[Senate Hearing 116-615]
[From the U.S. Government Publishing Office]
S. Hrg. 116-615
THE REAUTHORIZATION OF STELAR
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HEARING
BEFORE THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 23, 2019
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-764 PDF WASHINGTON : 2023
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota MARIA CANTWELL, Washington,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin JON TESTER, Montana
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
John Keast, Staff Director
Crystal Tully, Deputy Staff Director
Steven Wall, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
C O N T E N T S
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Page
Hearing held on October 23, 2019................................. 1
Statement of Senator Wicker...................................... 1
Statement of Senator Cantwell.................................... 3
Statement of Senator Tester...................................... 34
Statement of Senator Thune....................................... 37
Statement of Senator Blunt....................................... 40
Prepared statement entitled, ``Renewing STELAR Will Help
Rural Americans'' by Patricia Jo Boyers, Chairman, ACA
Connects--America's Communications Association............. 40
Statement of Senator Schatz...................................... 43
Statement of Senator Fischer..................................... 45
Statement of Senator Baldwin..................................... 47
Statement of Senator Markey...................................... 49
Statement of Senator Blumenthal.................................. 51
Witnesses
Emily Barr, President and CEO, Graham Media Group; and Television
Board Chair, National Association of Broadcasters.............. 4
Prepared statement........................................... 6
Denny Law, Chief Executive Officer and General Manager, Golden
West Telecommunications........................................ 9
Prepared statement........................................... 10
Robert Thun, Senior Vice President--Content and Programming, AT&T 19
Prepared statement........................................... 21
J.C. Watts, Chairman and Co-Founder, Black News Channel.......... 24
Prepared statement........................................... 26
Jonathan Schwantes, Senior Policy Counsel, Consumer Reports...... 27
Prepared statement........................................... 29
Appendix
Letter dated September 23, 2019 to Hon. Roger Wicker, Hon.
Lindsey Graham, Hon. Frank Pallone, Jr., Hon. Jerrold Nadler
from Betsy E. Huer, President, National Grange................. 59
Letter dated October 1, 2019 to Committee Member, Committee on
Commerce, Science, and Transportation from Thomas A. Schatz,
President, Council for Citizens Against Government Waste; Jeff
Mazzella, President, Center for Individual Freedom; Andrew
Langer, President, Institute for Liberty; Bartlett Cleland,
Executive Director, Innovation Economy Institute; Daniel
Schneider, Executive Director, American Conservative Union;
David Williams, President, Taxpayers Protection Alliance; and
Phil Kerpen, President, American Commitment.................... 60
Letter dated October 11, 2019 to Hon. Jerrold Nadler from
Alejandro Roark, Executive Director, Hispanic Technology &
Telecommunications Partnership................................. 60
Letter dated October 15, 2019 to Hon. Roger Wicker, Hon. Maria
Cantwell, Hon. Lindsey Graham, Hon. Dianne Feinstein, Hon.
Frank Pallone, Jr., Hon. Greg Walden, Hon. Jerrold Nadler and
Hon. Doug Collins from Common Cause, Consumer Action, Consumer
Federation of America, Consumer Reports, Open Technology
Institute at New America and Public Knowledge.................. 61
Letter dated October 16, 2019 to Hon. Roger Wicker, Hon. Maria
Cantwell, Hon. Lindsey Graham and Hon. Dianne Feinstein from
Shane Larson, Senior Director of Government Affairs and Policy,
Communications Workers of America (CWA)........................ 63
Letter dated October 22, 2019 to Hon. Roger Wicker and Hon. Maria
Cantwell from Mike Chappell, Chairman, American Television
Alliance....................................................... 64
Letter dated October 23, 2019 to Hon. Roger Wicker and Hon. Maria
Cantwell from Jay Landers, Vice President, Government Affairs,
RV Industry Association; Phil Ingrassia, President, RV Dealers
Association; Paul Bambei, President and CEO, National
Association of RV Parks and Campgrounds (ARVC); Jon Walker,
National President, FMCA; and Shawn Loring, CEO and Attorney,
Escapees RV Club............................................... 65
Response to written question submitted to Emily Barr by:
Hon. Rick Scott.............................................. 66
Hon. Amy Klobuchar........................................... 66
Response to written questions submitted by Hon. Rick Scott to:
Robert Thun.................................................. 67
Response to written questions submitted by Hon. Jacky Rosen to:
J.C. Watts................................................... 67
Response to written question submitted by Hon. Amy Klobuchar to:
Jonathan Schwantes........................................... 68
THE REAUTHORIZATION OF STELAR
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WEDNESDAY, OCTOBER 23, 2019
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:01 a.m., in
room SH-216, Hart Senate Office Building, Hon. Roger Wicker,
Chairman of the Committee, presiding.
Present: Senators Wicker [presiding], Thune, Blunt,
Fischer, Moran, Gardner, Blackburn, Lee, Johnson, Young, Scott,
Cantwell, Blumenthal, Schatz, Markey, Peters, Baldwin, Tester,
Sinema, and Rosen.
OPENING STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
The Chairman. Good morning. If members could take their
seats and guests and our distinguished panel, we will begin in
a moment or two. Thank you all and good morning. Today the
Committee convenes to discuss the reauthorization of STELAR,
the Satellite Television Extension and Localism Act.
I am glad to convene this hearing with my colleague,
Ranking Member Cantwell. I welcome this distinguished panel and
thank them for appearing. We will hear from Ms. Emily Barr,
President and Chief Executive Officer of the Graham Media Group
and Chair of the Television Board at the National Association
of Broadcasters.
Mr. Denny Law, Chief Executive Officer and General Manager
of Golden West Telecommunications; Mr. Robert Thun, Senior Vice
President of Content and Programming at AT&T; Mr. J.C. Watts,
my former colleague, Chairman and Co-Founder of the Black News
Channel; and Mr. Jonathan Schwantes, Senior Policy Counsel for
Consumer Reports. Did I pronounce your name correctly, sir?
Mr. Schwantes. Yes, sir, you did.
The Chairman. Thank you. I got it right. In June, this
Committee held a hearing on the state of the television and
video marketplace. At that time, we heard from witnesses about
how consumers are living in this great age of television.
Today, Americans have more choices and access to video content
and programming than ever before. Through expanded Internet
connectivity and technological advancements, millions of
households now subscribe to video-on-demand and over-the-top
services.
Americans also consume more and more hours of mobile
streaming and digital programming. Yet, despite these
developments and the maturation of the digital video
marketplace, hundreds of thousands of Americans still cannot
receive traditional over-the-air broadcast television in their
homes. For the past 30 years, STELAR and previous iterations of
the law have provided a means for Americans living beyond the
reach of a broadcast signal to receive local programming.
Families in rural parts of the country, in addition to
those traveling or living in recreational vehicles, long-haul
truckers, and tailgaters, have been particularly reliant on
STELAR to access broadcast television. STELAR's distant signal
license has provided communities that lack a major network
affiliate, such as ABC, CBS, NBC or Fox, to receive broadcast
programming from another market through their satellite video
provider. This ensures that consumers can, at a minimum, access
national news as well as other programming that is relevant to
the public interest.
At the end of this year, absent congressional action,
STELAR will expire, and many Americans could immediately lose
access to broadcast television stations. STELAR's other
significant requirement that broadcasters and cable operators
negotiate retransmission consent agreements in good faith would
also expire--absent action by the Congress. Although I
recognize that some believe STELAR has largely outlived its
original purpose and usefulness, it is my view that it remains
a critical law for preserving access to video services for
those that typically find themselves on the wrong side of the
digital divide.
As the Committee prepares to reauthorize STELAR and work
with our colleagues in the Judiciary committee to extend the
Section 119 distant signal license, I hope witnesses will
discuss the appropriate length of time for the law's renewal.
In doing so, witnesses may want to address the unique needs of
consumers in RVs and short markets as well as long-haul
truckers and tailgaters.
In addition, I ask today's witnesses to discuss how to
ensure that those individuals can maintain permanent access to
broadcast programming. The Congress needs to know whether
consumers will immediately lose access to certain television
channels if STELAR expires. Witnesses should also address
whether the expiration of STELAR would increase prices for
consumers to access broadcast programming, and how ending the
law would impact the bottom line for broadcasters, both local
affiliates and networks, as well as satellite and cable
television providers.
Today is also an opportunity for witnesses to discuss the
effectiveness of the good faith requirement. I hope witnesses
will address whether Congress should consider modifications to
this requirement to further achieve its intended purpose in
establishing fairness in retransmission consent negotiations.
For example, earlier this year C Spire's video service in
Mississippi was granted a market modification by the Federal
Communications Commission. Under this market modification, C
Spire is authorized to provide local programming to the City of
Diamondhead in Hancock County, Mississippi. Diamondhead is a
part of the New Orleans designated market area.
Since the market modification petition was granted,
however, C Spire has filed a good faith complaint against a
local broadcast affiliate in Mississippi for refusing to
provide its signal to Diamondhead residents unless C Spire also
carries the New Orleans local affiliate station. I understand
this situation involves contracts between a broadcast network
and affiliates, but I question whether requiring a video
provider to carry two of the same affiliate stations following
the approval of a market modification from the FCC embodies the
spirit of the good faith requirement.
In addition to these issues, I look forward to hearing from
witnesses about other targeted reforms this Committee might
consider in reauthorizing STELAR to ensure that the next
iteration of the law promotes competition, innovation, and
consumer choice in the video marketplace. Thank you again to
our witnesses and I thank my dear friend and Ranking Member,
Senator Cantwell, and recognize her for whatever she might want
to say in way of an opening statement.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman, and thank you
for holding this hearing. The laws at the heart of STELAR were
first developed 30 years ago with the distant signal laws in
the eighties when the marketplace was far different than it is
today, and most consumers watched over-the-air broadcasting.
And those who wanted an alternative to broadcasting later in
the nineties were not held with the same amount of competition
that they got from cable, and we made changes to the law to
bring in more competition.
So, it is no wonder that when the original STELAR law was
necessary in order to inject essential competition for
services, the idea was to help get these competitors off the
ground and facilitate driving down costs to consumers. The
STELAR law allowed those companies to provide consumers with
distant broadcast TV stations with the expectation that these
would help in providing competition to the marketplace. Thirty
years later, consumers have a multitude of video options, that
is for sure, but the two satellite television providers are
mature competitors in a marketplace with millions of customers.
Whether Congress ends the distant signal STELAR laws now or
in the future, we must be sure that consumers are not left in
the lurch. Certainly, consumers will find a way to access
content that they deserve, but the obligation should be on
those who most strongly advocating for the end of STELAR to
prove that they do have plans for what happens afterwards.
These issues are so important, Mr. Chairman. I hope that we
will ask important questions today about what are the changes
of the video marketplace for the future that are really going
to add value to the American consumer.
We know that Americans have many more choices, but in some
instances more choices than they want or want to pay for. We
want to make sure that there is true competition among these
platforms and not just capturing consumers and charging them
higher fees. A recent report suggested that big cable is
engaging in questionable billing practices that add hundreds of
dollars to consumers' bills each month. Consumers are rapidly
losing the diversity and localism that often drives our
interest in video.
The larger media conglomerates are buying up the
competition, leaving little room in the market for new entrants
with unique perspectives. And it is an open question whether
these massive media conglomerates have the same commitment to
the public interest on television that we had enjoyed before
from our local broadcasters. So, these are important issues. I
see with the FCC, they are perfectly happy to continue policies
that I believe undercut national policies that support local
broadcasters. Stations no longer have to maintain a local
studio. But for the agency's resounding defeat in the Third
Circuit, the FCC was perfectly happy to facilitate nearly
unfettered consolidation among broadcast stations.
These structural changes that are happening in a very
disruptive environment raise. I think, important questions that
I hope our committee would deal with, which is what is the
future of local journalism? I have had the pleasure of sitting
down with dozens of Washington State broadcasters last August
to talk to them about how they are charting this path forward.
These stations are trying to chart a path through these various
changes in technology while continuing delivering award-winning
quality journalism, but they raised some important issues with
me.
Ad sales at the stations are dropping due to competition
with online platforms. Viewers are migrating away from
traditional cable and satellite, preferring online options that
do not always carry the broadcaster stations, and the shift is
starting to drive down the revenue stations gain from their
distributing partners. They are facing contentious carriage
negotiations with ever-larger cable companies, and negotiations
often result, as the Chairman just mentioned, in blackouts that
can last for months.
Stations are having to pay license fees back to their
network partners that then erode their gross revenue. And now
broadcast networks are investing in their own direct-to-
consumer online video platforms that may draw must-have content
away from the local stations. I think all of this is important,
Mr. Chairman, because I want to see continuation of local
broadcasters. They are about our public interest, the
journalism, the public service provided by these truly local
broadcasters, and their commitments to our communities are
important to the health of our democracy.
So, I hope as we look at today's hearing and hear from all
those participating, we will be able to chart a path forward.
We do want consumers to have more choice. We are glad that
there is more content, but we here have to keep our eyes on
these important issues of protecting the consumers and
protecting local journalism. I thank you, and I look forward to
hearing from the witnesses.
The Chairman. Thank you Senator Cantwell for your excellent
statement. We will now begin with five minute summaries of your
testimony. Witnesses are advised that your entire testimony
will be submitted in full and made a part of the record. And we
ask each of you to summarize your comments in five minutes. And
we will begin with Ms. Emily Barr. Ma'am, you are recognized.
STATEMENT OF EMILY BARR, PRESIDENT AND CEO,
GRAHAM MEDIA GROUP; AND TELEVISION BOARD CHAIR,
NATIONAL ASSOCIATION OF BROADCASTERS
Ms. Barr. Thank you very much. Good morning, Chairman
Wicker, Ranking Member Cantwell, and members of the Committee.
My name is Emily Barr and I am the President and CEO of Graham
Media Group. As the television Board Chair of the National
Association of Broadcasters, I am testifying today on behalf of
the free and local broadcast television stations serving our
hometowns.
Local broadcasters continue to believe that STELAR should
expire at the end of this year as Congress intended. Not only
have its provisions become unnecessary and ineffective, but
today STELAR affirmatively harms viewers who are being denied
access to their local television stations as the result of its
continued reauthorization. Your constituents turn to our local
broadcast stations for crucial weather information, to learn
how to help neighbors in need, and to watch trusted news
anchors and reporters deliver unbiased accounts of what is
happening in our hometowns.
Local broadcasting is the critical electronic glue that
binds every community together, keeping them informed and safe.
This is our industry's North Star. Unfortunately, STELAR denies
some viewers these benefits. When enacted 30 years ago,
STELAR's distant signal license successfully enabled the
nascent satellite companies to better compete with cable's
monopoly by giving them a temporary crutch, the ability to
serve viewers with out-of-market network programming at a below
market rate and without having to negotiate for it. At the
time, the technology did not exist for those providers to
otherwise serve viewers with their local broadcast stations.
Today these satellite companies that Congress subsidized are
now among the largest paid TV platforms and no technological
impediment exists.
Any reauthorization of STELAR will further incentivize
AT&T, Direct TV to continue to neglect rural markets and is
simply not justified. Practically speaking, a STELAR renewal
will mean that Direct TV subscribers in 12 rural markets,
including Alpena, Helena, Glendive, Grand Junction, San Angelo,
Victoria, Kirksville, Scottsbluff, and North Platte will
continue to see news from New York City and Los Angeles rather
than life-saving tornado coverage or wildfire updates.
This is a business decision that Direct TV is making as a
result of this law, a choice that puts their profits ahead of
service to rural consumers and the safety of our communities.
Broadcasters and viewers thank the U.S. Copyright Office and
Members of Congress who have highlighted this consumer harm and
called for STELAR to end. Some have suggested that STELAR's
expiration would somehow harm viewers in these rural markets
because of the time it would take Direct TV to offer them local
service. They ignore the fact that in 2010 it took Dish only
one week from passage of this law to launch all of its
remaining markets. Others have suggested that renewal of
STELAR's expiring good faith requirement is itself a reason for
reauthorization.
While well-intended, the expiring good faith requirement
has provided no quantifiable benefit, in large part because
both parties have every incentive to reach a deal without a
Government backstop. As a broadcaster who is frequently
outmatched in size and revenue by the pay TV companies with
whom I negotiate, I can state with certainty that STELAR's
expiration will have no impact on my ability to complete a
retransmission consent deal. Most significantly, some pay TV
companies seem to be manufacturing a blackout crisis,
withholding broadcast signals from viewers to justify self-
serving changes to the retransmission consent laws. This has no
place in the STELAR debate.
Over the past five months alone as Congress has ramped up
its consideration of STELAR, Direct TV has orchestrated 10
retransmission consent impasses with broadcast groups across
the country, impacting more than 179 stations. By comparison
during the same period last year, Direct TV was involved in
only one impasse. Congress should reject these harmful tactics
and end the STELAR cycle of perpetual five-year
reauthorizations.
In conclusion, I have worked in all aspects of local
broadcast television over nearly four decades, including as a
news editor, a general manager, and now a CEO. I understand the
business and financial costs of running a newsroom, investing
in state-of-the-art equipment, and producing award-winning
investigative journalism that makes broadcasters unique and
indispensable to the communities we serve.
Broadcasters urge you to consider these enduring benefits
when you are asked by pay TV companies to either limit your
constituents' access to local broadcast stations or undermine
broadcasters' ability to receive fair compensation for our
programming.
Thank you again for the opportunity to testify today, and I
look forward to your questions.
[The prepared statement of Ms. Barr follows:]
Prepared Statement of Emily Barr, President and CEO, Graham Media
Group; and Television Board Chair, National Association of Broadcasters
Introduction
Good morning Chairman Wicker, Ranking Member Cantwell and members
of the committee. My name is Emily Barr and I am the President and CEO
of Graham Media Group, owner of seven local television stations across
the United States--KPRC-Houston (NBC), WDIV-Detroit (NBC), WSLS-Roanoke
(NBC), KSAT-San Antonio (ABC), WKMG-Orlando (CBS), WJXT-Jacksonville
(fully local) and WCWJ-Jacksonville (CW). I appreciate the opportunity
to testify on behalf of the National Association of Broadcasters, where
I serve as the Television Board chair, and its more than 1,300 full-
power, free and local broadcast television stations that provide
uniquely valuable service to our hometowns.
Local broadcasters continue to believe that the Satellite
Television Extension and Localism Act Reauthorization (STELAR) should
be allowed to expire at the end of 2019--the date that Congress
intentionally chose for this temporary law to sunset. Not only have its
provisions become unnecessary and ineffective, but today STELAR
affirmatively harms viewers who are being denied access to their local
television stations as the result of its continued reauthorization.
Broadcasters: The Authentic, Local Voice Passionately Informing and
Celebrating Our Communities
In today's hyper-competitive media landscape, broadcasters are the
authentic, local voice passionately informing and celebrating our
communities. Local broadcast television remains the most-watched source
of news, entertainment programming, sports, emergency information and
investigative journalism in communities across America. Your
constituents turn to our local stations to get the weather report,
learn how to help neighbors in need and watch trusted local news
anchors and reporters deliver unbiased accounts of what is happening in
their hometowns. Local broadcasting is the critical electronic glue
that binds every community together, keeping them informed and safe.
This is our industry's North Star.
At Graham Media Group, we are deeply committed to informing and
improving our communities in a multitude of ways. Just this year, two
of our local stations--KPRC 2 News in Houston and WDIV Local 4 in
Detroit--were each recognized with Edward R. Murrow awards for
exemplary public service and outstanding journalism. KPRC received this
prestigious award for its team coverage of the May 2018 school
shootings in Santa Fe, Texas. The KPRC news team worked to provide
complete and compassionate coverage to its community in the immediate
wake of these horrific events. WDIV received the award for its
excellence in the use of sound in storytelling. I am enormously proud
of our local broadcasters, who always go the extra mile to inform their
communities.
In Florida, WKMG-TV in Orlando has received national accolades for
its journalism, which has recently led to significant changes in state
law. These include multi-year reporting efforts to update Florida law
making texting and driving a primary offense and allowing workers'
compensation for first-responders diagnosed with post-traumatic stress
disorder (PTSD). We were particularly honored that then-Governor Rick
Scott, now a member of this committee, recognized WKMG-TV's reporting
on the Pulse Nightclub shooting and the resulting first-responders'
struggles with PTSD when he signed the Workers' Compensation Benefits
for First Responders Act into law. WKMG-TV's News 6 anchor Matt Austin
who led the charge for additional safety--and is himself a victim of a
serious texting and driving automobile accident--summarized
broadcasters' unique role in their local communities: ``You see a
problem, and together with your neighbors, you work to solve it. When
you can ultimately change laws that can save lives, well, that is what
good journalism is all about. That is what being of service to your
community is all about.''
While local television broadcasters make significant investments
and sacrifices to cover emergency situations of all kinds, it is our
continuous coverage in the aftermath of these crises that connects us
to the community. For example, beyond WJXT's recent wall-to-wall
coverage of Hurricane Dorian which kept our viewers safe and out of
harm's way, the station separately produced an hour-long documentary
providing a raw, real and graphic look at the destruction in our
neighboring Bahamas caused by this record storm. The WJXT team spent
four days on the ground and in the air covering the disaster from the
hardest-hit areas. The eye-opening film, ``96 Hours of Anguish,'' aired
on WJXT and features Bahamians who are struggling to survive as well as
Florida-based volunteer operations delivering life-sustaining supplies
into the hard-to-access islands. It is this focused investment on the
unique issues of importance to our local communities that distinguishes
broadcasting from other mediums.
I have worked in all aspects of local broadcast television for
nearly four decades. I have held the position of news editor, creative
services director, operations manager, general manager and am now a
CEO. As a result, I am proud of the unique services broadcasters
provide their local communities, but I also understand the business and
financial costs of running a newsroom, investing in state-of-the-art
equipment, producing award-winning investigative journalism and
enabling our stations to go above-and-beyond when our neighbors need it
most. To fulfill our unique and indispensable role in the communities
we serve, broadcast television must have the ability to reach our local
viewers on every platform and earn fair compensation for our
programming. Broadcasters urge you to consider these enduring benefits
when you are asked by pay-TV companies to support proposals that would
either limit your constituents' access to their local broadcast signals
or undermine broadcasters' ability to receive fair compensation for our
programming during retransmission consent negotiations.
STELAR's Distant Signal License Harms Viewers by Denying Them Local
Stations
When enacted 30 years ago, STELAR's distant signal license allowed
nascent satellite television companies to better compete with big cable
monopolies when the technology did not otherwise exist for those
providers to carry local broadcast stations. On a temporary basis,
Congress allowed the satellite companies to serve their subscribers
with a broadcast station operating outside of the local community at a
discounted rate in order to ensure that those households could receive
their favorite network programming.
That law was wildly successful, yet the market and media landscape
have fundamentally changed over the past three decades. Today, there is
no technological impediment to delivering local station signals to all
markets, and those satellite companies are now media behemoths who do
not need a subsidy: AT&T-DIRECTV is a $280 billion company, and DISH is
a $17 billion company. DISH is providing this local service in all 210
local markets today and has been for nearly a decade, yet AT&T-DIRECTV
continues to offer only out-of-town signals to viewers in 12 markets
simply because it is more profitable for the company.
As pointed out by the U.S. Copyright Office in calling for STELAR's
distant signal expiration, the number of households being denied their
local network channels is shrinking. Although only AT&T-DIRECTV and
DISH have access to a detailed breakdown of the precise numbers--which
they have refused to give to members of this committee, among others--
NAB estimates that only 500,000 households were still served under
STELAR's distant signal license in 2017. For those households, the
impact is still significant, as they were denied access to their local
ABC, CBS, FOX or NBC broadcast stations and instead received an
imported signal from another market, primarily from New York City or
Los Angeles.
The reason for this continued misuse of STELAR's distant signal
license by these billion-dollar satellite companies is simple.
Royalties under this outdated license are discounted substantially
below the carriage fees for these stations negotiated in the market by
other pay-TV providers. This below-market subsidy incentivizes the
satellite companies to deny viewers local news, weather and lifesaving
emergency information, while still charging their subscribers hefty
fees each month for an out-of-market station.
Viewers will benefit from eliminating this outdated law, ensuring
they receive the local content most relevant to them. In rare instances
where a local broadcast channel is not available, private business
arrangements between satellite TV providers and broadcasters can
resolve these issues. Broadcasters applaud those members of Congress,
many on this committee, who have stood up and raised concerns over
their constituents' limited access to local broadcasting which this law
incentivizes.
Pay-TV Companies Use the Recurring STELAR Reauthorization Process to
Turn Viewers into Pawns
In an earlier reauthorization of STELAR, Congress added a
requirement that broadcasters and pay-TV providers negotiate in good
faith for carriage of local TV stations. While well intended, the
expiring good faith requirements have provided no quantifiable benefit
to broadcasters, pay-TV providers or American consumers. This is in
large part because both parties have every incentive to reach a deal
and serve consumers on their own accord. The countless agreements
successfully completed outside this broadcast-only framework reveal
that this well-intentioned provision simply does not justify STELAR's
reauthorization.
Most significantly, however, this cycle of repeated
reauthorizations now affirmatively causes great harm to consumers.
During a time when broadcasters' trusted information is increasingly
critical to local communities, some pay-TV companies seem to be
manufacturing a ``blackout'' crisis, withholding broadcast signals from
viewers simply to justify their proposed changes to the retransmission
consent laws that aim to tilt the negotiating scales in their favor at
the expense of local viewers. Over the past five months alone as
Congress has debated STELAR, AT&T-DIRECTV has been involved in 10
retransmission consent impasses with broadcast groups across the
country impacting more than 179 stations. (By comparison, during this
same period last year, AT&T-DIRECTV was involved in only one impasse
and it affected only a single station.) These anti-consumer negotiating
tactics are encouraged every five years by STELAR's renewal.
The fact is, the good faith provisions have only been enforced once
in their 20-year history--against a pay-TV provider that was found to
have violated them. Broadcasters have every incentive to efficiently
negotiate in good faith to allow the retransmission of their content to
as many viewers as possible, while reinvesting those revenues in local
news, journalism and entertainment programming. The harm posed to
viewers by STELAR's cyclical five-year reauthorization simply does not
justify the claimed consumer benefit.
Conclusion
Congress should allow STELAR to expire as it originally intended.
There is no policy justification or technological reason to renew this
outdated law, and any temporary reauthorization harms viewers.
Thank you again for the opportunity to discuss this issue critical
to America's broadcasters and the communities we serve. I look forward
to your questions.
The Chairman. Four, three, two, one. Very good.
[Laughter.]
The Chairman. You did much better than I did. That is
right, these broadcasters know how to get in within the time.
[Laughter.]
The Chairman. Mr. Law on behalf of Golden West
Telecommunications. You are recognized.
STATEMENT OF DENNY LAW, CHIEF EXECUTIVE OFFICER AND GENERAL
MANAGER, GOLDEN WEST TELECOMMUNICATIONS
Mr. Law. Thank you, Chairman Wicker, Ranking Member
Cantwell, and members of the Committee. Thank you for this
opportunity to testify regarding STELAR Act reauthorization. I
am Denny Law. I am the CEO of Golden West Telecommunications
Cooperative Inc. based in Wall, South Dakota. Golden West has
operated in rural South Dakota for nearly a century. We began
in the video distribution industry nearly 40 years ago and
today we serve almost 10,000 video customers.
Our furthest systems are over 360 miles apart and our
largest community has only 3,500 residents. Sixty-five percent
of Golden West video subscribers cannot receive at least one of
the four major broadcast networks via our offered signal and
one-third of our customers cannot receive any of the four major
networks off-air.
The significant advancement of broadband has driven changes
in viewer consumption, no longer a simple choice between cable
company and satellite TV for distribution. With streaming video
and virtual distributors, consumers have more choices than ever
before, and these are all good things to be sure but current
law is holding back even greater innovation and consumer choice
in the video marketplace.
This warrants more attention as Congress considers STELAR
reauthorization. Specifically, the retransmission consent
system in the 1992 Cable Act requires certain distributors to
pay their broadcasters increasing sums for carrying local TV
signals. This is a relic of a bygone era when distribution
choices were limited, and many consumers could receive over-
the-air signals. The one clear effect of the 1992 law today is
that it makes consumers who want to access programming in a
certain way through a local distributor like Golden West pay
more to do so. If we want to let the marketplace work when it
comes to video options, this regime is a clear barrier.
The staggering escalation in retransmission consent fees in
recent years highlights how drastically the marketplace has
changed to the detriment of consumers that have to pay that
price. These fees are projected to grow to over $16 billion in
2024. And while the retransmission amounts collected by
broadcasters nationally are staggering, the impact on local
consumers is concerning. Since 2009, the local broadcast TV
rates paid by Golden West customers have increased by more than
2,000 percent or by more than 30 percent compound annual growth
rates. To provide perspective, that same growth rate would
results in a 2009 cup of coffee costing $45.
In just the past five years since STELAR was renewed, the
local broadcast TV rates for Golden West customers have
increased by more than 350 percent. Meanwhile newer entrances
into the video distribution marketplace are not bound by this
legacy 1992 Act obligations. This outdated law therefore places
an affirmative thumb on the scale by attaching ever escalating
costs to only certain kinds of distributors like Golden West.
The 1992 Act is not promoting an effective marketplace.
To the contrary, it is hindering the workings of such a
marketplace. My filed testimony describes how this is a far cry
from the rosy picture painted by broadcasters in the early
1990s. In addition, rather than these revenues being used to
promote local broadcast content, they are being funneled
instead to distant corporate ownership or national network
partners. So, what should be done to make this marketplace
work? In the absence of comprehensive reform, I would suggest
five steps.
One, prohibit price discrimination within each designated
market area. Each local broadcast affiliate is the only source
of network programming in each DMA. That content is the same
throughout the DMA for each distributor, and there is no
rational basis for price discrimination.
Two, prohibit mandatory bundling or tying of non-network
channels.
Despite retransmission consent being focused on local
signals, broadcasters require distributors like Golden West to
carry affiliated multicast or other channels. This increases
the prices consumers must pay for content they do not want.
Three, eliminate requirements that compel distributors to carry
broadcast signals on their basic tiers and then mandates
customers to purchase basic tiers. These provisions deny
consumers' choice and hinder distributors from tailoring
packages that consumers want. It is worth noting that newer
distributors are not bound by such provisions.
Four, prohibit charging for broadcast channels that cannot
be received over the air. Rural viewers should not have to pay
for a broadcaster's failure to provide a signal throughout its
licensed area, and distributors should not have to pay for the
right to carry a broadcast signal that would not otherwise
reach viewers. And five, strengthen the good faith requirement
in the current law, Congress should expand on the types of
conduct and negotiation practices that constitute per se bad
faith practices rather than forcing small video distributors to
pursue burdensome, case-by-case adjudication.
In closing, Congress should move promptly to reauthorize
STELAR but in doing so it should tackle the retransmission
consent regime that stands out as anti-competitive and an anti-
consumer anachronism. Thank you for this opportunity to testify
today, and I look forward to your questions.
[The prepared statement of Mr. Law follows:]
Prepared Statement of Denny Law, Chief Executive Officer, Golden West
Telecommunications Cooperative, Inc.
Chairman Wicker, Ranking Member Cantwell, and members of the
Committee, thank you for the opportunity to testify regarding
reauthorization of the STELA Reauthorization (STELAR) Act of 2014. I am
Denny Law, Chief Executive Officer of Golden West Telecommunications
Cooperative, Inc., in Wall, South Dakota.
Background on Golden West
For more than a century, Golden West Telecommunications and its
subsidiaries have provided communications services to rural South
Dakota, starting initially with stringing telephone lines along fence
posts. Today, we have over 30,000 accounts, including more than 25,000
broadband subscribers and nearly 10,000 cable television customers.
Golden West began in the video distribution industry nearly 40
years ago. We built our first cable television systems in 1981 starting
with a few small western South Dakota communities. Golden West has
since built or purchased dozens of cable television operations, and we
now operate 40 video distribution systems in rural South Dakota
communities. Our video subscribers are spread across two Designated
Market Areas (DMAs). The two furthest systems are over 360 miles
apart--and our largest community has only 3,500 residents.
Golden West's initial objective in providing video service was to
ensure that customers in rural and remote communities had access to
news and entertainment options similar to customers in urban areas,
even though in many cases our customers were located too far from the
urban centers to receive over-the-air broadcast signals. Our systems
helped the television broadcasters connect with viewers where their
signals did not reach, and this continues to be the case. Today, 65
percent of Golden West's cable television subscribers are unable to
receive at least one of the four major broadcast networks via an over-
the-air signal, and one-third of our video customers are unable to
receive any of the four major broadcast networks due to the
broadcasters' failure to provide signals throughout their licensed
areas.
Astounding Changes in the Video Marketplace--Except for the Decades-Old
Retransmission Consent Regime
To provide context for what should come next as Congress considers
reauthorizing the STELAR Act, it is important to understand where we
are, how we got here, and how current law fails to reflect the current
lay of the land in the video marketplace.
To say that it has been a ``wild ride'' in the video business over
the past 40 years seems like an understatement. We have witnessed
countless technology changes and upgrades. In 1981, our initial lineup
had 14 channels, but today we offer over two hundred channels--nearly
all of them in high definition (HD) format. Competition in the video
distribution business began in the mid-1990s with the introduction of
satellite-delivered consumer video service from DirecTV and soon after
Dish Network.
From my perspective, however, the changes in the video distribution
business from 1981 through 2010 pale in comparison to the changes we
have seen over the last nine years and what we will likely witness in
the next few years.
Certainly, the significant adoption of broadband connections by
consumers and the availability of mobile data services have provided
new options and driven changes in viewer consumption habits and
consumer video preferences. As a result, the distribution of video
services has changed dramatically as well. The days of consumers
choosing solely between either cable or satellite Multichannel Video
Programming Distributors (MVPD) for viewing of video content are over.
The advent of broadband deployment now allows consumers to purchase
similar video services from virtual Multichannel Video Programming
Distributors (vMVPD) or Subscription Video on Demand (SVOD) service
such as YouTube TV, Hulu, fuboTV, Sony PlayStation Vue, Philo, Sling TV
and AT&T TV Now.
In addition to the vMVPD services that include live video content,
consumers can also choose from a significant number of streaming
services that provide large libraries of video content including
Netflix and Amazon Prime Video, CBS All Access and HBO Now. According
to public announcements, there will soon be more entrants including
Disney+, Apple TV and Peacock.\1\ Indeed, the availability and
awareness of online pay-TV services is growing, and it is estimated
that 70 percent of U.S. Broadband households subscribe to at least one
SVOD service.\2\ More than half of all U.S. households subscribe to two
or more SVOD services.\3\
---------------------------------------------------------------------------
\1\ ``New Streaming Video Services are Ready to Launch'', Consumer
Reports, September 19, 2019. (available at: https://
www.consumerreports.org/streaming-media-devices/new-streaming-video-
services-to-check-out/
#targetText=The%20new%20options%20will%20join,you%20cut%20the
%20cable%20cord.)
\2\ ``Market Snapshot: The Changing World of Pay TV,'' Parks
Associates, August 2019. (available at: http://
newsroom.parksassociates.com/whitepapers/snapshot-paytv)
\3\ Leichtman Research Group, August 27, 2019. (available at:
https://www.leichtmanresearch
.com/wp-content/uploads/2019/08/LRG-Press-Release-08-27-19.pdf)
---------------------------------------------------------------------------
In short, consumers now have more video distribution choices than
ever before, much of which is tailored to their viewing preferences
through the development of ``skinny bundles'' or subsets of programming
genres. These are all good things, to be sure--but there is one area
where current law is holding back even greater innovation and consumer
choice in the video marketplace because it is premised upon a decades-
ago snapshot of what this marketplace once was.
Specifically, the current ``retransmission consent'' system
regarding local broadcast stations is hindering the ability of MVPDs to
compete in this otherwise dynamic marketplace and thereby harming
consumers who would benefit from even greater choice but for this law
from a bygone era. The notion of retransmission consent arises out of
the Cable Television Consumer Protection and Competition Act of 1992
(the 1992 Act). Retransmission consent was adopted in response to the
``must carry'' rules that required cable operators to carry all
significantly viewed local stations. Stations could either keep their
must carry status, as many smaller independent stations did at first,
or negotiate with cable operators. When this law was enacted and
retransmission consent was first created, there were few options for
video distribution and thus, there was relatively equal bargaining
power between broadcasters and cable operators. Moreover, local
broadcast channels were generally available over the air for free so
that consumers could affordably access local news, weather, and sports.
In that context, the law aimed to promote agreements on mutually
beneficial terms between parties negotiating from relatively equal
positions of strength.
As described earlier, however, the video marketplace of 1992 no
longer exists. Retransmission consent negotiations transpire in a very
different environment today. Changes in broadcast distribution shrunk
the contours in which broadcast channels could be received over the air
for free. And today, the pay-television distribution industry is
competitive, including cable operators, satellite distributors,
telephone companies and the long list of vMVPD and SVOD providers I
listed earlier--with more undoubtedly to come.
Broadcasters will claim that the current marketplace is exactly
what the 1992 Act envisioned, so the law is serving its purpose and
should not be disturbed as Congress looks now at video marketplace
issues in the context of STELAR Act reauthorization. But this is a
false correlation. The dynamic changes in the video marketplace noted
above have nothing to do with retransmission consent--they are driven
by technology, not by a compensation structure dictated by a 1992 law.
To the contrary, the one clear effect of the 1992 law today is to
undermine consumer choice by making consumers who want to or must
access local programming in a certain way--through an MVPD--pay
increasingly more for that specific option. If you want to ``let the
marketplace work'' when it comes to video options, a key step is to
revisit a decades-old law that has no tether to what the marketplace
actually is today.
In fact, the imbalance that has arisen in the video marketplace
between broadcasters and MVPDs since 1992 could not be clearer. Even as
MVPDs compete with all of various distribution options discussed
earlier, broadcasters still retain government-granted local monopolies
as well as other carriage benefits that impact negotiations, allowing
broadcasters to pit competing distributors against each other and to
use ``retransmission consent'' to foist increasing costs on certain
distributors under the cover of a nearly 30-year-old law. When
consumers are asked for the main reason they are cutting the proverbial
cord from traditional MVPDs, rising rates are cited as the primary
reason.\4\ For Golden West video customers, the cost of retransmission
consent is the primary and overwhelming driver of any such rate
increases. Ultimately, consumers are the ones paying the price--both in
terms of spiraling fee increases and disrupted local programming.
---------------------------------------------------------------------------
\4\ ``Cord Cutting Continues, Fueled by High Cable Pricing,
Consumer Reports' Survey Finds,'' September 17, 2019. (available at:
https://www.consumerreports.org/telecom-services/cord-cutting-
continues-high-cable-pricing/)
---------------------------------------------------------------------------
Before returning in more detail to those increases in consumer fees
and related issues, it is important to discuss first the state of
broadcast television today and why the broadcasters hold the market
power they do.
As an initial matter, consolidation in the broadcast industry has
been significant. Just last month, the Federal Communications
Commission (FCC) approved the merger of Nexstar and Tribune, a
combination that apparently ``owns, operates, programs or provides
sales and other services to 197 television stations (including partner
stations) in 115 markets or approximately 63 percent of all U.S.
television households.'' \5\ Other groups, like Sinclair and Gray,
similarly have significant national presences. In addition, even beyond
corporate consolidation, control of stations is increasingly
concentrated. The American Television Alliance, for example, has
highlighted that there are more than 100 identified instances of groups
using multicast and low-power ``loopholes'' to control multiple network
stations in the same local market.\6\
---------------------------------------------------------------------------
\5\ See https://www.nexstar.tv/stations/ (emphasis added). It is
unclear if this reflects the final count following the transaction and
anticipated divestitures.
\6\ See https://www.americantelevisionalliance.org/wp-content/
uploads/2019/04/2019-04-29-ATVA-Quadrennial-Comments-FINAL.pdf
---------------------------------------------------------------------------
On the other hand, local MVPDs have not seen the same kind of
consolidation and concentration. Moreover, as discussed above, we do
not hold a monopoly in our markets any longer, as vMVPDs and SVODs
provide consumers with multiple means of accessing much of the same
content that we provide over our cable systems. In the end, this means
that, in my case and many others, you have a local small business that
serves very rural communities negotiating with nationwide groups that
hold a monopoly on certain content and may even control multiple
stations within the same market. In short, this is not the cable TV
market of 1992.
A Closer Look at Where We Are Now--The Implications of a 1992 Law in a
2019 ``Marketplace''
The staggering escalation in retransmission consent fees in recent
years highlights how drastically this ``marketplace'' has changed in
recent years--to the detriment of consumers that ultimately pay the
price. These fees are estimated to be nearly $12 billion in 2019 and
are projected to grow to over $16 billion in 2024.\7\
---------------------------------------------------------------------------
\7\ ``Retrans Projections Update: Sub Rates Continue to Rise,'' S&P
Global Market Intelligence, July 25, 2019. (available at: https://
www.spglobal.com/marketintelligence/en/news-insights/research/retrans-
projections-update-sub-rates-continue-to-rise)
And, to underscore the level of consolidation and concentration
driving this dynamic, of the estimated $10.5 billion of retransmission
consent revenues in 2018, only ten television station owner groups
accounted for nearly 70 percent of that amount.\8\
---------------------------------------------------------------------------
\8\ ``Nexstar Is The Star of TV Station Groups,'' TVNewsCheck, May
29, 2019. (available at: https://tvnewscheck.com/article/235386/
nexstar-is-the-star-of-tv-station-groups/)
---------------------------------------------------------------------------
While the retransmission amounts collected by broadcasters at a
national level are staggering, the local impact on individual consumers
is even more concerning. The broadcasters in the two DMAs in which
Golden West operates first began requesting retransmission consent
payments in 2009, and our monthly local broadcast TV rates just ten
years ago were well below a dollar per subscriber per month in both the
Rapid City and Sioux Falls DMAs.
Fast forward to present day, and Golden West customers now pay
nearly $16 per month per subscriber in the Rapid City DMA and almost
$17 in the Sioux Falls DMA for local broadcast TV. In both cases, this
represents an increase of more than 2,000 percent in ten years, or more
than 30 percent compound annual growth rates. To put these increases in
perspective, the same growth rate would result in a 2009 cup of coffee
now costing $44.40, a 2009 gallon of milk would cost $62.20, and a 2009
gallon of gas would be $47.00. Even if using a slightly shorter period,
from just 2014 when Congress last renewed STELAR, the combined local
broadcast TV rates for Golden West customers have increased by more
than 450 percent in the Rapid City DMA and over 350 percent in the
Sioux Falls DMA.
I do not believe these high fees or the growth in them to be an
anomaly. My understanding is that other rural operators' local
broadcast TV rates as reflected in customers' bills are in a similar
range, if not higher--as one example, a 2018 industry survey reported
that small and medium-sized cable operators were paying $11 on average
per subscriber per month in 2017 for retransmission consent, with those
rates projected to increase to $19 on average by next year.\9\
Meanwhile published reports indicate that the local broadcast TV rates
for two of the largest MVPDs in the country are considerably lower--but
still relatively expensive--at $11.99 and $9.99 per month,
respectively.\10\
---------------------------------------------------------------------------
\9\ See https://acaconnects.org/corporate-broadcasters-force-
exorbitant-rate-increases-on-cable-customers/
\10\ ``Cable Firms Shrug Off Video Losses by Playing the Broadband
Card,'' Investor's Business Daily, August 22, 2019. (available at:
https://www.investors.com/news/technology/comcast-stock-shrugs-off-
video-losses-as-cable-firms-play-broadband-card/)
---------------------------------------------------------------------------
Such figures are a far cry indeed from the rosy picture that the
broadcasters painted when retransmission consent was first being
considered. Back then, the president of the National Association of
Broadcasters (NAB) claimed, ``There is no reason to believe that cable
consumers would see any increase in their monthly cable bills because
of retransmission consent.'' \11\ There may be no better depiction of
how far we are from the marketplace surrounding the 1992 law than to
consider this perspective in light of what we see today.
---------------------------------------------------------------------------
\11\ See https://prodnet.www.neca.org/publicationsdocs/wwpdf/
53111mediacom.pdf at p. 43.
---------------------------------------------------------------------------
And, these developments are all the more galling when one considers
that, for many rural consumers, the broadcasters' signal would not
reach the consumers without the help of MVPDs like Golden West. As
noted earlier, roughly two-thirds of Golden West's cable television
subscribers cannot receive at least one of the four major broadcast
networks via an over-the-air signal, and one-third of our video
customers are unable to receive any of the four major broadcast
networks. In other words, in addition to all of the network investments
we need to make to carry those signals, Golden West and its customers
are paying more and more simply for the ``privilege'' of delivering the
broadcasters' content to consumers it would otherwise not reach--giving
broadcasters more viewers in turn to sell to advertisers.
In response to such concerns, broadcasters tend to justify the
current state of the marketplace and the fees they charge for
retransmission consent by citing their role as the ``most-watched''
source of programming.\12\ But this is a red herring, as the phrase
``most-watched'' does not mean what it once did. Viewership of
broadcast television in primetime has fallen dramatically.\13\ In fact,
in comments filed with the U.S. Department of Justice to advocate for
loosening current restrictions on the number of television stations
broadcasters can own in a single market, the broadcasters' own words
demonstrate that ``most-watched'' is not what it once was:
---------------------------------------------------------------------------
\12\ Testimony of Gordon H. Smith, June 5, 2019. (available at:
https://www.commerce.senate
.gov/services/files/21F22C87-FF31-4CB1-AE67-BAC7A2FA337E)
\13\ ``Ratings Bombshell: In Two Years, Network TV Demos plummeted
27 percent,'' Ad Age, January 28, 2019. (available at: https://
adage.com/article/media/c3/316390)
``Broadcast television's share of prime time viewing (counting
cable, broadcast and DBS) among the audience most coveted by
advertisers fell from 46 percent in 2003 to just 31 percent in
2018. These figures overstate TV stations' share of all video
viewing, because they do not take account of streaming or
subscription video on demand (SVOD); if SVOD and streaming were
included in total viewing, then broadcast's share would be
smaller still.'' \14\
---------------------------------------------------------------------------
\14\ Letter from Rick Kaplan, General Counsel and Executive Vice
President, NAB, June 17, 2019, at p. 3. (available at: https://
www.nab.org/documents/filings/CommentsOnPublicWork
shopOnCompetitionInTelevisionandDigitalAdvertising(6-17-19).pdf)
``The ratings of the most popular broadcast TV programs declined by
over 67 percent from the 1985-1986 TV season to the 2017-2018 season.''
\15\
---------------------------------------------------------------------------
\15\ Id., at p. 4
---------------------------------------------------------------------------
``The average 24-hour commercial rating + 3-day DVR viewing or `C3'
rating of broadcast TV programs for audiences aged 18-49 has declined
24 percent in the past two years. Only three general-entertainment
programs on broadcast networks are averaging a C3 rating of 2.0 or
better, and one of them aired its final episode in May 2019. Four years
ago, 32 entertainment programs were averaging a C3 rating of 2.0 or
better.'' \16\
---------------------------------------------------------------------------
\16\ Id., at p. 4
---------------------------------------------------------------------------
``That is, among the average 30.5 million people ages 18-49 using
TV during any given minute of prime time in 2018, an estimated 9.56
million were viewing broadcast stations--and these 9.56 million people
represent just 7.4 percent of the estimated total 128.9 million people
ages 18-49 in U.S. TV households. Similarly, the average 31.79 million
people ages two and older who viewed broadcast TV during any given
minute of prime time in 2018 represent only 10.4 percent of the
estimated total 304.5 million people ages two and older in U.S. TV
households.'' \17\
---------------------------------------------------------------------------
\17\ Id., at p. 64.
---------------------------------------------------------------------------
The decline in broadcast television viewership is not limited only
to primetime shows; viewership for local broadcast network affiliate
news has declined as well across all time periods from 10 to 20 percent
in just the last three years.\18\
---------------------------------------------------------------------------
\18\ Local TV News Fact Sheet, Pew Research Center, June 25, 2019.
(available at: https://www.journalism.org/fact-sheet/local-tv-news/)
---------------------------------------------------------------------------
Even the marquee events traditionally broadcast on local stations
have seen viewing decreases. The Super Bowl has seen declining
viewership in each of the last five years,\19\ along with similar
decreases in viewing the Academy Awards \20\ and the Emmy Awards \21\
as examples. All of these data points together therefore undercut the
assertion that retransmission consent increases are justified based
upon demands for the programming.
---------------------------------------------------------------------------
\19\ See https://www.tvb.org/Portals/0/media/file/tracts/
Super_Bowl.pdf
\20\ See https://www.tvb.org/Portals/0/media/file/tracts/
Academy_Awards.pdf
\21\ See https://www.tvb.org/Portals/0/media/file/tracts/
Emmy_Awards.pdf
---------------------------------------------------------------------------
If the increases in retransmission consent cannot be justified
based upon viewing numbers, another defense of retransmission consent
has been and still is that these fees promote localism--that these fees
sustain local stations and promote local content. Again, back in 1991,
NAB asserted this framework was all about localism: ``Retransmission is
a right granted to local stations in their local areas. Networks are
not involved in any negotiations.'' \22\
---------------------------------------------------------------------------
\22\ See https://prodnet.www.neca.org/publicationsdocs/wwpdf/
53111mediacom.pdf at p. 44.
---------------------------------------------------------------------------
Of course, NAB's early 1990s claims that networks would not be
involved with retransmission consent has proven false--again, the
marketplace has moved. Instead, through what is known as ``reverse
comp,'' local broadcasters now split the retransmission consent fees
they collect from distributors and video subscribers with their network
partners. Reports indicated that the networks received over $3.8
billion in reverse comp in 2018 from their local broadcast
affiliates,\23\ and Wall Street analysts estimate that local affiliates
split between 50 percent and 75 percent of their retransmission consent
revenues with their network partners.\24\
---------------------------------------------------------------------------
\23\ ``Retrans Projections Update: Sub Rates Continue to Rise,''
S&P Global Market Intelligence, July 25, 2019. (available at; https://
www.spglobal.com/marketintelligence/en/news-insights/research/retrans-
projections-update-sub-rates-continue-to-rise)
\24\ ``Panel, Retrans Pie Will Grow,'' Multichannel News, September
27, 2018 (available at: https://www.multichannel.com/news/panel-
retrans-pie-will-grow)
---------------------------------------------------------------------------
And the networks are not done extracting fees from local
affiliates, which will in turn increase the rates video consumers pay.
In 2018, CBS received an estimated $1.7 billion in retransmission
consent payments and reverse comp,\25\ and in a recent earnings call
with investors, CBS forecasted that amount to rise to $2.5 billion in
2020 \26\--a nearly 50 percent increase in just two years.
---------------------------------------------------------------------------
\25\ ``ViacomCBS Remarriage Fails to Impress Investors,''
Multichannel News, August 19, 2019. (available at: https://
www.multichannel.com/news/viacomcbs-remarriage-fails-to-impress-
investors)
\26\ Statement of Chris Spade, CBS Chief Financial Officer, August
8, 2019. (available at: https://seekingalpha.com/article/4283652-cbs-
corporation-cbs-ceo-joe-ianniello-q2-2019-results-earnings-call-
transcript?part=single)
---------------------------------------------------------------------------
This is not an isolated instance involving one network. In an
investor presentation in June, FOX network's Chief Financial Officer
stated plans to increase the national network's draw of retransmission
consent fees by 60 percent in the next three years:
``We've made it clear that sort of on a run rate rolling 12-
month basis we're at about $1.650 billion in retrans revenue
going into September just gone. We expect that to grow by
another $1 billion by calendar year 2022.'' \27\
---------------------------------------------------------------------------
\27\ Statement of Steve Tomsic, Credit Suisse 21st Annual
Communications Conference, June 4, 2019, at p, 2. (available at:
https://investor.foxcorporation.com/static-files/a9861572-4693-44d0-
a1d5-9bd9728cf806)
In a recent call with Wall Street analysts, the CEO of the Nation's
largest broadcast group confirmed that networks are demanding more from
local affiliates and that in turn, local affiliates are going to
---------------------------------------------------------------------------
increase the costs to MVPDs and their consumers.
``I mean long-term listen the networks negotiating and asking
for more from us and we in turn are asking for more from the
MVPDs and the revenue line is greater than the expense line. So
if they move in tandem we actually increase our margins.'' \28\
---------------------------------------------------------------------------
\28\ Statement of Perry Sook, CEO, Nexstar Media Group, August 7,
2019. (available at: https://seekingalpha.com/article/4282813-nexstar-
media-group-inc-nxst-ceo-perry-sook-q2-2019-results-earnings-call-
transcript?part=single)
In fact, broadcasters have taken to using retransmission consent
revenues in ways that would be difficult to imagine for the authors of
the 1992 Act. In one of the largest broadcast television acquisitions,
Nexstar's recent acquisition of Tribune Media Company, Nexstar
highlighted three ``Year 1 Synergies'' that benefited shareholders in
this transaction. In addition to reductions in corporate overhead and
other expenses as part of the transaction, the single largest
``synergy'' identified by Nexstar was an $85 million increase in the
retransmission consent rates of the acquired Tribune Media Company
viewers. In other words, MVPDs' and consumers' bills increased $85
million in year one and every year thereafter simply because Nexstar
was apparently able to increase Tribune Media retransmission consent
rates to the higher Nexstar rates.\29\
---------------------------------------------------------------------------
\29\ Completed Acquisition of Tribune Media Company, Nexstar
Investor Presentation, September 20, 2019, at p 9. (available at:
https://www.nexstar.tv/wp-content/uploads/2019/09/Nexstar-Tribune-
Investor-Closing-Deck-FINAL-9-20-19.pdf)
---------------------------------------------------------------------------
The practice of increasing retransmission consent rates as part of
an acquisition is hardly new. In Gray Television's 2018 acquisition of
Raycom, Gray identified four ``synergies'' as part of the Raycom
transaction. The first item on the ``synergy'' list was a $15 million
increase in net retransmission consent revenue comprised of a
contracted step-up of Raycom subscribers to Gray's higher
retransmission consent rates.\30\
---------------------------------------------------------------------------
\30\ Gray to Combine with Raycom to Become the Third Largest TV
Broadcast Group, Gray Television, Inc. Investor Presentation, June 25,
2018, at p. 7. (available at: https://gray.tv/uploads/documents/
presentations/GrayTelevisionInvestorPresentationJune.pdf)
---------------------------------------------------------------------------
It is clear that retransmission consent has gone far afield of its
initial intent and purpose. In extolling the benefits of retransmission
consent to their shareholders, broadcasters are quick to point out the
positive impact that ``profitable, predictable subscription revenues''
have to their bottom line, and that broadcasters' retransmission
consent revenues are ``immune from secular or economic trends.'' \31\
So confident are the broadcasters in their ability to control
retransmission consent revenues, the Nation's second largest local
broadcast group, Tegna, literally likens retransmission consent to an
annuity:
---------------------------------------------------------------------------
\31\ TEGNA Investor Presentation, September 2019, at p. 8.
(available at: http://investors.tegna.com/static-files/2a4d41af-d245-
4758-bea0-df54a27513cd)
---------------------------------------------------------------------------
``As we've discussed before, these sticky and high-margin subs
produced annuity-like cash flows, which allows us strong forecasting
ability.'' \32\
---------------------------------------------------------------------------
\32\ Q4 2018 TEGNA Inc Earnings Call, March 1, 2019, Statement of
Victoria Dux Harker, Executive VP and CFO, at p 5. (available at:
http://investors.tegna.com/static-files/f3183827-4740-4eba-a521-
7d1178b27458)
---------------------------------------------------------------------------
The broadcasters who assert localism as a defense of and
justification for retransmission consent cannot hide that these
revenues are flowing away from local markets--and that retransmission
consent fees will increase to keep feeding the revenues upward.
Despite adding billions of dollars a year to their own (and the
networks') coffers via retransmission consent, there is no evidence
that broadcasters have invested these gains in enhancing or adding to
their local news operations. From 2010 to 2018, total employment in
local broadcast television newrooms was static, from 28,640 in 2010 to
28,670 in 2018--a change of less than 1/10th of 1 percent over eight
years \33\ despite collecting over $48 billion in retransmission
consent fees during the same period.\34\ Moreover, even while
collecting ever more retransmission consent fees, the number of local
television stations originating local television news since 2013 has
actually declined.\35\ So even if localism may have been the intended
purpose in 1992, the reality in 2019 is that those funds are not going
back into local news operations.
---------------------------------------------------------------------------
\33\ Local TV News Fact Sheet, Pew Research Center, June 25, 2019.
(available at: https://www.journalism.org/fact-sheet/local-tv-news/)
\34\ ``Retrans Projections Update: Sub Rates Continue to Rise,''
S&P Global Market Intelligence, July 25, 2019. (available at: https://
www.spglobal.com/marketintelligence/en/news-insights/research/retrans-
projections-update-sub-rates-continue-to-rise)
\35\ 2018 Local News Research, Radio Television Digital News
Association. (available at: https://www.rtdna.org/uploads/files/
2018%20Local%20News%20Research.pdf)
---------------------------------------------------------------------------
Finally, demonstrating how anachronistic retransmission consent
fees are in 2019, one must consider the inequitable and technologically
discriminatory way in which they apply. Although ``traditional'' MVPDs
must pay these amounts--even where the broadcast signal would actually
not reach the consumer without the MVPD--new entrants into the video
distribution business that offer live television content such as
YouTube TV, Hulu, Sling TV and AT&T TV Now are not bound by the same
legacy 1992 Act obligations. Thus, the 1992 Act is actually ``putting a
thumb on the scale'' and interfering in what is an otherwise dynamic
marketplace, punishing only some distributors with inflated costs due
to a decades-old law that has no tether to where things stand today.
What Can Be Done Now in the Context of STELAR Reauthorization?
To address all of these concerns, I would advocate first and
foremost for a fundamental overhaul of the retransmission consent
regime contemplated by the 1992 Act. The Modern Television Act of 2019
(H.R. 3994) introduced by Representatives Eshoo and Scalise could
provide a helpful starting point for such discussions. This being said,
to the extent that STELAR reauthorization might not offer a platform
itself for such comprehensive change, there are narrower, targeted
changes that should be considered and made as part of STELAR renewal
for the benefit of consumers. Specifically:
1.) Prohibit price discrimination within each DMA. Broadcasters are
provided with government-sanctioned monopolies in 210 Designated Market
Areas. While there now are multiple MVPDs and vMVPDs serving all or
most DMAs, the local broadcast affiliate is the only source of network
programming for each DMA. Broadcasters should not be able to
discriminate in price among video distributors. This is particularly
important for video distributors that are smaller or serve rural
communities. Indeed, a report released late last year by the FCC
indicates that small system operators, such as Golden West, pay 30
percent more in retransmission consent fees than larger systems.\36\
There is no basis whatsoever for such pricing discrimination within a
DMA since the broadcaster's content is the same throughout the DMA and
as provided to each distributor.
---------------------------------------------------------------------------
\36\ FCC Communications Marketplace Report, December 26, 2018,
Appendix B, at p. 20 (available at: https://www.fcc.gov/document/fcc-
adopts-first-consolidated-communications-marketplace-report-0)
---------------------------------------------------------------------------
2.) Prohibit broadcaster-imposed mandatory bundling or tying of
additional non-network channels. The origins of retransmission consent
were limited to the carriage of the major network (i.e., ABC, CBS, FOX,
NBC) channels. Yet, in connection with retransmission consent for the
major network channels, broadcasters now require MVPDs to carry (and
thus force subscribers to pay for) a whole litany of multicast or
separate channels entirely unrelated to the major network. These
additional channels are not requested by MVPD subscribers and
needlessly force consumer rates higher. Examples of these channels
include MeTV, Grit, Escape, Laff, Bounce, ThisTV, Charge!, Stadium,
Comet, GetTV, Justice Network, MyTV, AntennaTV, Cozi, Movies!, Heros &
Icons, BuzzR, Quest, TBDTV, StartTV, Decades, Retro and Circle. This
list of typical ``bundled'' or ``tied'' channels is not all inclusive
and it seems to grow nearly daily. Broadcasters should also be
prohibited from including negotiations or contractual ties for Regional
Sports Networks or any other non-broadcast content as part of the
retransmission consent process.
3.) Eliminate the 1992 Act requirements that compel: (a) cable
operators/MVPDs to carry broadcast signals on their lowest service
levels/basic tiers; and (b) cable customers to purchase these lowest
service levels/basic tiers before they can purchase any other level of
service.\37\ These requirements unnecessarily compel all subscribers to
purchase broadcast channels, regardless of what any given consumer
actually wants. New entrants in the video marketplace, such as vMVPDs,
are not bound by such an anti-consumer, anti-choice provision.
---------------------------------------------------------------------------
\37\ 47 U.S.C. Sec. 543(b)(7)
---------------------------------------------------------------------------
4.) Prohibit charging for broadcast channels that are unable to be
received over the air. Many rural areas, and likely some urban areas as
well, are unable to receive over-the-air broadcasts of one or more
broadcast channels. Rural viewers should not have to pay for a
broadcaster's failure to provide a signal throughout its licensed area,
and MVPDs should not have to pay for the ``right'' to carry a broadcast
signal that would not otherwise reach viewers.
Below is a graphic showing the coverage area of one of the ``Big
Four'' broadcasters in the Rapid City DMA. The coverage by the
broadcaster below represents only 14 percent of the geographic area
within the DMA. Yet every video consumer outside of that small coverage
is forced to pay for receipt of the broadcaster's signal over a MVPD
system, despite having no option to receive that signal otherwise for
``free'' over the air.
A similar situation arises in the Sioux Falls DMA, with the graphic
below showing the coverage area of a different ``Big Four''
broadcaster. Even with the addition of several low power signals, this
broadcaster only covers an estimated 38 percent of the DMA's geographic
area.
---------------------------------------------------------------------------
\38\ See https://www.fcc.gov/media/television/tv-query, Nexstar
Broadcasting, Inc. KCLO-TV
\39\ See https://www.fcc.gov/media/television/tv-query Independent
Communications, Inc., KTTW/KTTM
5.) Make the ``Good Faith'' requirement in current law more
meaningful. Section 325 of the Communications Act grants broad
authority to the FCC to implement a framework for promoting ``good
faith'' dealing in retransmission consent negotiations. The FCC has
implemented the ``good faith'' provision by adopting a two-part
framework that includes a list of negotiating tactics that are
considered per se violations of the obligation, as well as a ``totality
of the circumstances'' standard that can be used to prove the absence
of a sincere desire to reach a mutually acceptable agreement.\40\
---------------------------------------------------------------------------
\40\ See, e.g., Implementation of the Satellite Home Viewer
Improvement Act of 1999, Retransmission Consent Issues: Good Faith
Negotiations and Exclusivity, First Report and Order, 15 FCC Rcd 5457,
44 (2000); Amendment of the Commission's Rules Related to
Retransmission Consent, Report and Order and Further Notice of Proposed
Rulemaking, MB Docket No. 10-71, 9 and 31 (2014).
---------------------------------------------------------------------------
Nothing in the STELAR Act limited this authority, and the only
STELAR-related congressional committee report that addressed Section
325 called for the agency to address ``whether certain substantive
terms offered by a party may increase the likelihood of the
negotiations breaking down'' and to provide ``additional specific
guidance as to actions that, taken as a whole, evidence bad faith based
on the totality of the circumstances.'' \41\ Moreover, when passing
STELAR, Congress was well aware of the FCC's efforts to implement
Section 325, and legislatively affirmed a revised per se standard.\42\
In considering reauthorization of STELAR now, I would encourage
Congress to expand on the types of conduct and negotiation practices
that constitute per se bad faith practices--such as several of those
outlined above--rather than forcing smaller MVPDs in particular to
pursue case-by-case adjudication that consumes substantial resources
and leaves most MVPDs with no practical remedy to ensure continued
carriage of content.
---------------------------------------------------------------------------
\41\ See S. Rep. No 113-322 at 13 (2014).
\42\ See STELAR Act Sec. 103(a).
---------------------------------------------------------------------------
Conclusion
Congress should move promptly to reauthorize STELAR, but in doing
so, should tackle the retransmission consent regime that stands out
uniquely as an anti-competitive, anti-consumer anachronism in an
otherwise dynamic marketplace. To the extent that STELAR may not
provide an opportunity for comprehensive reform, I have identified
several targeted changes that would help at least to improve conditions
for consumers in rural areas served by smaller distributors. Golden
West is committed to delivering the best possible services for its
consumers in some of the most rural terrain to be found in the United
States, and we look forward to working with members of this committee
and others in Congress to ensure that this vision can be realized
through laws that reflect and allow today's marketplace to operate
effectively.
The Chairman. Thank you very much, Mr. Law. And now we turn
to Mr. Robert Thun of AT&T.
STATEMENT OF ROBERT THUN, SENIOR VICE PRESIDENT--CONTENT AND
PROGRAMMING, AT&T
Mr. Thun. Thank you, Chairman Wicker, Ranking Member
Cantwell, and members of the Committee. My name is Robert Thun,
Senior Vice President of Content and Programming for AT&T. In
my current role, I am responsible for securing content rights
for both the major networks and the local broadcast station
groups for AT&T's television platforms. I am testifying to urge
renewal of STELAR because without STELAR's distant signal
license, 870,000 subscribers, your constituents, will lose
access to the network television program they have relied on
for years. These include hundreds of thousands of your
constituents, mainly in rural areas, that cannot obtain free
over-the-air signals from a local network broadcaster.
That point is worth repeating. We are able to offer distant
signals to hundreds of thousands of your constituents only
because the broadcasters have failed to provide these
constituents with a local signal over the air. Put simply,
local broadcasters want Congress to pull distant signal from
viewers that they have chosen not to serve. Of course, nothing
prevents the local broadcasters from using their ever-
increasing revenues they get from the broken retransmission
consent regime to invest in their local communities and provide
these consumers free over the air signals.
Instead of so doing, the local broadcasters have asked
Congress to let STELAR expire and impose a permanent blackout
on these consumers, denying them network TV, both over the air
or through a distant signal. Congress avoided this consumer
double whammy when it adopted the satellite and cable distant
signal license decades ago and its logic in so doing remains
just as sound today. STELAR also allows us to provide distant
signals to recreational vehicles and commercial trucks,
allowing long-haul truckers, RV and camping enthusiast, and
tailgating sports fans access to network TV.
These are a unique set of subscribers with no other
alternative to obtain network programming that Congress chose
to protect. There is no reason for Congress to abandon them
now. Recognizing the consumers will lose access to network
programming without STELAR, consumer industry groups are lining
up in favor of STELAR's renewal. These groups include the Free
Press, Public Knowledge, Common Cause, Cal Innovates, CWA,
IBEW, Consumer Action, Consumer Federation of America, Consumer
Reports, Open Technology at New America, The Grange, The
Hispanic Technology and Telecommunications Partnership, and a
number of RV associations, including the RV Industry
Association, National Association of RV Parks and Campgrounds,
Escapees RV Club, RV Dealers Association, and The Family Motor
Coach Association.
Congress should take this opportunity to make the satellite
distant signal license permanent as it has done for cable, our
largest competitor. AT&T also strongly supports the provisions
in STELAR that require broadcasters and MVPDs to negotiate in
good faith. This requirement serves as an important backstop
that places guideposts around our negotiations. While we still
have issues with stations refusing to negotiate or respond to
offers, the good faith provision helps move our negotiations
along. Without the good faith rules, there would certainly be
even greater price increases and blackouts.
While the good faith rules continue to be necessary to help
bring broadcasters to the negotiation table, the retransmission
consent regime is in dire need of reform. We urge Congress to
use STELAR's renewal as an opportunity to help fix this broken
regime. Retransmission consent was first put in place last
century when cable was the only pay TV offering in most areas.
Under these rules if a local broadcaster withholds its
programming, MVPDs cannot offer the subscribers with
alternative network programming even on a temporary basis.
Now with consumers having a multitude of content options,
these statutory protections are no longer necessary. And
looking more deeply at this problem is important to look at the
numbers. Since 2006, retrans fees have gone up from $250
million to $11.7 billion in 2019, an increase of over 5,300
percent. This is quantifiable evidence that local broadcasters
shielded by their special statutory protections have a
disproportionate bargaining position. To give more perspective,
if the price of gas rose at the same rate during this period, a
gallon of gas would cost $162 today.
And despite the staggering increases, broadcasters still
respond to otherwise reasonable offers with blackouts. In just
the first 10 months of 2019 they have set a record for the most
TV blackouts in a single calendar year, taking down signals
from cable and satellite customers 276 times. That is why AT&T
has long supported legislative efforts to end the
retransmission consent regime.
We applaud the efforts of Representatives Eshoo and Scalise
to reform the system and end local broadcaster blackouts
through the bipartisan Modern Television Act of 2019. AT&T
thanks the Committee for holding this important hearing. We
look forward to engaging with members on both sides of the
aisle to renew STELAR and reform the badly broken retrans
regime to benefit customers.
[The prepared statement of Mr. Thun follows:]
Prepared Statement of Robert Thun, Senior Vice President--Content and
Programming, AT&T
Thank you, Chairman Wicker, Ranking Member Cantwell, and Members of
the Committee.
I am Rob Thun, Senior Vice President of Content and Programming for
AT&T. In my current role, I am responsible for securing content rights
from the major networks and local broadcast station groups for AT&T.
AT&T has invested $130 billion \1\ in the United States over the last
five years, more than any other public company. We employ 200,000
Americans, representing all 50 states. Without doubt, we are deeply
invested in our country, our communities, our employees and our
customers.
---------------------------------------------------------------------------
\1\ Includes capital investment and acquisitions of spectrum and
wireless operations.
---------------------------------------------------------------------------
The Need to Renew the Satellite Television Extension and Localism
Reauthorization Act (STELAR)
I am testifying in this hearing to protect our customers, your
constituents, and join a growing list of consumer and industry groups
supporting renewal of STELAR. These groups include Free Press, Public
Knowledge, Common Cause, CWA, Consumer Action, Consumer Federation of
America, Consumer Reports, Open Technology Institute at New America,
the Hispanic Technology and Telecommunications Partnership, and a
number of RV associations, among others.
These groups support STELAR because they know that it protects
consumers. In particular, without STELAR's distant-signal-license,
870,000 satellite subscribers, your constituents, would lose access to
the network television programming they have relied on for years.
In all cases, failure to renew STELAR would remove channels from
people who legally receive them today--many of whom have done so for
years--and who would not understand why those channels were taken away.
While the number of customers receiving service through the distant
signal license has declined over time, that does not mean that those
870,000 subscribers that continue to receive high-quality satellite
network programming because of the license should now be left behind.
For the same reasons it has for decades, Congress should continue to
protect those subscribers' access to network programming.
These include hundreds of thousands of your constituents, mainly in
rural areas, that cannot obtain a free over-the-air signal from a local
network broadcaster. That point bears repeating: we are able to offer
distant signals to hundreds of thousands of your constituents because
the broadcasters have failed to provide these constituents with their
local signal over-the-air.
Nothing prevents local broadcasters from investing in their local
communities, extending the reach of their signals, and providing these
customers free, over-the-air-signals. Indeed, the government provided
local broadcasters access to free spectrum with the hope that they
would do just that. Instead of doing so, local broadcasters choose to
blame Congress, and take the easier (and certainly cheaper) path of
opposing renewal of STELAR, thereby putting satellite subscribers at
risk.
Local broadcasters cannot have it both ways. They cannot, on the
one hand, fail to provide consumers access to free, over-the-air local
network programming, while at the same time asking Congress to deny
these same consumers access to network programming via the distant-
signal-license. Congress rightly avoided this consumer ``double
whammy'' when it adopted the satellite and cable distant signal license
decades ago and its logic in doing so remains just as sound today.
STELAR also allows us to provide distant signals to mobile/
recreational vehicles or commercial trucks, allowing long-haul trucks,
RV and camping enthusiasts, and tailgating sports fans access to
satellite network TV. These are a unique set of subscribers that
Congress chose to protect, and there is no reason for Congress to
abandon them now. A host of RV trade associations have come out in
favor of renewing STELAR, including the RV Industry Association,
National Association of RV Parks and Campgrounds, Escapees RV Club, RV
Dealers Association, and the Family Motor Coach Association.
Renewal of STELAR is also important to keep satellite providers on
equal competitive footing with their cable competitors. Cable
providers, our competitors, have a permanent distant-signal-license. It
makes no sense for Congress to provide cable operators a such a
statutory competitive advantage over satellite providers. Congress
should take this opportunity to make the satellite distant-signal-
license permanent, as it is for cable.
AT&T also strongly supports the provisions in STELAR that require
broadcasters and MVPDs to negotiate with one another in ``good faith.''
This requirement serves as an important backstop that places guideposts
around negotiations. We still have issues with stations refusing to
negotiate or respond to an offer, and the good faith provision helps
move those negotiations along. Without the protections the ``good
faith'' rules offer, there would likely be even greater increases in
prices and blackouts. As with the satellite distant-signal-license,
Congress should make this provision permanent in STELAR.
The Need For Retransmission Consent Reform
While the good faith rules continue to be necessary to help bring
broadcasters to the table, the retransmission consent regime is in dire
need of reform. In every prior reauthorization, Congress has also
enacted substantive reform apart from the expiring provisions. It
should do the same here to fix the broken retransmission consent
regime.
That regime was first put in place last century, to help small
local broadcasters obtain carriage on cable platforms that were then
the only pay-TV offering in most areas. Now, with consumers having a
multitude of options to watch their content, those statutory
protections are no longer necessary and only serve to harm consumers
and competition. Since 2006, retrans fees have gone from about $215
million to $11.7 billion in 2019, an increase of 5,359 percent.\2\
Local broadcasters, shielded by their special statutory protections,
have a disproportionate bargaining position and reflexively respond to
reasonable offers with blackouts. Indeed, these antiquated laws have
unfairly penalized the nearly 90 million customers \3\ that have chosen
to keep their traditional pay-TV service.
---------------------------------------------------------------------------
\2\ ``Broadcasters Try to Kill STELAR and Victimize 870,000 Viewers
with Deceptive Political Ads,'' American Television Alliance, October
2019, https://www.americantelevisionalliance.org/broadcasters-try-to-
kill-stelar-and-victimize-870000-viewers-with-deceptive-political-ads/
\3\ ``Major Pay-TV Providers Lost About 1,530,000 Subscribers in 2Q
2019,'' Leichtman Research Group, Inc., August 2019, https://
www.leichtmanresearch.com/major-pay-tv-providers-lost-about-1530000-
subscribers-in-2q-2019/
---------------------------------------------------------------------------
That is why AT&T has long supported legislative efforts to end the
retransmission consent regime, and we applaud the efforts of
Representatives Anna Eshoo and Steve Scalise to reform the system and
end local broadcaster blackouts and consumer harm through the
bipartisan Modern Television Act of 2019.\4\
---------------------------------------------------------------------------
\4\ Modern Television Act of 2019, H.R. 3994, 116th Congress
(2019).
---------------------------------------------------------------------------
We are all aware of the enormous changes in the video marketplace
since the last STELAR renewal, in 2014. Consumers are choosing to leave
traditional pay TV services to obtain their programming through the
growing number of direct-to-consumer options, including both
subscription services (Netflix, Hulu, Amazon) and free services, like
YouTube. There are now more than 180 million over-the-top
subscriptions,\5\ with Netflix having more subscribers \6\ than DIRECTV
and Comcast combined.\7\ Major pay-TV providers lost more than 1.5
million subscribers in 2Q 2019--more than in any previous quarter.\8\
---------------------------------------------------------------------------
\5\ ``Hulu and Amazon Prime Video Are Gaining on Netflix in the
Streaming Wars,'' AdWeek, August 2019, https://www.adweek.com/tv-video/
hulu-and-amazon-prime-video-are-gaining-on-netflix-in-the-streaming-
wars/
\6\ Netflix 3Q 2019 Earnings, https://s22.q4cdn.com/959853165/
files/doc_financials/quarterly_reports/2019/q3/FINAL-Q3-19-Shareholder-
Letter.pdf
\7\ ``Major Pay-TV Providers Lost About 1,530,000 Subscribers in 2Q
2019,'' Leichtman Research Group, Inc., August 2019, https://
www.leichtmanresearch.com/major-pay-tv-providers-lost-about-1530000-
subscribers-in-2q-2019/
\8\ ``Major Pay-TV Providers Lost About 1,530,000 Subscribers in 2Q
2019,'' Leichtman Research Group, Inc., August 2019, https://
www.leichtmanresearch.com/major-pay-tv-providers-lost-about-1530000-
subscribers-in-2q-2019/
---------------------------------------------------------------------------
AT&T has embraced these trends, providing consumers the innovative
and mobile video alternatives they desire. In 2016, we launched our
live-streaming service AT&T TV NOW, providing consumers customized
packages--allowing them to watch TV wherever they want on different
devices. And, of course, AT&T continues to provide high-quality premium
video service to over 20 million customers.
No doubt, consumers have unparalleled choice and competition for
video content. Yet the laws that govern the video marketplace were
first written in 1934, and the present legal framework dates back to
1992. Under these current laws, broadcasters can choose either: (1)
retransmission consent, where cable (and later all MVPDs) must pay to
carry broadcast programming (which broadcasters otherwise make free
over-the-air), or (2) must-carry, where cable (and later all MVPDs) are
required to devote capacity to carry the station. If a local
broadcaster withholds its programming, MVPDs generally cannot offer
their subscribers alternative, out-of-market network affiliate
programming, even temporarily. These laws were written to protect local
broadcasters at time when there was only one distributor, so cable and
broadcasters were mutually dependent on each other, and customers had
few options besides cable. Now, these laws stubbornly protect local
broadcasters from the inexorable changes occurring in the video
marketplace, and thus distort and stymie innovation and consumer
choice.
As competition first came from satellite, and now from over-the-top
providers, local broadcasters have relied on their special statutory
protection to more effectively use the threat of blackouts to
dramatically increase retransmission fees for stations also available
for free, over-the-air. As a result, these broadcasters have
dramatically raised retransmission fees, as detailed above. And, when
MVPDs balk at local broadcasters' rate hikes, they have responded with
blackouts. Local broadcasters shattered the record for the most TV
blackouts in a single calendar year already in 2019, intentionally
taking down signals from cable and satellite customers 276 times.\9\
Because of existing law, consumers are harmed by these unwarranted and
unnecessary blackouts.
---------------------------------------------------------------------------
\9\ ``Broadcasters Try to Kill STELAR and Victimize 870,000 Viewers
with Deceptive Political Ads,'' American Television Alliance, October
2019, https://www.americantelevisionalliance.org/broadcasters-try-to-
kill-stelar-and-victimize-870000-viewers-with-deceptive-political-ads/
---------------------------------------------------------------------------
We understand the desire to preserve local programming.\10\
However, local content will always have value and no longer needs to be
given special protections in the law. Scores of cable networks,
including those operated by our WarnerMedia group, respond to
competitive and economic forces by delivering--to consumers and
distributors--high quality products and programming. An approach in
which the overall effect would be ``market-based'' should be the model
for modern local broadcasting, too. Continuing favoritism for some
content over others is outdated and ultimately harmful to consumers. It
is time for the law to catch up to the marketplace.
---------------------------------------------------------------------------
\10\ In fact, the law preventing ownership of multiple stations in
a market was in part intended to prevent one entity from having too
large an editorial voice in a community.
---------------------------------------------------------------------------
AT&T/DIRECTV Service in all 210 DMAs
I would like to take this opportunity to clear up some confusion
over DIRECTV's service in all 210 DMAs. Today, DIRECTV serves 198
markets through our satellites and in 12 markets we offer local
broadcast signals through an antenna. We then integrate that signal
with our other offerings so that it looks exactly the same to the
customer; the channel appears in the programming guide like all other
channels, can be recorded with a DVR, and can be managed with our
parental controls. And in the 12 markets where we harness the
broadcaster's free, over-the-air signal, we offer consumers a $3
discount off of all DIRECTV packages. In addition to a lower price,
consumers in those markets have never endured a local broadcaster
blackout because local broadcasters cannot withhold their over the air
signal. So in those markets--and this is the key point--if the local
broadcast signal reaches you, you can get it on DIRECTV already. And if
you cannot, it is due to the broadcaster's failure to provide that
signal.
Moreover, the local broadcasters in these 12 DMAs have successfully
evaded the FCC's ``top four prohibition,'' which prohibits a single
entity from controlling more than one ``top four rated station'' in a
given DMA. In fact, in these DMAs, local broadcasters own two or three
affiliates in eleven of them. A single broadcaster owns at least two
network affiliates in six of these markets and three in the other five.
They have accomplished this by using loopholes, such as carrying one of
the network affiliates on a multicast stream or on low-power television
stations, or both, to control multiple network feeds in a single DMA.
These tactics only serve to exacerbate the problems with the
retransmission consent regime. Giving broadcasters a pass on local
ownership limits would all but guarantee more blackouts and higher
prices for consumers in those DMAs. Given the competitive state of the
market, and the plethora of consumer choices for video content, it is
simply not a viable option for us to ask consumers in these markets to
absorb these mounting prices and increased blackouts.
Finally, I want to stress that providing local satellite service in
these 12 markets would not protect the 870,000 subscribers who are at
risk of losing their network signals if STELAR were allowed to expire.
We can provide distant signals to those consumers that cannot receive a
local station's over-the-air signal. Where broadcasters in these 12
markets are providing their signal with the free spectrum they have
received from the government, we are offering our customers a distant
signal. Simply put, contrary to the deliberate confusion that
broadcasters are trying to create, satellite local service is not a
replacement for a distant signal. And, in fact, it actually puts these
consumers at more risk of losing their signal through a broadcaster
blackout. Put simply, broadcasters want Congress to pull distant-
network signals from viewers that its member companies have chosen not
to serve.
****
AT&T thanks the Committee for holding this important hearing we
look forward to engaging with Members on both sides of the aisle to
renew STELAR and reform the badly broken retransmission consent regime
to benefit consumers and competition.
The Chairman. Thank you very much. Representative Watts,
you are recognized. Thanks for joining us.
STATEMENT OF J.C. WATTS, CHAIRMAN AND CO-FOUNDER, BLACK NEWS
CHANNEL
Mr. Watts. Thank you, Chairman Wicker, and Ranking Member
Cantwell, and members of the Committee. I am J.C. Watts, former
Member of Congress from Oklahoma. However, I am here today as
the Chairman and Co-Founder of an exciting new business
venture, the Black News Channel, or BNC. When BNC launches, it
will become the Nation's very first 24/7 news network dedicated
to covering the unique perspective of African American
communities. It is a new voice that will represent African
Americans in mainstream media, and help shed light on the
unique social, economic, and political challenges facing urban
communities.
In doing so, it will help close the image gap that exists
today between the negative African American stereotypes found
throughout mainstream news and media and our enterprising black
communities. There are undoubtedly many reasons why it has
taken so long for the first news channel dedicated to the
African American community to emerge in this country. It is
particularly difficult for BNC to obtain carriage from the two
major satellite operators.
It is our understanding that satellite has relatively low
penetration in urban cores due to line-of-sight issues and the
difficulty of residents in those areas to place satellite
dishes on multi-tenant dwellings. BNC's target audience,
however, is more concentrated in urban cores than any other
ethnic groups.
A higher percentage of African Americans live within urban
areas than do other ethnic groups. Satellite providers have
told us that due to these issues it is more difficult for them
to justify traditional commercial carriage of a niche network
like BNC. Over the past several years, we have tried various
approaches that would make it easier for satellite providers to
take a chance on a new network like BNC and part of that
solution requires your help.
BNC supports the reauthorization of STELAR because we
believe it is a critical component of preserving satellite as a
viable competitive alternative to cable for traditional multi-
channel video programming services, as well as new streaming
services. We also believe Congress should use the opportunity
of reauthorizing STELAR to make at least one modest change to
the Communications Act, just as Congress has done in the past
in deciding to reauthorize this important piece of legislation.
In the 1992 Cable Act, Congress enacted Section 335 of the
Communications Act, which requires DBS providers to set aside a
certain percentage of their channel capacity exclusively for
non-commercial programming of an educational or informational
nature. As implemented, however, Section 335, as well as other
provisions of the Act, have failed to provide sufficient
opportunities for independent programming of an educational or
informational nature. And legislation to date has failed to
create a true diversity of views and media voices as Congress
intended.
Congress can address the lack of diverse programming by
modestly revising Section 335 to allow DBS providers to use
their set-aside channels not only for non-commercial
programming but also for independently owned programming of an
educational or informational nature. Specifically, Congress
should expand the DBS set aside to include any network that is
unaffiliated with any MVPD, broadcast network, or movie studio,
provided such network produces and televises at least 8 hours
of original educational or informational programming, including
news programming, per day.
This modest expansion of the set aside that we propose
would open the door for other types of educational and
informational programming to compete for use of this space.
This would lower the high entry barriers for entrepreneurial
new networks like BNC, who seek to give an on-air voice and
platform to an underserved community. It will, in short,
fulfill the goals that Congress originally had in mind when it
first adopted Section 335, and that are even more pressing
today.
On behalf of BNC, I urge this Committee to adopt our
suggested language in any proposed legislation for the
reauthorization of STELAR. And I urge Congress to reauthorize
STELAR, incorporate, and approve our proposed language, and
fulfill its mission of achieving a more diverse media
landscape. Chairman Wicker, Ranking Member Cantwell, thank you
for this opportunity.
[The prepared statement of Mr. Watts follows:]
Prepared Statement of J.C. Watts, Chairman and Co-Founder,
Black News Channel
Thank you Chairman Wicker, Ranking Member Cantwell, and Members of
the Committee.
I am J.C. Watts, former member of Congress from Oklahoma. I am here
today as the Chairman and Co-Founder of an exciting new business
venture--the Black News Channel, or BNC. When BNC launches, it will
become the Nation's very first 24/7 news network dedicated to covering
the unique perspective of African American communities. It is a new
voice that will represent African Americans in mainstream media, and
help shed light on the unique social, economic, and political
challenges facing urban communities. In doing so, it will help close
the image gap that exists today between the negative African American
stereotypes found throughout mainstream news and media, and our
enterprising black communities.
There are undoubtedly many reasons why it has taken so long for the
first news channel dedicated to the African American community to
emerge in this country. It is very difficult for any new network to get
off the ground. Traditionally, for a network to become commercially
viable, it needs to convince cable TV companies and satellite operators
to carry it. Despite the rapid growth of streaming, a majority of
American households still obtain news and information from cable TV and
satellite. That is particularly true with respect to older generations,
which tend to be the largest consumers of news and informational
programming.
It has been particularly difficult for BNC to obtain carriage from
the two major satellite operators. It is our understanding that
satellite has relatively low penetration in urban cores due to line-of-
sight issues and the difficulty of residents in those areas to place
satellite dishes on multi-tenant dwellings. BNC's target audience,
however, is more concentrated in urban cores than other ethnic groups.
Approximately a quarter of African Americans still live within urban
cores, compared to only about 10 percent of whites, 20 percent of
Asians, and 17 percent of Hispanics. Satellite providers have told us
that due to these issues, it is more difficult for them to justify
traditional commercial carriage of a niche network like BNC.
Over the past several years, we have tried various approaches that
would make it easier for satellite providers to take a chance on a new
network like BNC. And part of that solution requires your help.
BNC supports the reauthorization of STELAR because we believe it is
a critical component of preserving satellite as a viable competitive
alternative to cable for traditional multi-channel video programming
services, as well as to new streaming services.
We also believe Congress should use the opportunity of
reauthorizing STELAR to make at least one modest change to the
Communications Act, just as Congress has done in the past in deciding
to reauthorize this important piece of legislation.
In the 1992 Cable Act, Congress enacted Section 335 of the
Communications Act (47 USC Sec. 335), which requires DBS providers to
set aside a certain percentage of their channel capacity ``exclusively
for non-commercial programming of an educational or informational
nature.'' At the time, Congress found a ``substantial governmental and
First Amendment interest in promoting a diversity of views provided
through multiple technology media.'' 1992 Cable Act Sec. 2(a)(6).
Congress has also expressed the goal of reducing ``market entry
barriers for entrepreneurs and other small businesses'' in order to
fulfill a ``national policy'' of ``favoring diversity of media
voices.'' 47 U.S.C. Sec. 257.
As implemented, however, Section 335--as well as other provisions
of the Act--have failed to provide sufficient opportunities for
independent programming of an educational or informational nature. And
legislation to date has failed to create a true diversity of views and
media voices as Congress intended.
Congress can address the lack of diverse programming by modestly
revising Section 335 to allow DBS providers to use their set-aside
channels not only for non-commercial programming, but also for
independently owned programming of an educational or informational
nature. Specifically, Congress should expand the DBS set aside to
include any network that is unaffiliated with any MVPD, broadcast
network, or movie studio, provided such network produces and televises
at least eight (8) hours of original educational or informational
programming (including news programming) per day.
The modest expansion of the set aside that we propose would open
the door for other types of educational and informational programming
to compete for use of this space. This would lower the high entry
barriers for entrepreneurial new networks like BNC, who seek to give an
on-air voice and platform to an underserved community. It will, in
short, fulfill the goals that Congress originally had in mind when it
first adopted Section 335, and that are even more pressing today.
On behalf of BNC, I urge this Committee to adopt our suggested
language in any proposed legislation for the reauthorization of STELAR.
And I urge Congress to reauthorize STELAR, incorporate and approve our
proposed language, and fulfill its mission of achieving a more diverse
media landscape. Thank you.
______
Appendix: BNC's Proposed Modification to 47 U.S.C. Sec. 335
To promote diverse programming, Congress should modestly revise
Section 335 to allow DBS providers to use their set-aside channels not
only for non-commercial programming, but also for independently owned
programming of an educational or informational nature. Congress should
add the following underlined language to 47 U.S.C. Sec. 335(b)(1)(A):
Except as provided in subparagraph (B), the Commission shall
require, as a condition of any provision, initial
authorization, or authorization renewal for a provider of
direct broadcast satellite service providing video programming,
that the provider of such service reserve a portion of its
channel capacity, equal to not less than 4 percent nor more
than 7 percent, exclusively for noncommercial programming of an
educational or informational nature, or for any network that is
unaffiliated with any MVPD, broadcast network, or movie studio,
provided such network produces and televises at least eight (8)
hours of original educational or informational programming
(including news programming) per day.
The Chairman. Thank you, Mr. Watts. And Mr. Schwantes, you
are recognized.
STATEMENT OF JONATHAN SCHWANTES, SENIOR POLICY COUNSEL,
CONSUMER REPORTS
Mr. Shwantes. Thank you, Chairman Wicker, Ranking Member
Cantwell, and the members of the Senate Commerce Committee for
inviting me to testify today on the reauthorization of STELAR.
My name is Jonathan Schwantes and I am a Senior Policy Counsel
at Consumer Reports. Before I begin my substantive remarks, I
would like to say that it is good to be back in the Senate
where I began my career as a young attorney on the Judiciary
committee more than two decades ago.
Ironically enough, one of the first major pieces of
legislation I worked on was the Satellite Home Viewer
Improvements Act of 1999, an earlier version of STELAR. Little
did I know that I would still be working on these very issues
20 years later. Consumer Reports endorses the reauthorization
of STELAR and the extension of the consumer-friendly provisions
of the law that are set to expire at the end of the year.
STELAR in all of its earlier forms was and is a pro-consumer
and pro competition law. Renewing its expiring provisions every
5 years has also provided Congress a chance to consider
targeted reforms of the video marketplace. This year is no
different.
A golden opportunity exists for lawmakers to enact
straightforward policy changes that would directly and
immediately help consumers. A new STELAR bill offers Congress a
legislative vehicle to address an increasingly expensive
problem experienced by consumers. And that is the spread of
hidden company-imposed fees in pay TV bills. First, I would
like to quickly address the current debate surrounding STELAR's
reauthorization. Where consumers cannot receive their local
broadcasters? channels over the air with an antenna, think of
rural areas, they are considered unserved under the law.
A satellite operator is permitted to provide those
relatively few unserved consumers broadcast programming from a
market other than their local one, it is a distant signal, so
long as the local channels are not being provided in that
market by the satellite company. The Section 119 distant signal
license is what makes this service possible, and the estimated
number of consumers who receive distant signals today is
870,000. Should Congress receive some calls to let STELAR
expire and along with it the Section 119 license, the only
guaranteed outcome is that almost a million consumers would
wake up on New Year's Day without the broadcast programming
they received the day before. Consumers would likely blame
Congress and not the broadcasters or the satellite companies
for taking away their broadcast channels.
Another key STELAR provision scheduled to expire concerns
the good faith requirements upon broadcasters and pay TV
operators that apply to retransmission consent negotiations.
The good faith rules can be improved. I have offered
suggestions in my written testimony. And they should also be
made permanent so long as the retransmission consent regime
remains in place. This process created by the 1992 Cable Act,
and subsequently applied to satellite companies, governs one
method for how programming is obtained from broadcasters. Over
time, this system has resulted in skyrocketing retransmission
consent fees paid to broadcasters, the amount of which has been
well documented by the pay TV industry.
However, what is lost amidst the finger-pointing between
the broadcasters and the cable and the satellite companies is
that consumers end up bearing the overwhelming cost of the
current system because rising retransmission consent fees have
directly led to the birth of company-imposed fees like the
broadcast TV fee and others. Consumer Reports recently studied
this issue in depth and our results were published earlier this
month in a report that is available online. We discovered that
in the past decade, cable companies have begun to impose new
fees for services that were previously included in their
advertised base rates.
Our analysis of hundreds of pay TV bills submitted to us by
consumers shows that company-imposed fees, which to be clear
these are separate and apart from charges related to
Government-imposed fees and taxes, now add almost 25 percent of
the base price to the typical monthly cable bill. On average,
the cable industry generates close to $450 per year, per
customer from company-imposed fees. And if we multiply that
number by the total number of U.S. cable subscribers, cable
companies might be making an estimated $28 billion a year from
charging company-imposed fees that are often buried in the fine
print. That is a staggering amount.
The good news is that Congress, beginning with the Commerce
Committee, can begin to solve this problem. A bill introduced
by Senator Markey earlier this year, The True Fees Act, would
among other things simply require company-imposed fees to be
included in the advertised price. A version of this common-
sense fix was applied to the airline industry in 2011 in the
form of the full fare advertising rule.
And applying it to the telecom industry would inject real
transparency to cable billing practices in the same fashion.
Consumer Reports recommends and supports the attachment of the
True Fees Act to whatever STELAR reauthorization bill is
drafted by this Committee. Doing so would immediately bring
relief to fee-exhausted consumers in the video marketplace and
would also continue and reinvigorate STELAR's tradition as a
pro-consumer measure. Thank you.
[The prepared statement of Mr. Schwantes follows:]
Prepared Statement of Jonathan Schwantes, Senior Policy Counsel,
Consumer Reports
Consumer Reports \1\ (CR) thanks Chairman Wicker, Ranking Member
Cantwell, and the Members of the Senate Commerce Committee for inviting
me to testify on whether or not to reauthorize the STELAR Act, and to
suggest other targeted video marketplace reforms Congress should
consider as part of this work. A golden opportunity exists for
lawmakers to enact straightforward policy changes that would directly
and immediately help consumers in a STELAR reauthorization bill passed
before the end of this year, a reauthorization that CR strongly
supports.
---------------------------------------------------------------------------
\1\ Consumer Reports (CR) was founded as the Consumers Union of
America in 1936 and became known by millions of Americans for our
award-winning magazine Consumer Reports. In recent years, our overall
organization transitioned to the name Consumer Reports. Consumer
Reports is a non-profit organization with more than six million members
that works for a fair, safe, and transparent marketplace, fueled by our
trusted research, journalism, advocacy, and insights.
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At a time when consumers enjoy more and more choices in the video
marketplace thanks to the increasing number of online video
distributors, consumers also, almost paradoxically, find themselves
with less power as huge tech companies control more and more of the
choices that impact their everyday lives. As our Nation grows
increasingly concerned over the out-sized influence of companies like
Google, Amazon, Facebook and others, we must not lose sight of the
challenges consumers continue to face in the more traditional video
marketplace, where nearly 94 million Americans subscribe to pay-TV
service from an MVPD (multichannel video programming distributor) be it
a cable, satellite, or telephone operator that includes telecom giants
like AT&T (which owns DIRECTV), Comcast, Verizon, Charter, and
others.\2\
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\2\ Federal Communications Commission, Consolidated Communications
Marketplace Report, Report, GN Docket No. 18-231, FCC 18-181 (Dec. 26,
2017) Available at https://docs.fcc.gov/public/attachments/FCC-18-
181A1.pdf.
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Indeed, STELAR in its earliest forms, from the Satellite Home
Viewer Act (SHVA) to the Satellite Home Viewer Improvements Act (SHVIA)
and subsequent versions, was a pro-consumer and pro-competition law.\3\
By permitting direct broadcast satellite (DBS) companies to offer
consumers broadcast programming, especially local broadcast networks,
satellite operators like DIRECTV and Dish Network were better able to
compete with the incumbent cable companies that otherwise faced little,
if any, direct competition. Consumers wanted access to their local
broadcast channels, and with the passage of SHVIA, DBS companies were
finally able to legally provide them in a cost-effective manner.
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\3\ Satellite Home Viewer Act of 1988, Pub. L. No. 100-667;
Satellite Home Viewer Act of 1994, Pub. L. No. 103-369; and Satellite
Home Viewer Improvement Act of 1999, Pub L. No. 106-113, App. I.
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Though the name changed every five years, from SHVIA to SHVERA to
STELA, and finally to STELAR in 2014, the reauthorization of key
provisions scheduled to sunset has permitted Congress to improve the
law in ways that benefit competition and consumers alike.\4\ Rather
than revisiting this debate again in the future, expiring provisions in
STELAR should be made permanent, namely the Section 119 ``distant
signal'' license \5\--a compulsory copyright license that permits
satellite companies to import an out-of-market broadcast channel into a
market where the local channel is unavailable--and the ``good faith''
requirements \6\ attached to retransmission consent negotiations which
permit the Federal Communications Commission to adjudicate programming
carriage disputes between broadcasters and MVPDs. The reauthorization
legislation we are discussing today also provides Congress a
legislative vehicle to address an increasingly expensive harm
experienced by consumers in the video marketplace: the proliferation of
company-imposed fees in pay-TV bills.
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\4\ Id. See also Satellite Home Viewer Extension and
Reauthorization Act of 2004, Pub. L. No. 108-447; Satellite Television
Extension and Localism Act of 2010, Pub L. No. 111-175; and STELA
Reauthorization Act of 2014, Pub. L. No. 113-200.
\5\ 17 U.S.C. Sec. 119.
\6\ 47 C.F.R. Sec. 76.65.
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STELAR Protects Nearly a Million Unserved Americans
We must first consider the current debate surrounding STELAR's
reauthorization in 2019. Even though this would lead to a sudden
disruption of television service to hundreds of thousands of consumers,
the National Association of Broadcasters (NAB) has urged Congress to
let STELAR expire at the end of this year.\7\ And despite broadcast
channels being offered to consumers who are otherwise unable to receive
them, NAB asserts that the distant signal license has provided
satellite operators like DIRECTV a disincentive to provide local
broadcast networks into all 210 local markets. To be sure, satellite
companies were permitted by the 1999 version of STELAR (SHVIA) to
provide local broadcast channels into their local markets (also known
as ``local-into-local'' service) under the Section 122 compulsory
copyright license.\8\ But presumably in a few cases, it is less
expensive to import one or two distant broadcast networks into some
areas versus offering the full complement of local broadcast channels
given the ``carry one, carry all (local channels)'' mandate placed upon
DBS operators who offer local networks.
---------------------------------------------------------------------------
\7\ See Statement of Gordon Smith, National Assn. of Broadcasters,
STELAR Review: Protecting Consumers in an Evolving Media Marketplace,
U.S. House of Representatives Energy and Commerce Committee Hearing,
(June 4, 2019), https://energycommerce.house.gov/sites/
democrats.energycommerce.house.gov/files/documents/Testimony_Smith.pdf.
\8\ 17 U.S.C. Sec. 122.
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There are a dozen local markets where DIRECTV does not provide
local programming via satellite.\9\ And in those particular markets,
where consumers cannot receive their local broadcast channels over the
air, they are considered ``unserved'' under the law. When a household
is considered unserved in this instance, a DBS operator is permitted to
provide those consumers that broadcast programming from a market other
than their local one--a distant signal--if no other local channels are
being provided by that satellite company. The distant signal license is
set to expire at the end of this year is what makes this service
possible--not only for unserved consumers in rural areas, but also for
recreational vehicle and commercial truck operators, who Congress
decided years ago could be provided distant signals by their satellite
company.
---------------------------------------------------------------------------
\9\ John Eggerton, Senators Press AT&T/DirecTV for Small-Market,
Remote Area TV Signals, Broadcasting and Cable (Mar. 14, 2019), https:/
/www.broadcastingcable.com/news/senators-press-at-t-directv-for-small-
market-remote-area-tv-signals.
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Recent estimates of the number of consumers who receive distant
signals in this manner number 870,000.\10\ Should Congress heed NAB's
advice to simply let STELAR and the distant signal license expire, the
only guaranteed outcome is that almost a million consumers will wake up
on New Year's Day without the broadcast programming they received the
day before, and have likely relied on for years. It is important to
note that if DIRECTV wanted to provide local-into-local service into
those markets, it could do so right now under current law, just as its
DBS competitor, Dish Network, does. Nonetheless, what lawmakers and the
broadcasters cannot guarantee, absent a change in current law, is that
DIRECTV will fill that gap and choose to provide local networks to
unserved consumers. Consumers would likely blame Congress--and not the
NAB or their service providers--for taking away their broadcast
channels. Consumers should not suffer restricted access to service
without a guaranteed alternative.
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\10\ John Eggerton, SCBA Pushes Permanent STELAR Renewal,
Broadcasting and Cable (Oct. 17, 2018), https://
www.broadcastingcable.com/news/sbca-pushes-permanent-stelar-renewal.
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Good Faith Requirements Should Be Stronger and Made Permanent
Other key provisions in STELAR that are set to expire this year
concern good faith requirements upon broadcasters and MVPDs that apply
to retransmission consent negotiations. Consumer Reports supports the
strengthening of these requirements, starting with clearer guidance on
what constitutes violative behavior. For example, broadcasters could be
required to offer a local broadcast channel as a standalone offer, and
not bundled with other channels, especially other broadcast network
channels. Furthermore, the rising number of station blackouts--the
consequence of an expired retransmission consent deal--could be
mitigated if they were not allowed to occur right before must-see
programming like the Super Bowl, or prohibited altogether when parties
who cannot agree to new terms were instead subjected to binding
arbitration.
The good faith rules can be improved along these lines and they
should also be made permanent so long as the retransmission consent
regime remains in place. This process, created by the 1992 Cable Act
and subsequently applied to DBS operators, governs one method of how
pay-TV operators obtain programming from broadcasters.\11\ This system
has resulted in the skyrocketing of retransmission consent fees paid to
broadcasters, the amount of which has been well-documented by the
American Television Alliance (ATVA).\12\
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\11\ Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, 106 Stat. 1460, (1992)
\12\ Broadcasters Use Old Myths in Attempt to Keep Video
Marketplace Laws Old and Unfair, American Television Alliance, January
2019, https://www.americantelevisionalliance.org/broadcasters-use-old-
myths-in-attempt-to-keep-video-marketplace-laws-old-and-unfair/.
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However, what is lost in this furious debate and finger-pointing
between broadcasters and MVPDs is that consumers end up bearing the
overwhelming cost of the current system, where rising retransmission
consent fees have directly led to the birth of company-imposed fees
like the Broadcast TV Fee and others. These fees are the sole creation
of the pay-TV industry, and cable operators plainly state that these
fees are meant to help them recoup their rising programming costs.
Although that explanation is straightforward enough, the application of
these fees is not, and confused consumers are being made to pay
increasingly expensive, non-optional fees because of a retransmission
consent system that is broken.
Hidden Fees Should Be Eliminated
Consumer Reports recently examined this issue in depth, and the
results of our work were published earlier this month in a report
entitled, How Cable Companies Use Hidden Fees to Raise Prices and
Disguise the True Cost of Service. \13\ Aside from assessing the cost
of company-imposed fees in the video marketplace, the report also
provides policy recommendations for Congress to consider for how best
to mitigate the harm caused by these fees.
---------------------------------------------------------------------------
\13\ A full copy of the report can be found at https://
advocacy.consumerreports.org/wp-content/uploads/2019/10/CR-Cable-Bill-
Report-2019.pdf. (CR Cable Bill Report)
---------------------------------------------------------------------------
In the past decade, cable companies have begun to impose new fees
for services previously included in the base rates that are typically
quoted in advertisements. Consumer Reports' analysis of hundreds of
pay-TV bills submitted to CR by consumers reveals that company-imposed
charges--which, to be clear, are separate and apart from charges
related to any government-imposed fees and taxes--now add almost 25
percent of the base price to the typical monthly cable bill. An analogy
from the report helps illustrate the problem. Imagine your surprise if
you were to learn in the supermarket check-out line that the box of
cereal you wanted to buy was going to incur a Cardboard Box Surcharge
and a Grain Refinery Fee, adding nearly 25 percent to the purchase
price. It sounds absurd--but actually is not very different from what
many consumers experience month-in, month-out, when they pay their
cable bills.
Unsurprisingly, consumers get frustrated and angry when they
discover these company-imposed fees on their bills. A recent CR
nationally representative survey of 2,057 U.S. adults asked about add-
on fees across many industries, and found that nearly seven in 10 (69
percent) Americans who have used a cable, internet, or phone service
provider in the past two years reported encountering unexpected or
hidden fees.\14\ And nearly all--96 percent--of those who reported
having encountered hidden or unexpected fees in an industry that we
asked about said they find them annoying. Two-thirds--64 percent--
called them ``extremely'' or ``very'' annoying.
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\14\ WTFee?! Survey, 2018 Nationally Representative Multi-Mode
Survey, Prepared by the Consumer Reports Survey Research Department
(January 3, 2019) (hereafter CR WTF?! Survey) available at: https://
advocacy.consumerreports.org/research/wtfeesurvey/.
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The depth of that frustration reflects the insidious market effect
of company-imposed fees: they enable cable companies to camouflage
price increases, confounding consumer efforts to comparison shop and to
maintain household budgets. This happens in at least two ways. First,
the fees are often imposed or increased with little notice and are
often listed among a dizzying array of other charges, including
government-imposed fees and taxes. Second, by passing along additional
costs as ``fees'' and not building them into the core package price,
cable companies are able to continue advertising relatively lower base
rates. Thus, they can generate more revenue each month with little
pushback from their customers--including even those who are locked into
fixed-price promotional offers.
The combined effect is stretching consumer pocketbooks to the
breaking point. CR's survey found that the telecom industry was the
worst budget-buster of the ones we asked about. Nearly six in 10 (59
percent) Americans who encountered unexpected or hidden fees while
using telecom services in the past two years say the fees caused them
to exceed their budgets.
Make no mistake, the cost of company-imposed fees is not
insignificant. The report's analysis of nearly 800 cable bills
collected from consumers across the country shows that:
Company-imposed fees, from Broadcast TV and Regional Sports
Fees to Set-Top Box Rental Fees, add what amounts to a 24
percent surcharge on top of the advertised price.
On average, the cable industry generates close to $450 per
year per customer from company-imposed fees.
Based on the total number of U.S. cable subscribers and our
findings, cable companies might be making an estimated $28
billion a year from charging company-imposed fees.\15\
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\15\ See CR Cable Bill Report at p. 7 and FN 20.
The problem is growing worse and more expensive because the cost of
company-imposed fees continues to escalate. For example, in 2015, the
Nation's largest cable company, Comcast Corporation, charged consumers
a $1-a-month Regional Sports Fee and $1.50-a-month Broadcast TV Fee,
for a total of $2.50 per month. Those two fees combined now cost
Comcast customers $18.25 a month.\16\ That represents a more than 600
percent fee increase in four years. Similarly, Charter Communications
raised the price of its Broadcast TV Surcharge three times in just the
last year, meaning that particular company-imposed fee now costs
consumers $13.50 a month, a 50 percent increase of what that fee cost a
year ago--and far more than the $1 it was when first introduced in
2010.\17\
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\16\ Jon Brodkin, Comcast Raises Cable TV Bills Again--Even if
You're Under Contract, ArsTechnica (Nov. 26, 2018), https://
arstechnica.com/tech-policy/2018/11/comcasts-controversial-tv-and-
sports-fees-rise-again-hit-18-25-a-month/.
\17\ Luke Bouma, Spectrum is Raising its TV & Internet Pricing (The
Third Price Hike on Broadcast TV in 12 Months), Cord Cutter News (Sep.
7, 2019), https://www.cordcuttersnews
.com/spectrum-is-raising-its-tv-internet-pricing-including-the-3rd-
price-hike-on-broadcast-tv-in-12-months/. See also Karl Bode, Charter
Starts Charging `Broadcast TV Surcharge' So They Can Raise Rates, But
Leave the Advertised Price the Same, DSLReports (Sep. 13, 2010), http:/
/www.dslreports.com/shownews/Charter-Starts-Charging-Broadcast-TV-
Surcharge-110316.
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To make matters worse, new mandatory modem and router fees have
also begun to saddle consumers with additional company-imposed fees.
Many consumers have long been able to avoid monthly equipment rental
fees by purchasing and using their own modems and routers. With rental
fees costing up to $11 a month, they can often recoup their investment
in less than a year.\18\ But Frontier Communications recently began
charging a leasing fee ``for your Frontier router or modem--whether you
use it or not,'' eliminating this money saving strategy.\19\
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\18\ Luke Bouma, Comcast Is Raising Their Modem Rental Fee (The
Good News Is You Don't Have to Pay It), Cord Cutters News (Nov. 27,
2018), https://www.cordcuttersnews.com/comcast-is-raising-their-modem-
rental-fee-the-good-news-is-you-dont-have-to-pay-it/.
\19\ Jon Brodkin, Frontier Customer Bought His Own Router--But Has
to Pay $10 Rental Fee Anyway, ArsTechnica (July 2, 2019), https://
arstechnica.com/information-technology/2019/07/frontier-customer-
bought-his-own-router-but-has-to-pay-10-rental-fee-anyway/. See also
https://frontier.com/helpcenter/categories/internet/installation-setup/
compatible-routers-and-modems for Frontier's explanation of its
mandatory router fee: ``Frontier charges you a monthly lease fee for
your Frontier router or modem--whether you use it or not.''
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Finally, our report also uncovered new company-imposed fees being
applied separately to Internet access service. Bills issued by Frontier
during the time period we studied contained a $2 Internet
Infrastructure Surcharge, and RCN bills included a $2 Network Access
and Maintenance fee. Both are mandatory. Adding new company-imposed
fees to the cost of Internet service is a disturbing new trend, and
predicts a future where even internet-only consumers--including so-
called cord-cutters, who generally look to save money by dropping cable
TV service and relying only on Internet service for their video
entertainment--will not be safe from the growing burden of add-on fees.
Paying for TV and Internet service in the 21st century should not
be this fraught with frustration. But the problem is hardly confined to
the cable industry. Airline passengers now routinely pay an extra fee
to bring luggage on their trip, or to secure an assigned seat; hotel
``resort fees'' are proliferating, even at properties that offer little
more than a place to sleep; and buying tickets to a cultural or
sporting event is nearly always accompanied by a non-optional service
fee. The common thread of these fees is a nominal attachment to
services that, not long ago, were commonly included in the base price.
And as in the pay-TV industry, this practice obscures the true price of
goods and services, rendering comparison shopping and budgeting a
challenge, and sometimes impossible.
The good news is that Congress, beginning with the Commerce
Committee, can act to solve this problem--in the video marketplace and
elsewhere. A bill introduced by Senator Markey earlier this year, the
TRUE Fees Act, would, among other things, simply require company-
imposed fees to be included in the advertised price.\20\ A version of
this common sense fix was applied to the airline industry in 2011 in
the form of the Full Fare Advertising Rule, and applying it to the
telecom industry would inject real transparency to cable billing
practices in the same fashion.
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\20\ Truth-in-Billing, Remedies, and User Empowerment over Fees Act
of 2019 or the TRUE Fees Act of 2019, S.510, 116th Cong. (2019).
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Consumer Reports recommends and supports the attachment of the TRUE
Fees Act to whatever STELAR reauthorization bill is drafted and
considered by this committee. Doing so would immediately bring relief
to fee-exhausted consumers in the video marketplace, and would also
continue and reinvigorate STELAR's (and its many names) tradition of
being a pro-consumer measure.
The Chairman. Well, thank you all and it is clear that this
is an expert panel and I hope that we can further enlighten
ourselves and the public with questions. So, let me begin with
some questions that I outlined in my opening statement. Mr.
Thun, according to satellite television providers approximately
870,000 subscribers make use of the Section 119 license. If
STELAR expired at the end of this year, are there consumers who
would immediately lose access to broadcast programming?
Mr. Thun. Absolutely.
The Chairman. And what is the likelihood that these
subscribers would have to pay more to access broadcast
programming at the beginning of 2020? And please explain.
Mr. Thun. Well, if it relates to the prior question, if it
went away would they pay more? If it went away, I do not think
they could get to it. We are providing distant signals that
customers cannot get through broadcast station signals.
Certainly, as you think about our technology as it applies to
long-haul truckers or RVs, we are the only technology that can
reach those particular customers. So, in the absence of the
extent of the distant signal, whether they would not pay more
fees, they would just lose access to networks all together.
870,000 customers would be left without any access to network
television that they are used to getting today.
Mr. Chairman. OK. Mr. Law, if you would like to follow up
on that, I would appreciate it. But also, on the good faith
requirement, how is it important to you and how would the
expiration of STELAR impact the cost of programming, and
frankly, the bottom line of the various companies?
Mr. Law. Thank you, Chairman. And as it relates to the good
faith report requirements today. I do think the good faith
requirements should be strengthened and at a minimum the good
faith requirements that are contained in the nine steps
outlined by the FCC at least provide some very wide,
alternative white lines on the highway for the code of conduct
between the two parties negotiating.
I think there needs to be a significant improvement in that
language quite frankly because the code of conduct that is
outlined in these nine steps really just deals with, you know,
thou shalt return e-mails on a timely fashion and thou shalt
let the other folks know what you are doing.
However, even in recent issues from the good-faith issues
from the FCC in rulings, they make very clear that the good
faith requirements, this is the FCC, reiterate our long-
standing precedent that absent other factors disagreements over
rates terms and conditions of retransmission consent is not a
lack of good faith. They go on to say in there that tying and
bundling, and other services is found in a competitive market
and is also not a sign of good faith.
I do think that that should be addressed. But at least at a
minimum I think Congress should continue to support the level
of good faith requirements that are there and I would recommend
strengthening them.
The Chairman. You know, five minutes is such a short time
to get into something like this but Ms. Barr, I bet you have a
different take and perhaps Mr. Schwantes after you.
Ms. Barr. Thank you, Mr. Chairman. First of all, I would
say, with respects to my colleague to my left, that is AT&T's
choice not to provide local service if this were to expire.
Dish was able to do it within one week when they did it. And
so, they are a similar type of company. They provide local into
local.
No matter what, I would say that what is imperative here is
to provide local broadcasters the opportunity to reach their
local constituents in the markets in which they live. That is
the bedrock on which we are so based.
The Chairman. So, with Dish, if a subscriber subscribes to
Dish, they are able to get the local programming in that
locality?
Ms. Barr. That is correct.
The Chairman. OK. Mr. Schwantes.
Mr. Schwantes. Well in terms of consumer costs, I guess
there is a theoretical world where if you get rid of the
distant signal license, which is a compulsory copyright license
and so it is an artificially low market rate, if you got rid of
that and you got rid of the retransmission consent because
right now distant signals brought to satellite companies do not
need to obtain retransmission consent to bring those signals
into market.
In theory you could still have that way of delivering
program, but I think it would become much more expensive
because as we have seen with retransmission consent
negotiations, those fees paid by satellite and cable operators
to broadcasters is going up. So, if you could I guess negotiate
a distant signal coming into a market I would imagine that
would be cost prohibitive and I cannot speak for AT&T or Dish
but will make it very expensive to do so.
The Chairman. Thank you very much. And I understand Senator
Cantwell wishes to defer to another member?
Senator Cantwell. Mr. Chairman, if I could defer to my
colleague from Montana who has I think a very, you know,
impacted perspective on this that needs to be part of the
debate. Senator Tester.
The Chairman. Senator Tester.
STATEMENT OF HON. JON TESTER,
U.S. SENATOR FROM MONTANA
Senator Tester. Thank you, Mr. Chairman, Madam Chair. Thank
you everybody for testifying today. I appreciate your
testimony. I want to touch on this to begin with two of the 12
media markets that cannot get local broadcasts are in Montana.
They are not RVs. They are not local long-haul truckers. They
are just regular folks. And the question is Mr. Thun, can you
commit to providing service to those markets?
Mr. Thun. I think we do commit to providing service to
those customers.
Senator Tester. With local TV?
Mr. Thun. We do provide local television in all 210
markets. In the 12 markets that you are referring to, we do not
deliver a satellite delivered local signal but we provide
customers who request a receiver, they can get an antenna that
picks up local air signals and those signals are integrated
into their experience in a seamless way that allows them the
ability to DVR their content.
Senator Tester. So why not do it like you do it in my
house? And by the way, my house is pretty damn remote, and I
get my local TV. I live in Montana. Helena has got a lot more
people. Glendive has got a lot more people. Why cannot you
commit to doing the same thing for them that you do for me?
Mr. Thun. I think we do.
Senator Tester. No, you do not. I mean I get mine right off
the satellite.
Mr. Thun. Yes, we deliver an integrated solution. The
failure to deliver the signals in the state of Montana is borne
by the broadcasters. They do not deliver a clean signal
everywhere across the state, and in those areas, that is where
we need a distant signal. In the center of Helena, you can get
a clean signal off the air and we provide an antenna that
allows the customer to experience broadcast television.
Senator Tester. So how can Dish do this with that same
signal? They seem to be able to do it and Direct TV cannot.
Mr. Thun. We offer different solutions in providing that
content.
Senator Tester. But you just said the reason you cannot do
it is because it is crappy signal. Dish deals with that same
crappy signal.
Mr. Thun. No, in the remote areas of your State, the
broadcasters fail to deliver the signal in areas due to the
topography and they do not invest in their broadcast stations
in order to deliver a broader signal. And our solution, which
allows customers to get a clean signal, where the signal is
available, they can get it, and we provide it to them free of
charge for the antenna and we give them a discount in fact on
their bills. So, we believe we do provide the service.
Senator Tester. I just--there is a difference of opinion
here and quite frankly Helena by Montana standards is far from
remote. It is our State capital. And so, I think that there is
a lack of desire, quite frankly, to provide it. I am not sure
what the hell we can do about it on this panel, but maybe we
can do something about it. And I hope we do. This is the World
Series season. World Series is on TV. I watched it last night
from where I live here in Washington, D.C.
I happen to be an old Expos fan and so consequently, I am
an honest Nats fan. When I go home to my farm, that station is
blacked out. I doubt we are going to be able to see any World
Series TV. And by the way, my high-speed Internet is not good
enough to get it on the iPad. As I referred before, Mr. Thun, I
actually pay you guys a fair amount of money every month for
that signal. Can you tell me why it is blacked out?
Mr. Thun. I am sorry, I am not sure----
Senator Tester. Can you tell me why it is blacked out? Can
you tell me why I do not have that signal for, well, I will
even drop the name for the Fox network that is broadcasting the
World Series games.
Mr. Thun. Well, if we are at an impasse with the station,
it is the station's inability to negotiate a deal with us at a
fair price.
Senator Tester. That is good. So, let me ask you something.
I am a farmer. AT&T isn't exactly small spuds. That equation is
like me negotiating a price with General Mills, and I guarantee
we do not negotiate prices with General Mills. It is you take
this, or you leave it. How many times is that done where you
walk in and say, here is the money? You guys, you know, a lot
of these are family owned stations in Montana. They are not
very big. And you just say here is the money, take it or go.
Mr. Thun. I differ with what actually happens in these
negotiations. I am a party to those and what happens is
actually the converse. The broadcasters come to us with a gun
to our head telling us you are going to take this price and
when we say that is too high, it is a ridiculous amount, they
say, well thank you for your past business. That is actually an
exact quote from one of the broadcasters. And they threaten to
pull the signal away. In certain cases, they do.
Senator Tester. Ms. Barr, would you like to give a
different opinion?
Ms. Barr. Certainly. Thank you, Senator. I can tell you
that from Graham Media's point of view, we have never
experienced a blackout in any of our negotiations with anyone.
We have always come to the table willing to get a deal done. It
is in our best interest and it is in the industry's best
interest to do a deal because we do not want to lose viewers
for one hour, one day, or one year. We want to have access to
our viewers no matter how they receive us, whether satellite or
cable.
Senator Tester. I am way out of time, but I got to ask is
that the way it is with most stations? I mean, it seems my
station is an exception and they want to be blacked out?
Ms. Barr. No, I do not think there is any television
station that willingly wants to be blacked out. I think what we
have to remember is that television stations are having their
signals resold, if you will, by cable and satellite and they
are looking for just a fair price for the programming that they
produce. It costs money to produce news.
Senator Tester. Yes, and I would just finish with one thing
and that is, you are right. I do pay. I think when I first set
this up, it was five bucks a month, but it has been a while
since I looked at it for each station and I haven't had the
station for a month. And so, do I get a refund?
Mr. Thun. I think it is part of our contract with our
customers. We explain that sub-channel lineups are subject to
change. We endure a lot of cost in these retransmission consent
disputes. We lose customers because of that. And we have to
provide, in a lot of cases, rebates. So, we do lose money in
these things. This is not a winning proposition for us at all.
Senator Tester. It might not be a winning proposition, but
I am paying for something I am not getting. It kind of chaps my
butt, OK. Thank you. Thank you, Mr. Chairman.
The Chairman. We will make note of that.
[Laughter.]
The Chairman. Senator Thune.
Senator Tester. I could have said something else.
[Laughter.]
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman, for holding today's
hearing, and thank you to all of our witnesses for being here
today. And it is great to have Mr. Denny Law, the CEO of Golden
West Telecommunications in South Dakota before the Committee
today.
Golden West was the first company to stretch telephone
lines across the remote planes of Western South Dakota, and
today under Denny's leadership Golden West serves some of the
most remote rural parts of our state, including my hometown of
Murdo, South Dakota.
And I appreciate his commitment to bringing affordable and
reliable broadband services across many parts of South Dakota.
Mr. Chairman, the investment, new technology, and talent
required to produce high-quality news, sports, and
entertainment content continues to increase in order to keep up
with consumer demands. Broadcasters should have confidence in
their ability to recoup those investments in the video
marketplace.
At the same time, the marketplace is changing at an
incredibly rapid pace and we need to make sure that as the
market adapts, consumers are put first. During the last
reauthorization in 2014 I put forth a proposal called Local
Choice which sought to give consumers more options in the video
marketplace while also recognizing the important service that
local broadcasters provide.
And while I won't be offering that proposal this year, I do
hope we can continue to work together and receive input from
all stakeholders to advance pro-consumer solutions and promote
local content in the changing video marketplace. I would direct
this to all panelists, and I will start, Mr. Law, with you. But
each of you has acknowledged that today's video marketplace has
rapidly changed since the last reauthorization in 2014.
With that said, are there reforms to the 1992 Cable Act
that we as policymakers should consider, as this Committee
gives the reauthorization of STELAR, additional consideration?
Mr. Law. Thank you, Senator. I think there are a couple of
key points to look at with that. In addition to the changes as
I specifically reflect around how the retransmission consent
system works. I am not suggesting in my testimony that
broadcasters should not be paid for their content. Nowhere in
my testimony do I suggest that their content does not have
value. It does. However, I would suggest that the scale is so
tipped in advantage of the broadcasters that these are not
negotiations in terms of the respect to the price, and quite
frankly in my testimony I reference the fact that rural
consumers or consumers that are served by small or rural cable
systems pay 30 percent more for retransmission consent and off-
air channels than those in urban markets. Yet the product is
the same.
There is no additional cost to broadcasters to provide that
product if they even offer an off-air signal in those areas. So
why not level the playing field? Prohibit price discrimination
in markets, prohibit broadcasters from adding additional
channels, multicast channels as part of the agreements. In our
agreements with various broadcasters, we are required to carry
certainly the network content that we sought.
In addition, we get to carry such fine programming like
antenna TV, this TV, that TV, cozy TV among others. Every time
one of those channels is added, consumers pay more, and when
you take that times four more broadcasters in a market, it adds
$10 plus a month to their bill yet the consumer turns to me as
their provider and says, why does my bill keep going up?
So, I think those are some simple perhaps looks that are
more narrowly targeted and instead of a comprehensive reform
that I think is overdue.
Senator Thune. Yes. Others? Ms. Barr.
Ms. Barr. Thank you, Senator. I would just go back to the
harm that is being caused by out of market signals coming into
local markets. If I am living in Montana or in Presque Isle,
Maine or wherever, I may not be able to get a local signal. And
if there is a major event, whether it is a weather-related
events, a political event, or some kind of event of local
importance and I am a customer of satellite television, I
cannot find that information locally on my TV.
And that can create real danger and harm for local
constituents. So, I would just continue to emphasize that
whatever happens with rule changes, the localism needs to be
front and center.
Mr. Thune. Does the current regulatory landscape create
parity between broadcasters and MVPDs with respect to carriage
negotiations, would you say?
Ms. Barr. I think we go to the table and we negotiate in
good faith. I do not think there has ever been a broadcaster
who has been accused of not doing that. And as I said earlier,
my company has never had a blackout situation occur because we
do not want one and we do not believe the people on the other
side really want one. So, we try to come to the table looking
for equity on both sides. We are trying to get paid fairly for
the product that we put out there.
Senator Thune. Mr. Law, carriage negotiations?
Mr. Law. That has not been my experience, Senator. Our
discussions as a small provider based primarily in South
Dakota, based exclusively in South Dakota. My experience is we
are presented with a list of demands from the broadcaster. The
negotiations will likely include perhaps one minor move by that
broadcaster to satisfy the good-faith requirements and then the
negotiations are over. When I characterize it to colleagues and
friends of what these negotiations are like, my comment is
imagine you are going into a fight. The other side has bazookas
and you have a plastic fork.
Senator Thune [presiding]. All right. Senator Cantwell.
Senator Cantwell. Thank you. Thank you to the witnesses for
being here today. I know these are challenging issues. But to
me, I look at again back to the consumer and localism and how
do we protect those. And so Ms. Barr, I was concerned to hear
from our broadcasters as I look at some of the statements that
AT&T has made writ large about satellite or as I see how people
are migrating to these partnerships, you know, whether that is
Disney and ESPN or you know, I just see these big conglomerates
trying to just control access to content, which worries me
because then I think okay, we are just going to--a bunch of
people are just going to chop up ways to charge more to the
consumers.
But one thing I was concerned about, that broadcasters,
even in the negotiations with their own networks are having
challenges keeping their revenue as opposed to the network,
then using that to compete against them. So, what do we do
about that because we want the localism. We do not, as Senator
Tester said, want to see a New York or LA broadcast if you are
in Montana. You want to see local content.
So, how do we deal with this issue?
Ms. Barr. So, first of all, I agree that negotiating with
networks can sometimes be challenging but I would point to the
fact that many, many, many network affiliate relationships have
been going on for decades, so they have come to a way of
negotiating.
I won't pretend that it is easy, but I will tell you that
in my own negotiations, which I do personally with four
different networks, that our negotiations have been civil. They
are tough, as they probably will be and should be. They are
paying for a lot of programming. We are paying for a lot of
local programming.
So, there is a give and take but we ultimately have come to
our agreements. We work very well together. We support each
other. So, I do not see that the problem exists between the
networks and the affiliates in this same way.
Senator Cantwell. Well, I see a problem if you do not have
local revenue that you can count on and so I just want to make
sure. I don't know, Mr. Schwantes, if you have a thought on
this issue, but one of the reasons why I do not think a five-
year reauthorization is a wise idea is because I have no idea
what is going to happen in the next two years in this space,
the level of consolidation and change.
What I want to get right is localism. What I want to get
right is diversity. What I want to get right is driving down
the cost to consumers if we can because that I think they
deserve to have that level of competition. But what about this
continued consolidation and how it is affecting this debate?
Mr. Schwantes. And that is a fair point, Senator Cantwell,
and it is something we are concerned about. I mean one of the
pillars of our work is consumer choice, which I do think is
related to localism and diversity, things of those nature. And
Mr. Law makes an interesting point about bundling. What we hear
mostly from video customers is we want choices, we want ` la
carte cable programming, which I know causes the hair to rise
on people's necks.
Senator Cantwell. Well, I think that has been in this
Committee, Senator Thune would attest along, that the Commerce
Committee has long heard this discussion and maybe it is, you
know, getting closer to that moment.
Mr. Schwantes. I am well aware, the Local Choice Act. And I
think it is a novel approach and it goes back to the 1992 Cable
Act. There is no need to get into the details but basically the
long and the short of it is cable companies are obligated to
carry local broadcast networks, satellite companies are not.
I mean, they have the obligation of they go into a market
and they carry one local channel, then they have to carry them
all. But it is more of an ` la carte offering of the whole
suite of local channels in the satellite package verse the
cable package. And then it has the problem, the double effect
for consumers of well I have to take the local channels because
Mr. Law has to carry them, but then we have to pay the fees for
it.
And you could disrupt that by making those local channels a
la carte. The problem with that is, and in my experience on
these very difficult issues, it is like an old sweater. You
pull the string, the whole thing comes apart. So, it is
something that I think is well worth the Committee's time to
look forward to in the future. I agree that we should not be
doing this every five years. I think more comprehensive reform
of--everything is on the table, the 1992 Cable Act, all of the
various versions of STELAR, and let's do it.
Senator Cantwell. Thank you. And to this--well, I am going
to say. I feel that one thing that is missing and I get
proprietary information, but there just should not really be
this level of ambiguity about whether someone, as Senator
Tester was referring to, could or could not get content. Like
we should just be able to answer technically this question, and
it should be clear to the Committee. So hopefully in our
further discussions, will be able to get that information.
Thank you, Chairman.
Senator Thune. Thank you, Senator Cantwell. Senator Blunt.
STATEMENT OF HON. ROY BLUNT,
U.S. SENATOR FROM MISSOURI
Senator Blunt. Thank you, Chairman Thune. Let me first, I
have an unanimous consent request just to submit for the record
some written testimony from Pattie Boyers who is the Chairman
of America's Communications Association. She and her husband
Steve, good friends of mine, are small cable providers in
Southeast, Missouri, and she testified before the House
committee in June. She couldn't be here for this testimony and
that is our loss because Pattie Boyers is if nothing else
passionate about her business and colorful. It does not quite
come through in this written testimony, but I would like to
submit it for the record. Senator Thune: Without objection.
[The information referred to follows:]
Renewing STELAR Will Help Rural Americans
By Patricia Jo Boyers, Chairman, ACA Connects--America's Communications
Association
Smaller pay television providers are under assault from the
excessive demands of local TV stations. Congress needs to step in and
support legislative reforms that curb the undue price hikes and sudden
signal blackouts designed to turn consumers against their traditional
pay-TV providers.
As a small cable operator from Southeast Missouri, I was invited to
testify before the House Energy and Commerce Committee in June to talk
about how fees charged by broadcasters are leading to more and more TV
blackouts.
In the four months since I testified, things have gotten much
worse. Since my appearance on Capitol Hill, there have been 216
broadcaster blackouts, impacting 138 markets across 44 states. That's
216 blackouts in the past 134 days alone! Additionally, a new poll
shows that 1 in 3 television or streaming users has been the victim of
one of these blackouts.
This week the Senate Commerce Committee will consider legislation
that is designed to protect consumers from broadcaster abuses. The
limited oversight provided to the Federal Communications Commission
(FCC) known as ``good faith'' rules are included in the Satellite
Television Extension and Localism Act Reauthorization Act of 2014
(STELAR), which Congress must reauthorize before the end of the year.
Failure to do so will leave hundreds of small cable operators and
millions of consumers without protections that have been in place for
many years.
Small video providers who support STELAR's renewal face a big
obstacle: The National Association of Broadcasters (NAB) and its
members are lobbying Congress to let the program expire. It's not
surprising why the NAB would want to pull the government's referee from
this process. Even with the FCC's oversight in place, broadcasters have
been able to collect billions of dollars in fees. Since 2006, retrans
fees have gone from about $215 million to $11.7 billion annually, an
increase of more than 5,300 percent. Meanwhile, broadcast TV ratings--
the measurement used to determine popularity and thus advertising
rates--continue their downward trajectory.
Out-of-control retransmission consent fees disproportionately harm
smaller cable operators. According to a recent FCC report, small
systems pay at least one-third more than large systems pay in retrans
fees. Because cable operators pass these fees along to customers--as
much as $20 per month - rural cable subscribers pay much more for
nominally ``free, over-the-air'' broadcast programming than their urban
counterparts. Small cable operators not only suffer from paying higher
fees but are also forced into accepting onerous terms and conditions,
like the forced bundling of various channels and carrying unpopular
channels that our customers do not want.
Recent changes in the marketplace are making this situation even
worse.
First, individual broadcasters now control multiple ``top-four''
network feeds in more than a hundred local markets--and sometimes
control three or even four such feeds--despite FCC rules that are
supposed to prevent this kind of anti-consumer consolidation.
Second, corporate broadcasters have gotten much bigger nationally,
with behemoths like Sinclair and Nexstar controlling more than one
hundred stations each across the country.
Third, broadcasters increasingly bundle other ``marquee''
programming networks with their signals--raising consumer prices for
both. This means that broadcasters have more market power than ever
before, and certainly more than Congress expected, and cable
subscribers pay the price.
Under the current system, small cable operators like mine are
facing tough choices. Recent headlines indicated that retransmission
consent fees and other programming fee hikes have prompted some smaller
cable operators to exit the business. This is especially bad for older
Americans less likely to turn to streaming services, and especially
those living in rural areas like those my company serves.
Congress must not just reauthorize the good faith rules. It's not
enough. It must revisit its video laws and make meaningful reforms to
protect consumers. Every five years since 1988 Congress has
reauthorized STELAR, and each time it has used the opportunity to
review other video laws along with it. It must do so again this year.
For instance, I've urged Congress to extend the good faith rules to the
buying groups of small and medium-sized cable operators in their
negotiations with large stations groups. But let's be honest: Congress
needs to update the Communications Act.
Big broadcasters shouldn't be allowed to bully companies like mine.
Small cable operators and millions of rural Americans are counting on
Congress to not only re-authorize STELAR before the end of the year,
but also strengthen protections for TV viewers during retransmission
consent negotiations.
Over the course of time, small cable operators and our customers
have been able to rely on Congress for small, incremental safeguards in
STELAR, such as the ``Good Faith'' rules. The sunsetting of these rules
without any consideration will leave us out in the cold-without any
protections at all.
Please don't allow our ``horse'' to die WITHOUT giving us a new
horse on which to put our saddle!
Mrs. Boyers is Chairman of ACA Connects and President of BOYCOM Vision
in Poplar Bluff, Mo.
Senator Blunt. Let me just ask two or three points. Mr.
Thun, I do not think I quite understand the significance of the
people who are mobile as part of this discussion, the long-haul
truckers or others. I mean the whole idea of local coverage, at
least in my mind, would indicate that you were in one locale--
you were in a place. So that may be an important group that you
serve but I do not quite see how that relates to the discussion
very directly of expecting local coverage if you are moving all
the time as opposed to local coverage if you are in one place.
Am I missing something there?
Mr. Thun. No, you are absolutely correct. They are moving
around and the only way to give them access to the network
programming is to deliver them a satellite delivered feed of a
distant signal. We cannot authorize as they go through the
country each station's DMA's. So, they are authorized to get
one station or all the stations that they want on a distant
signal basis, and that allows them----
Senator Blunt. To keep up with where they want to keep up
with?
Mr. Thun. Yes. They would not be authorized otherwise to
receive the signal as they went through.
Senator Blunt. All right, that is helpful. Both Mr. Law and
you, Mr. Thun, both suggested that low-power television
affiliates have been used as a way to drive up the price for
local broadcasting. The FCC specifically has never come up with
any rule that prohibited multiple ownership of low-power
affiliates. What are you thinking there? Do you have any
examples of where that is really been a specific problem? And
then Ms. Barr, I am going to come to you next and ask about the
importance of the ability to have the low-power affiliates. But
any specific story you would like to share about why a low-
power affiliate has been used in a way that you thought was
unfair?
Mr. Law. Thank you, Senator. I would address it from the
perspective of, just to clarify my comments in my pre-filed
testimony dealt more with the fact of a broadcaster controlling
two network affiliates, two or more network affiliates, within
a particular DMA, whether it be low power or not and the
inordinate amount of power that gives that particular
broadcaster when it comes to negotiating retransmission
consent. It outstates the load considerably.
Senator Blunt. As you know, the FCC specifically has looked
at this and has never prohibited that joint ownership. I am
going to run out of time but Ms. Barr, do you want to talk a
little about the importance of having that low-power affiliate?
Ms. Barr. Sure. Thank you. I want to preface this by saying
I do not own any low-power television stations. I am not a
complete expert on this but what I would refer back to is that
the ability to provide local information, local news, local
critical information is absolutely paramount for any community.
And if that is being done in certain markets by low-power
television stations, and they in fact for economic reasons may
own, you know, one or more affiliates, I see that as serving
that local community. I do not see it in any other way.
Senator Blunt. Thank you. Congressman Watts, good to see
you here today. We served together, you and Senator Thune, and
Senator Moran who was here a moment ago and I, and always good
to have a chance to visit with you. But J.C. you mentioned the
difficulty of getting the black news channel on satellite. Have
you had a similar difficulty with cable, and do you want to
talk about that a little more about the frustration or the
difficulties you have had to try to make this alternative
available to people?
Mr. Watts. Well and thank you, Senator. On the cable side--
we have been at this now for 10 years, and on the cable side,
we have had success and we have gotten distribution through
Charter and several other MVPDs. However, on the satellite side
because of line of sight issues what we have gotten is that
because of line of sight issues and, you know, the multi-
dwelling units and having to have satellites on those
facilities, how difficult it is to service the demographic that
we are wanting to serve. We are before the Committee today
asking for this modification to 335.
You know, it has been awfully difficult for an independent.
The satellites told us that for a niche organization like ours
it is difficult to carry us because of the issues that they run
into and because of the demographics that they serve. However,
if we can get this modification and we can get Section 335
modified in STELAR, then they will carry us in that DBS space,
that set aside space.
And that gives us, you know, coast-to-coast coverage, gives
us opportunity to support original news, which can be
expensive, and it gives us advertising sales opportunities. And
it also gives us access to a rural community of African
Americans that would be very helpful for us. So, I appreciate
you engaging me. I have kind of enjoyed the debate here.
Senator Blunt. Thank you, J.C. Thank you, Chairman.
Senator Thune. Thank you, Senator Blunt, and Congressman
Watts, it is nice to have you back.
Mr. Watts. Thank you.
Senator Thune. Senator Schatz.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you all for being here. I'll start
with Ms. Barr. I want to talk a little bit about the
relationship between broadcast consolidation and the decrease
in news gathering, and I'll cite a couple of studies. One study
from 2009 showed a decrease in local news coverage from 12 to 7
percent over a nine-year period. Another study showed that in
four of the six markets studied where there was broadcast
consolidation, local news coverage decreased. What do we do
about the specific nexus between broadcast consolidation and
the reduction of news gathering at the local level, and are
there other factors impacting the reduction of news gathering
at the local station level?
Ms. Barr. Thank you, Senator. So, first of all, we own
seven television stations in six markets, so I am hardly one of
these massive consolidators. And what I can tell you from
personal experiences, we have done nothing but increase the
amount of news we provide. What practically happens is that
when stations do consolidate, sometimes they will be the same
newscast on multiple stations in a market so that----
Senator Schatz. Sure, and we have a joint operating
agreement in Hawaii and actually in my judgment, this is not
deep analysis, but my observation is that the net impact
locally has been more news gathering, more high-quality
content.
That however is the exception to what is happening with
Sinclair and others where you have got broadcast consolidation.
It seems to crowd out local content gathering and that is what
I am referring to.
Ms. Barr. Well, I can only refer back to what we do at
Graham Media Group, which is that we are a very committed local
broadcaster. We have increased by many hours the amount of news
we provide locally in our markets, and the number of people who
work for us in our news departments has grown exponentially.
Senator Schatz. OK. Mr. Schwantes, a couple of questions.
First just generally speaking, why are the rates rising faster
than inflation? Is it only because of these fees that they are
tacking on? Are there other factors here? And then I want you
to go into some detail about these fees and what we can do
about it.
Mr. Schwantes. Sure. Thank you, Senator Schatz. I would say
definitely a huge driver and to be fair to the cable industry,
the retransmission consent fees, Mr. Law pointed it out, they
are just astronomical increases and that goes back to what we
do with the retransmission consent regime.
But what is interesting about those fees and so now that
that has broken out as a separate line item and that number is
increasing. Charter, for example, has raised their broadcast TV
fee three times in just the last year. In 2010, that fee was $1
a month. Now, it is $13.50. So, they are off the charts and
that is leading to increases that exceed----
Senator Schatz. And break that down for the public. That
fee is not a Government fee--that is not a pass-through of some
transaction. That is just, they are calling it--what are they
calling it?
Mr. Schwantes. They are calling it a broadcast TV fee.
Senator Schatz. But they could call it whatever they want,
it is just an extra charge.
Mr. Schwantes. It is kind of glass half-full, half-empty. I
mean we see it as half empty. I mean, yes, there retrans costs
are going up but this used to be--and you would think a cable
operator one of the basic things that they do is provide local
broadcast channels, clear high-quality signal to their
consumers. And that used to be part of the base rate. And so
now Charter can charge for example, $13.50 and point back to
these retrans negotiations and say this is for the big four.
Costs are going up. We have got to raise our rates too, and now
consumers, look, you can see how much it is costing us. But the
base rates are not going down.
Senator Schatz. But there is no transparency. Let's say it
is $13.50. They cannot demonstrate that all that is actually a
pass-through, can they?
Mr. Schwantes. They do not currently, and I think if
something--I do not want to speak for Mr. Law, something we
would agree with. If cable companies could actually say what
they are actually paying to broadcasters for these retrans
fees, that is transparency for consumers, and we are all for
it. We think the problem is, is most consumers do not see it
that way.
I mean if you imagine yourself at a supermarket and you are
going to go get your favorite box of cereal and it is
advertised for $5 you think great, maybe on the way to the
checkout line you look at the fine print like fees might apply.
But once you get to the checkout line and they said well,
Senator Schatz, you have a grain refinery charge and this is a
cardboard box surcharge and now box of cereal is $7, you are
going to be pretty upset. And that is what consumers are facing
in the video industry.
Senator Schatz. Oh you want that milk in a container, that
will be a dollar. OK. So, what do we? Is this the purview of
the Congress or would this be micromanaging the market for us
to get in if we do reauthorize STELAR? Is there an appropriate
place for us to weigh in to get either some transparency or
some better fairness because clearly if it adds up to $450 per
year for the average customer, and most of that is just
additional profit, it does seem like Congress should get
involved.
Mr. Schwantes. I think so. I mean we could kick it over to
the FCC, but I think Congress is the better place to do it. And
that is why I like Senator Markey's True Fees Act. We are on
record supporting it because it does not eliminate these fees.
You can still itemize your cost and your charges whatever that
might be for. It gets to the front end of the problem. It puts
the cart before the horse saying actually your bill is going to
be $150 a month rather than that great teaser rate that you saw
online. And I think that for most consumers would be a huge
win.
Senator Schatz. Thank you.
Senator Thune. Thank you, Senator Schatz. Next up is
Senator Fischer.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Senator Thune. Nebraska's
orphan county situation makes it difficult for an entire region
of our state to access local and State programming. There are
16 counties in Western Nebraska that are assigned to out-of-
state markets. And today some of our witnesses have made
suggestions that would improve their company's competitive
positions in the marketplace.
However, I am interested in how we can improve access to
Nebraska-based programming for everybody in my state. So, if we
are going to consider reforms to help the bottom line of cable
providers, satellite providers, broadcasters, news programmers,
then we should consider ensuring the provision of in-state
programming in counties that are assigned to out-of-state
markets.
And I would ask you, Mr. Schwantes, do you think ensuring
this access to such in-State programming would improve
consumers' experience?
Mr. Schwantes. Senator, that is a great question. It brings
up the tricky issue of orphan counties. We dealt with it 20
years ago and----
Senator Fischer. And we are still facing it today?
Mr. Schwantes.--we are still facing it today. In my home
state of Wisconsin, you know, we have got some great counties
in Western Wisconsin that are in, God forbid, the Minneapolis
DMA. But beyond them wanting their Packer games on Sunday, and
it does affect civic engagement, for example. They are
receiving all the news from St. Paul, but they are going to
vote in elections either for Senator Johnson or Senator Baldwin
and they want to know what is going on in Madison, in
Washington.
And maybe it is for politics at the local level. Maybe the
Federal level is not the best analogy, but I do believe orphan
counties present a real problem. I do not even want to say
there are anomalies because they are all across the country.
There you are on the border and instead of being, in my case on
the Wisconsin DMA, you are in the Minneapolis DMA.
I think there have been attempts to try to deal with this,
petitions to the FCC for market modification. It is not
perfect, but I think one was granted recently in Colorado so
now that county in Southwestern Colorado can receive news from
in State in Colorado versus, I think it was New Mexico. So that
is something we do support and I think it is good for
consumers. And this kind of goes beyond consumer choice, but
more toward civic engagement.
Senator Fischer. I would agree with you. We are talking
about a fourth to a third of the State of Nebraska, the Western
part of Nebraska. They are closer to Denver than they are to
our State capital of Lincoln. We want all Nebraskans to be
engaged in what is happening in our state. Obviously, property
tax issues, every other issue affects them, and they need to
know what is going on.
Mr. Law, based on your knowledge from providing
communication services in South Dakota and you were very
familiar with one of the counties in our State of Nebraska, it
is an orphan county, Cherry County. What do you think we need
to do to look at this?
Mr. Law. Well, I think one of the options, Senator--yes, I
am familiar with Cherry County. It is a wonderful territory. I
think one of the options to consider is quite frankly part of a
more comprehensive video reform discussion. What you do with
DMAs and have DMAs to some degree necessarily lived out their
usefulness as it relates to the provisioning of local broadcast
content. I think I would suggest one thing you could perhaps
look at is the Modern Television Act of 2019 that was
introduced in the House by Representatives Scalise and Eshoo
which would potentially open the markets up to allow consumers
to access the content that they want as opposed to
policymakers, and quite frankly cable providers and
broadcasters and others dictating, here is what you are going
to get. If you want to purchase and pay for programming from a
different market, knock yourself out.
Senator Fischer. OK. Mr. Thun, this brings up another issue
we have in Nebraska when we look at Scotts Bluff and North
Platte. They have not received a local broadcast signal on
Direct TV who you represent. Last year Press Report said that
Direct TV does not plan to launch any new satellites. Is that
still the case?
Mr. Thun. I believe that is still the case.
Senator Fischer. Is Direct TV unwilling to serve these
markets with local broadcast content or is there some
technological issue?
Mr. Thun. No, I think as I said previously, we believe we
actually serve these customers. We are in all 210 DMAs. We
provide customers in those particular areas the opportunity to
get an antenna and pull over-the-air signals and integrate that
broadcast signal into their Direct TV experience. So, we
believe we are serving those customers and we are delivering
those signals. Not in the way that the NAB perhaps would like
us to deliver it but that is the way we are delivering it.
There are other competitive options to go to other places if
you do not like the way we do it.
Senator Fischer. It may not be the way Nebraskans that live
in those areas that are very rural would like you to do that
either. Ms. Barr, if you could respond to this. As you know in
the rural panhandle counties here in Nebraska, Nebraskans rely
on satellite TV services and they are beyond the physical reach
of an antenna signal and they do not have access to cable
networks at all. And this is the very point I believe is to why
launching local channels is so important.
A free antenna is not going to fix this. You know, we are
looking at residents in rural areas who should really be able
to expect to view local channels just as our metropolitan
constituents do as well. Have the broadcasters chosen not to
serve our rural constituents?
Ms. Barr. Absolutely not. We are licensed by the FCC. We
have a certain amount of power that we are allowed to extend.
We cannot just arbitrarily decide we are going to increase
power and extend the signal beyond what we are licensed to do.
If we could that would be great, but we are not allowed to do
that and the solution here is really AT&T's choice.
Senator Fischer. I mean you look at Cherry County, Mr.
Chairman, my last comment. You look at Cherry County. Mr. Law
knows where Cherry County is. You look at Cherry County, 6,000
square miles, less than one person per square mile. There is no
way that there is going to be a reach of an over-the-air
antenna that a free antenna is going to be able to be able to
meet. Thank you.
The Chairman [presiding]. Thank you, Senator Fischer.
Senator Baldwin.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you, Mr. Chairman, and I want to
thank all of our witnesses today. Mr. Schwantes, this is going
to sound quite familiar because we both know what is happening
in terms of Wisconsinites' access to local programming in
certain counties. So, by my count there are 13 Wisconsin
counties that are assigned to out-of-state media markets and
the largest of those is the Minneapolis, St. Paul media market
affecting about 400,000 people who live in that part of Western
Wisconsin.
And they end up getting the weather, local news, and yes
professional football games from Minneapolis rather than a
Wisconsin city. I think one of the key differences perhaps
between Nebraska's issue and Wisconsin's is that we do have a
professional football team in the state that many like to enjoy
watching. I have mused before as close to a political crisis as
you could have in a state is when you hear angry calls from
people who cannot get their favorite team on paid television.
Because of that, I have introduced The Go Pack Go Act which
takes one approach to allowing these constituents from 13
Wisconsin counties to have the option to receive local
programming from their cable and satellite providers. I am
pleased to hear everyone acknowledges the importance of access
to local programming, but I want a solution. I want to make
sure that everybody in these orphan counties have the
opportunity to say we want the networks, but we can have it
from our state rather than the DMA to which they are assigned.
So, I hope that we will consider how we fix these issues
since so many of us have raised this as a concern. But Mr.
Schwantes, from your perspective representing consumers, how
important is it to provide the option of more relevant local
programming? And I am going to follow up with a question about
consolidation. I want you to have that in the back of your mind
as you are answering this question.
Mr. Schwantes. Thank you, Senator Baldwin, it is good to
see you and the Packers are off to a great start this year, it
has been a couple of years. But in particular this is a
complicated issue and it is one, like I said to Senator
Fischer, we have been wrestling with for years. But to your
point, and I would like to look at the Go Pack Go Act and see
if that is something we can support. And if it builds upon what
we did in 2014's version of STELAR--the market modification
process is imperfect, and I think sometimes it pits
broadcasters against one another and I want to make sure that
we represent consumers. I think it would be great if you are
sitting there in Western Wisconsin and Hudson, and you can pull
in, you know, stations from my hometown of Wausau and to watch
your Packer games. I think that would be great for consumers.
I think Mr. Law pointed out something to legislation on the
House side. If we can kind of throw this in more to a copyright
regime, that would be a big, big change. But as far as we are
concerned, options that give consumers more choices. We are for
that and it is something we should definitely consider moving
forward.
Senator Baldwin. Thank you. In his testimony, Mr. Thun
notes that in the markets where his company uses the distant
signal license there has been significant ownership
consolidation among the network affiliates in many of those
markets.
Regardless of how that informs our discussion about
reauthorizing those provisions of STELAR, it is part of a trend
that could impact access to local programming and consumer
prices. According to Pew Research as of 2016, the five largest
companies in local television owned, operated, or serviced 443
broadcast stations or 37 percent of all stations and that is an
increase from only 179 stations in 2004.
So, turning again to you, Mr. Schwantes, for the consumer
perspective. What effect do you see on consumers from
consolidation in broadcast television? And what about the
broader video marketplace?
Mr. Schwantes. That is an excellent question, Senator. I
think the short answer is this is why we at Consumer Reports
opposed the Sinclair and Tribune merger in 2017. We feared
that--we can get into FCC media ownership rules if we want but
that is a different kind of rabbit hole, but it was something
that at a real base level would give Sinclair, which would own
multiple local broadcast stations, and not just ABC but you
know multiple of the different big four networks, and it gives
them increased leverage and retransmission consent negotiations
where they have, you know, hundreds of different stations that
they are negotiating on behalf of.
That is why we opposed that merger. We thought it would
lead to increased retransmission consent rates, which we agree
with our friends in the cable industry, that they are going up,
we just do not like that consumers end up paying them. But then
it was just a question of localism. It was something the
Commission always considered as part of their media ownership
rules and kind of took a beating in the courts in the 2000s and
that is something, we do support. We think is important for
consumers and we think it is important for local broadcasting,
local news, weather, and sports.
Senator Baldwin. Thank you.
The Chairman. Thank you, Senator Baldwin. Senator Markey,
while you were out of the room Mr. Schwantes said you got a
bill he likes.
[Laughter.]
Senator Markey. Thank you, Mr. Chairman.
The Chairman. You are recognized.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. A preview of coming attractions. Thank you
for this and I think there might be a couple he likes. I will
just go first to follow up on what Senator Baldwin was just
raising because I have a very similar concern that she does.
And that is, out in Berkshire County they have lost access to
local Massachusetts broadcast television, because their cable
provider dropped the Springfield NBC station and the Boston ABC
station from its channel lineup.
And because the Berkshires are technically part of Albany,
New York designated market area, Western Massachusetts viewers
can only access broadcast stations to focus on New York. And
so, for people in the Berkshires, they get news about what is
going on in the Albany State House, but they really care about
the Massachusetts State House. That is their real concern in
terms of how it will impact their lives.
And it is not just an annoyance to people who watch
Massachusetts teams on game day, it is a threat to the informed
citizenry that a healthy democracy requires. The public should
know how their elected officials are representing them at the
State House and that is why I introduced legislation along with
Representative Neal to force the Berkshire Cable Provider
Charter to engage in good faith negotiations with WWLP and WCBB
to bring those stations back on the air in Berkshire County.
And I am willing to work with any member of this committee.
I know that Senator Fischer raised a similar issue so that
we can come together in this legislation to begin to find
solutions to problems that really do bother people at the local
level in our country.
So, I know that you have a concern about that Mr.
Schwantes, so I will come back and I will ask a question that I
think Senator Wicker was referring to and that is that
ultimately the video marketplace must work for consumers. For
too many Americans that is not the case today. A new study by
Consumer Reports shows that every month consumers are surprised
to find that the cable bill is much higher than the advertised
price they signed up for. And the numbers are clear.
On average, cable companies generate close to $450 annually
per customer from fees. The average cable bill includes more
than a dozen added line item charges and these fees add nearly
25 percent of the base price to a consumer's monthly bill, not
the advertised price, but these fees then come in in addition.
These charges are more than a nuisance, they are
unanticipated costs that squeeze consumers and that is why I
introduced the True Fees Act legislation that would put an end
to cable, internet, and telephone advertising practices that
only confuse consumers about the true cost. The True Fees Act
requires providers to include all chargers in the prices they
advertise for service, allow customers to end a contract
without early termination fees if providers increase their
fees, and provide clear and timely notice of price changes.
So, Mr. Schwantes, in your testimony you voice support for
the True Fees Act. Can you explain the ways that increased
transparency in cable billing will benefit consumers?
Mr. Schwantes. Thank you, Senator. And thank you for your
leadership on this issue. I think just three things. If you had
more transparent cable billing and you missed my cereal box
analogy and I will not torture the panel with that again, but
basically consumer frustration, if they actually knew what the
cost they are going to pay each month was right up front, right
on the advertised price, I think consumer frustration and blood
pressure levels will go down.
I mean as part of our work we survey consumers and I want
to say 96 percent of consumers were annoyed with hidden fees in
all industries. This is not just unique to the cable industry.
Almost two-thirds are extremely annoyed. So, I think that level
of frustration would come down. I think it would also allow
consumers to comparison shop. I mean, there are lots of I think
a success story or the number of online streaming services that
are out there for consumers to choose from. But as you are
trying to add it up like well, what is my cable bill really
going to be as I am paying for all these other services, that
would help comparison shopping.
And finally, just a real basic, help households keep their
budgets. I think for some families if an extra $50 to $200 a
month and add-on fees can blow a hole in the budget. And in our
survey work, I want to say 6 out of 10 of our consumers that we
surveyed said yeah, it hurts our budgets.
Senator Markey. National Association of Broadcasters, how
do you feel about the True Fees Bill?
Ms. Barr. We want to see fairness across the board, and we
want to see local stations carried in their local markets.
Senator Markey. So, you do not want to see surprise fees?
Ms. Barr. No. I do not like to look at them either. I do
agree that there are more options today so you can go to an
over-the-top service. You can go to other services as well. We
remain obviously--we are still free and over the air. We always
will be, and so we want to see fairness on that as well.
Senator Markey. I agree with the National Association of
Broadcasters and Consumer Reports. Thank you, Mr. Chairman,
very much, and thank you for your support for my bill.
The Chairman. Thank you, Senator Markey.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thanks, Mr. Chairman. Thank you all for
being here today. I apologize that I was at a number of other
hearings as I suspect many of my colleagues were, and I want to
focus on an area that I think may not have received enough
attention so far, blackouts. I am a big fan of local
broadcasting. Connecticut has some of the best in the country.
I am proud to say. And I appreciate firsthand that local news
and localism is vital for democracy. I praise our broadcasters
and our local press generally for providing the information
that we need for democracy to work, truthful and accurate
information.
Blackouts obviously are a plague for consumers. These
blackouts are always unfair to consumers because they are on
unable to watch the content for which they have paid. So, I
have a simple question for all of you, but most especially for
Ms. Barr, Mr. Thun, and Mr. Schwantes, is the failure to renew
STELAR likely to lead to more or fewer blackouts of programming
for satellite television subscribers?
Ms. Barr. Thank you, Senator. In my opinion, the expiration
of STELAR will have no effect because it is in our best
interest, it has always been in our best interest to negotiate
in good faith. And I know for my company speaking strictly for
mine, we have never had a blackout. We do not want a blackout.
We work very, very hard not to. And we are negotiating as a
relatively small company with AT&T, Dish, Charter, others, and
we have managed to successfully get those deals done to our
mutual satisfaction.
Senator Blumenthal. Others? Mr. Thun?
Mr. Thun. Yes, I would disagree with that notion. We have
good faith today and it provides the lowest standard of good
faith. We currently face a sea of increases that I provided
earlier. There was a 5,400 percent increase in 2006 to today.
Those increases are unsustainable. And those increases I think
demonstrate that while the broadcasters are pretending as if
they are poor little Mom and Pops against big AT&T, the fact of
the matter is that when they are at the negotiating table, they
have supreme leverage, and they utilize it every chance. And
so, the notion that we would take good faith away I think would
only exacerbate the problem. It would lead to higher prices and
more blackouts.
Senator Blumenthal. Mr. Schwantes?
Mr. Schwantes. I agree with Mr. Thun on that, but I would
also say you would have a very massive blackout on New Year's
Day. I am a political realist. I do not believe that if we let
STELAR expire that within a week--the Dish Network story is a
little complicated but I do not think within a week Direct TV
will suddenly be carrying these distant signals, and one of the
provisions is a very obscure one, but right now 119 distant
signal can be brought into a local market without
retransmission consent. It is not required.
If that goes away, both the compulsory license, which I am
more familiar with goes way. But also, the ability not to have
to engage in these tents retransmission consent negotiations.
Suddenly, they would be at the bargaining table on January 1
trying to figure this out without the benefit of a compulsory
copyright license. So, you would have a very big blackout in
January of next year.
Senator Blumenthal. Well, I was an advocate for ending the
sports blackout rule. When we fought to--and that rule the NFL
warned that football would disappear over the air if the sports
blackout went away. So maybe we have a lesson for future
reform. Were there any negative effects stemming from the FCC
repealing its sports blackout rule? Question for all of you. I
see some heads being shaken. The record will then reflect they
were side to side, not up and down.
Mr. Watts. Senator, in Oklahoma we think it is communism to
let football be blacked out.
Senator Blumenthal. Well so far, the communists have not
taken over.
Senator Markey. And J.C. Watts was the quarterback on two
Oklahoma teams that won the Orange Bowl. So, you helped to make
it a religion.
Senator Blumenthal. This is a serious subject especially
for dedicated football fans and we have many in Connecticut as
well. But it is more than sports. It is a principle that is
vital to our democracy. And so, I hope that we will make sure
that blackouts are a thing of the past. Thank you, Mr.
Chairman.
The Chairman. Thank you. Senator Markey, do you have follow
up questions?
Senator Markey. No, I am fine.
The Chairman. OK. Who has thoughts on the five-year renewal
or a different timeframe? Does anyone wish to talk about that?
Mr. Thun. I think we would definitely prefer that this was
permanently enacted. Our cable partner, or our cable
competitors have a permanent license. We are not sure why we
would be treated any differently. We think that STELAR provides
customers access to network television that they would not
otherwise get and to be taking STELAR away would only harm
those customers and they would not have another choice to get
that content.
The Chairman. So, Ms. Barr, you want zero and Mr. Thune
wants forever. What are your thoughts on what he said, why is
he totally wrong?
Ms. Barr. I just go back to I think the five-year cycle has
created more harm than anything else and I would say that we do
not need it for five more minutes, never mind five more years.
We need to be we need to be focused on what we do locally and
the best way to do that is allow us to continue to do our local
jobs, so I would not renew it at all.
I think the distant signals coming into these markets
whether it is from New York or LA are not providing any real
service other than they are giving you a network signal, but
they are giving you nothing of the local. So again, as I said
earlier if you have a wildfire going on in your State or you
have a tornado or whatever and you are watching a station from
New York, you are not getting any information that could
literally be lifesaving.
The Chairman. Mr. Schwantes, is something between five and
zero appropriate, do you have any thoughts on this?
Mr. Schwantes. I am always open to ideas. We are on record
Senator of in favor of a permanent reauthorization for much of
the same reasons Mr. Thun from AT&T has pointed out. Mostly for
parity with cable. I think what is good for cable in this
context should be good for satellite, and I think back when I
worked on the 1999 version of this law, we were talking about
millions of distant signal subscribers. Now that number is
below a million.
I think it is not the problem that it used to be, but I
think a five-year cycle gives us an opportunity to consider
targeted marketplace reforms that can always be a good thing.
It is the legislation that is moving. But I do think so many of
the issues we discussed here today beg for a larger bill, a
larger reform of the video marketplace. We haven't really done
that mean that apart from these five-year cycles. We have not
really done that since the 1996 Telecom Act, and I think all of
us in this room know that the media marketplace is very, very
different now in the Internet age than it was in the mid-90s.
The Chairman. Anybody else have thoughts on that?
Mr. Law. Senator, I would echo Mr. Schwantes' comments in
terms of years. While I may not have a specific number, I do
think it is important that STELAR be renewed for a period
throughout two to five years, at least somewhere in there if
nothing else to keep the current system, flawed as it is, in
place, but also as part of a larger video discussion. In my
career, it seems that as part of a larger video discussion in
the marketplace, this vehicle seems to be about the only time
this comes up for discussion.
Mr. Thun. I think it is worth saying again that if STELAR
goes away, 870,000 customers are going to lose access to TV
broadcasting signals.
The Chairman. Ms. Barr, you say that is flatly incorrect.
Now, how can two people of good will have such a disparity?
Ms. Barr. Because it is my understanding, sir, that AT&T is
making a decision not to serve those markets with the local
stations. That is a business decision. They are certainly
entitled to make that decision, but it is not something they
are incapable of doing. It is just something they choose not to
do.
Mr. Thun. Can I clarify that?
The Chairman. Certainly.
Mr. Thun. Because I think there is some conflation going on
here that is confusing people. In the markets where we take an
over-the-air signal, we are not using the distant signal in the
middle of Helena, Montana. In the middle of Helena, Montana the
only vehicle for us to provide broadcast signals is through the
antenna, which we provide to our customers for free and give a
discount to our subscribers. It is only in the outskirts of the
DMAs where the broadcasters fail to deliver a signal is where
these distant signals come into play or in the case of the
long-haul truckers and the recreational vehicle users. Those
also come to play as well which are important constituents.
But the notion that taking STELAR down is going to then
close a loophole where we provide broadcast signals in the
middle of markets is patently untrue.
The Chairman. Mr. Thun, when you say the broadcasters fail
to deliver a signal, Ms. Barr responds to that by saying they
have a certain geographic area where they can broadcast their
signal and beyond that they cannot do so. And so, what is the
answer? And I would like both of you talk about that.
Mr. Thun. Well, I think if they put repeaters in the
outskirts of the areas, I guess I am not familiar with the
technology of what megahertz they are allowed to broadcast
that, but I believe that there is technologies to put repeaters
on the outskirts of these DMAs in order to afford customers
access to the signals.
The Chairman. Is that expensive?
Mr. Thun. Well, I think they have got a windfall of money
coming through the retrans fees that we pay, so they have got
plenty of money to pay for it.
Ms. Barr. I think the use of the term fail is just--it is
not correct. We are doing what the law allows us to do. We are
broadcasting at maximum power and we are reaching as far as we
can. That is that is what the FCC has licensed us to do and
that is what we are doing. The fact is that we know that other
companies, satellite companies, cable companies have
technologically figured out a way to take our local signals and
put them on their services.
And AT&T could do this. We know Dish is doing it. There are
signals available on over-the-top platforms that they are able
to receive from our local television stations. So, all of that
is possible, it is just a question of having the will to do it.
And I just do not think that AT&T at this moment has the will
to do that.
The Chairman. Mr. Schwantes, help us once again understand
what the expiration of STELAR would do to prices for consumers?
Mr. Schwantes. If you let it expire and we then we deal
with this 119 license issue. That is the distance signal
license. That is what AT&T and some instances Dish Network are
using to deliver these distant signals into some markets. That
would go away. The issue is a little more complicated in how
they bring these in like in. In Helena, Montana, for example,
we looked at that market--what Direct TV is doing and I would
defer to Mr. Thun, is they are bringing in not a signal from
New York or LA, they bring it in from a neighboring market, say
from Butte, Montana and there are some rules that allow them to
do that.
But in terms of how it makes it more expensive, right now
those distant signals are not subject to retransmission consent
negotiations. Direct TV or Dish Network, the other satellite
providers do not need to sit down with the broadcasters and
negotiate a fee for carriage.
The Chairman. They pay a fee to the copyright office,
right?
Mr. Schwantes. Yes. It is a compulsory license. That is
correct, Senator. And in general, that is lower than the market
rate in my experience. But if that 119 license goes away and
along with it the requirement, the privilege of not having to
engage in retransmission consent, it throws that market off. I
think I do agree with Mr. Thun. Some signals will go dark. And
then AT&T and Dish Network, they also use the 119 license in
some markets. They would then have to sit down with the
broadcasters and cut a new deal. And if it is very low now, I
can only imagine, and this is just a hazarding guess, it will
be more than what it currently is. And I would hazard a second
guess that it would be passed onto consumers.
Mr. Watts. Mr. Chairman.
The Chairman. OK, please Mr. Watts, yes.
Mr. Watts. Just one thing I want to add. Over the last hour
and 46 minutes we have been talking about reauthorization of
STELAR. For the last 10 years I have been trying to get an
independent network up and going and the theme of what we have
heard over the last hour and 45 minutes has been retransmission
fees being escalated, consumer bills being escalated,
blackouts. That has kind of been the theme of our conversation.
And the reason that we think modifying Section 335 is so
critical, the independents get caught in the mix. In any one of
those three issues, independence get squeezed or they get
squeezed out. And so, there is nowhere on the TV dial that the
African American community can go today to get information or
education and see a very unique perspective concerning current
affairs, history, you know, HBCUs, wellness, etc., etc., etc.
So, I hope in this discussion we have seen why it is critically
important to modify Section 335 for independent content
providers like BNC.
The Chairman. Thank you very much. Well, let us do this.
Each of you take a minute to summarize what the bottom line is
and what you would like to say, anything that we have missed,
and we will start with you, Ms. Barr, and go down and then that
will be the end.
Ms. Barr. OK. Thank you very much, Senator. I would just
like to reiterate that it is our belief that the harm caused to
local markets by bringing in distant signals is something that
needs to be addressed, and this is going to continue if STELAR
is allowed to be reauthorized.
So, from my point of view and from the point of view of the
NAB we feel strongly that local news, local television should
be paramount. It is the bedrock of what we do. It is as I said
earlier, the news we provide in these local markets is our
North Star. We do not believe we need a regulation to govern
good faith bargaining because it is in our best business
interest to good faith bargain, and we do that now. And in
large part, in large part, despite the publicized blackouts, we
are getting these deals done.
It is interesting to me that with respect to AT&T in the
last five months we have had a lot of blackouts but in a year
ago at this time, we only had one so with respect to them, so I
would just argue that if we allow STELAR to sunset, I think it
accomplished everything it was supposed to do when it first was
designed under its former name, but I think at this point we
have we have moved on.
The Chairman. Thank you. Mr. Law.
Mr. Law. Thank you, Mr. Chairman. I would simply state that
I think that the Congress should take a serious look at how to
reform certain applications on a targeted basis for video
subscribers, including the nondiscriminatory practices in terms
of retransmission consent prices, tying, bundling, and the
requirement of purchasing a basic tier.
And in response to some of the questions today regarding
the receipt of an off air signal, while I respect Ms. Barr's
comment regarding broadcasting at full power, in South Dakota
and in rural areas, there are significant areas within their
licensed DMA and within their license for spectrum that
broadcasters could distribute their signal and not require
customers to purchase it from companies like mine, but the
broadcasters have chosen not to broadcast in those areas.
The Chairman. The local stations?
Mr. Law. The local stations. Local stations have chosen not
to put transmitters in additional locations to cover their DMA.
And as a matter of fact, one broadcaster in a certain DMA
covers exactly 14 percent of the geography of the DMA and
leaves the other 86 percent behind. I happen to live in that
other 86 percent.
The Chairman. Thank you. Mr. Thun.
Mr. Thun. Yes, I would say that we are here to talk about
the reauthorization of STELAR and we are losing sight of the
fact that 870,000 customers rely on these distant signals to
get network programming. All of the talk about we are not
servicing the local communities is not true. We are servicing
them through an antenna. And it will not change. The removal of
STELAR will not change how we deliver the signals in that
fashion. It has no bearing whatsoever.
What we are talking about here is the broadcasters' failure
to deliver in certain markets. And for those customers who
cannot receive an over-the-air signal, we are trying to give
them a practical way to receive their network content that they
are looking for and that they have relied on for years. So that
notion that we are talking about all these different things, I
think very straightforwardly we are talking about the renewal
of STELAR and the customers that are being impacted.
I think it would be a tremendous disservice to those
customers to take it down now and remove those things from
them, as well as just the ancillary impacts of taking away good
faith, which being on the frontline of these negotiations I can
tell you good faith is not something that is adhered to at the
highest levels. It is at the absolute minimum that broadcasters
adhere to it and we have to remind them in certain cases you
are not acting in good faith to whip them back into shape in
certain cases.
So, to take that piece of STELAR away from us in those
negotiations would be harmful. It would raise prices and create
further blackouts. And further, blackouts are not in our
interest. We do not do this as a vehicle to try to get STELAR
reauthorized. It is absolutely crazy to think that we would
lose hundreds of thousands of customers for this. That is not
the case. I think it would be economically imprudent to do so.
The Chairman. Thank you. Mr. Watts, I heard you on
television one time quoting someone else as saying we are all
entitled to our own opinion just not to our own facts. It seems
that somehow these people of good faith are entitled to their
own facts. I am sure you cannot help me there but what would
you say in a way of 60 seconds?
Mr. Watts. Mr. Chairman, my closing comments were my
previous comments. I am here at the table trying to, you know,
create more opportunity for independent content providers and
my proposal to amend section 335 is I think a way that we can
do that. Dish Net and Direct TV both are supportive of that. So
again----
The Chairman. This exploration negotiation gives you an
opportunity for that negotiation to be successful.
Mr. Watts. Correct.
The Chairman. Mr. Schwantes, wrap it up in 60 seconds.
Mr. Schwantes. Will do. Thank you, Senator. I will go back
to what I said in my earlier remarks, which is STELAR in all
its earlier forms was a pro-consumer and a pro competition law
and it has done a lot of great things for consumers and
competition. I think it is October 23. We immediately need to
help these hundreds of thousands of consumers who face real
anti-consumer result of not having their signals come New
Year's Day.
So, I think we need to deal with the STELAR
reauthorization, move past it, and then take on some of these
bigger issues. And we need to because these bigger issues are
causing the inflation and the rise of company-imposed fees and
bills and that is largely because, I do agree with some of the
panelists, a broken retransmission consent system.
So, let's take on those bigger issues. In the meantime, let
us use it as a vehicle to help consumers bring some
transparency to billing but really engage in the bigger issues
and figure this out and lower prices and increase consumer
choice. Thank you.
The Chairman. Well, I want to thank all of our witnesses. I
think you have all been excellent and this has taken place in a
spirit of openness and sort of debate that we welcome here in
this country, and I really appreciate each and every one of
you. I need to say that the hearing record will remain open for
two weeks.
Senators are asked to submit any questions for the record
during this time. And to our witnesses, upon receipt, can you
submit your written responses as soon as possible, but no later
than November 20, 2019.
Okay, we thank you and we conclude the hearing once again.
And we are grateful to each and every one of you for your
insights and for your participation. This hearing is now
adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
A P P E N D I X
National Grange
Washington, DC, September 23, 2019
Hon. Roger Wicker,
Chairman,
Hon. Maria Cantwell,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate.
Hon. Lindsey Graham,
Chairman,
Hon. Dianne Feinstein,
Ranking Member,
Committee on the Judiciary,
United States Senate.
Hon. Frank Pallone, Jr.
Chairman,
Hon. Greg Walden,
Ranking Member,
Committee on Energy and Commerce,
United States House of Representatives.
Hon. Jerrold Nadler,
Chairman,
Hon. Doug Collins,
Ranking Member,
Committee on the Judiciary,
United States House of Representatives.
Re: Support for STELAR Act reauthorization
Dear Chairmen Wicker, Graham, Pallone, Nadler and Ranking Members
Cantwell, Feinstein, Walden, Collins:
When it comes to obtaining access to basic services, rural
communities are prone to experiencing gaps or interruptions. Television
content is unfortunately no different. Unless Congress moves quickly to
reauthorize the of Satellite Television Extension and Localism Act
Reauthorization (STELAR), over 870,000 satellite TV customers, mostly
in rural areas, will lose basic protections that afford them access to
basic broadcast network programming in places where over-the-air
signals can't reach.
Rural residents should not be needlessly punished and their access
to network entertainment should not be curtailed because they live in a
less convenient area to service. Therefore, the National Grange urges
your support for prompt STELAR reauthorization before it expires on
December 31, 2019. This important legislation will help preserve the
connectivity of hardworking, rural communities by providing them access
to local news, sports, and other programming of their choice.
Technical limitations make it difficult for many residents in small
towns and rural communities to watch broadcasting from one of the ``big
four'' networks without STELAR reauthorization. STELAR contains a key
provision that enables satellite and pay-TV providers to import
broadcast signals to these communities without interruption.
Our members depend on STELAR not just to access network
programming, but also to keep their service affordable because STELAR
encourages good-faith negotiations between broadcasters and satellite
providers. This law's importance cannot be overstated: its provisions
serve as the single set of rules that help to protect consumers from
programming ``blackouts,'' which broadcasters deploy to extract
retransmission fee increases from rural residents and small businesses.
Congress must take prompt action to ensure that STELAR's
protections remain in place. This law's reauthorization has always had
strong bipartisan support; when STELAR was last considered in 2014 it
passed Congress unanimously. Reauthorization before the law expires at
the end of this year will demonstrate that Congress is truly committed
to preserving rural Americans' access to information and entertainment.
Sincerely,
Betsy E. Huber,
President.
______
October 1, 2019
Committee Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
512 Dirksen Senate Building,
Washington, DC.
Dear Senator,
On behalf of the undersigned organizations, we urge Senate
Commerce, Science, and Transportation Committee to review the existing
laws governing the video marketplace.
Since the Cable Act of 1992 was enacted, the way in which consumers
view video has changed dramatically. Nearly everything can be watched
anywhere. Movies, television shows, news, and sporting events are
available through online platforms like Netflix, Pluto TV, Roku, and
YouTube, through podcasts and direct subscriptions to movie services
including HBO Now and Starz, as well as broadcast television and cable.
The laws surrounding video viewing have remained stagnant and are
in need of review and modernization. We encourage the start of this
effort and look forward to further engagement with you throughout the
process.
Again, thank you for your consideration.
Sincerely,
Thomas A. Schatz, Jeff Mazzella,
President, President,
Council for Citizens Against Government Center for Individual Freedom.
Waste.
Andrew Langer, Bartlett Cleland,
President, Executive Director,
Institute for Liberty. Innovation Economy Institute.
Daniel Schneider, David Williams,
Executive Director, President,
American Conservative Union. Taxpayers Protection Alliance.
Phil Kerpen,
President,
American Commitment.
______
Hispanic Technology & Telecommunications Partnership
October 11, 2019
Hon. Jerrold Nadler,
Rayburn House Office Building,
Washington, DC.
Dear Congressman Nadler,
We represent a diverse community of Hispanic entrepreneurs,
creatives, and consumers who deserve to experience the full benefits of
the revolution in content delivery. Technology and the way in which
consumers access media has changed dramatically over the last decade.
When you consider the advent of streaming and growing popularity of
mobile viewership, it is almost unthinkable that the laws and
regulations governing the video marketplace in the United States have
not been updated since the 1990s. That is why we urge you to pass
legislation to modernize the video marketplace and protect consumers'
unfettered access to today's innovative digital media market.
One of the most important things Congress can do immediately is to
renew the Satellite Television Extension and Localism Act
Reauthorization (STELAR). This law helps ensure that more than 870,000
consumers can access network TV programming through the distant signal
license provision. For rural Hispanic communities, this provision is
especially important as it is makes it much easier for residents to
access basic network content.
STELA Reauthorization ensures that Latino consumers have access to
important content which is normally free over the air when they are
within the broadcasters service area. Congress should ensure the rules
it passes do not disadvantage them and make this programming more
difficult or costly to view even for consumers outside the broadcasters
service area.
If Congress fails to renew the STELAR Act--or permanently codify
its most important provisions--communities in so-called ``short
markets,'' where content from one of the ``Big Four'' broadcasters is
not available, will have no way to access the media they depend on.
Particularly in rural parts of the country, cutting off network access
can deprive rural, otherwise hard-to-reach Hispanic communities of
valuable sources of local news, events, election updates, sporting
events, and other important information.
Reauthorization also gives Congress an opportunity to codify a set
of basic consumer access protections while addressing the outdated
regulations that currently govern the video marketplace.
It is past time to protect consumers by updating these rules to
reflect the realities of today's video content marketplace. Keeping our
video marketplace laws stuck in the past unfairly disadvantages the
Hispanic community for embracing new technology and seeking out
Hispanic media representation and Spanish-language programming.
Congress must act quickly and thoughtfully to address the range of
issues that our outdated rules and regulations for video distribution
have created. We should no longer be relying on laws last updated in
the early 1990s to govern the ever-evolving marketplace of content
today.
Please work with your colleagues in the Senate and House of
Representatives--and on both sides of the aisle--to help pass
meaningful legislation that updates our video marketplace laws, while
also working to renew the STELAR Act to help protect Hispanic consumers
and all Americans from unfair and abusive practices.
Sincerely,
Alejandro Roark,
Executive Director,
HTTP.
About HTTP
Formed in 1996, Hispanic Technology & Telecommunications Partnership
(HTTP) is the leading national Latino voice on technology and
telecommunications policy. HTTP's coalition of nonpartisan national
Latino civil rights organizations, work to ensure that the full array
of technological and telecommunications advancements are available to
all Latinos in the United States. Together and through their missions,
each promote the social, political, and economic advancement of over 50
million Americans of Hispanic/Latino descent by facilitating access to
high quality education, economic opportunity and effective health care
through the use of technology tools and resources.
______
Public Knowledge
October 15, 2019
Hon. Roger Wicker,
Chairman,
Committee on Commerce, Science, & Transportation,
United States Senate,
Washington, DC.
Hon. Lindsey Graham,
Chairman,
Committee on the Judiciary,
United States Senate,
Washington DC.
Hon. Frank Pallone, Jr.,
Chairman,
Committee on Energy & Commerce,
United States House of Representatives,
Washington, DC.
Hon. Jerrold Nadler,
Chairman,
Committee on the Judiciary,
United States House of Representatives,
Washington, DC.
Hon. Maria Cantwell,
Ranking Member,
Committee on Commerce, Science, & Transportation
United States Senate,
Washington, DC.
Hon. Dianne Feinstein,
Ranking Member,
Committee on the Judiciary,
United States Senate,
Washington, DC.
Hon. Greg Walden,
Ranking Member
Committee on Energy & Commerce,
United States House of Representatives,
Washington, DC.
Hon. Doug Collins,
Ranking Member,
Committee on the Judiciary,
United States House of Representatives,
Washington, DC.
Dear Chairmen Wicker, Graham, Pallone, and Nadler, Ranking Members
Cantwell, Feinstein, Walden, and Collins,
In 2014, Congress unanimously voted in favor of the Satellite
Television Extension and Localism Act Reauthorization (STELAR). Among
other things, this law allows satellite TV subscribers who would not
otherwise be able to access network programming at all to access these
broadcast stations. Without these critical legal protections in place,
more than 870,000 satellite television subscribers risk losing their
ability to access news, sports and programming at a fair and
competitive price. Many of the residents most likely to be impacted by
a failure to renew STELAR are disproportionately rural or otherwise
live in areas that put them at a considerable disadvantage for access
to information compared to urban and suburban communities--for example,
they may live in ``short'' markets that lack a national network
presence or in households that cannot receive stations over the air.
Therefore, consumers across the country are counting on this Congress
to reauthorize and reaffirm STELAR and its important consumer
protections before they expire on December 31, 2019.
The current situation in which hundreds of thousands of satellite
television subscribers are held hostage to cyclical and frequent
regulatory disputes is unsustainable. We believe that consumers deserve
to be treated better, and that they should be entitled to fair access
to a full range of national programming. STELAR's key provisions--
including the distance signal license--ensure that satellite television
companies can continue to provide broadcast stations to all their
customers. Permanently reauthorizing STELAR will allow viewers living
in underserved areas to continue receiving content without unnecessary
disruption and lay the foundation for improved video marketplace
competition.
Congress should take this opportunity to build on STELAR's
foundational provisions and modernize the nearly 30-year-old rules
governing TV and video transmission. The increasing numbers of ``cord
cutters'' and ``cord nevers'' show that consumer habits are changing
and that today's video audience wants to take advantage of their ever-
growing viewing options.
Unfortunately, many of the rules from the 1992 Cable Act and its
subsequent iterations are stifling today's modern and innovative video
market. This outdated law does little to keep bills in check. The
retransmission fees consumers pay to broadcasters has ballooned from
about $200 million in 2006 to $11.7 billion this year. Even worse,
MVPDs unload their increased costs onto consumers in the form non-
optional, company-imposed fees, like the ``broadcast TV fee'' and
others. Moreover, consumers usually don't have the option of a low-cost
carrier with limited channel offerings that is less beholden to
negotiating with broadcasters. The result is that since 2010, there
have been more than 1,000 blackouts and this trend is only getting
worse. In 2017, there were more than twice as many blackouts as in
2016. In 2019 alone, there have already been 230 blackouts.\1\
Thousands of cable and satellite subscribers become bargaining chips
whenever broadcasters and providers fail to reach an agreement.
---------------------------------------------------------------------------
\1\ American Television Alliance, ``Broadcasters Are to Blame for
Skyrocketing Retrans Fees and Record Number of TV Blackouts,'' https://
www.americantelevisionalliance.org/broadcasters-are-to-blame-for-
skyrocketing-retrans-fees-and-record-number-of-tv-blackouts-says-atva/
(July 24, 2019)
---------------------------------------------------------------------------
Consumers are being taken advantage of and Congress can put a stop
to it. In addition to provisions addressing satellite licenses, STELAR
contains ``good faith'' provisions that, if properly enforced by the
FCC, could reduce blackouts and lower consumer bills.
As Reps. Steve Scalise and Anna Eshoo have proposed in the Modern
Television Act of 2019, Congress could fix things by shifting the video
marketplace to a system based on privately negotiated copyright. Such a
system would better fit consumers' ongoing transition to online, multi-
platform viewing. While bold approaches of this are probably needed to
fundamentally restructure the video marketplace to better fit the needs
of consumers, allowing STELAR to expire in the interim would represent
a step backward. Video marketplace reform does not need to come at the
cost of harming 870,000 satellite subscribers.
The evidence for a permanent STELAR reauthorization is
overwhelming. The video marketplace is in dire need of sweeping
regulatory reform, but the artificial deadlines imposed by STELAR's
expiration keep that from happening. In the interest of consumers
across the country, we call on Congress to reauthorize STELAR before it
expires at the end of this year.
Sincerely,
Common Cause
Consumer Action
Consumer Federation of America
Consumer Reports
Open Technology Institute at New America
Public Knowledge
______
Communications Workers of America
Washington, DC, October 16, 2019
Hon. Roger Wicker,
Chairman,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
512 Dirksen Senate Office Building,
Washington, DC.
Hon. Lindsey Graham,
Chairman,
Committee on the Judiciary,
U.S. Senate,
224 Dirksen Senate Office Building,
Washington, DC.
Hon. Maria Cantwell,
Ranking Member,
Committee on Commerce, Science, and Transportation,
U.S. Senate,
512 Dirksen Senate Office Building
Washington, DC.
Hon. Dianne Feinstein,
Ranking Member,
Committee on the Judiciary,
U.S. Senate,
224 Dirksen Senate Office Building,
Washington, DC.
Dear Chairman Wicker, Ranking Member Cantwell, Chairman Graham and
Ranking Member Feinstein:
On behalf of the officers and 700,000 members of the Communications
Workers of America (CWA), I am writing to urge prompt passage of the
Satellite Television Extension and Localism Act Reauthorization Act
(STELAR). Failure to reauthorize STELAR means that more than 870,000
satellite subscribers, most of whom are rural customers, would lose
access to network TV programming from the loss of the distant signal
license.
The Satellite Television and Localism Act ensures that customers
who live beyond the contours of local TV stations can receive network
programming via satellite. The Satellite Act requires reauthorization
every five years and thus sunsets on December 31, 2019 unless Congress
acts now to reauthorize it.
Failure to reauthorize STELAR would mean that many rural Americans
would not have access to broadcast network programming that the rest of
the country receives and that these rural customers have paid for and
continuously relied on.
Since the last time Congress reauthorized the Satellite Act, CWA
has gained recognition of tens of thousands of DIRECTV employees whose
union contract provides good wages, benefits, and working conditions.
STELAR reauthorization will help protect these good jobs in communities
across the United States.
Finally, I note a lack of parity in the treatment of out-of-market
licensing for cable and satellite providers. The cable statutory
license does not have an expiration date, whereas the satellite license
must be renewed every five years. Satellite subscribers should not live
with the possibility that their service could end every five years.
Ideally, there should be a permanent STELAR reauthorization. But
barring permanent reauthorization, Congress must once again extend the
Satellite Act as it has done since 1988.
Thank you in advance for your consideration.
Sincerely,
Shane Larson,
Senior Director of Government Affairs and Policy,
Communications Workers of America (CWA).
Cc: Members of the Committees
______
American Television Alliance
October 22, 2019
Hon. Roger Wicker,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. Maria Cantwell,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Re: Hearing on the Reauthorization of STELAR
Dear Chairman Wicker and Ranking Member Cantwell:
I write on behalf of the American Television Alliance \1\ to
provide our perspective in advance of your hearing entitled The
Reauthorization of STELAR.
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\1\ ATVA seeks to be a voice for the American television viewer.
Our members include cable and broadband operators, satellite carriers,
phone companies, trade associations, independent programmers, consumer
groups and others concerned about the state of the video marketplace.
You can find out more information about us at
www.americantelevisionalliance.org.
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When I wrote to you before your last hearing ``The State of the
Television and Video Marketplace,'' \2\ I described the growing
dysfunction in the retransmission consent regime and the need for
Congress to address these issues in STELAR reauthorization.
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\2\ Letter from Mike Chappell to the Hon. Roger Wicker and the Hon.
Maria Cantwell (June 4, 2018), available at https://
www.americantelevisionalliance.org/wp-content/uploads/2019/10/ATVA-
Letter-Senate-June-4-FINAL111.pdf.
---------------------------------------------------------------------------
In the four months since then, broadcasters have initiated 216
blackouts affecting tens of millions of consumers. This brings the
total number of blackouts to 276 for 2019 and breaks the previous
annual record of 213. Indeed, broadcasters initiated more blackouts in
the last four months than they had caused in any prior entire year. And
broadcasters continue to raise prices by double digits each and every
year--more than five thousand percent since 2006.\3\
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\3\ News Release: ATVA Applauds Senate Hearing on STELAR; Urges
Committee to Address Retrans Reform (Oct. 16, 2019) (citing numbers
compiled by ATVA based on publicly available information).
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How bad have things gotten? A nonprofit, locally owned electric
utility (called BELD) in Braintree, Massachusetts recently announced
that it will ``cut the cord''--that is, exit the video business
entirely--this December.\4\ It stated that its decision ``was a direct
result of ever-increasing, out-of-control fees that BELD must pay
programmers for the privilege of carrying their channels'' and added
that, ``[a]t this point, the fees have left us no choice but to leave
the cable [TV] business.'' \5\ It is not the first video provider to
make this decision,\6\ and it surely will not be the last.
---------------------------------------------------------------------------
\4\ https://www.lightreading.com/video/video-services/another-
cable-operator-gives-pay-tv-the-heave-ho-/d/d-id/754319.
\5\ Id.
\6\ See id. (noting that 3 Rivers Communications in Fairfield,
Montana made a similar decision earlier this year).
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In such circumstances, it should be unthinkable for Congress to
eliminate the ``good faith'' rules by failing to reauthorize STELAR.
These rules provide at least some expectation of legitimate
negotiations and some recourse for those operating in manifest bad
faith. Without the good faith rules, the harm to consumers we are
seeing in the marketplace will only accelerate.
To the contrary, the facts on the ground show that Congress should
strengthen consumer protections. As I stated in my correspondence on
June 4, we believe that Congress should address issues such as
broadcaster consolidation, blackouts, phantom subscribers, and the
forced bundling of broadcast channels in any STELAR reauthorization.
Without Congressional action, consumers can expect more blackouts, more
price increases, less localism, and more video providers exiting the
business in the coming years (and thus, lets competition).
We look forward to working with Congress in the coming weeks on
this very important issue.
Sincerely,
/s/ Mike Chappell,
Chairman,
American Television Alliance.
______
October 23, 2019
Hon. Roger Wicker,
Chairman,
Senate Committee on Commerce, Science, and Transportation,
Dirksen Senate Office Building,
Washington, DC.
Hon. Maria Cantwell,
Ranking Member,
Senate Committee on Commerce, Science, and Transportation,
Hart Senate Office Building,
Washington, DC.
Dear Senators Wicker and Cantwell,
We are writing to you on behalf of a community that spends some
portion of their lives traveling around the country in recreational
vehicles. Our associations represent the manufacturers, dealers and
owners of RVs as well as the campgrounds they visit. It is unusual for
us to be writing to Congress regarding video issues, but it has come to
our attention that, absent congressional action, many RV consumers will
lose their access to network television signals.
By way of introduction, The RV Industry Association is the national
trade association representing approximately 400 RV manufacturers and
component and aftermarket parts suppliers who together fuel an industry
that has an overall economic impact to the U.S. economy of $114
billion; supporting nearly 600,000 jobs, contributing more than $32
billion in wages, and paying over $12 billion in federal, state, and
local taxes. RVDA--the national RV Dealers Association--is dedicated to
advancing RV retailers' interests through education and member services
programs designed to enhance the RV travel experience. The National
Association of RV Parks and Campgrounds (ARVC) is the only national
association exclusively representing the interests of private RV parks
and campgrounds in the U.S. FMCA is the world's largest not-for-profit
association for recreation vehicle (RV) owners, with more than 150,000
members. Escapees RV Club is one of the largest recreational vehicle
owners clubs serving approximately 70,000 RV enthusiasts.
As you may know, when RV families are on the road for weeks or
months at a time, many of them receive multi-channel television service
from satellite providers DIRECTV and Dish Network. Because they move
from one local television market to another, it is not possible for
them to receive the same local signals that satellite subscribers
receive at home. Instead, they receive Distant Network Signals under
the license granted in Section 119 of the Copyright Act. This allows
them to access sports and entertainment programming as well as national
news.
We are aware that the Section 119 license is set to expire at the
end of the year unless Congress acts to reauthorize the Satellite
Television Extension, Localism and Reauthorization (STELAR) Act,
portions of which are in your committee's jurisdiction. Our
associations generally would not insert themselves into a fight between
large satellite television companies and large broadcasters; however,
the loss of access to network signals would have a significant negative
impact on the quality of life for many RV families. We would emphasize
that most RVers have cable or satellite subscriptions at their fixed
homes, and that they are already paying once for each of the four
national networks; in accessing distant network signals, they pay an
additional fee to the networks through the Section 119 license. We are
simply asking that they continue to be allowed to do so.
Accordingly, we are writing to urge your committee to adopt
legislation reauthorizing STELAR, so that the Section 119 license can
be renewed, and, ideally, made permanent, at least for RV users. We
look forward to your response, which we will share with our members.
Thank you for your consideration.
Sincerely,
Jay Landers, Phil Ingrassia,
Vice President, Government Affairs, President,
RV Industry Association. RV Dealers Association.
Paul Bambei, Jon Walker,
President and CEO, National President,
National Association of RV Parks and FMCA.
Campgrounds (ARVC).
Shawn Loring,
CEO and Attorney,
Escapees RV Club.
Cc: Members, Senate Committee on Commerce, Science and Transportation
______
Response to Written Question Submitted by Hon. Rick Scott to
Emily Barr
Question. Current STELAR language requires multichannel video
programming distributors and broadcasters to negotiate in ``good
faith.'' Why do we need a government mandate to ensure industry
partners negotiate in ``good faith?''
Answer. While well intended, the expiring good faith requirement
has provided no quantifiable benefit, in large part because both
parties have every incentive to reach a deal without a government
backstop. As a broadcaster who is frequently outmatched in size and
revenue by the pay-TV companies with whom I negotiate, I can state with
certainty that STELAR's expiration will have no impact on my ability to
complete a retransmission consent deal.
______
Response to Written Question Submitted by Hon. Amy Klobuchar to
Emily Barr
Question. Local broadcasting is an important part of life in
Minnesota. More than 5 million Minnesotans watch live broadcasts, and
we rely on local television broadcasters in our state for news,
weather, entertainment, sports, music, and educational programming.
Can you speak to the importance of local broadcasting for
consumers in rural areas and how we can best ensure that these
consumers can continue to access local broadcasts?
Answer. In many parts of rural America, including Minnesota, local
broadcasters represent the glue that binds these communities together.
Particularly during a time when small-town newspapers and other local
media outlets are disappearing around the country, local broadcasters
often provide rural viewers and listeners their only link to their
communities. This link is provided by those who understand and reflect
the very communities they live in and serve. Local broadcasters around
the country also serve the critical function of ``first informer,''
alerting viewers and listeners of severe weather and other emergencies.
And as we have seen time and time again in communities around the
country, when a community has been plagued by crisis or natural
disaster, local broadcasters are first on the scene and the last to
leave, helping to ensure the safety of viewers and listeners whose
access to other forms of communication may be unavailable. Finally,
many rural areas have been left behind or forgotten by modern media
outlets, particularly in those communities that have little or no
access to reliable broadband Internet connections. In these
communities, local broadcasters provide not only a source of critical
local information, they also serve as the primary source of quality
entertainment and live sporting events.
We can best ensure that viewers and listeners can continue to
access their local broadcasts by pursuing policies that are mindful of
the unique challenges facing local broadcasters, which, in turn, often
threaten their very survival. Particularly in light of the explosion of
tech companies that are taking an ever-increasing share of overall
advertising revenue from traditional advertisers such as broadcasters,
magazines, and newspapers, one important policy choice is to ensure
that there are no new restrictions on the content or type of
advertisements that broadcasters can carry, as well as to protect the
current deductibility of all types of advertising as a normal business
expense. For local television broadcasters, another important source of
revenue emanates from the so-called ``retransmission consent'' process,
under which Federal law dictates that pay TV providers must reimburse
local broadcasters for content that they repackage and sell to
consumers for profit. Similarly, policies should be pursued that ensure
that local broadcasters are fairly compensated when their content and
stories are distributed over digital platforms.
In many ways, broadcasters are the last bastion of localism in our
country, and their value is even more pronounced in rural America. In
light of the intense competition from newer media sources, particularly
online services, policymakers should remain vigilant and avoid policies
that will further threaten broadcasters' ability to compete--and
survive.
______
Response to Written Questions Submitted by Hon. Rick Scott to
Robert Thun
Question 1. During my eight years as Governor of Florida, I saw
firsthand the destruction left behind by multiple devastating
hurricanes--Michael, Irma, Hermine, Matthew.
During these times of crisis, it is critical that our emergency
management leaders and law enforcement have the ability to share life-
saving information with our communities before, during and after the
storm.
If STELAR is not reauthorized, how would that impact the
communication of this information to our communities, especially in our
rural areas, in emergency situations?
Answer. Without STELAR, satellite customers will have less access
to critical network news during times of emergency. For example, STELAR
allows DIRECTV and DISH to import distant network signals to provide
network programming, including news to customers in ``short'' markets.
These are customers, usually in rural areas, left behind by local
broadcasters and missing one, two or even all four major local
broadcasters. As a result, the only way that these satellite customers
can be provided satellite network programming and news during times of
emergency is through the distant network signal.
We would also like to take this opportunity to restate AT&T/
DIRECTV's commitment to providing customer's weather and emergency
information during national disasters. That is why, during recent
weather events, DIRECTV has added a dedicated Severe Weather Mix
channel in affected areas. That channel provides national storm
coverage from local broadcasters in the area, as well national news and
weather channels (e.g., the Weather Channel, Weather Nation, CNBC, Fox
News, and CNN). The Severe Weather Mix switches local affiliates as a
storm moves, to provide viewers with up-to-the-minute coverage.
Question 2. How can Congress streamline regulations to improve your
ability to communicate with our communities, especially in times of
natural disasters?
Answer. At AT&T, we are in the business of connecting and
communicating with our communities each and every day. During periods
of natural disaster, AT&T provides dedicated external-facing websites
with essential information for affected communities, including current
network status. Depending on the disaster and the communities affected,
AT&T communicates with its customers through a variety of vehicles
including websites, broadcast e-mails, individual e-mails or phone
calls from AT&T representatives, and Interactive Voice Response
systems. Methods of communication vary based on the severity and
proliferation of an event.
Additionally, AT&T provides a webpage that describes to customers
how we prepare for hurricanes and offers customer tips about how they
should prepare for hurricanes, and makes its Business Continuity
Preparedness Handbook available to its customers at all times. While
AT&T has not encountered significant regulatory impediments to these
communication efforts, Congress should consider making it clear that
wireless carriers may use the location information of customer devices
in any area affected by a natural disaster to send targeted
communications to those devices related to the specific emergency.
______
Response to Written Questions Submitted by Hon. Jacky Rosen to
J.C. Watts
MEDIA DIVERSITY: The media marketplace today looks vastly different
from when STELAR was adopted more than 30 years ago. Today's consumers
have a variety of ways to access an abundance of news and
entertainment, from cable to satellite to countless new streaming
services. Nonetheless, despite this increased consumer choice in
programming, the companies providing our news and entertainment have
become increasingly concentrated, with far too little diversity both on
and off the air. For example, women own just under six-percent of the
commercial television stations in the United States and fewer than 500
commercial stations overall. Latinos, who make up more than a quarter
of the population in my home state of Nevada, own only 42 full-powered
stations nationwide. And African Americans own just 18 stations. That
is 18 out of approximately 7,800 television stations across the
country.
If we are going to have real diversity--true economic diversity--
then we need to have a media that better reflects us as a nation, a
media that is more reflective and representative of the world on which
it reports.
Congressman Watts, I understand it took you about ten years to get
the Black News Channel up and running.
Question 1. Can you talk to the Committee about some of the
obstacles and challenges you faced when launching the Black News
Channel?
Answer. BNC is on the verge of launching to millions of Americans.
It has taken more than a decade to get to this point. The challenges we
have faced include some that are common to many start-up networks, such
as creating a viable business model, demonstrating proof-of-concept,
raising adequate funds, and obtaining carriage from cable and other
distributors. Many of these challenges were particularly difficult for
BNC because, unlike most other national news networks, we are
independent--that is, we are not affiliated with an MVPD, broadcast
network, or movie studio.
BNC has also faced challenges due to its unique mission. There has
never been a full-time news channel dedicated to the viewpoint of
African Americans. In making the case for such a channel to investors
and distributors, BNC demonstrated both the need for such a channel as
a cultural and social matter, as well as the viability of such a
channel as an economic matter. This required many years of fact
gathering, audience testing, and discussions and negotiations with the
industry.
Question 2. Can you tell us how the sunset of STELAR's provisions
can either help or hurt diversity in media ownership and programming?
Answer. Like every other national news network, BNC seeks the
widest possible distribution, through a variety of platforms. Satellite
providers like DISH and AT&T/DIRECTV remain important distribution
platforms for millions of Americans, and BNC accordingly views these
providers as important partners in the quest to create the Nation's
first full-time news channel dedicated to the viewpoints of the African
American community. Carriage on satellite providers such as DISH and
AT&T/DIRECTV will further BNC's model of news gathering that is
culturally specific to the African American community.
If STELAR was permitted to sunset, it could raise the costs of
satellite providers, potentially making it more difficult for these
providers to reach subscribers. That could threaten access to BNC's
programming for millions of Americans, which would obviously harm
diversity in media programming. That is why I testified that Congress
should reauthorize STELAR.
But I also believe Congress can and should take this opportunity to
go one step further in the name of diversity. In reauthorizing STELAR,
Congress should also modestly amend the ``DBS set-aside'' provision of
the Communications Act (47 U.S.C. Sec. 335 (b)(1)(A)) so that it can be
used for any network that is unaffiliated with any MVPD, broadcast
network, or movie studio, where such network produces and televises at
least eight (8) hours of original educational or informational
programming (including news programming) per day. DISH and AT&T/DIRECTV
have told us that this amendment would enable them to distribute BNC to
an even wider audience, and that they support it.
______
Response to Written Question Submitted by Hon. Amy Klobuchar to
Jonathan Schwantes
Question. Consumers deserve fair prices for cable packages, but
despite competition from satellite and online video, cable prices have
risen steadily at nearly three times the rate of inflation. In
addition, Consumer Reports recently reviewed hundreds of consumer cable
bills and found that cable customers pay an average of $450 per year in
unexpected fees on TV service.
In your view, why have cable prices continued to rise at
this rate?
Answer. As pointed out in your question, cable prices--and by that
I am referring to the advertised ``base package'' rate--have increased
and outpaced the rate of inflation for many years. The introduction of
company-imposed fees (e.g., the Broadcast TV Fee) less than ten years
ago by most major cable operators have made the cost of cable service
even more expensive.
As highlighted in Consumer Reports white paper on cable fees
published earlier this year (entitled How Cable Companies Use Hidden
Fees to Raise Prices and Disguise the True Cost of Service), cable
companies have increased company-imposed fees at an alarming rate, and
sometimes several times in a single year.\1\ For example, Charter
Communications (doing business as Spectrum) raised its Broadcast TV
Surcharge three times in the last year. What used to be an already
expensive, non-optional charge a year ago of $8.85 to receive their
local channels now costs consumers $13.50 a month--a 50 percent
increase of that fee and far more than the $1 it was when first
introduced in 2010.\2\ Similarly, Comcast announced a substantial hike
of its Broadcast TV Fee for 2020, with one media report citing a 57
percent increase of that fee from $8.70 to $13.65 a month.\3\
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\1\ Jonathan Schwantes, How Cable Companies Use Hidden Fees to
Raise Prices and Disguise the True Cost of Service, Consumer Reports
(October, 2019), available at https://advocacy.consumerreports.org/wp-
content/uploads/2019/10/CR-Cable-Bill-Report-2019.pdf. (CR Cable Bill
Report)
\2\ CR Cable Bill Report at p. 3.
\3\ Tamara Chuang, Comcast Raising Local TV Fees 57 percent in
January; Altitude Sports Missing from 2020 Lineup, Colorado Sun
(December 13, 2019) available at https://coloradosun.com/2019/12/13/
comcast-raising-local-tv-fees-57-in-january-altitude-sports-missing-
from-2020-lineup/.
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The cable industry is quick to cite rising retransmission consent
costs--which, to be clear, are a cost of doing business and used to be
part of the base package price--as the primary reason for both the
itemization of the Broadcast TV Fee and its dramatic increase. To be
fair, we examine rising retransmission consent fees in our report, and
suggest policy solutions to address this serious problem.\4\
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\4\ CR Cable Bill Report at pp. 19-20.
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However, what we have not seen is any evidence of a decrease in the
package price offered by cable companies when these new company-imposed
fees were first introduced and are now increased. Presumably, if a
cable operator is breaking out an input cost--in this case, the money
it spends to acquire broadcast channels via retransmission consent
fees--we might see an offsetting decrease of the overall package price
since this cost has been broken out as line-item fee. Yet, this has not
been the case. Both package prices and company-imposed fees continue to
increase, and we can only assume this is to maintain the cable
industry's profit margins, even in the face of well-documented
subscriber losses.
We encourage you to ask the cable industry this very question.
Consumer Reports stands willing to work with you and your staff on this
issue in order to ensure consumers are paying affordable prices for
video content.
[all]