Federal Communications 
Commission, and the fact that they don't step up and do their 
job, as required by statute, by the law, to do their ownership 
review, look at cross-ownership so we have a strengthened voice 
out there of First Amendment writers. And so it is just really 
frustrating, because you can cite all these statistics, but on 
the ground, when you are meeting a payroll, when you are trying 
to make things work, there are a lot of other things that come 
into play.
    So, Mr. Powell, this draft will relieve cable and their 
consumers of a significant cost burden, the cost of making 
leased set-top boxes compliant with the integration ban. There 
has been a little bit of opposition to this voiced by your 
colleagues to your left, and I am aware of that. That was a 
little understatement there. I want you to explain again, and 
answer their criticisms of what they raise. They say it is not 
going to help consumers, and it is going to hurt innovation. 
How do you answer that?
    Mr. Powell. Sure. Well, thank you. So this guy was a 
commissioner on the Federal Communications Commission when I 
said that TiVo was God's machine. That same guy, in that same 
year, dissented from the FCC's decision to impose an 
integration ban for two simple reasons. One, it was clearly not 
compelled by the statute in any way, and shape, or form. What 
was compelled by the statute was to make sure that third party 
boxes could get access to the signal by descrambling that 
signal through a separate security requirement. That I 
wholeheartedly endorsed then, I continue to wholeheartedly 
endorse now.
    The second part was problematic. My belief then, and my 
belief now, was it took away an innovative third option for 
consumers, which is a lower cost box with integrated security 
that would buy FCC data, costs $50 per box less, costs 
consumers less, and be substantially more energy efficient. 
Many cable companies have been forced to attempt to seek 
waivers in order to deploy new and innovative boxes, including 
new software-centric systems. Those waivers have often taken up 
to two years.
    Mr. Walden. Ms. Burdick, it is expensive to run a TV 
station or a newspaper in this day and age. I think it would be 
difficult to make it work, but successful companies with proven 
track records continue to do so, and do it well. Doesn't it 
make sense to allow good companies with good resources to put 
their expertise to work in failing stations or newspapers? 
Talking about cross-ownership here. We are talking about JSAs 
used appropriately. Not inappropriately, but appropriately, for 
the management.
    Ms. Burdick. Thank you, Mr. Chairman. You touched on a key 
point earlier, and you have echoed it again, is that the 
ownership regulations have not kept up for the changing 
broadcast marketplace. To put it in perspective, in the small 
and medium markets in which we operate, we are governed 
basically under ownership regs that were enacted in 1970. And I 
don't know about the members of this committee, but in 1970 I 
was starting middle school, and listening to Bridge Over 
Troubled Water on AM radio. The world has changed.
    In 1970, most broadcasters were being paid by their 
networks to distribute the product, and in small and medium 
markets, that was basically their profit. That has gone away. 
And so, as that world has changed, and the economics have 
changed, as I mentioned earlier, with people competing with us 
for advertising dollars, which supports 90 percent of our 
costs, 90 percent of our revenue in local broadcasting comes 
from advertising, as that pie is sliced even thinner, the rules 
have not kept up. And so, in fact, broadcasters, like Schurz, 
have entered into some of these agreements, ours approved by 
the FCC, by the way, to create more news, more jobs, and more 
public service in the communities that we serve.
    Mr. Walden. I appreciate that. And clearly, in the 
developing Internet world, you have got stations probably that 
have to compete against Internet, cable, everything else. And 
it just seems like these ownership rules are outdated when Jeff 
Bezos can pick up the ``Washington Post'' for 250 million, or 
the owner of the Red Sox can pick up the ``Boston Globe''. I am 
trying to figure out why somebody that is actually in the 
journalism business can't engage in that cross-ownership too.
    Ms. Burdick. Because the rules say we can't.
    Mr. Walden. And that is why the FCC should do its job, and 
follow the law. With that, I will turn over to the gentlelady 
from California, Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. I love hearings, and I 
love the mix that is here. Although I wouldn't refer to former 
Chairman Powell as that guy, I would say great guy, but here it 
comes. Here it comes. I have two quick questions for you.
    The first one, Mr. Powell, I think it is a yes or no 
question. On this whole issue of the integration ban, you had 
written to me last year and said that it cost consumers roughly 
a billion dollars. My question is, would Cable companies commit 
to lowering the monthly cost for consumers that pay to lease 
the set-top box, particularly those with advanced 
functionality, and print this on your customers' monthly bill 
if the integration ban is repealed? I mean, you know, so much 
of this is about money, we all know that, so you don't want 
this anymore, you have stated your case. Are you willing to 
reduce the price, print it on the bill so consumers know that 
there is a savings to them?
    Mr. Powell. I think what we are willing to do is commit 
that that money gets invested into the network in a manner that 
is beneficial to consumers. When we had the roundtable, which 
you were generous----
    Ms. Eshoo. Right.
    Mr. Powell [continuing]. Host, you will remember ACA, a 
representative of small cable companies, made the very 
compelling point that those additional expenses are expenses 
that could not be used by small cable companies attempting to 
provide faster broadband speeds, an important, and I think 
significant point. So, no, I am not the representative of the 
business judgments of exactly how the savings would be 
returned, but I do believe it is fair to say----
    Ms. Eshoo. You know what, I really do think some thought 
needs to be given to that.
    Mr. Powell. Sure.
    Ms. Eshoo. I do. I mean, if, in fact, your stand on behalf 
of cable operators in the country is what it is. I mean, 
everyone is entitled to their view, and what they want, and 
what is going to work well for them. People that are here are 
obviously speaking to their interests, which is really fair. We 
have to protect the public interest in all of this, try to, 
anyway. So if it costs consumers, as you said to me in your 
letter last year, one billion, maybe there can be a reduction 
of one billion somehow.
    Now, you described the repeal of the FCC's integration ban 
as a narrow fix that will not change cable operators' 
requirement to provide the cable cards. But last year, in your 
comments before the FCC, NCTA, and at least one of your member 
companies, argued that because of the EchoStar case, cable 
operators are no longer required to provide or support cable 
cards to retail devices. So my question is, which is it?
    Mr. Powell. I----
    Ms. Eshoo. Because those are two distinctly different 
arguments.
    Mr. Powell. I would argue our position is consistent. One 
of----
    Ms. Eshoo. I know you would say that, but----
    Mr. Powell. I thought you might.
    Ms. Eshoo [continuing]. They are not, though.
    Mr. Powell. I thought you might.
    Ms. Eshoo. Not. I mean, you said something else to----
    Mr. Powell. Well----
    Ms. Eshoo [continuing]. The FCC, and, you know----
    Mr. Powell. It is important to note that what the court 
found offensive about the FCC rules was it didn't believe it 
had the authority to apply them to satellite companies. Cable 
companies had actually, through an MOU, developed the rules. We 
were the only industry segment, including this guy, who----
    Ms. Eshoo. There you go.
    Mr. Powell [continuing]. Intervened to defend the rules in 
court. When the rules were overturned because the court said 
the commission didn't have the ability to apply them fairly to 
both satellite and cable----
    Ms. Eshoo. Yes.
    Mr. Powell [continuing]. TiVo and other companies filed, 
asking them to be applied just to cable.
    Ms. Eshoo. Yes. Now I want to go to, thank you very much, 
to Mr. Zinn and to Mr. Wood. Thank you for being here, and for 
your testimony.
    Last month most members of this subcommittee voted for 
legislation that permits consumers to unlock their wireless 
phones so they can be used on any carrier's network. My 
question to both of you is, isn't this what Section 629, and 
the integration ban, is trying to do? I mean, obviously it is a 
softball question, but I think members need to do some 
integrating here, in terms of how they have voted on the floor. 
And doesn't this unlock the cable set-top box? Is there a 
reason to treat video devices differently from wireless 
devices?
    Mr. Zinn. No. I mean, that is a very astute point. I would 
first like to thank you for your unwavering support for 
consumer choice in set-top boxes, and your leadership on this 
issue since 1996. It is very important to consumers, and there 
are a lot of consumers who thank you every day because they 
love the choice that they have by having access to TiVo.
    What Congress is trying to do, in terms of unlocking cell 
phone, is to give consumers a choice of providers to use with 
their phone, and Section 629 is seeking the same result, give 
consumers a choice of both equipment and networks, rather than 
having to take the lowest common denominator set-top box that 
your provider wants to lease you. So I would say there is no 
difference.
    Mr. Wood. Yes, thank you very much. Just very quickly, I 
would say they are very much the same principles, and creating 
choices for people, rather than restricting them to what their 
provider offers, so there are some technical and legal 
distinctions, of course. I think the important thing to note 
too, at the outset, is about the cost. I would say that was a 
no. Obviously, Mr. Powell is not in a position to promise that 
companies that are his members will lower their prices, but we 
heard that that would not necessarily lead to lower prices.
    And I think that that estimate of a billion dollars a year 
too, of the cost of a cable card, is actually based on 2008 
data, if I am not mistaken on that. So I think the costs are 
also in dispute here, let alone whether those savings would be 
passed on to actual cable customers.
    Ms. Eshoo. Yes.
    Mr. Zinn. And keep in mind that, if the cable industry has 
spent a billion dollars on cable card, which, as Matt said, is 
based on 2008 data, before the integration ban really went into 
effect, and there was mass production, I mean, it is hard to 
believe that this card, this little hunk of metal, unless it is 
made of gold, costs $56. But the bigger point is, over the past 
7 years, cable operators have billed consumers $50 billion to 
lease set-top box equipment, OK? Seven billion dollars a year 
for 7 years.
    Mr. Walden. The gentlelady's time has expired.
    Ms. Eshoo. Yes. Mr. Chairman, I just want to say that I 
will submit my questions to both Mr. Palkovic and Ms. Burdick 
in writing, and I thank you.
    Mr. Walden. Perfect.
    Ms. Eshoo. Thank you for testifying. Thank you to all of 
you.
    Mr. Walden. Thank the gentlelady. We will now recognize the 
gentlelady from Tennessee, the Vice Chair of the full 
committee, Ms. Blackburn, for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman, and thank you to 
all of our witnesses.
    Ms. Burdick, I want to come to you. Now, your company is 
called Schurz, right?
    Ms. Burdick. Yes.
    Mrs. Blackburn. OK, great. And you own broadcast TV 
stations?
    Ms. Burdick. Yes.
    Mrs. Blackburn. And radio stations?
    Ms. Burdick. Yes.
    Mrs. Blackburn. OK. Do you require compensation for the re-
trans of your broadcast TV stations?
    Ms. Burdick. Yes.
    Mrs. Blackburn. OK. And compensation for the copyright of 
original content that you produce?
    Ms. Burdick. Yes.
    Mrs. Blackburn. Yes, OK. Does Schurz compensate the 
copyright holders of content it uses for its broadcast TV 
stations?
    Ms. Burdick. I think you are asking, as you did last time I 
was here, about radio, and the compensation of radio----
    Mrs. Blackburn. I am asking for a yes or no.
    Ms. Burdick. Yes. Ask the question again, if you wouldn't 
mind?
    Mrs. Blackburn. Do you compensate the copyright holders of 
content it uses for broadcast----
    Ms. Burdick. Yes.
    Mrs. Blackburn [continuing]. On your TV stations? OK. Do 
you pay a performance right for the music that you broadcast 
over your radio stations?
    Ms. Burdick. We pay ASCAP and BMI, and SESAC.
    Mrs. Blackburn. That is not the question that I asked you. 
The answer is no.
    Ms. Burdick. Yes.
    Mrs. Blackburn. Ms. Burdick----
    Ms. Burdick. That is correct.
    Mrs. Blackburn. That is correct, you are right.
    Ms. Burdick. Yes, the----
    Mrs. Blackburn. The answer----
    Ms. Burdick [continuing]. Answer is no----
    Mrs. Blackburn [continuing]. Is no.
    Ms. Burdick [continuing]. That is correct. You are right.
    Mrs. Blackburn. And if you can provide a Constitutional 
justification for that inconsistency, God bless your heart, 
because, I have to tell you, there is not one. And it is 
intellectually inconsistent, and I think that you are fully 
aware of that.
    OK. In your testimony you state that re-trans consent 
negotiations are free market negotiations, and that the major 
network broadcast content is the most sought after and valuable 
content today. You then go on to advocate for our nation's 22-
year-old regulatory structure dictating the terms of these 
negotiations. So how is it possible that, in fact, free market 
negotiations, as you say, if we live under a regulatory 
structure that dictates to one party details like where your 
stations must appear on the cable lineup?
    Ms. Burdick. Yes. Thank you for the questions. I appreciate 
your passion on some of these issues. I guess I would look 
back, in researching this, and I went back into history. The 
first report and order of the FCC on what was then cable 
antenna television said one important thing that has carried 
through, and Congress has supported in every iteration of its 
action, and that is that CATV should carry local stations 
because it supplements, not replaces, local stations, and non-
carriage is inherently contrary to the public interest. For all 
of the things that we have talked about, the floods in your 
district this year, Internet didn't make up for the service 
that local broadcaster provide. We provide an inherent and 
important public service that is not replicated anywhere.
    Mrs. Blackburn. Yes. Well, no one is arguing about the 
public service. What I am asking you is about free market 
negotiations, and you say you own the most valuable and sought 
after content. Then why do you need this archaic regulatory 
structure? Wouldn't a pay TV provider negotiate to place your 
content on their basic tier if it is indeed the most sought 
after programming?
    Ms. Burdick. Yes, and I guess I didn't make my point 
clearly, but the point is that when the basic tier requirement 
was enacted, it was because Congress thought it important to 
preserve the values of localism, and to require that local 
televisions be seen by all consumers, and placed on that basic 
tier, and we believe that today.
    Mrs. Blackburn. Well, I admire that you are desiring to 
move to parity and deregulation, and work toward that, and I 
know you are going to continue along that vein. Let me ask you 
this. In your opinion, would true regulatory parity in the 
video marketplace allow you the freedom to negotiate like non-
broadcast owners?
    Ms. Burdick. You know, we have said in the context of this 
bill that we would embrace a wholesale view of the ownership 
and the regulatory versus deregulatory issues that affect the 
video marketplace. Unfortunately, most of the things that we 
have been discussing only benefit one side of the table, not 
the other. And so that is why we support a holistic review of 
the ownership rules, and the rules under which we operate 
today.
    Mrs. Blackburn. Can you envision a world in which you are 
treated like a cable company?
    Ms. Burdick. You know, I guess I will go to Jay Carney's 
line of the last couple of days, I am always hesitant to 
predict the future.
    Mrs. Blackburn. All right, fair enough. I yield back.
    Mr. Walden. Thank you very much. The gentlelady yields 
back, and the Chair now recognizes for 5 minutes the gentleman 
from Pennsylvania.
    Mr. Doyle. Thank you, Mr. Chairman. Thank you to the 
witnesses for your testimony. I am glad to see the provisions 
included in this draft bill that address joint negotiations of 
the retransmission consent. I believe these negotiations can 
cause anti-competitive behavior, and can lead to increased 
prices paid by consumers, so I am glad to see that the issue is 
at least being addressed in the draft bill, and is being 
addressed by Chairman Wheeler at the FCC.
    Mr. Powell, let me ask you, do you think the exemptions in 
Section 3 of the draft bill, that allows for joint 
retransmission consent, are necessary, or do you think they 
detract from the goal of this provision?
    Mr. Powell. I think our view is the practice of joint 
negotiations is of great concern. The exception attempts to 
exempt companies that are genuinely owned. The practical 
challenge there is if somebody literally owns both stations, 
hard to imagine they are not privy to all the same information. 
As a joint negotiator, though, we would be more than happy for 
those not to be permitted either. I do think the companion 
efforts by Chairman Wheeler, in the context of good faith, to 
address undue power among top four stations is a valuable 
complement to the statute.
    Mr. Doyle. Mr. Wood, how about you?
    Mr. Wood. I think that is right. I think that, as Mr. 
Powell said, that you can have a situation where, even if you 
prohibit explicit joint negotiations at the table, if you have 
a single entity that has the books, and has the power to 
control the activities of both stations, it will have much more 
leverage, and much more view into what the two agreements say. 
So we certainly think that there are some competitive harms 
that aren't necessarily addressed completely by Section 3, and 
that is why we are looking also to the FCC to look further into 
the practice.
    Mr. Doyle. Mr. Wood, let me ask you, you and others point 
out in your testimony that the FCC will consider changing the 
way it attributes ownership of broadcast stations, based on 
general operation and service agreements. Section 4 of the 
draft bill would force the FCC to complete its quadrennial 
review in advance of modifying these types of rules. What do 
you think the effect of this provision would be on the FCC's 
ability to make rules in this area?
    Mr. Wood. Well, we think it would be harmful, and I don't 
disagree with Chairman Walden's statement that, of course, the 
FCC should complete its quadrennial review. It has that 
obligation, and we have called on it to do that in a data-
driven fashion several times. Not only to look at the changing 
business models over time, but the harms of media 
consolidation, and of undue concentration at the local level. 
However, we see Section 4 as prohibiting the FCC from enforcing 
its rules today, and going after violations of its multiple 
ownership rules.
    Chairman Walden also talked about the appropriate use of 
these agreements. There can be some synergies and some savings 
if back office operations are combined for sure, but what we 
are most concerned about are operational control, de facto 
transfer of control, where you have one station that is not 
only calling all the shots for the other, but producing the 
news, has every right to buy the station, it really has full 
control over its partner and its sidecar company, as they are 
sometimes called.
    Mr. Doyle. Thank you. I want to give Ms. Burdick a chance 
to also comment on that. I take it you might not agree.
    Ms. Burdick. Thank you, Mr. Doyle. Two points. First of 
all, on the joint negotiation, you are talking about one side 
of the negotiation equation, and not the other. Cable companies 
also link their negotiation strategies through consultants, or 
the ACA basically advises its members to employ the same law 
firm, that has access to all the data. So let us be fair in our 
approach when we talk about the negotiations, number one. But 
number two, on the JSA/SSA issue, Free Press particularly will 
often repeat fiction as fact. It doesn't make it so. And, in 
fact, many of these operations extend local news and public 
service that would not exist.
    Very quickly, in 2009 Schurz had a station, the only one we 
own that is not number one in its market, that lost money for 
12 years after launching a full complement of news. We could no 
longer, in the recession years, support it through our other 
operations. We had two choices, go out of business in news, and 
just become an entertainment provider, or enter into an 
agreement that preserved and added news with another entity, 
which is what we did.
    Mr. Doyle. Thank you very much. And my last question, Mr. 
Zinn, TiVo provides a competitive set-top box product that 
competes with set-top boxes provided by the MPVDs. From your 
perspective, what has been the value of competition to 
consumers in the set-top box marketplace, and how has cable 
card failed to deliver that experience, and what reforms do you 
think need to be made to the program?
    Mr. Zinn. There is a lot in those three questions. The 
value of competition in the set-top box marketplace is a very 
good question. Of course, you can't quantify exactly what the 
value would be, but if you look at other markets in the United 
States, you look at phone, wireless, personal computing, you 
can get a sense of what competition brings, and that is 
innovation, choice, jobs, and lower costs for consumers.
    In the set-top box market you can just look at what TiVo, 
one little company, has been able to accomplish. We invented 
the DVR. We were the first to bring Amazon over the top 
services to the television. We were the first integrate 
Internet services with cable services in one user interface. We 
were the first to allow you to move content from your 
television to your computer and mobile devices. And we are on 
the cusp of an IP transition in video, and all the innovation 
that that can release.
    And, really what we are looking for here, if cable wants to 
move on from cable card, and it is not energy efficient, and it 
is too expensive, we say, great. Just give us another solution 
that we can use to provide competition to consumers. Obviously, 
if the cable industry wants to get away from cable card, they 
have got something in mind, so just share it. And so my point 
is, will you share the solution? Will you do that?
    You know, in terms of the current regime, there have been 
multiple failures. First of all, there was a failure of the FCC 
not to ensure that retail boxes out of the gate had access to 
all cable content. So, right at the gate, retail boxes were put 
at a competitive disadvantage. Then there was a failure by the 
FCC that the cable card standard was not competently supported 
by cable operators. And the integration ban, which is really a 
light regulatory touch, designed to just make sure if the cable 
industry is using the same security standard as retail, they 
are going to support it, right? Otherwise they have no 
incentive to support it, and we have 10 years of evidence on 
that. Mr. Powell can dispute that, but the evidence is in the 
record. And then the third failure----
    Mr. Walden. I am sorry, the gentleman's time has expired.
    Mr. Doyle. Mr. Chairman, thanks for your indulgence.
    Mr. Walden. Thanks very much. Gentleman yields back. And at 
this time the Chair recognizes himself for 5 minutes. And, 
interestingly enough, Mr. Powell, I think I will start with 
you. But, again, thank you very much for testifying today. And, 
you know, one of the things that has been out there, if the 
integration ban is eliminated for loose-top boxes, is the cable 
industry still going to support cable cards?
    Mr. Powell. Absolutely. A couple quick things to say. First 
of all, it is important to remember that, even if Congress 
passed this provision eliminating the integration ban, we would 
have absolute legal obligation to continue to provide separate 
security and cable cards. Unless you believe we just completely 
flaunt the law, with no consequences at the commission, that 
will continue to be the case.
    Secondly, we have 44 million subscribers of our own who use 
cable cards. Failure to support them, and failure to support 
those consumers, will have dire competitive consequences, 
particularly since our principal competitors are collected in 
industries that have none of those requirements, and are able 
to offer competitive alternatives if we fail to deliver an 
adequate experience.
    The third thing I think is important for the committee to 
understand is the majority of revenue today that TiVo derives, 
and as their CEO has noted, they have deals with 10 of the top 
20 cable companies. The majority of what they are doing is 
providing cable boxes through cable companies. Those deals with 
small companies, like Suddenlink, and others, meant that they 
have to continue to support that as their principle cable 
equipment. So we think the incentives remain strong to comply 
with the law that we have a duty to abide by.
    Mr. Walden. So with the language in the draft right now, is 
Section 629 repealed, with the language from my section dealing 
with the integration ban?
    Mr. Powell. Absolutely not. I think, as I mentioned 
earlier, I had the privilege of sitting on the commission 
during implementation of Section 629. I think the thing that 
trouble us at the time, that troubles us today, is that this 
was not in any way a requirement of the statutory provision. An 
elimination of an FCC rule in this context does not in any way 
affect the other provisions of the statute.
    Mr. Walden. Thank you. Going on, how is the cell phone 
unlocking different from Section 629?
    Mr. Powell. Well, I giggle a little bit, because the 
analogy is completely inept. The third party box----
    Ms. Burdick. Thanks.
    Mr. Powell. It was from this guy. I mean, with all respect, 
here is the difference. It is not an accurate analogy because 
the third party set-top box, in essence, comes unlocked. 
Nothing locked about it. The cable card is what allows you to 
put it into the box and have it work. It is important to 
remember cable boxes in cable systems have no reason. They 
can't work on any other system. A Comcast box does not work in 
a Time-Warner cable system. They are unlike the portability of 
cell phones, or the portability of other devices that are 
trying to change networks. Leased boxes never change networks. 
The boxes that do change networks are third party boxes, and 
they are unlocked, and that is what the cable card provides.
    Mr. Walden. And let me just continue on. Some have raised 
concerns that the elimination of the integration ban will 
greatly harm consumer choice, thwart competition, and seriously 
damage the retail market for set-top boxes, and remove 
incentive for cable to develop a new generation solution or IP 
standard that is compatible with competitive navigation 
devices. How would you address those claims?
    Mr. Powell. I think the one thing we have to take real 
cognizance of is there has been an explosion of video devices 
and new content sources that were hardly imagined in 1996, or 
1998, when these provisions were implemented. The list is 
legion. Roku, Apple TV, Xbox, Vuda services, Netflix services, 
all the iOS devices, all the Android devices, all of which are 
platforms today for distributing video content, including cable 
content. That market is being developed by the marketplace at 
an extraordinarily fast clip.
    Our view is that market innovation is moving to meet 
demand, is moving to make consumer preferences, and doesn't 
need an additional intervention in order to make it succeed.
    Mr. Walden. You know, when you talk about things moving 
quickly over the last several years, you know, if you go back 
just 10 years to where we are today, what would you say, on the 
innovation side, has really transpired in that period of time, 
and where do you think in the next maybe 5 to 10 years we are 
going to be?
    Mr. Powell. I think it is completely unimaginable. My 
opinion is, we are only in the third or fourth inning of the 
transformational power of the Internet. And I think the ability 
to reduce video content to bits of zeroes and ones, and 
distribute them over any existing data infrastructure, or any 
existing data capable devices means our old fashioned ways of 
looking at things, and stovepipe ways, are going to be 
eliminated. And the consumers are going to be, I think, the 
great winner, even if it is a stress for many of our companies.
    Mr. Walden. Well, thank you very much, and my time has 
expired, and I yield back. And the chair now recognizes Mr. 
Welch.
    Mr. Welch. Thank you very much. I appreciate the hearing, 
and appreciate all the witnesses. You know, there are a lot of 
good things that are happening. The programming has never been 
better. That is what most people say, and a lot of my 
constituents say. The choices have never been wider, but the 
cost has never been higher. That is the real challenge. And 
that is what I am hearing about from a lot of folks in Vermont, 
and I know that is true for all of us here, and the consumer 
just doesn't have much control, other than to just pull the 
plug, which is not what we want them to face. And I am 
wondering, just quickly, is there anything in the Satellite 
Reauthorization bill that is going to start addressing the 
cost, which, according to the FCC statistics, is going up about 
twice the rate of inflation every year? Just quickly, is there 
anything? Each of you can answer that. And briefly, because I 
don't want to take up all my time on this. Mr. Palkovic?
    Mr. Palkovic. Sure. On behalf of DirecTV, there is a very 
important change here, and that is dealing with the joint 
negotiation of stations that are not commonly owned----
    Mr. Welch. OK.
    Mr. Palkovic [continuing]. To negotiation retransmission--
--
    Mr. Welch. Ms. Burdick?
    Mr. Palkovic [continuing]. Access greatly.
    Ms. Burdick. We remain free and over the air at all times, 
so the consumers have always had the choice to get us for free.
    Mr. Welch. Well, wait a minute, but you get involved in the 
retransmission too, and that adds to the cost to the consumer, 
right?
    Ms. Burdick. All broadcasters in a market combined don't 
earn what ESPN alone earns.
    Mr. Welch. Well, that isn't exactly responsive.
    Ms. Burdick. We----
    Mr. Welch. I mean, eBay makes more than some broadcasters.
    Ms. Burdick. eBay makes more----
    Mr. Welch. My point is----
    Ms. Burdick. True, and they are not----
    Mr. Welch [continuing]. That your answer----
    Ms. Burdick [continuing]. Creating local----
    Mr. Welch [continuing]. Was not an answer.
    Ms. Burdick [continuing]. Content either. Yes.
    Mr. Welch. It was a good answer----
    Ms. Burdick. Thank you.
    Mr. Welch [continuing]. But not a responsive answer.
    Ms. Burdick. Yes. We have an opportunity to negotiate the 
value in the free marketplace with cable and satellite 
providers that are much bigger than we are. We don't earn----
    Mr. Welch. OK.
    Ms. Burdick [continuing]. What the viewership would suggest 
we share.
    Mr. Welch. I don't have much time, so let me go on. Mr. 
Powell, anything----
    Mr. Powell. I would just agree with Mr. Palkovic on the 
JSAs. I do think the Department of Justice has explicitly found 
that these practices result in higher prices for consumers. And 
I won't repeat my comments, but my belief----
    Mr. Welch. OK.
    Mr. Powell [continuing]. That the integration ban has that 
virtue as well.
    Mr. Welch. Thank you. Mr. Zinn?
    Mr. Zinn. I think Mr. Powell clearly stated that consumers 
aren't going to see any benefit, monetarily, from an 
integration ban repeal.
    Mr. Welch. OK. Mr. Wood?
    Mr. Wood. I would agree with Mr. Palkovic and Mr. Powell 
that the JSA ban, if implemented correctly, I am sorry, the 
joint negotiation ban could reduce----
    Mr. Welch. OK.
    Mr. Wood [continuing]. Costs. I do think, though, giving 
people choice over which channels they pay for would do even 
more to do that, and that is why we supported Ms. Eshoo's bill 
and Ms. Lofgren's bill on that subject.
    Mr. Welch. OK. Thank you. By the way, I understand that 
this bill is not all around that. It is really just trying to 
maintain a status quo and level playing field, with some modest 
changes.
    One of the other questions I have is this, to Mr. Powell. I 
understand the NCTA supports the eliminating the retransmission 
consent stations from the basic must-buy tier, and I know there 
is a dispute on that. And I just want you to speak to that, and 
then perhaps Ms. Burdick.
    Mr. Powell. Just briefly, it is the position of NCTA that 
must-buy has outlived its usefulness, and is a provision ripe 
for repeal for the reasons that I think we have heard expressed 
here by the committee today.
    Mr. Welch. OK. Ms. Burdick?
    Ms. Burdick. I find it interesting that cable likes to talk 
about tiering only when it is with broadcast stations, and not 
other programming.
    Mr. Welch. You, I think, quite accurately pointed out how 
things are totally different now, but most people used to get 
the big network broadcast for free. And now, Vermonters get all 
of their signals through satellite or cable, and then what they 
could still get for free with an antenna, they don't get for 
free if that gets bundled up. I think that is the point you are 
making, isn't it, Mr. Powell?
    Mr. Powell. Yes. We have to be candid that this is the only 
class of program to which the government, by law, requires an 
American consumer to purchase as a predicate to anything else 
the consumer might want. That just is a difference of 
substantial magnitude to any other----
    Mr. Welch. Right.
    Mr. Powell [continuing]. Kind of commercially negotiated--
--
    Mr. Welch. And that was actually, as I heard Ms. 
Blackburn's question, the tone of her question. She was kind of 
getting to that situation. But I just want to say, I appreciate 
you all coming in. I mean, this is so important to the economy 
and to consumers, and we are not going to be able to deal with 
this now.
    The changes that you have described that have occurred are 
enormous. The programming, everyone is saying, has never been 
better, and obviously there is got to be a financing mechanism 
that is going to support the infrastructure and the creative 
content. But, bottom line, we have got to have some provisions 
in here that address the consumer, and their inability to be at 
the table, by and large, when these very important negotiations 
with very legitimate competing interest are taking place.
    So, going forward, I just implore all of you to remember 
that, even as you make compelling arguments for the interests 
that you represent, that are important to consumers, that the 
outcome here be something that is going slow this rate of 
growth that is going at twice the rate of inflation. And I 
yield back.
    Mr. Walden. Thank you very much. The gentleman yields back, 
and the chair now recognizes for 5 minutes the gentleman from 
Louisiana.
    Mr. Scalise. All right. Thank you, Mr. Chairman. I want to 
start with Ms. Burdick. And let me first say I have always felt 
that broadcasters should be compensated for their content, for 
the programming that you provide. Where we probably disagree is 
I don't believe every single cable subscriber should be 
mandated by the Federal Government to buy what anyone else 
might be selling. That is something that two parties should be 
negotiating, not the Federal Government coming in and say, you 
have to do this this way. Let the parties get in a room, and 
you all have negotiations. But I guess where my issue has been 
has that, in many cases, there are federal mandates that set 
the stage for how those negotiations even begin.
    And so, with that, my question would be, do you think it is 
fair that the Federal Government mandates that cable 
subscribers, in my district the average household income is 
around $45,000. And so, should those people be required by law 
to buy broadcast programming, as well as the other programming 
that, maybe three or four or five other stations along with it, 
rather than just letting it be a free market negotiation 
between two parties?
    Ms. Burdick. You know, I think we have always expressed a 
willingness to enter and be engaged in those discussions. But, 
as I said in my testimony, broadcasters have regulations that 
other people don't, and some with that, and some public service 
obligations, came some benefits. That was one of the benefits. 
And in every----
    Mr. Scalise. Invaluable spectrum that goes along with it. I 
know you have mandates there----
    Ms. Burdick. Well, I have paid for my----
    Mr. Scalise [continuing]. But you have----
    Ms. Burdick [continuing]. Spectrum. Satellite got theirs 
for free too. So, I think you can have an intellectual 
argument, but you need to take a wholesale look, and not just 
pieces that are in this bill.
    Mr. Scalise. Right, and I would agree. That is why I do 
think we need to take that wholesale view of this. And we are 
starting that conversation in this STELA reauth, which we will 
get into maybe later. There has never been a clean STELA bill, 
so clearly we are starting to have some of those conversations, 
and trying to start levelling that scale, but clearly we have 
got a long way to go to get to a true level negotiation. And 
now the broader discussion will occur after we are removed with 
this conversation. And I think the chairman of both the full 
and subcommittee agree that we have to have a broader 
discussion on that.
    I guess that brings me to you, Mr. Powell. It is one thing 
for both parties in a negotiation to arrive at a tiering plan, 
or channel packaging, and that is something, I sure think that 
should be a negotiation that you all enter into. But right now 
it is a different dynamic, where the government is mandating 
that is how you have to walk out of the room if you have that 
negotiation.
    And one of the things that we have been starting to 
highlight is, when you look at the '92 Cable Act, and some of 
the things your companies have to deal with, I love this brick 
phone, because it underscores just the point that the law was 
written at a time when this was your smartphone. This was the 
main telecommunications device.
    And so, when we think about these laws, I think it is 
always important to go back and say, these laws were written 
when this was the smartphone of the day. This was the most 
telecommunications power you could put in. And now, of course, 
the things you could put into this little device, you can 
actually stream video, you can pull up programs that were on TV 
last night. I still have not----
    Mr. Walden. Do you still use that? Is that still----
    Mr. Scalise. I have tried to get an arrangement where I 
could at least get some kind of a signal on this thing, and for 
some reason it doesn't work, but, unfortunately, the laws don't 
work either. They have updated this device, by the way, and you 
can go through about 50 different iterations to this device, 
yet we don't have any iterations of updating of the laws that 
still govern how things operate.
    So I want to ask you, Mr. Powell, how do your companies 
deal with a legal environment that was written, and still 
functions today, under laws that were based on this technology, 
when today you are competing in a world with this technology?
    Mr. Powell. Yes. Just in short, I think it is challenging 
because the market reality, the facts of not only the products, 
but the market structures, who are your competitors, what are 
your innovative choices, all are things that, when layered over 
the statute, which is, at best, ambiguous, because it is not 
clearly applicable or appreciable compared to what is really 
happening. And it leads to a lot of delay. The one thing that I 
would argue that it does, quite aggressively, is create 
uncertainty and delay. Things that should be done quickly in 
Internet time now take years sometimes of resolution at the 
commission just because of a statute that doesn't imagine the 
changed technical circumstances of the market.
    So it is challenging. They do their best to work around 
those ambiguities. And I don't think we are even here to say 
that deregulation for its own sake is even the answer. But law 
should at least honestly and accurately reflect the reality of 
the marketplace it is purporting to oversee. And when that is 
as badly out of alignment as some of these rules are, I think 
it is certainly time to re-evaluate their----
    Mr. Scalise. Yes, I think it is pretty clear that the time 
for re-evaluation is long past. Again, I have been through, 
fortunately, multiple different phones. I actually couldn't 
afford one of these when I was a college student, but a lot of 
college students, and, in fact, my 6-year-old daughter has one 
of these, and she knows how to use it probably better than me. 
But if you look at the iterations of growth and innovation 
between these two devices, it just shows you how outdated the 
current laws are. That Congress hasn't gone and revised and 
updated those laws since this was the device, long past time 
that we do it.
    I am glad we are at least starting that conversation, 
putting a little bit of those concepts in STELA, but knowing 
that, longer term, the bigger issues have to be confronted. And 
they have got to be confronted soon if we are going to benefit 
consumers, who are the people that we represent. It is the 
people that all of you service in your lines of business. So I 
look forward to that broader discussion as we get through this. 
And I appreciate the Chairman----
    Mr. Walden. Thank you.
    Mr. Scalise [continuing]. And Ms. Eshoo's----
    Ms. Eshoo. Thank you.
    Mr. Scalise [continuing]. Efforts as well, and we will 
continue working forward to get to that goal. Yield back the 
balance of my time.
    Mr. Walden. We appreciate you bringing that black and white 
TV with you.
    Ms. Eshoo. Yes.
    Mr. Walden. We will now turn to gentlelady from Colorado, 
Ms. DeGette, for 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman. I was going to 
suggest that, given the topic of this bill, maybe Mr. Scalise 
would like to bring in his TV from that era the next time he 
comes. Yes. I want to add my thanks to the Chairman for issuing 
a discussion draft, and trying to work in a bipartisan way on 
this bill. It has always been a bipartisan bill. And, while we 
have some concerns about it, I think we can all work together 
to bring it to a markup.
    There are a couple of issues that I want to talk about 
today. The first one is blackouts, because we have all been 
talking about how our consumers feel, and a lot of Americans 
don't really understand what STELA is, or retransmission 
consent, but they can clearly see what happens when 
negotiations break down, and there is a blackout. And I will 
tell you, if the Bronco games got blacked out, I would hear 
universally from all of my constituents in Denver and the 
surrounding vicinity.
    We have heard from witnesses representing all parts of the 
video marketplace that blackouts are unfair to consumers, and 
on behalf of the consumers, I agree. I think we need to talk, 
as we look at reauthorization, and I am happy to see the 
diversity of opinions today, about what we can do, as we look 
at the reauthorization, to consider the impact on that growing 
problem.
    So I want to start with you, Mr. Powell, and ask you if you 
think Section 3 of the draft legislation would make blackouts 
more or less common for consumers?
    Mr. Powell. I personally believe it is a useful step to 
making them less of a problem for consumers.
    Ms. DeGette. Ms. Burdick, what is your view on that?
    Ms. Burdick. I said, when I was here last time that we have 
agreed to support the draft because I think, frankly, it is 
kind of a stocking horse. We do 100 agreements every cycle. In 
one time in 10 years has an MVPD asked for separate 
negotiation. And when asked again the next time, they said it 
is more efficient to do it together. We have said all along, if 
they want to do them separately, they can.
    Ms. DeGette. So you----
    Ms. Burdick. It will add cost, it will add time, 
particularly to smaller broadcasters. And that----
    Ms. DeGette. But----
    Ms. Burdick [continuing]. Those costs will have to be 
passed on.
    Ms. DeGette [continuing]. To reiterate my question, do you 
think Section 3 would make blackouts more or less common for 
consumers? I appreciate your being part of the time, but----
    Ms. Burdick. I think the negotiations are still going to be 
tough, particularly when you are the small guy----
    Ms. DeGette. Do you think blackouts will be more or less 
common, Ms. Burdick?
    Ms. Burdick. I have no way to gauge it.
    Ms. DeGette. OK. Mr. Palkovic?
    Mr. Palkovic. They will be less, significantly less. There 
is no question about it.
    Ms. DeGette. OK. I think I will leave it at that. I want to 
talk for a minute about shared service agreements. I am pleased 
that the draft bill is recognizing that we should not permit 
broadcaster coordination for retransmission consent, but shared 
service agreements also have an impact on jobs and local news. 
And so, if we can all agree that broadcaster cooperation can 
harm competition, it seems inconsistent that then, in the bill, 
we would tie the FCC's hands and prevent the agency from 
addressing these harms outside the retransmission consent 
product.
    So, Ms. Burdick, I want to ask you, the National 
Association of Black Journalists recently wrote the FCC, 
supporting Chairman Wheeler's proposal on shared service 
agreements. They said many of the stations that are now part of 
a shared service agreement had working news departments with 
journalists who covered local news. Those news departments were 
closed for various reasons, disrupting the lives and careers of 
the affected journalists. How do you respond to that allegation 
by the National Association of Black Journalists?
    Ms. Burdick. Yes. I think they have changed their position, 
because they have since sent a letter indicating that they have 
come around the bend on that issue, because they have seen the 
fact that minority ownership is ending. I can speak for our 
company's experience, and I mentioned the Augusta experience, 
where our choice was only going out of the local news business, 
or entering into agreement.
    We have two others, one in Kansas, represented by people 
here today, where we began news in Spanish with a JSA with 
Univision. It is the only local newscast in Spanish, does 
emergency alerts and weather warnings, in the State of Kansas. 
The second is in Springfield, Missouri, where we took a number 
four, failing by almost any measure station. That DTV 
transition solution was a 15 watt transmitter, 15 watt. With a 
local businessman, we entered into a JSA. That station is now 
competitive for number two, and won the national Edward R. 
Murrow Award for best local newscast last year.
    Ms. DeGette. Thank you.
    Mr. Wood, how would you respond to this, so we can get your 
opinion on the record as well?
    Mr. Wood. Well, more than one witness has used the word 
fiction, and I think there have been a lot of stories told in 
both directions. I think the problem we have had until now is 
that JSAs are just one tactic that broadcasters use to 
coordinate. And, as Chairman Walden said, when it is 
inappropriately done, when it actually harms competition, and 
that is both in terms of retransmission, and also in terms of 
the newscasts that we see, and other diversity of viewpoints, 
and competing viewpoints, that we need, that is when we are 
concerned.
    When there is a de facto transfer of control, and you 
actually have one station airing the same news on two, or 
three, or four channels in a market, we have documented several 
examples of that, and we think the Federal Communications 
Commission needs to look into that practice to see when there 
is actually a transfer of control happening, and shared news, 
rather than just shared advertising.
    Ms. DeGette. Thank you very much. Mr. Chairman, I have this 
letter from the Association of Black Journalists. It is dated 
March 10----
    Ms. Burdick. Could I correct myself? You are right, I am 
wrong.
    Ms. DeGette. OK.
    Ms. Burdick. It was the----
    Ms. DeGette. Thank you.
    Ms. Burdick [continuing]. Black Owned Broadcasters----
    Ms. DeGette. OK.
    Ms. Burdick [continuing]. Association.
    Ms. DeGette. I would like unanimous consent to put the 
March 10 letter into the record to----
    Mr. Walden. Without objection.
    Ms. DeGette [continuing]. Clear up any confusion. Thank you 
very much.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. Gentlelady's time has expired. We will now go 
to the gentleman from Missouri, I believe is next, Mr. Long, 
for 5 minutes.
    Mr. Long. Thank you, Mr. Chairman. Thank you all for being 
here today, and for your testimony. Ms. Burdick, you discussed 
earlier today the competition in the local markets for 
advertising. You had a chart you put up on the wall. I know the 
Department of Justice recently put together a paper for the 
Federal Communication Commission detailing the leverage that 
broadcasters have in local markets. And how does your analysis 
stack up against what Department of Justice recently found in 
their findings?
    Ms. Burdick. Yes. And thank you for the question, 
Congressman Long. I think there are three key points in that 
DOJ filing. First of all, large sections of it were lifted from 
1997, dealing with the radio JSAs. They were out of date, and 
they were inaccurate. Number two, it never mentioned cable in 
the document at all, as if cable did not compete with local 
broadcasting for advertising. And I think this committee's own 
data suggests that one cable system in a market is the 
equivalent to about a number two or a number three television 
station. It didn't even mention the word cable, much less 
Internet, or any of the new advertising sources.
    And probably most disingenuous, as far as I am concerned, 
is in its footnote the DOJ noted that it itself had reviewed 
several complaints of alleged anti-competitive activity, and 
found that not to be the case, and encouraged a case by case 
review. But then, in its conclusion, basically came up with a 
bright line, ban all JSAs. I thought it was sloppy, I thought 
it was disingenuous, and I don't think it should be relied on 
as a document of fact.
    Mr. Long. OK. Thank you. Also for your, Ms. Burdick, in the 
draft STELA bill, it contained a provision eliminating the 
sweeps rule. And can you explain to me exactly how that rule 
works, and what the potential impact on smaller stations and 
smaller markets would be?
    Ms. Burdick. Well, I think you have rightly hit on a point 
that most people have not recognized, and that is the impact on 
smaller markets. Many of our members of NAB don't like it. We 
have said we could support, and could live with, the compromise 
in this legislation. But the distinction is that larger 
markets, usually markets 60 and above, are always in sweeps. 
They are metered markets. Diary markets, 60 and below, are 
rated four times a year, and basically their advertising and 
their economics are set three times a year.
    And this was enacted because of documented mischief from 
the cable side in history, where they were pre-emptively taking 
broadcasters off the air during sweeps, so their rates and 
their advertising economics would be negatively impacted. But 
we have said we can live with it, and we would support that 
change in the bill. But there is a distinction of local 
markets, and I appreciate you raising it, small markets.
    Mr. Long. OK. Thank you. And I have got to say, earlier, 
when Mr. Zinn was making reference to Mr. Powell next to him, 
and said, this guy, and then Mr. Powell reached over and picked 
up his cup, I thought we were going to have a Jerry Springer 
moment for a minute. But thankfully he was just going for a 
drink of water. I yield back, Mr. Chairman.
    Mr. Walden. Gentleman yields back the balance of his time. 
We turn to the gentleman from Iowa, Mr. Braley.
    Mr. Braley. Thank you, Mr. Chairman. I hope we don't have a 
Jerry Springer moment here. I don't think that the committee 
could handle that.
    Ms. Burdick, I once tried a case in the Quentin Burdick 
Courthouse in Fargo, North Dakota. Are you at all related to 
Senator Burdick?
    Ms. Burdick. You know, I asked my husband that.
    Mr. Braley. Yes.
    Ms. Burdick. As far as I know, although that family is from 
that North Dakota-South Dakota border, we don't think so.
    Mr. Braley. Well, it is a lovely courthouse. If you ever 
get to----
    Ms. Burdick. Yes.
    Mr. Braley [continuing]. Fargo----
    Ms. Burdick. And there is a Burdick Highway.
    Mr. Braley. It is. I am glad that the committee is moving 
forward on a reauthorization of STELA, and I want to be open to 
all the stakeholders who have an interest in this 
reauthorization, and so I have a very simple question for each 
one of you. I know it has been a long hearing, but I want to 
ask each of you, if there was one thing you could change about 
the discussion draft to improve it, what would it be? And I 
will start with you, Mr. Wood, and we will just work our way 
down the table.
    Mr. Wood. I would simply remove Section 4 and give the FCC 
the power to look into these agreements so that they can make 
the data driven rules that we all know they need to have in 
this day and age.
    Mr. Braley. Thank you. Mr. Zinn?
    Mr. Zinn. I would eliminate the 629 amendment. If you step 
back, this is STELA legislation designed to provide distant 
signals to 1.5 million unserved satellite customers, but it has 
been hijacked to disenfranchise a million people who are using 
retail devices. And this committee is not one to pick winners 
and losers, and I would take that out.
    Mr. Braley. Mr. Powell?
    Mr. Powell. I think we would just continue to work with the 
committee to make sure that the JSA provisions are sufficiently 
tight, that they don't undermine the ability for the commission 
to look at this issue in the narrow area of retransmission 
consent.
    Mr. Braley. Thank you. Ms. Burdick?
    Ms. Burdick. Yes, thank you for the question. My change 
would be, if there are going to be requirements that govern how 
one side of the table, broadcasters, can negotiate 
retransmission consent, that similar agreements on the MVPD 
side also be looked at.
    Mr. Braley. OK. Thank you. Mr. Palkovic?
    Mr. Palkovic. Yes, we are very happy with the way the bill 
is drafted today. If we were going to change anything, we 
probably want to be a little bit stronger on the blackout 
issue, so there is no way that people can black out channels.
    Mr. Braley. Well, I appreciate all of your succinct 
answers, and I will treat you with a similar courtesy, and 
yield back the balance of my time. Thank you.
    Mr. Walden. Thank the gentleman for yielding back. I am 
going to yield, before I go to Mrs. Ellmers, to the ranking 
Democrat here.
    Ms. Eshoo. Thank you. Mr. Chairman, I just want to ask for 
a unanimous consent request to place in the record the Pew 
Research Center's Project for Excellence in Journalism, which 
demonstrates the amount of healthy revenues that are reported 
relative to local broadcast TV advertising revenue and its 
growth. Thank you.
    Mr. Walden. Thank the gentlelady. And before I yield to 
Mrs. Ellmers, I am just curious if, Ms. Burdick and Mr. Powell, 
on this issue of the sweeps, and the market size, we are not 
trying to do violence to somebody. Is that an issue, Mr. 
Powell, that you think there is common ground, maybe, between 
these that are metered and those that are di-read?
    Mr. Powell. I think----
    Mr. Walden. Or is that something----
    Mr. Powell [continuing]. We fully support the provision as 
it is currently drafted.
    Mr. Walden. Currently drafted, OK. We will go now to Mrs. 
Ellmers for 5 minutes.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our 
panel for being here today on this very important issue, as we 
take the steps forward to deal with STELA. I do have some 
questions for Mr. Palkovic that are a little more specific to 
North Carolina, my region of the country, and having to do with 
Inspiration Network, one of the independent networks.
    It has come to my attention, Mr. Palkovic, that there have 
been some negotiations, and that DirecTV is no longer carrying 
Inspiration TV. And I am coming at this approach not only as a 
member of this committee, a member of Congress, but also as a 
mom, and, actually, one of your customers. I am concerned about 
this, because there seems to be a little bit of unfair dealing 
with how we deal with the independent networks.
    And I just was wondering if you could discuss that with me, 
and then if you would be so kind as to commit to work with my 
office, this committee, and others within the independent 
networks as well.
    Mr. Palkovic. Sure. We are always happy to work with people 
on these kind of issues. We have, as you can imagine, a lot of 
programming agreements. And some of the agreements, we are 
paying for content, some of the agreement the content providers 
pay us to be carried. And----
    Mrs. Ellmers. Yes.
    Mr. Palkovic [continuing]. As you can probably appreciate, 
we don't disclose individual terms and conditions.
    Mrs. Ellmers. Sure.
    Mr. Palkovic. We are not allowed to, contractually. In this 
particular case, we had a relationship with the Inspiration 
Network they did not want to continue along the----
    Mrs. Ellmers. Yes.
    Mr. Palkovic [continuing]. Same lines, or even similar 
lines, as their previous agreement, so they chose to take their 
channel down.
    Mrs. Ellmers. Yes.
    Mr. Palkovic. Sometimes we are forced to take a channel 
down. We don't like to do it. It is not in any way, shape, or 
form what we strive for. In this case, it happened to be their 
decision.
    Mrs. Ellmers. Yes. And that is----
    Mr. Palkovic. Our door is always open for them if they want 
to come back.
    Mrs. Ellmers. And that is my understanding as well, and our 
purpose is not to interfere with negotiations. This, for me, 
again, is an issue of fairness, one that I believe is very 
important in dealing with these types of issues, especially 
with the appearance that it takes. You know, being that this 
particular network deals with family, wholesome, faith-based 
programming, I see them as possibly being discriminated 
against.
    And it is my understanding, and there again you don't have 
to go into details, but that, actually, they were paying a 
significant amount of money to be carried by DirecTV, that cost 
was going to have to go up. And then, within the negotiations 
they said, look, we simply can't afford that, and, by the way, 
we know that you actually carry other networks for free, and 
can't we negotiate that kind of a deal? And, as you can 
imagine, the appearance is that they are being dealt with 
unfairly.
    Mr. Palkovic. Well, I can assure you, our track record as a 
company is just the opposite of that. We do deal with people 
fairly. And I won't get into the details----
    Mrs. Ellmers. Yes.
    Mr. Palkovic [continuing]. Of that particular relationship, 
but obviously we had a deal with them on acceptable terms.
    Mrs. Ellmers. Yes.
    Mr. Palkovic. And, as I said, there was discussions about 
continuing under similar conditions, different than what you 
characterized, through what you have been told, and they chose 
not to.
    Mrs. Ellmers. Yes.
    Mr. Palkovic. So if, for some reason, they want to continue 
discussions, again----
    Mrs. Ellmers. Yes.
    Mr. Palkovic [continuing]. We talk to everybody. And, you 
know your comment on programming that is targeted at the family 
program, we are a huge proponent of family programming. We have 
a lot of examples of that on our platform. Just so I can get it 
on the record, we are a big proponent of----
    Mrs. Ellmers. Yes.
    Mr. Palkovic [continuing]. Family programming at DirecTV.
    Mrs. Ellmers. Well, thank you. And will you commit to me 
today that we can work together on this, and then bring others 
together so that we can solve this problem?
    Mr. Palkovic. Sure.
    Ms. Eshoo. Would the gentleman----
    Mrs. Ellmers. Thank you so much.
    Ms. Eshoo [continuing]. Gentlewoman yield just for----
    Mrs. Ellmers. Sure.
    Ms. Eshoo [continuing]. Five seconds?
    Mrs. Ellmers. I have 37 seconds.
    Ms. Eshoo. Yes. I just want to say that I would be happy to 
work with you on this, and----
    Mrs. Ellmers. Wonderful.
    Ms. Eshoo [continuing]. It is not negotiations, it is 
suggestions, and we are happy that you are open to what the 
gentlewoman spoke to. So I would be happy to----
    Mrs. Ellmers. Thank you.
    Ms. Eshoo [continuing]. Work with you.
    Mrs. Ellmers. Thank you to the ranking member, and I am 
looking forward to being able to work together on this. Thank 
you very much, and I yield back the remainder of my time.
    Mr. Walden. Gentlelady yields back. And that is obviously 
an issue a number of us have heard about, so appreciate you 
raising that. Turn now to the gentleman from Nebraska, Mr. 
Terry.
    Mr. Terry. Appreciate you calling to say you wanted me to 
come back to extend this hearing by another 5 minutes. 
Actually, I had a quick meeting I had to take, so I am glad it 
was still going on when I got back.
    Mr. Powell, I am interested in learning a little bit more 
about the interconnects that Ms. Burdick referred to in her 
testimony, and how that works, but do you have any additional 
information on joint sales of local advertising between cable, 
satellite, and telcos? What is your viewand----
    Mr. Powell. You know, I think----
    Mr. Terry [continuing]. Perception?
    Mr. Powell [continuing]. I would say, for purposes of this 
bill, the joint use of agreements for advertising has 
absolutely nothing to do with what we are here making support 
for. We are having a concern with the use of joint agreements 
as a basis for validating collective negotiation of 
retransmission consent, not advertising. I don't have an 
opinion on whether their advertising models are efficient or 
not efficient in the sales of local advertising.
    What I do think is, beyond efficiency, and treads into the 
territory of anti-competitive conduct, is collusively 
negotiating prices for re-trans consent. And I don't think that 
bears on at all whatever the virtues, or lack of them, on local 
advertising markets are.
    Mr. Terry. Ms. Burdick?
    Ms. Burdick. Thank you. The fact of the matter is that the 
cable industry itself, in an ex parte filed by NexStar in the 
last couple of days, they cite some specific examples where 
non-co-owned cable companies have linked together their 
negotiations with the same consultants. And I am not here to 
speak badly of cable. We own cable companies as well. But we 
have personal experience with ACA members in which they will 
tell us in a negotiation that they will have to run this by 
ACA, or the ACA attorneys, before they can get back to us on 
the acceptance of a deal.
    So my only point was, if you are going to look at how those 
negotiations happen, look at it not just on the broadcast side, 
but on the other side as well. And I may be the only one in the 
room who finds it a little ironic that Comcast and Time-Warner 
can merge, but two little stations in August, Georgia can't 
talk to them about their retransmission agreements, but----
    Mr. Terry. Fair point.
    Ms. Burdick [continuing]. I would encourage you to look at 
both sides.
    Mr. Terry. So in regard to JSAs, in calculating ownership, 
which I think is a creative thing, do you think that many 
broadcasters would have to unwind JSAs in order to remain 
compliant with local ownership caps?
    Ms. Burdick. The proposal that has come out from the FCC 
suggests that there would have to be a hard unwind. There are 
rules yet to be written. In our particular case, our agreement 
was reviewed and approved by the FCC in 2008, I think it was. 
So if now, a few years later, after investing $11 million in 
equipment, and expanding news and public service, I have to 
unwind, I would suggest that is a harmful thing. So the rules 
have yet to come out, but the suggestion is yes, there would 
have to be an unwind that would lead to less news, less local 
news, and less public service.
    Mr. Terry. OK. Mr. Wood, is there any scenario for JSAs to 
be not anti-competitive? If you can use two negatives.
    Mr. Wood. You can. I don't know if I can. As we have said, 
JSAs are really just the tip of the iceberg here. The FCC has a 
long record on them, and has been studying them for a while. 
They have applied this rule in the radio context for several 
years.
    I want to be clear again that when we talk about synergies, 
and eliminating back office expenses, that is jobs too. The 
same NexStar letter that was referred to by Ms. Burdick said 
that some of our figures were wrong. And they said of our 30 
layoffs, only three of those were on-air personalities. So the 
other 27 people still lost jobs as well. I would say that 
perhaps there is some efficiency to be gained from combining 
back office operations.
    However, we are talking more about total management and 
control of one station by another, especially when the sidecar 
companies, or shell companies, are doing nothing but holding 
the license for the purpose of evading FCC rules, and not 
necessarily situations where you do actually have separate news 
teams, and separate broadcasters, but where the owner, for FCC 
purposes of the license, is doing nothing but that. Has no 
office, no personnel, no control over programming, no control 
over leasing, or any right to sell the station to anyone but 
the operating broadcaster.
    Mr. Terry. Let me ask you about this scenario, then. What 
about JSAs just for, as Mr. Powell was discussing, negotiations 
for retransmission on either side, the cable side or the 
network sides?
    Mr. Powell. Yes. We----
    Mr. Terry. Or the station owner sides?
    Mr. Powell. Yes. I am sorry. We have said in our filings 
that we want the FCC to take a look at the totality of the 
circumstances here. JSAs are one indicator of common control. I 
wouldn't say that they necessarily transferred control all by 
themselves. And so there could be a role for some negotiations, 
and some sharing of resources.
    Another example that is commonly cited is the same two 
stations using a radar system, or sharing the same news 
helicopter, or something like that, that is a physical asset. 
Our hackles are raised when they are sharing people, and 
sharing news, and sharing the same stories on two supposedly 
competing stations.
    Ms. Burdick. May I answer that one quickly?
    Mr. Terry. Certainly. Go ahead.
    Ms. Burdick. Mr. Chairman, Free Press starts with a false 
assumption, that if there wasn't this sharing, that there would 
be a robust separate----
    Mr. Terry. Right.
    Ms. Burdick [continuing]. Newsroom, and that is simply not 
true.
    Mr. Walden. Thank the gentlelady. Mr. Latta, I believe you 
have something for the record?
    Mr. Latta. Thank you very much, Mr. Chairman. I would like 
to enter a letter of support from my language regarding an 
integration ban from the League of Rural Voters.
    Mr. Walden. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. And I have an item from the ``Wall Street 
Journal'' from Juan Williams I referenced in my testimony I 
would like to put in the record. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. And I want to thank the witnesses, and all of 
the participants in this hearing, our members. This is 
obviously an important subject, a complicated one, and we are 
going to continue to move forward. We thank you. We will 
probably have some questions for the record to clarify some 
issues going forward, but thanks for your participation. And 
with that, we stand adjourned.
    [Whereupon, at 12:34 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                                 [all]