[Congressional Record Volume 140, Number 144 (Thursday, October 6, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 6, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                   SATELLITE HOME VIEWER ACT OF 1994

                                 ______


                         HON. WILLIAM J. HUGHES

                             of new jersey

                    in the house of representatives

                       Wednesday, October 5, 1994

  Mr. HUGHES. Mr. Speaker, I am pleased to note the passage yesterday 
by the Senate of H.R. 1103, the Satellite Home Viewer Act of 1994. The 
bill will now be sent to the President for signature.
  H.R. 1103 will extend the statutory license for satellite carriers 
who deliver, by retransmission, television programming to areas which 
are largely unserved by over-the-air television broadcasting.
  In addition to providing a 5-year extension of the authority for such 
retransmissions, the bill also contains important transitional 
provisions to help ensure that, at the end of this period of extension, 
compulsory licensing will end and free market conditions will control. 
Finally, the bill contains dispute resolution mechanisms which should 
help resolve conflicts between those who deliver satellite programming 
and local affiliates of the national television networks regarding 
satellite delivery of network television programming to households 
which cannot receive over-the-air signals.
  On March 17, 1993, the Subcommittee on Intellectual Property and 
Judicial Administration, which I Chair, held a hearing on H.R. 1103.
  A written statement submitted jointly by the three national 
television networks for the record of that hearing was inadvertently 
not included in the final record. I include it at this point so that 
our colleagues and others interested in this important legislation may 
have available to them the views of the three networks on this 
legislation. The statement is as follows:

     Statement of Capital Cities/ABC, Inc., CBS Inc., and National 
                  Broadcasting Co., Inc. on H.R. 1103

       Capital Cities/ABC, Inc., CBS Inc., and National 
     Broadcasting Co., Inc. (collectively ``Networks''), hereby 
     submit their comments about Title I of H.R. 1103.\1\ That 
     Title would extend the Satellite Home Viewer Act of 1988 
     beyond its current sunset date of December 31, 1994, and 
     would also make certain technical changes to the Act.
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     Footnotes at end of article.
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       Should the Committee decide to extend the Act beyond its 
     sunset date, the Networks have several suggestions for 
     improving it. We believe that these suggestions will help 
     protect the network/affiliate distribution system, ensure 
     equitable treatment for all copyright owners, and set the 
     stage for the transition to a voluntary, marketplace solution 
     that the 1988 Act envisioned. We look forward to working with 
     you and other members of the Subcommittee on these issues.
       First, the Networks wholeheartedly endorse the testimony of 
     the Network Affiliated Stations Alliance about the need for 
     more stringent enforcement procedures to ensure that 
     satellite carriers in fact comply with the existing 
     ``unserved household'' restrictions of Section 119.
       Second, Congress should adopt a uniform rate for satellite 
     carriage of all commercial television stations to home dish 
     owners. The current pricing differential between independent 
     and network stations is an irrational anachronism.
       Third, when the arbitration panel adjusts the royalty fee 
     in the future, it should set the new fee at a marketplace 
     rate.
       Finally, the bill should encourage copyright owners and 
     satellite carriers to work out private contractual 
     arrangements if possible, rather than relying on the 
     compulsory license. To avoid stifling such arrangements, the 
     bill should contain a relatively short ``sunset'' provision.


            enforcement of ``unserved household'' limitation

       The Networks believe that the provisions for enforcement of 
     the ``unserved household'' restrictions of Section 119 need 
     to be substantially strengthened. As Congress observed in 
     enacting the Satellite Home Viewer Act, maintenance of the 
     exclusivity of local network stations in their areas is 
     a critical part of the network/affiliate relationship.\2\ 
     Yet compliance by satellite carriers with the unserved 
     household restrictions has been disappointing at best.
       The testimony of the Network Affiliated Stations Alliance 
     contains extensive documentation of the need for stronger 
     safeguards to ensure that satellite carriers comply with the 
     unserved household restrictions. The Networks endorse that 
     testimony.


                          EQUALITY OF PRICING

       As Section 119 was originally drafted in 1988, it 
     established a much lower rate for network stations than for 
     independent stations (12 cents/month vs. 3 cents/month). An 
     Arbitration Panel raised those rates slightly for 1993-94, 
     but retained a large differential between the rates for 
     independent stations and network stations. (The rate for 
     independent stations is now either 17.5 cents or 14 cents/
     month, while the rate for network stations is 6 cents/
     month.)\3\ As currently drafted, H.R. 1103 would adopt the 
     Arbitration Panel's determinations for 1993-94, while 
     providing for further adjustments in 1995 and at five-year 
     intervals thereafter.
       We respectfully submit that it would be a mistake for the 
     Committee to perpetuate the existing discrimination against 
     network stations. Consider the following undisputed (and 
     indisputable) facts:
       The ABC, CBS, and NBC stations that home dish owners 
     receive under Section 119 carry by far the most popular 
     programming available in the marketplace. These programs--
     such as Roseanne, Murphy Brown, Law and Order, Northern 
     Exposure, 20/20, NFL Football, and the network evening news 
     programs--are the main course of most families' television 
     diets.
       Under the ``white area'' restrictions of Section 119, the 
     only families eligible to receive ABC, CBS, or NBC 
     programming from a satellite carrier are those who cannot 
     obtain network programming over the air or through a cable 
     system.
       In other words, satellite carriers who deliver network 
     station signals under Section 119 are providing their 
     customers with their only access to the most popular 
     programming available anywhere in broadcasting or cable. Yet 
     as the law currently stands, satellite carriers pay much less 
     to deliver a network station than to deliver an independent 
     station, even though the network station's programming is 
     much more popular with viewers.\4\ This turns the market-
     place on its head.
       Worse still, a recent CRT ruling about distribution of 
     satellite carrier royalties creates a ``double whammy'' for 
     the owners of programs carried on network stations. Based on 
     the disparate statutory fees now paid into the royalty pool, 
     the CRT divined a congressional intent (which we believe 
     never existed) to create separate funds under Section 119 for 
     network and independent stations.\5\ Because of the CRT's 
     ruling, the effect of the unfairly low rates charged for 
     network stations is that the owners of all programs carried 
     on network stations can share in only a tiny fraction of the 
     overall satellite royalty payments, even though that 
     programming commands the bulk of all viewership on satellite-
     delivered broadcast stations.
       A single statistic will make the point: as illustrated on 
     the attached charts, programs carried on network stations\6\ 
     accounted for 57.4% of all viewing of ``Section 119 signals'' 
     in satellite households during a typical month; yet because 
     of the discriminatory ``pay-in'' rates, the owners of those 
     programs could collectively share (under the 1989-92 rates) 
     only 9.0% of the royalties paid by satellite carriers for 
     those signals.\7\ This is obviously, and grossly, unfair.
       The solution is simple: the rates paid by satellite 
     carriers for network stations should be at least as high as 
     those for independent station signals. If the Committee 
     wishes to rely on the conclusions of the Arbitration Panel 
     for the period 1993-94, the appropriate rate for all 
     commercial stations should be at least 17.5 cents/month (if 
     not ``syndex-proof'') or 14 cents/month (if ``syndex-
     proof'').8


                           marketplace rates

       As now written, Section 119 provides for a complex set of 
     seven factors to be taken into account in adjusting the rates 
     to be paid by satellite carriers. See Sec. 119(c)(3)(D). We 
     respectfully suggest that this lengthy list of factors could 
     better be replaced by a single factor: the rate that would be 
     set in a free marketplace in the absence of a compulsory 
     license.
       The purpose of the compulsory license is to solve the 
     problem of excessive transaction costs, not to provide a 
     governmentally-mandated subsidy to satellite carriers. Yet 
     the list of factors in Section 119 includes several that 
     could lead future arbitration panels to vary--without sound 
     justification--from a marketplace rate.
       For example, the statutory directive to consider ``any 
     disruptive impact on . . . generally prevailing industry 
     practices'' (Sec. 119(c)(3)(D)(iv)) was read by the recent 
     Arbitration Panel as a directive to ensure that rates not 
     rise rapidly on a percentage basis--whatever marketplace 
     conditions may be.9 But if participants in the real-
     world market for similar programming face higher rates for 
     similar programming, there is no reason why copyright owners 
     should be saddled with a below-market rate here. Indeed, 
     since the absolute amounts involved are tiny--a satellite 
     carrier currently pays only 72 cents per household per year 
     for a network station and a maximum of $2.10 per household 
     per year for an independent station--the impact of even a 
     large percentage increase is de minimis as a practical 
     matter.


             encouraging transition to voluntary agreements

       As Chairman Hughes observed in introducing H.R. 1103, 
     ``some progress has been made toward private licensing of 
     satellite service to unserved areas.'' We believe that the 
     bill can be improved so as to encourage further progress in 
     this direction. In particular, we suggest that the compulsory 
     license for satellite carriers contain a sunset provision, 
     under which the compulsory license would expire after a short 
     period of years. A sunset was, of course, a critical feature 
     of the 1988 Act. Absent such a provision, the satellite 
     carrier industry is unlikely to come to the bargaining table 
     to negotiate about a long-term voluntary solution.


                               conclusion

       ABC, CBS, and NBC strongly urge the Committee to: 
     strengthen the enforcement mechanisms for the ``white area'' 
     provisions of the Satellite Home Viewer Act; eradicate the 
     unfair discrimination against network stations that is now 
     embodied in Section 119's rate structure; direct future 
     arbitration panels to apply a marketplace test in determining 
     royalty rates, and add a sunset provision to encourage a 
     rapid transition to a voluntary, marketplace solution.


                               footnotes

     \1\Our comments here are limited to Title I of that bill.
     \2\See H.R. Rep. No. 100-887, Part 1, at 14 (1988); H.R. Rep. 
     No. 100-887, Part 2, at 19-20 (1988).
     \3\See 1991 Satellite Carrier Rate Adjustment Proceeding, 57 
     Fed. Reg. 19,052 (May 1, 1992).
     \4\As the satellite carriers admitted before the CRT, they 
     charge as much or more for network signals as for independent 
     station signals. See 1991 Satellite Carrier Rate Adjustment 
     Proceeding, 57 Fed. Reg. 19,052, 19,060 (May 1, 1992) 
     (``Carrier witness Hardy testified that the price charged in 
     1992 by PrimeTime 24 for network signals was about $12.50 per 
     year per signal, while the price charged by Superstar 
     Connection for superstation signals was $11.00 per year per 
     signal.'').
     \5\Consolidated 1989-91 Satellite Carrier Royalty 
     Distribution Proceeding,  57 Fed. Reg. 62,422 (Dec. 30, 
     1992).
     \6\This includes programs distributed nationally by ABC, CBS, 
     and NBC as well as local and syndicated programs carried on 
     network stations.
     \7\The rate adjustment adopted by the Arbitration Panel for 
     1993-94 would reduce this disparity slightly. Since the new 
     rate continues to discriminate sharply against network 
     stations, however, the disparity will continue to be very 
     large. For example, if the current rates for carriage (14/17 
     cents for independent stations and 6 cents for network 
     stations) had been applied during 1989-91, the network 
     station share of total royalties would have been between 
     12.0% and 14.5%.
     \8\A station is ``syndex-proof,'' as defined in the 
     Arbitration Panel's decision, if it does not carry programs 
     that would be subject to the Federal Communication 
     Commission's syndicated exclusivity rules if they were 
     delivered by a cable system to the same household. 57 Fed. 
     Reg. at 19,056 n.10.
     \9\57 Fed. Reg. at 19,059, 19,061.

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