[House Report 108-660]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-660

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



 
    SATELLITE HOME VIEWER EXTENSION AND REAUTHORIZATION ACT OF 2004

                                _______
                                

 September 7, 2004.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4518]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 4518) to extend the statutory license for secondary 
transmissions under section 119 of title 17, United States 
Code, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................     7
Background and Need for the Legislation..........................     7
Hearings.........................................................    12
Committee Consideration..........................................    12
Vote of the Committee............................................    13
Committee Oversight Findings.....................................    13
New Budget Authority and Tax Expenditures........................    13
Congressional Budget Office Cost Estimate........................    13
Performance Goals and Objectives.................................    16
Constitutional Authority Statement...............................    17
Section-by-Section Analysis and Discussion.......................    17
Changes in Existing Law Made by the Bill, as Reported............    19
Markup Transcript................................................    33

                             The Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Satellite Home 
Viewer Extension and Reauthorization Act of 2004''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.

           TITLE I--STATUTORY LICENSE FOR SATELLITE CARRIERS

Sec. 101. Extension of authority.
Sec. 102. Reporting of subscribers; significantly viewed and other 
signals; technical amendments.
Sec. 103. Statutory license for satellite carriers outside local 
markets.
Sec. 104. Waivers.
Sec. 105. Study.
Sec. 106. Effect on certain proceedings.
Sec. 107. Expedited consideration of voluntary agreements to provide 
satellite secondary transmissions to local markets.

           TITLE I--STATUTORY LICENSE FOR SATELLITE CARRIERS

SEC. 101. EXTENSION OF AUTHORITY.

    (a) In General.-- Section 4(a) of the Satellite Home Viewer Act of 
1994 (17 U.S.C. 119 note; Public Law 103-369; 108 Stat. 3481) is 
amended by striking ``December 31, 2004'' and inserting ``December 31, 
2009''.
    (b) Extension for Certain Subscribers.--Section 119(e) of title 17, 
United States Code, is amended by striking ``December 31, 2004'' and 
inserting ``December 31, 2009''.

SEC. 102. REPORTING OF SUBSCRIBERS; SIGNIFICANTLY VIEWED AND OTHER 
                    SIGNALS; TECHNICAL AMENDMENTS.

    Section 119(a) of title 17, United States Code, is amended--
            (1) in paragraph (1)--
                    (A) in the paragraph heading, by striking ``and pbs 
                satellite feed'';
                    (B) in the first sentence, by striking ``(3), (4), 
                and (6)'' and inserting ``(5), (6), and (8)'';
                    (C) in the first sentence, by striking ``or by the 
                Public Broadcasting Service satellite feed''; and
                    (D) by striking the second sentence;
            (2) in paragraph (2)--
                    (A) in subparagraph (A), by striking ``(3), (4), 
                (5), and (6)'' and inserting ``(5), (6), (7), and 
                (8)''; and
                    (B) by striking subparagraph (C) and inserting the 
                following:
                    ``(C) Exceptions.--
                            ``(i) States with single full-power network 
                        station.--In a State in which there is licensed 
                        by the Federal Communications Commission a 
                        single full-power station that was a network 
                        station on January 1, 1995, the statutory 
                        license provided for in subparagraph (A) shall 
                        apply to the secondary transmission by a 
                        satellite carrier of the signal of that station 
                        to any subscriber in a community that is 
                        located within that State and that is not 
                        within the first 50 television markets as 
                        listed in the regulations of the Commission as 
                        in effect on such date (47 CFR 76.51).
                            ``(ii) Certain additional stations.--The 
                        statutory license provided for in subparagraph 
                        (A) shall apply to the secondary transmission, 
                        by a satellite carrier to subscribers in no 
                        more than two counties in a State that are in 
                        local market principally comprised of counties 
                        in another State, of the signals of any network 
                        station located in the capital of the State in 
                        which such counties are located, if the total 
                        number of television households in the two 
                        counties combined did not exceed 10,000 for the 
                        year 2003 according to Nielsen Media Research.
                    ``(D) Submission of subscriber lists to networks.--
                            ``(i) Initial lists.--A satellite carrier 
                        that makes secondary transmissions of a primary 
                        transmission made by a network station pursuant 
                        to subparagraph (A) shall, 90 days after 
                        commencing such secondary transmissions, submit 
                        to the network that owns or is affiliated with 
                        the network station--
                                    ``(I) a list identifying (by name 
                                and street address, including county 
                                and zip code) all subscribers to which 
                                the satellite carrier makes secondary 
                                transmissions of that primary 
                                transmission to subscribers in unserved 
                                households; and
                                    ``(II) a separate list, aggregated 
                                by designated market area (as defined 
                                in section 122(j)) (by name and street 
                                address, including county and zip 
                                code), which shall indicate those 
                                subscribers being served pursuant to 
                                subsection (a)(3), relating to 
                                significantly viewed stations.
                            ``(ii) Monthly lists.--After the submission 
                        of the initial lists under clause (i), on the 
                        15th of each month, the satellite carrier shall 
                        submit to the network--
                                    ``(I) a list identifying (by name 
                                and street address, including county 
                                and zip code) any persons who have been 
                                added or dropped as subscribers under 
                                clause (i)(I) since the last submission 
                                under clause (i); and
                                    ``(II) a separate list, aggregated 
                                by designated market area (by name and 
                                street address, including county and 
                                zip code), identifying those 
                                subscribers whose service pursuant to 
                                subsection (a)(3), relating to 
                                significantly viewed stations, has been 
                                added or dropped.
                            ``(iii) Use of subscriber information.--
                        Subscriber information submitted by a satellite 
                        carrier under this subparagraph may be used 
                        only for purposes of monitoring compliance by 
                        the satellite carrier with this subsection.
                            ``(iv) Applicability.--The submission 
                        requirements of this subparagraph shall apply 
                        to a satellite carrier only if the network to 
                        whom the submissions are to be made places on 
                        file with the Register of Copyrights a document 
                        identifying the name and address of the person 
                        to whom such submissions are to be made. The 
                        Register shall maintain for public inspection a 
                        file of all such documents.'';
            (3) by striking paragraph (8);
            (4) by redesignating paragraphs (9) through (12) as 
        paragraphs (10) through (13), respectively;
            (5) by redesignating paragraphs (3) through (7) as 
        paragraphs (5) through (9), respectively;
            (6) by inserting after paragraph (2) the following:
            ``(3) Secondary transmissions of significantly viewed 
        signals.--
                    ``(A) In general.--Notwithstanding the provisions 
                of paragraph (2)(B), and subject to subparagraph (B) of 
                this paragraph, the statutory license provided for in 
                paragraphs (1) and (2) shall apply to the secondary 
                transmission of the signal of a network station or a 
                superstation to a subscriber who resides outside the 
                station's local market (as defined in section 122(j)) 
                but within a community in which the signal of that 
                station was determined by the Federal Communications 
                Commission, on or before the date of the enactment of 
                the Satellite Home Viewer Extension and Reauthorization 
                Act of 2004, to be significantly viewed in accordance 
                with the provisions of section 76.54 of title 47, Code 
                of Federal Regulations, as in effect on such date of 
                enactment.
                    ``(B) Limitation.--Subparagraph (A) shall apply 
                only to secondary transmissions of network stations and 
                superstations to subscribers who receive secondary 
                transmissions from a satellite carrier pursuant to the 
                statutory license under section 122.''; and
            (7) in paragraph (2)(B)(i), by adding at the end the 
        following new sentence: ``The limitation in this clause shall 
        not apply to secondary transmissions under paragraph (3).''.

SEC. 103. STATUTORY LICENSE FOR SATELLITE CARRIERS OUTSIDE LOCAL 
                    MARKETS.

     Section 119 of title 17, United States Code, is amended as 
follows:
            (1) Subsection (a) is amended by inserting after paragraph 
        (3), as added by section 102 of this Act, the following:
            ``(4) Statutory license where retransmissions into local 
        market available.--
                    ``(A) Rules for subscribers under subsection (e).--
                            ``(i) For those receiving distant 
                        signals.--In the case of a subscriber of a 
                        satellite carrier who is eligible to receive 
                        the signal of a network station solely by 
                        reason of subsection (e) (in this subparagraph 
                        referred to as a `distant signal'), and who is 
                        receiving the distant signal of a network 
                        station on the date of the enactment of the 
                        Satellite Home Viewer Extension and 
                        Reauthorization Act of 2004, the following 
                        shall apply:
                                    ``(I) In a case in which the signal 
                                of a local network station affiliated 
                                with the same television network is 
                                made available by that satellite 
                                carrier to the subscriber pursuant to 
                                the statutory license under section 
                                122, the statutory license under 
                                paragraph (2) shall apply only to 
                                secondary transmissions by that 
                                satellite carrier to that subscriber of 
                                the distant signal of a station 
                                affiliated with the same television 
                                network--
                                            ``(aa) if, within 60 days 
                                        after receiving the notice of 
                                        the satellite carrier under 
                                        section 338(h) of the 
                                        Communications Act of 1934, the 
                                        subscriber elects to retain the 
                                        distant signal; but
                                            ``(bb) only until such time 
                                        as the subscriber elects to 
                                        receive such local signal.
                                    ``(II) Notwithstanding subclause 
                                (I), the statutory license under 
                                paragraph (2) shall not apply with 
                                respect to any subscriber who is 
                                eligible to receive the distant signal 
                                of a television network station solely 
                                by reason of subsection (e) and to whom 
                                subclause (I) applies unless the 
                                satellite carrier, within 60 days after 
                                the date of the enactment of the 
                                Satellite Home Viewer Extension and 
                                Reauthorization Act of 2004, submits to 
                                that television network a list, 
                                aggregated by designated market area 
                                (as defined in section 122(j)(2)(C)), 
                                that--
                                            ``(aa) identifies that 
                                        subscriber by name and address 
                                        (street or RFD number, city, 
                                        State, and zip code) and 
                                        specifies the distant signals 
                                        received by the subscriber; and
                                            ``(bb) states, to the best 
                                        of the satellite carrier's 
                                        knowledge and belief, after 
                                        having made diligent and good 
                                        faith inquiries, that the 
                                        subscriber is eligible under 
                                        subsection (e) to receive the 
                                        distant signals.
                            ``(ii) For those not receiving distant 
                        signals.--In the case of any subscriber of a 
                        satellite carrier who is eligible to receive 
                        the distant signal of a network station solely 
                        by reason of subsection (e) and who did not 
                        receive a distant signal of a station 
                        affiliated with the same network on July 1, 
                        2004, the statutory license under paragraph (2) 
                        shall not apply to secondary transmissions by 
                        that satellite carrier to that subscriber of 
                        that distant signal.
                    ``(B) Rules for other subscribers.--In the case of 
                a subscriber of a satellite carrier who is eligible to 
                receive the signal of a network station under the 
                statutory license under paragraph (2) (in this 
                subparagraph referred to as a `distant signal'), other 
                than subscribers to whom subparagraph (A) applies, the 
                following shall apply:
                            ``(i) In a case in which the signal of a 
                        local network station affiliated with the same 
                        television network is made available by that 
                        satellite carrier, on January 1, 2005, to the 
                        subscriber pursuant to the statutory license 
                        under section 122, the statutory license under 
                        paragraph (2) shall apply only to secondary 
                        transmissions by that satellite carrier to that 
                        subscriber of the distant signal of a station 
                        affiliated with the same television network if 
                        the subscriber's satellite carrier, within 60 
                        days after such date, submits to that 
                        television network a list, aggregated by 
                        designated market area (as defined in section 
                        122(j)(2)(C)), that identifies that subscriber 
                        by name and address (street or RFD number, 
                        city, State, and zip code) and specifies the 
                        distant signals received by the subscriber.
                            ``(ii) In a case in which the signal of a 
                        local network station affiliated with the same 
                        television network is not made available by 
                        that satellite carrier, on January 1, 2005, to 
                        a subscriber pursuant to the statutory license 
                        under section 122, the statutory license under 
                        paragraph (2) shall apply only to secondary 
                        transmissions by that satellite carrier of the 
                        distant signal of a station affiliated with the 
                        same network to any person--
                                    ``(I) who is a subscriber of that 
                                satellite carrier on such date, or
                                    ``(II) who becomes a subscriber of 
                                that satellite carrier after such date 
                                but before the local signal is 
                                available,
                        but only until such time as the subscriber 
                        elects to receive the local signal from that 
                        satellite carrier.
                    ``(C) Future applicability.--The statutory license 
                under paragraph (2) shall not apply to the secondary 
                transmission by a satellite carrier of a primary 
                transmission of a network station to a subscriber who--
                            ``(i) does not receive such secondary 
                        transmission as of the date of the enactment of 
                        the Satellite Home Viewer Extension and 
                        Reauthorization Act of 2004; and
                            ``(ii) resides in a local market where the 
                        satellite carrier makes available a network 
                        station affiliated with the same television 
                        network pursuant to the statutory license under 
                        section 122.
                    ``(D) Other provisions not affected.--This 
                paragraph shall not affect the applicability of the 
                statutory license to secondary transmissions under 
                paragraph (3) or to unserved households included under 
                paragraph (12).
                    ``(E) Available defined.--For purposes of this 
                paragraph, a local signal has been made available by a 
                satellite carrier to a subscriber or person if the 
                satellite carrier offers that local signal to other 
                subscribers who reside in the same zipcode as that 
                subscriber or person.''.
            (2) Subsection (b)(1) is amended by striking subparagraph 
        (B) and inserting the following:
                    ``(B) a royalty fee for that 6-month period, 
                computed by multiplying the total number of subscribers 
                receiving each secondary transmission of each 
                superstation or network station during each calendar 
                month by the appropriate rate in effect under this 
                section.''.
            (3) Subsection (b)(1) is further amended by adding at the 
        end the following flush sentence:
        ``Notwithstanding the provisions of subparagraph (B), a 
        satellite carrier whose secondary transmissions are subject to 
        statutory licensing under paragraph (1) or (2) of subsection 
        (a) shall have no royalty obligation for secondary 
        transmissions to a subscriber who resides outside the station's 
        local market (as defined in section 122(j)(2)) but within a 
        community in which the signal of that station was determined by 
        the Federal Communications Commission, on or before the date of 
        the enactment of the Satellite Home Viewer Extension and 
        Reauthorization Act of 2004, to be significantly viewed in 
        accordance with the provisions of section 76.54 of title 47, 
        Code of Federal Regulations, as in effect on such date of 
        enactment.''.
            (4) Subsection (c) is amended--
                    (A) by amending paragraph (1) to read as follows:
            ``(1) Applicability and determination of royalty fees.--The 
        appropriate rate for purposes of determining the royalty fee 
        under subsection (b)(1)(B) shall be the appropriate rate set 
        forth in part 258 of title 37, Code of Federal Regulations, as 
        in effect on the date of the enactment of the Satellite Home 
        Viewer Extension and Reauthorization Act of 2004, as modified 
        under this subsection.'';
                    (B) by striking paragraph (2);
                    (C) in paragraph (3)--
                            (i) by redesignating that paragraph as 
                        paragraph (2);
                            (ii) in subparagraph (A)--
                                    (I) by striking ``January 1, 
                                1997,'' and inserting ``January 1, 
                                2005,''; and
                                    (II) by striking ``who are not 
                                parties to a voluntary agreement filed 
                                with the Copyright Office in accordance 
                                with paragraph (2)'';
                            (iii) in subparagraph (C), by striking ``as 
                        provided'' and all that follows through 
                        ``later'' and inserting ``on January 1, 2006''; 
                        and
                            (iv) by striking subparagraph (D); and
                    (D) by striking paragraphs (4) and (5) and 
                inserting the following:
            ``(3) Cost of living adjustment.--The royalty rates set 
        forth in subsection (b)(1)(B), as adjusted under paragraph (2) 
        of this subsection, shall be adjusted by the Librarian of 
        Congress--
                    ``(A) on January 1, 2005, to reflect any changes 
                occurring during the period beginning on January 1, 
                2000, and ending on November 30, 2004, in the cost of 
                living as determined by the most recent Consumer Price 
                Index (for all consumers and items) published by the 
                Secretary of Labor during that period; and
                    ``(B) on January 1, 2007, and on January 1 of each 
                year thereafter, to reflect any changes occurring 
                during the preceding 12 months in the cost of living as 
                determined by the most recent Consumer Price Index so 
                published.
            ``(4) Reductions.--The rate of the royalty fee determined 
        under paragraph (2)--
                    ``(A) for superstations shall be reduced by 30 
                percent; and
                    ``(B) for network stations shall be reduced by 45 
                percent.''.
            (5) Subsection (d) is amended--
                    (A) by amending paragraph (9) to read as follows:
            ``(9) Superstation.--The term `superstation' means a 
        television broadcast station, other than a network station, 
        licensed by the Federal Communications Commission that is 
        secondarily transmitted by a satellite carrier. '';
                    (B) in paragraph (10)(D), by striking ``(a)(11)'' 
                and inserting ``(a)(12)''; and
                    (C) by striking paragraph (12).
            (6) Subsection (a)(7), as redesignated by section 102(5) of 
        this Act, is amended--
                    (A) in subparagraph (A), by striking ``who does not 
                reside in an unserved household'' and inserting ``who 
                is not eligible to receive the transmission under this 
                section'';
                    (B) in subparagraph (B), by striking ``who do not 
                reside in unserved households'' and inserting ``who are 
                not eligible to receive the transmission under this 
                section''; and
                    (C) in subparagraph (D), by striking ``is for 
                private home viewing to an unserved household'' and 
                inserting ``is to a subscriber who is eligible to 
                receive the transmission under this section''.

SEC. 104. WAIVERS.

    Section 119(a) of title 17, United States Code, is amended by 
adding at the end the following new paragraph:
            ``(14) Waivers.--A subscriber who is denied the secondary 
        transmission of a network station under paragraph (4)(C), or is 
        denied the secondary transmission of a network station or a 
        superstation under paragraph (3)(B), may request a waiver from 
        such denial by submitting a request, through the subscriber's 
        satellite carrier, to the network station or superstation in 
        the local market where the subscriber is located. The network 
        station or superstation shall accept or reject the subscriber's 
        request for a waiver within 30 days after receipt of the 
        request. If the network station or superstation fails to accept 
        or reject the subscriber's request for a waiver within that 30-
        day period, that network station or superstation, as the case 
        may be, shall be deemed to agree to the waiver request. Unless 
        specifically stated by the network station or superstation, a 
        waiver under section 339(c)(2) of the Communications Act shall 
        not constitute a waiver for purposes of this paragraph.''.

SEC. 105. STUDY.

     No later than June 30, 2008, the Register of Copyrights shall 
report to the Committee on the Judiciary of the House of 
Representatives and the Committee on the Judiciary of the Senate the 
Register's findings and recommendations on the operation and revision 
of the statutory licenses under sections 111, 119, and 122 of title 17, 
United States Code. The report should include, but not be limited to, 
the following:
            (1) A comparison of the royalties paid by licensees under 
        such sections, including historical rates of increases in these 
        royalties, a comparison between the royalties under each such 
        section and the prices paid in the marketplace for comparable 
        programming.
            (2) An analysis of the differences in the terms and 
        conditions of the licenses under such sections, an analysis of 
        whether these differences are required or justified by 
        historical, technological, or regulatory differences that 
        affect the satellite and cable industries, and an analysis of 
        whether either the cable or satellite industry is placed in a 
        competitive disadvantage due to these terms and conditions.
            (3) An analysis of whether the licenses under such sections 
        are still justified by the bases upon which they were 
        originally created.
            (4) An analysis of the correlation, if any, between the 
        royalties, or lack thereof, under such sections and the fees 
        charged to cable and satellite subscribers, addressing whether 
        cable and satellite companies have passed to subscribers any 
        savings realized as a result of the royalty structure and 
        amounts under such sections.

SEC. 106. EFFECT ON CERTAIN PROCEEDINGS.

    Nothing in this title shall modify any remedy imposed on a party 
that is required by the judgment of a court in any action that was 
brought before May 1, 2004, against that party for a violation of 
section 119 of title 17, United States Code.

SEC. 107. EXPEDITED CONSIDERATION OF VOLUNTARY AGREEMENTS TO PROVIDE 
                    SATELLITE SECONDARY TRANSMISSIONS TO LOCAL MARKETS.

    Section 119 of title 17, United States Code, is amended by adding 
at the end the following:
    ``(f) Expedited Consideration by Justice Department of Voluntary 
Agreements to Provide Satellite Secondary Transmissions to Local 
Markets.--
            ``(1) In general.--In a case in which no satellite carrier 
        makes available, to subscribers located in a local market, as 
        defined in section 122(j)(2), the secondary transmission into 
        that market of a primary transmission of one or more television 
        broadcast stations licensed by the Federal Communications 
        Commission, and two or more satellite carriers request a 
        business review letter in accordance with section 50.6 of title 
        28, Code of Federal Regulations (as in effect on July 7, 2004), 
        in order to assess the legality under the antitrust laws of 
        proposed business conduct to make or carry out an agreement to 
        provide such secondary transmission into such local market, the 
        appropriate official of the Department of Justice shall respond 
        to the request no later than 90 days after the date on which 
        the request is received.
            ``(2) Definition.--For purposes of this subsection, the 
        term `antitrust laws'--
                    ``(A) has the meaning given that term in subsection 
                (a) of the first section of the Clayton Act (15 U.S.C. 
                12(a)), except that such term includes section 5 of the 
                Federal Trade Commission Act (15 U.S.C. 45) to the 
                extent such section 5 applies to unfair methods of 
                competition; and
                    ``(B) includes any State law similar to the laws 
                referred to in paragraph (1).''.

                          Purpose and Summary

    The purpose of H.R. 4518 is to extend the copyright 
compulsory \1\ license for the retransmission by satellite 
carriers of distant over-the-air television broadcast stations 
for an additional 5 years, provide a process that will enable 
copyright owners whose works are retransmitted under the 
distant signal license to receive fair compensation for the 
statutory use of their creative works, ensure that satellite 
subscribers are able to continue to receive distant and local 
network and superstation signals to which they are entitled, 
and to make other necessary improvements and revisions to 
Sec. 119 of the Copyright Act.
---------------------------------------------------------------------------
    \1\ Compulsory licenses are authorized by the Copyright Act as a 
limitation on the exclusive rights that are otherwise granted to 
copyright holders. Also referred to as a statutory license, ``[a] 
compulsory license allows individuals to use protected works without 
obtaining the consent of the copyright owner upon payment of fees set 
by the government. In order to take advantage of a compulsory license, 
the prospective user must comply with certain statutory procedures.'' 
Roger E. Schechter and John R. Thomas, Intellectual Property: The Law 
of Copyrights, Patents and Trademarks Sec. 7, at 114 (2003).
---------------------------------------------------------------------------

                Background and Need for the Legislation

    American consumers rely upon broadcast, cable, and direct 
broadcast satellite (``DBS'') to deliver most television 
programming into their homes. Broadcast programming is 
generally available free to consumers who can receive it over-
the-air in the local market of the television station. Cable 
and DBS dominate the multichannel video programming 
distribution (``MVPD'') marketplace, where providers offer 
programming to consumers on a fee-for-subscription basis.
    According to the most recent data from the Federal 
Communications Commission (``FCC''), there are approximately 
107 million television households in the United States.\2\ Of 
those, 88% choose to subscribe to an MVPD service. Cable serves 
75% of subscribers, while DBS serves 22%.\3\
---------------------------------------------------------------------------
    \2\ 19 FCC Rcd. 1606, 12622, available at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/FCC-04-5A1.pdf. The FCC publishes an ``Annual 
Assessment of the Status of Competition in the Market for the Delivery 
of Video Programming,'' which surveys the MVPD market. The current 
edition was released in January 2004.
    \3\ Id.
---------------------------------------------------------------------------
    While cable still serves the vast majority of MVPD 
subscribers, DBS has benefitted from congressional efforts to 
promote localism \4\ and encourage competition \5\ in the MVPD 
marketplace. Historically, Congress has attempted to balance 
these twin goals in order to preserve the ability of Americans 
to continue to receive free over-the-air television 
programming, much of it local in nature, while still fostering 
competition, which provides consumers with a greater variety of 
choices, improved services, higher quality, and technological 
innovation, in the fee-for-subscription market. While DBS has 
provided competition to cable, its impact on cable operations 
has generally been associated with improved customer service 
and the expanded offerings of new cable stations rather than a 
substantial reduction in cable rates.\6\
---------------------------------------------------------------------------
    \4\ Localism is the concept that consumers should be able to view 
their own local news, weather, emergency, and community-oriented 
programming. The availability of local programming is largely dependent 
on the continued health of network affiliates, who use revenue from the 
sale of advertising, the rates for which depend on audience size, to 
produce local content.
    \5\ In 2003, the United States General Accounting Office (``GAO'') 
published a study that concluded there was a direct relationship 
between Congress's decision to permit DBS operators to provide local 
signals to subscribers in the Satellite Home Viewer Improvement Act 
(``SHVIA'') and the growth of DBS operators. ``Since 1999, when DBS 
operators acquired the legal right to provide local broadcast stations 
(such as affiliates of ABC, CBS, Fox, and NBC), these companies have 
emerged as important competitors to cable operators. In particular, in 
areas where subscribers can receive local broadcast stations from both 
primary DBS operators, the DBS penetration rate--that is, the 
percentage of households that subscribe to satellite service--is 
approximately 40 percent higher than in areas where subscribers cannot 
receive local broadcast stations from both primary DBS operators.'' 
U.S. General Accounting Office, Issues Related to Competition and 
Subscriber Rates in the Cable Television Industry, GAO-04-8 at 4 
(Washington, DC:October 2003), available at http://www.gao.gov/
new.items/d048.pdf.
    \6\ ``DBS competition is associated with a slight reduction in 
cable rates as well as improved quality and service. In terms of rates, 
we found that a 10 percent higher DBS penetration rate . . . is 
associated with a slight rate reduction--about 15 cents per month.'' 
Id. at 11.
---------------------------------------------------------------------------
    The two dominant DBS companies, DirecTV (a subsidiary of 
News Corporation) and EchoStar, which markets its service as 
the DISH Network, combined to sign up more than 80% of new 
cable and satellite television subscribers over the last year. 
Over the last decade, the DBS industry's growth rate has far 
outpaced that of cable, exceeding it by double digits in nine 
of those years.\7\ Evidence indicates the DBS companies are 
succeeding in providing effective competition to cable, 
including luring many customers away from their competitors.\8\
---------------------------------------------------------------------------
    \7\ 19 FCC Rcd. 1606, 1610. ``Since its introduction, the DBS 
growth rate has exceeded the growth rate of cable by double digits in 
every year except in the past year, when DBS growth exceeded cable 
growth by 9.16 percentage points.'' Id.
    \8\ Id. at 1651. ``DirecTV states that according to its internal 
subscriber data, approximately 70% of its customers were cable 
subscribers at the time they subscribed to DirecTV.'' Id.
---------------------------------------------------------------------------
    Several provisions of the Copyright Act (Title 17 of the 
U.S. Code) govern the ability of cable and DBS providers to 
retransmit copyrighted broadcast programming. The cable and DBS 
industries are always free to enter into private negotiations 
with copyright owners and to compensate them for the use of 
their content under agreed-upon terms. Such privately-
negotiated agreements provide the basis for the majority of 
programming that is retransmitted to subscribers by cable and 
DBS companies.
    In the absence of a freely-negotiated agreement, the cable 
and DBS industries rely upon separate and distinct copyright 
compulsory licenses that enable each to provide their 
subscribers with retransmitted over-the-air television 
broadcast programming without obtaining the permission of the 
copyright owners. In enacting each license, Congress has 
traditionally considered the unique historical, technological, 
and regulatory circumstances that affect each industry.
    Among other differences, the local character of cable 
systems and the national business model of DBS have resulted in 
differential public service, carriage, and taxation obligations 
that ought to be objectively reviewed before Congress enacts 
sweeping changes. Congress has historically sought to balance 
the interests of the public in having continued access to free, 
local programming with a desire by some consumers to pay to 
view additional stations. In achieving equilibrium, it is 
critical that Congress not compromise the legitimate interests 
of intellectual property holders nor sacrifice long-term 
competitive interests by unfairly favoring one industry over 
another.
    The distant signal satellite license, codified in 17 U.S.C. 
Sec. 119, was first enacted in 1988 as part of the Satellite 
Home Viewer Act. The license is temporary and applies to the 
retransmission of both distant network and superstation 
signals.
    Congress has renewed the distant signal satellite license 
twice before. First, in the Satellite Home Viewer Act of 1994 
and, second, in SHVIA in 1999. In addition, SHVIA added a new, 
permanent 17 U.S.C. Sec. 122 that permits satellite carriers to 
retransmit local television broadcast stations to their 
subscribers. The Sec. 119 distant signal license is slated to 
expire on December 31, 2004.
    The distant signal license is important to DBS carriers 
because it enables them to clear the rights to copyrighted 
programming contained on distant superstation and network 
stations by submitting a statement of account and paying a 
statutorily determined royalty fee to the Copyright Office on a 
semiannual basis. The ability to clear the rights by the use of 
a compulsory license permits the DBS industry to avoid the 
expense and uncertainty associated with negotiating individual 
terms and fees with copyright owners in advance of 
retransmitting each protected work.
    The abrogation of copyright owners' exclusive rights and 
the elimination of transaction costs for satellite carriers are 
valuable accommodations that benefit the DBS industry. The 
terms and conditions of Sec. 119, therefore, are crafted to 
represent a careful balance between the interests of satellite 
carriers who seek to deliver distant broadcast programming to 
subscribers in a manner that is similar to that offered by 
cable operators, and the need to provide copyright owners of 
the retransmitted broadcast programming fair compensation for 
the use of their works.
    The Sec. 119 license applies to two categories of distant 
broadcast television stations offered by satellite: 
superstations \9\ (i.e. commercial independent over-the-air 
television broadcast stations), and network stations \10\ (i.e. 
commercial television network stations and noncommercial 
educational stations). Satellite carriers calculate their 
royalty payment by multiplying the attendant fee for each 
superstation signal by the number of subscribers who receive 
that signal for each month of the 6-month accounting period, 
and by multiplying the different fee for each network station 
times the number of subscribers who receive that signal for 
each month of the 6-month accounting period.
---------------------------------------------------------------------------
    \9\ 17 U.S.C. Sec. 119 (d)(9)(A) defines a superstation as a 
``television broadcast station, other than a network station, licensed 
by the Federal Communications Commission that is secondarily 
transmitted by a satellite carrier. Essentially, it is an independent 
broadcast station. As of May 20, 2004, the Copyright Office reports 
that six superstations received payments under the distant signal 
license in recent years. These stations are:
---------------------------------------------------------------------------
      KTLA
                Los Angeles, CA
      KWGN
                Denver, CO
      WGN
                Chicago, IL
      WPIX
                New York, NY
      WSBK
                Boston, MA
      WWOR
                Secaucus, NJ (reported as New York, NY)
---------------------------------------------------------------------------
    \10\ 17 U.S.C. Sec. 119 (d)(2) defines a ``network station'' as . . 
. that is owned or operated by, or affiliated with, one or more of the 
television networks in the United States which offer an interconnected 
program service on a regular basis for 15 or more hours per week to at 
least 25 of its affiliated television licensees in 10 or more states . 
. .''
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    The flat, per subscriber royalty mechanism in Sec. 119 
stands in stark contrast to the more complicated percentage of 
gross receipts calculation applied to cable operators in the 
Sec. 111 license. The cable license royalty is based on the 
application of vestigial distant signal carriage rules, which 
were once used by the FCC. The flat, per subscriber royalty 
mechanism used to calculate distant signal satellite royalties 
is easier to comprehend, far simpler to calculate, and reduces 
the time and expense associated with royalty computation.
    The current royalty fees for network station and 
superstation programming were established by a Copyright 
Arbitration Royalty Panel (``CARP'') in 1997, applying a fair 
market value standard. In other words, the CARP determined 
what, in the absence of a statutory license, a willing buyer 
and a willing seller would negotiate as the fair market price 
for all the programming retransmitted on network stations and 
superstations. The CARP recommended a single royalty rate for 
programming on both network stations and superstations.
    In SHVIA, Congress mandated two separate royalty rates, one 
based on network station retransmissions, the other applying to 
programming on superstations. Congress further required 
substantial reductions in the CARP-determined rate, applying a 
statutory discount of 45 percent to programming on network 
stations and a discount of 30 percent to superstation 
programming. In spite of increased costs for program production 
and the cumulative effects of inflation, these royalty rates 
have been unchanged throughout the current extension of 
Sec. 119. This has eroded the real value of the royalties paid 
under the license, inuring greatly to the benefit of the DBS 
industry.
    As a general rule, the distant signal license permits 
delivery of distant network programming to unserved households 
\11\ only. The unserved household limitation prohibits a DBS 
provider from retransmitting a distant station of the same 
network to a subscriber who can otherwise receive the local 
network signal through-the-air by the use of a conventional 
rooftop antenna. The license provides limited exceptions for 
recreational vehicles, commercial trucks, C-band dish owners, 
and a class of subscribers ``grandfathered'' \12\ by SHVIA.
---------------------------------------------------------------------------
    \11\ 17 U.S.C. Sec. 119(d)(10) generally defines an ``unserved 
household,'' with respect to a particular television network, as a 
household that cannot receive an acceptable over-the-air signal of a 
network affiliate through the use of a conventional, stationary, 
outdoor rooftop receiving antenna.
    \12\ The term ``grandfathered subscribers'' is used to describe a 
class of individuals to whom DBS providers were not lawfully entitled 
to transmit distant network signals and to whom their provider was 
under a Federal district court order to terminate the transmission of 
such signals after July 11, 1998 but before October 31, 1999.
---------------------------------------------------------------------------
    An element of the Sec. 119 license since inception, the 
unserved household limitation has been a central tenet of 
congressional policy on distant signal carriage. Its primary 
purpose is to ensure that those residing in rural areas or in 
areas where terrain makes it impossible to receive an 
acceptable over-the-air signal from their local television 
stations can receive a ``life-line'' network television service 
from a satellite provider.
    Where a satellite provider can retransmit a local station's 
exclusive network programming but chooses to substitute 
identical programming from a distant network affiliate of the 
same network instead, the satellite carrier undermines the 
value of the license negotiated by the local broadcast station 
as well as the continued viability of the network-local 
affiliate relationship. In addition to these copyright and 
contractual concerns, broadcasters contend that the long-term 
interests and short-term welfare of DBS subscribers are 
compromised when they are not able to receive timely local 
news, weather, and emergency information via satellite.
    The Committee has consistently considered market-negotiated 
exclusive arrangements that govern the public performance of 
broadcast programming in a given geographic area to be 
preferable to statutory mandates. Accordingly, a second purpose 
of the unserved household limitation is to confine the 
abrogation of interests borne by copyright holders and local 
network broadcasters to only those circumstances that are 
absolutely necessary to provide the ``life-line'' service.
    To ensure that DBS carriers respect the boundaries of the 
unserved household limitation, Sec. 119 requires DBS operators 
to provide television networks with periodic reports that 
specify the identity and number of subscribers who receive 
network stations under the license. The purpose of these 
requirements is to discourage DBS provision of ``illegal'' 
signals to subscribers and avoid costly and protracted 
litigation between broadcast stations and DBS companies. The 
provision of such signals runs afoul of congressional policy 
that recognizes the importance of the network-affiliate 
exclusive licensing relationship, which is intended to promote 
the continued production and dissemination of local 
programming.
    SHVIA created a royalty-free copyright compulsory license 
that allows DBS providers to retransmit local network stations 
and local superstations to their subscribers in a given local 
market.\13\ Local markets are determined by reference to the 
stations designated market area (``DMA'').\14\ The practice of 
retransmitting this programming to subscribers who reside in 
the local market of these stations is sometimes referred to as 
``local-into-local.''
---------------------------------------------------------------------------
    \13\ 17 U.S.C. Sec. 122(j)(2)(A) defines a ``local market'' as the 
``designated market area in which a station is located, and--

      (i) in the case of a commercial television broadcast 
      station, all commercial television broadcast stations 
      licensed to a community within the same designated market 
      area are within the same local market . . .''
---------------------------------------------------------------------------
    \14\ 17 U.S.C. Sec. 122(j)(2)(C) describes the manner for 
determining a stations DMA ``as determined by Nielsen Media Research 
and published in the . . . Nielsen Station Index Directory and Nielsen 
Station Index United States Television Household Estimates or any 
successor publication.
---------------------------------------------------------------------------
    The terms of this license are contained in Sec. 122 of the 
Copyright Act. In contrast to the cable license, the DBS local 
license permits, but does not require, DBS providers to offer 
local-into-local service in the television markets of their 
choosing.\15\ However, once a DBS operator elects to retransmit 
one or more stations in a given market, the carrier must 
retransmit all eligible local stations in that market in a non-
discriminatory manner. Despite the fact that these local 
signals are made available to DBS operators on a copyright 
royalty free basis, the typical practice of DBS companies is to 
charge their subscribers a monthly fee for the receipt of such 
programming. In sum, Sec. 122, coupled with Sec. 119, enables 
DBS companies to provide their subscribers with a full 
complement of broadcast signals in a manner similar to that 
afforded to cable operators under the Sec. 111 statutory 
license.
---------------------------------------------------------------------------
    \15\ The cable license, contained in Sec. 111 of title 17 is often 
referred to as a ``must carry'' provision. The satellite local license, 
contained in Sec. 122 of title 17 is described as ``carry one, carry 
all'' since the decision to carry local stations in a given local 
market is permissive on the part of DBS operators.
---------------------------------------------------------------------------
    The Committee is concerned by allegations that DBS 
operators have been retransmitting superstation signals to 
commercial establishments, in violation of Sec. 119, which 
unambiguously restricts such retransmissions to private homes. 
The Committee encourages all affected parties to continue their 
efforts to reach an amicable resolution of the past liability 
for these unlawful transmissions and strongly recommends that 
they negotiate reasonable terms, rates, and conditions for the 
prospective availability of a license(s) that will permit the 
DBS industry to retransmit superstation signals to non-
residential customers, as cable providers are permitted to do 
under current law.
    To further promote competition between the cable and DBS 
industries, it is recommended that the Sec. 119 license be 
reauthorized for an additional 5 years. The Committee 
determines this period to be appropriate and consistent with 
prior extensions. Given the ongoing transition of the broadcast 
television industry from analog transmissions to digital, it is 
in the public interest for Congress to reexamine the terms and 
conditions of the Sec. 119 license in 5 years and to make any 
necessary adjustments at that time.

                                Hearings

    On February 24, 2004, the Committee's Subcommittee on 
Courts, the Internet and Intellectual Property held an 
oversight hearing to consider SHVIA \16\ and its extension. 
Testimony was received from four witnesses, who represented the 
U.S. Copyright Office, the Motion Picture Association of 
America, Inc., the Satellite Broadcasting Communications 
Association, and the National Association of Broadcasters. 
Additional materials were submitted by the American Society of 
Composers, Authors and Publishers, and Broadcast Music, Inc., 
the Association of American Publishers, Inc., and the Software 
& Information Industry Association; and the Association of 
Public Television Stations.
---------------------------------------------------------------------------
    \16\ Intellectual Property and Communications Omnibus Reform Act of 
1999, Appendix I, Title I, Pub. L. No. 106-113.
---------------------------------------------------------------------------

                        Committee Consideration

    On May 6, 2004, the Subcommittee on Courts, the Internet, 
and Intellectual Property met in open session and ordered 
favorably reported a Committee Print of legislation on this 
topic, as amended, by a voice vote, a quorum being present.\17\ 
On July 7, 2004, the Committee met in open session and ordered 
favorably reported the bill H.R. 4518,\18\ with an amendment, 
by a voice vote, a quorum being present.
---------------------------------------------------------------------------
    \17\ The text that the Subcommittee reported became the basis for 
H.R. 4518, which included proposed changes to the distant signal 
license codified in 17 U.S.C. Sec. 119.
    \18\ H.R. 4518 was introduced on June 4, 2004 by the Chairman of 
the Subcommittee on Courts, the Internet, and Intellectual Property, 
Rep. Smith of Texas, along with Representatives Conyers and Berman and 
was referred to the Committee on the Judiciary. The bill was based on 
the Committee Print reported by the Subcommittee and incorporated input 
from all stakeholders.
---------------------------------------------------------------------------

                         Vote of the Committee

    In compliance with clause 3(b) of Rule XIII of the Rules of 
the House of Representatives, the Committee notes that there 
were no recorded votes during the consideration of H.R. 4518.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increase tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 4518, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 22, 2004.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4518, the 
``Satellite Home Viewer Extension Act of 2004.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman, who can be reached at 226-2860.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 4518--Satellite Home Viewer Extension and Reauthorization Act of 
        2004.

                                SUMMARY

    Under current law, satellite television companies pay a 
monthly royalty fee for each subscriber to the Copyright Office 
(within the Library of Congress) for the right to retransmit 
network and superstation television signals to satellite 
television subscribers. The Copyright Office later distributes 
these fees to the copyright owners of the retransmitted 
material.
    H.R. 4518 would extend the requirement, set to expire under 
current law on January 1, 2005, that satellite carriers pay 
royalty fees to the Federal Government through December 31, 
2009, and would make other changes to current law relating to 
satellite retransmission of television broadcasting. CBO 
estimates that enacting the bill would increase revenues by $40 
million in 2005, $459 million over the 2005-2009 period, and 
$557 million over the 2005-2014 period. With higher royalty 
collections, the payments to copyright owners (including 
interest earnings) also would increase, resulting in an 
estimated increase in direct spending of less than $500,000 in 
2005, $48 million over the 2005-2009 period, and $582 million 
over the 2005-2014 period. Thus, the net impact on the Federal 
budget would be a decrease in the deficit of $40 million in 
2005 and $412 million over the 2005-2009 period, but it would 
increase the deficit by $24 million over the 2005-2014 period. 
(That net increase over the 10-year period reflects the payment 
of interest in addition to amounts collected in royalties.) 
Implementing the bill would not have a significant effect on 
spending subject to appropriation.
    H.R. 4518 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    H.R. 4518 would impose a private-sector mandate as defined 
in UMRA on satellite companies. CBO estimates that the cost of 
the mandate would not exceed the annual threshold for private-
sector mandates established by UMRA ($120 million in 2004, 
adjusted annually for inflation).

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of H.R. 4518 is shown in the 
following table. The costs of this legislation fall within 
budget function 370 (commerce and housing credit).

                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                      2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014
----------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES AND DIRECT SPENDING
Estimated Revenues                       0     40     91     99    108    121     98      0      0      0      0

Estimated Budget Authority               0     40     94    108    122    140    119     19     15     10      5

Estimated Outlays                        0      0      0      0     11     37     71    105    126    129    103

Estimated Net Increase or
  Decrease (-) in the Deficit
  from Changes in Revenue and
  Direct Spending                        0    -40    -91    -99    -98    -84    -27    105    126    129    103
----------------------------------------------------------------------------------------------------------------

                           BASIS OF ESTIMATE

    The bill would increase Federal revenues from copyright 
royalties. Those fees, plus interest, would then be paid out to 
copyright owners.
Extension of Copyright Royalty Fees
    H.R. 4518 would extend, through December 31, 2009, the 
requirement that satellite companies pay royalty fees to owners 
of copyrighted material for retransmitting that material to 
their subscribers. The bill also would require the Copyright 
Office to set a new rate on January 1, 2005, to account for 
increases in the cost of living from 2000 through 2004 and to 
adjust that rate on January 1st of each year starting in 2007.
    CBO estimates that, taken together, these changes would 
increase revenues by $40 million in 2005, $459 million over the 
2005-2009 period, and $557 million over the 2005-2014 period. 
With higher royalty collections, the payments to copyright 
owners also would increase. Historical spending patterns 
indicate that copyright holders may receive the fees and 
interest several years after the Copyright Office has collected 
the revenues. Thus, CBO estimates a significant lag between 
increases in revenue collections and higher payments to 
copyright holders. CBO estimates that increases in direct 
spending resulting from increases in royalty collections (and 
interest on those collections) would be negligible for the next 
few years but would total $48 million over the 2005-2009 period 
and $582 million over the 2005-2014 period.
Interest on Copyright Royalties
    H.R. 4518 would result in additional spending because all 
revenues are eventually paid to copyright holders with 
interest. Therefore, under the bill, budget authority for 
spending associated with royalty collections would be slightly 
higher than revenues associated with those collections.
Satellite Retransmission of Distant and Local Signals
    According to the Federal Communications Commission (FCC), 
about 20 million households subscribe to satellite television 
service in the United States. Under current law, satellite 
companies are permitted to retransmit signals originally 
broadcast by television stations back into the same area where 
they originated (``local-into-local'') for most subscribers and 
may retransmit signals that originate in a distant market into 
a local area (``distant-into-local'') under certain 
circumstances. As a result, some subscribers are eligible to 
receive both distant-into-local and local-into-local signals. 
Section 103 would require certain satellite subscribers to 
choose between receiving distant-into-local and local-into-
local signals.
    While satellite companies pay royalties for restransmitting 
distant-into-local signals, they do not pay royalties for 
retransmitting local-into-local signals. Under section 103, 
satellite companies would pay slightly fewer royalties because 
they would be retransmitting distant-into-local signals to a 
slightly smaller number of subscribers than they would if the 
current copyright laws were extended.
    CBO estimates that enacting section 103 would decrease 
revenue collections by about $1 million over the 2005-2010 
period. In addition, payments to copyright owners would 
decrease, causing a decrease in direct spending of about $1 
million from 2005-2014.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    H.R. 4518 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act and would not affect the 
budgets of state, local, or tribal governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    H.R. 4518 would impose a private-sector mandate as defined 
in UMRA on satellite companies. CBO estimates that the cost of 
the mandate would not exceed the annual threshold for private-
sector mandates established by UMRA ($120 million in 2004, 
adjusted annually for inflation).
    H.R. 4518 would require satellite companies to submit to 
television network stations a list of their subscribers that 
are receiving signals of ``significantly viewed'' stations. The 
FCC determines which over-the-air television broadcast stations 
are considered significantly viewed stations in a particular 
community. The satellite companies also would be required to 
submit an updated list monthly.

                         PREVIOUS CBO ESTIMATES

    On July 8, 2004, CBO transmitted a cost estimate for H.R. 
4501, the Satellite Home Viewer Extension and Reauthorization 
Act of 2004, as ordered reported by the House Committee on 
Energy and Commerce on June 3, 2004. While H.R. 4518 would 
extend the copyright royalty fees, H.R. 4501 would not. The 
cost estimates for the bills reflect this difference. Both 
bills contain provisions that would make similar changes to 
satellite retransmission of distant and local signals, and the 
cost estimate for those provisions are also similar.
    On July 22, 2004, CBO transmitted a cost estimate for S. 
2013, the Satellite Home Viewer Extension Act of 2004, as 
ordered reported by the Senate Committee on the Judiciary on 
June 17, 2004. Both S. 2013 and H.R. 4518 would extend the 
copyright royalty fees, but each would increase the rates in a 
slightly different manner. Both bills contain provisions that 
would make changes to satellite retransmission of distant and 
local signals, but S. 2013 would affect a smaller number of 
subscribers. The cost estimates for the bills reflect these 
differences.
    The private-sector mandate on satellite companies in H.R. 
4518 and S. 2013 are similar. H.R. 4501 includes the same 
mandate along with additional ones on satellite companies. The 
total direct costs of mandates contained in each of the bills 
would fall below the annual threshold for private-sector 
mandates established in UMRA.

                         ESTIMATE PREPARED BY:

Federal Costs: Melissa E. Zimmerman (226-2860)
Impact on State, Local, and Tribal Governments: Sarah Puro 
    (225-3220)
Impact on the Private Sector: Jean Talarico (226-2940)

                         ESTIMATE APPROVED BY:

Peter H. Fontaine
Deputy Assistant Director for Budget Analysis

                    Performance Goals and Objectives

    H.R. 4518 will extend the distant signal license for 5 
years and make other appropriate laws in this area. The 
Committee believes that this will foster continued competition 
in the MVPD market while also ensuring that copyright owners 
are fairly compensated.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, section 8 of the Constitution.

               Section-by-Section Analysis and Discussion

    Because H.R. 4518, the ``Satellite Home Viewer Extension 
and Reauthorization (SHVERA) Act of 2004'' was reported with an 
amendment in the nature of a substitute, the following 
discussion constitutes an explanation of the bill as reported 
by the Committee.
    Section 1 of the bill sets forth the title of the Act, the 
``Satellite Home Viewer Extension and Reauthorization Act of 
2004.''

           TITLE I--STATUTORY LICENSE FOR SATELLITE CARRIERS

Sec. 101. Extension of Authority.
    Subsection (a) extends the sunset date for 17 U.S.C. 
Sec. 119, for an additional 5 years. Similarly, subsection (b) 
extends the existing grandfather provision of Sec. 119 for 
recipients of network signals who would not qualify but for the 
exception provided in SHVIA over the past 5 years.
Sec. 102. Reporting of Subscribers; Significantly Viewed and Other 
        Signals; Technical Amendments.
    Section 102 eliminates expired and obsolete provisions from 
SHVIA and the Satellite Home Viewer Act of 1994, including 
those that pertain to the PBS Satellite Feed and a transitional 
television signal strength testing regime that expired in 1996.
    The section also permits satellite carriers to retransmit 
``significantly viewed'' signals to subscribers who receive 
retransmissions of their local signals from their satellite 
carrier under the Sec. 122 license. ``Significantly viewed'' 
signals are television stations that are located in adjacent 
television markets that are received over-the-air by a 
significant number of viewers in the local market but are 
technically considered to be distant signals. The Sec. 111 
cable license permits cable operators to retransmit 
significantly viewed signals to their subscribers royalty-free. 
Section 102 amends the Sec. 119 license to permit satellite 
carriers to retransmit these signals royalty-free to create 
parity between the two licenses. To be eligible to retransmit 
significantly viewed signals to subscribers in a local market, 
satellite carriers must provide initial and monthly lists of 
subscribers to broadcasters whose signals they carry on a 
significantly viewed basis.
    Section 102 also permits the retransmission, subject to 
payment of applicable copyright royalties, of certain 
additional television stations on a basis other than local or 
significantly viewed. These two exceptions are for States with 
a single commercial full-power commercial station and in 
certain other limited circumstances.
Sec. 103. Statutory License for Satellite Carriers Outside Local 
        Markets.
    Section 103 prescribes the conditions under which 
grandfathered subscribers and subscribers residing in unserved 
households may receive network stations under Sec. 119. The 
section distinguishes between subscribers who live in a local 
market where retransmission of the local stations are being 
offered by the satellite carrier and those subscribers who 
reside in a local market where such service is not currently 
offered. For a grandfathered subscriber who receives distant 
network stations on the date of enactment of the bill and 
resides in a local market where local stations are being 
offered by the satellite carrier, the subscriber may continue 
to receive distant network signals if 1) the subscriber elects 
to retain the distant network signals within 60 days of 
notification from the satellite carrier of an offer of local 
service, and 2) the subscriber declines receipt of the local 
network signals. Once the subscriber elects to receive local 
signals, the distant network signals may not be provided under 
Sec. 119. In addition, to continue retransmission of distant 
network signals to a subscriber who does not receive local 
signals, the satellite carrier must submit a list to each 
television network retransmitted that asserts the subscriber is 
a grandfathered subscriber and eligible to receive what is 
otherwise impermissible distant network service. If the 
subscriber did not actually receive service of distant network 
signals on July 1, 2004, they are no longer considered to be 
grandfathered and shall not qualify for the receipt of distant 
network stations as a grandfathered subscriber after that date.
    For a subscriber who resides in an unserved household (i.e. 
is not a grandfathered subscriber) located in a local market 
where the satellite carrier offers local signals on January 1, 
2005, the subscriber may continue to receive distant network 
signals only if the satellite carrier submits a list to the 
networks that identifies such subscribers within 60 days of 
that date. For a subscriber who resides in an unserved 
household located in a local market where the satellite carrier 
does not offer local signals on January 1, 2005, the subscriber 
may 1) continue to receive distant networks signals under 
Sec. 119 until such time as the subscriber elects local signals 
from the carrier, or 2) may sign up for service of distant 
network signals until such time as the local signals are made 
available and the subscriber elects the local signals.
    Finally, persons who reside in a local market where local 
signals are made available by their satellite carrier, but who 
have not sought distant network service from their satellite 
carrier, shall be ineligible to receive such service under 
Sec. 119.
    Section 103 also contains provisions that relate to the 
royalty fees due satellite carriers under the Sec. 119 license. 
Unless superseded by private agreements, the section requires 
the convening of a CARP in 2005 to establish fair market value 
rates for network stations and superstations. Identical to 
Congress's action in enacting the SHVIA in 1999, the rates 
determined by the CARP, and approved by the Librarian of 
Congress, will again be reduced by 45 percent for network 
stations and 30 percent for superstations. While the CARP 
proceeding is pending, the current Sec. 119 royalty rates will 
be adjusted for changes in the cost of living over the last 5 
years, as determined by the Consumer Price Index (``CPI''). 
Beginning in 2007, the Librarian of Congress will adjust rates 
annually to account for changes in the cost of living, as 
determined by the CPI, over the preceding year for the 
remainder of the license (2007, 2008, and 2009).
Sec. 104. Waivers.
    Section 104 creates a waiver process for subscribers who 
are not eligible to receive distant network signals under the 
provisions contained in Sec. 103 of the bill, and for 
subscribers who are not eligible to receive significantly 
viewed network and superstation signals because their satellite 
carrier does not offer service of local signals under Sec. 122 
of the Copyright Act. A subscriber may seek a waiver through 
his/her satellite carrier from the local broadcaster. The 
waiver is considered granted unless the broadcaster acts within 
30 days of receipt to reject the request. The Sec. 104 waiver 
provision does not apply to waivers from the unserved household 
restriction in Sec. 119, which are governed by Sec. 339(c)(2) 
of the Communications Act.
Sec. 105. Study.
    Section 105 requires the Copyright Office to conduct a 
study of the Sec. 119 and Sec. 122 licenses for satellite, and 
the Sec. 111 license for cable, and to make recommendations for 
improvements to the Committee and the Senate Committee on the 
Judiciary no later than June 30, 2008. The Office will analyze 
the differences among the three licenses and consider whether 
they should be eliminated, changed, or maintained with the goal 
of harmonizing their operation.
Sec. 106. Effect on Certain Proceedings.
    Section 106 clarifies that nothing in the bill is intended 
to modify any remedy imposed on a party pursuant to litigation 
brought under Sec. 119 prior to May 1, 2004.
Sec. 107. Expedited Consideration of Voluntary Agreements to Provide 
        Satellite Secondary Transmissions to Local Markets.
    Section 107 requires the Department of Justice to respond 
within 90 days of receipt of a business review letter from two 
or more satellite carriers that proposes to make or carry out 
an agreement to provide local-into-local retransmissions under 
17 U.S.C. Sec. 122 (j)(2), into a specific local market or 
markets where no satellite carrier has made available 
retransmissions under the Sec. 122 license. By ensuring 
satellite carriers will receive a timely response addressing 
whether proposed business conduct violates the antitrust laws, 
Sec. 107 is intended to provide an additional tool to 
facilitate the availability of local-into-local retransmissions 
in small and rural television markets. The Committee intends 
for this authority to be used only for the limited purpose of 
ensuring timely consideration of agreements that relate solely 
to the delivery of local signals.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

           SECTION 4 OF THE SATELLITE HOME VIEWER ACT OF 1994

SEC. 4. TERMINATION.

    (a) Expiration of Amendments.--Section 119 of title 17, 
United States Code, as amended by section 2 of this Act, ceases 
to be effective on December 31, [2004] 2009.

           *       *       *       *       *       *       *

                              ----------                              


              SECTION 119 OF TITLE 17, UNITED STATES CODE

Sec. 119. Limitations on exclusive rights: Secondary transmissions of 
                    superstations and network stations for private home 
                    viewing

    (a) Secondary Transmissions by Satellite Carriers.--
            (1) Superstations [and pbs satellite feed].--
        Subject to the provisions of paragraphs [(3), (4), and 
        (6)] (5), (6), and (8) of this subsection and section 
        114(d), secondary transmissions of a performance or 
        display of a work embodied in a primary transmission 
        made by a superstation [or by the Public Broadcasting 
        Service satellite feed] shall be subject to statutory 
        licensing under this section if the secondary 
        transmission is made by a satellite carrier to the 
        public for private home viewing, with regard to 
        secondary transmissions the satellite carrier is in 
        compliance with the rules, regulations, or 
        authorizations of the Federal Communications Commission 
        governing the carriage of television broadcast station 
        signals, and the carrier makes a direct or indirect 
        charge for each retransmission service to each 
        household receiving the secondary transmission or to a 
        distributor that has contracted with the carrier for 
        direct or indirect delivery of the secondary 
        transmission to the public for private home viewing. 
        [In the case of the Public Broadcasting Service 
        satellite feed, the statutory license shall be 
        effective until January 1, 2002.]
            (2) Network stations.--
                    (A) In general.--Subject to the provisions 
                of subparagraphs (B) and (C) of this paragraph 
                and paragraphs [(3), (4), (5), and (6)] (5), 
                (6), (7), and (8) of this subsection and 
                section 114(d), secondary transmissions of a 
                performance or display of a work embodied in a 
                primary transmission made by a network station 
                shall be subject to statutory licensing under 
                this section if the secondary transmission is 
                made by a satellite carrier to the public for 
                private home viewing, with regard to secondary 
                transmissions the satellite carrier is in 
                compliance with the rules, regulations, or 
                authorizations of the Federal Communications 
                Commission governing the carriage of television 
                broadcast station signals, and the carrier 
                makes a direct or indirect charge for such 
                retransmission service to each subscriber 
                receiving the secondary transmission.
                    (B) Secondary transmissions to unserved 
                households.--
                            (i) In general.--The statutory 
                        license provided for in subparagraph 
                        (A) shall be limited to secondary 
                        transmissions of the signals of no more 
                        than two network stations in a single 
                        day for each television network to 
                        persons who reside in unserved 
                        households. The limitation in this 
                        clause shall not apply to secondary 
                        transmissions under paragraph (3).

           *       *       *       *       *       *       *

                    [(C) Submission of subscriber lists to 
                networks.--A satellite carrier that makes 
                secondary transmissions of a primary 
                transmission made by a network station pursuant 
                to subparagraph (A) shall, 90 days after 
                commencing such secondary transmissions, submit 
                xto the network that owns or is affiliated with 
                the network station a list identifying (by name 
                and street address, including county and zip 
                code) all subscribers to which the satellite 
                carrier makes secondary transmissions of that 
                primary transmission. Thereafter, on the 15th 
                of each month, the satellite carrier shall 
                submit to the network a list identifying (by 
                name and street address, including county and 
                zip code) any persons who have been added or 
                dropped as such subscribers since the last 
                submission under this subparagraph. Such 
                subscriber information submitted by a satellite 
                carrier may be used only for purposes of 
                monitoring compliance by the satellite carrier 
                with this subsection. The submission 
                requirements of this subparagraph shall apply 
                to a satellite carrier only if the network to 
                whom the submissions are to be made places on 
                file with the Register of Copyrights a document 
                identifying the name and address of the person 
                to whom such submissions are to be made. The 
                Register shall maintain for public inspection a 
                file of all such documents.]
                    (C) Exceptions.--
                            (i) States with single full-power 
                        network station.--In a State in which 
                        there is licensed by the Federal 
                        Communications Commission a single 
                        full-power station that was a network 
                        station on January 1, 1995, the 
                        statutory license provided for in 
                        subparagraph (A) shall apply to the 
                        secondary transmission by a satellite 
                        carrier of the signal of that station 
                        to any subscriber in a community that 
                        is located within that State and that 
                        is not within the first 50 television 
                        markets as listed in the regulations of 
                        the Commission as in effect on such 
                        date (47 CFR 76.51).
                            (ii) Certain additional stations.--
                        The statutory license provided for in 
                        subparagraph (A) shall apply to the 
                        secondary transmission, by a satellite 
                        carrier to subscribers in no more than 
                        two counties in a State that are in 
                        local market principally comprised of 
                        counties in another State, of the 
                        signals of any network station located 
                        in the capital of the State in which 
                        such counties are located, if the total 
                        number of television households in the 
                        two counties combined did not exceed 
                        10,000 for the year 2003 according to 
                        Nielsen Media Research.
                    (D) Submission of subscriber lists to 
                networks.--
                            (i) Initial lists.--A satellite 
                        carrier that makes secondary 
                        transmissions of a primary transmission 
                        made by a network station pursuant to 
                        subparagraph (A) shall, 90 days after 
                        commencing such secondary 
                        transmissions, submit to the network 
                        that owns or is affiliated with the 
                        network station--
                                    (I) a list identifying (by 
                                name and street address, 
                                including county and zip code) 
                                all subscribers to which the 
                                satellite carrier makes 
                                secondary transmissions of that 
                                primary transmission to 
                                subscribers in unserved 
                                households; and
                                    (II) a separate list, 
                                aggregated by designated market 
                                area (as defined in section 
                                122(j)) (by name and street 
                                address, including county and 
                                zip code), which shall indicate 
                                those subscribers being served 
                                pursuant to subsection (a)(3), 
                                relating to significantly 
                                viewed stations.
                            (ii) Monthly lists.--After the 
                        submission of the initial lists under 
                        clause (i), on the 15th of each month, 
                        the satellite carrier shall submit to 
                        the network--
                                    (I) a list identifying (by 
                                name and street address, 
                                including county and zip code) 
                                any persons who have been added 
                                or dropped as subscribers under 
                                clause (i)(I) since the last 
                                submission under clause (i); 
                                and
                                    (II) a separate list, 
                                aggregated by designated market 
                                area (by name and street 
                                address, including county and 
                                zip code), identifying those 
                                subscribers whose service 
                                pursuant to subsection (a)(3), 
                                relating to significantly 
                                viewed stations, has been added 
                                or dropped.
                            (iii) Use of subscriber 
                        information.--Subscriber information 
                        submitted by a satellite carrier under 
                        this subparagraph may be used only for 
                        purposes of monitoring compliance by 
                        the satellite carrier with this 
                        subsection.
                            (iv) Applicability.--The submission 
                        requirements of this subparagraph shall 
                        apply to a satellite carrier only if 
                        the network to whom the submissions are 
                        to be made places on file with the 
                        Register of Copyrights a document 
                        identifying the name and address of the 
                        person to whom such submissions are to 
                        be made. The Register shall maintain 
                        for public inspection a file of all 
                        such documents.
            (3) Secondary transmissions of significantly viewed 
        signals.--
                    (A) In general.--Notwithstanding the 
                provisions of paragraph (2)(B), and subject to 
                subparagraph (B) of this paragraph, the 
                statutory license provided for in paragraphs 
                (1) and (2) shall apply to the secondary 
                transmission of the signal of a network station 
                or a superstation to a subscriber who resides 
                outside the station's local market (as defined 
                in section 122(j)) but within a community in 
                which the signal of that station was determined 
                by the Federal Communications Commission, on or 
                before the date of the enactment of the 
                Satellite Home Viewer Extension and 
                Reauthorization Act of 2004, to be 
                significantly viewed in accordance with the 
                provisions of section 76.54 of title 47, Code 
                of Federal Regulations, as in effect on such 
                date of enactment.
                    (B) Limitation.--Subparagraph (A) shall 
                apply only to secondary transmissions of 
                network stations and superstations to 
                subscribers who receive secondary transmissions 
                from a satellite carrier pursuant to the 
                statutory license under section 122.
            (4) Statutory license where retransmissions into 
        local market available.--
                    (A) Rules for subscribers under subsection 
                (e).--
                            (i) For those receiving distant 
                        signals.--In the case of a subscriber 
                        of a satellite carrier who is eligible 
                        to receive the signal of a network 
                        station solely by reason of subsection 
                        (e) (in this subparagraph referred to 
                        as a ``distant signal''), and who is 
                        receiving the distant signal of a 
                        network station on the date of the 
                        enactment of the Satellite Home Viewer 
                        Extension and Reauthorization Act of 
                        2004, the following shall apply:
                                    (I) In a case in which the 
                                signal of a local network 
                                station affiliated with the 
                                same television network is made 
                                available by that satellite 
                                carrier to the subscriber 
                                pursuant to the statutory 
                                license under section 122, the 
                                statutory license under 
                                paragraph (2) shall apply only 
                                to secondary transmissions by 
                                that satellite carrier to that 
                                subscriber of the distant 
                                signal of a station affiliated 
                                with the same television 
                                network--
                                            (aa) if, within 60 
                                        days after receiving 
                                        the notice of the 
                                        satellite carrier under 
                                        section 338(h) of the 
                                        Communications Act of 
                                        1934, the subscriber 
                                        elects to retain the 
                                        distant signal; but
                                            (bb) only until 
                                        such time as the 
                                        subscriber elects to 
                                        receive such local 
                                        signal.
                                    (II) Notwithstanding 
                                subclause (I), the statutory 
                                license under paragraph (2) 
                                shall not apply with respect to 
                                any subscriber who is eligible 
                                to receive the distant signal 
                                of a television network station 
                                solely by reason of subsection 
                                (e) and to whom subclause (I) 
                                applies unless the satellite 
                                carrier, within 60 days after 
                                the date of the enactment of 
                                the Satellite Home Viewer 
                                Extension and Reauthorization 
                                Act of 2004, submits to that 
                                television network a list, 
                                aggregated by designated market 
                                area (as defined in section 
                                122(j)(2)(C)), that--
                                            (aa) identifies 
                                        that subscriber by name 
                                        and address (street or 
                                        RFD number, city, 
                                        State, and zip code) 
                                        and specifies the 
                                        distant signals 
                                        received by the 
                                        subscriber; and
                                            (bb) states, to the 
                                        best of the satellite 
                                        carrier's knowledge and 
                                        belief, after having 
                                        made diligent and good 
                                        faith inquiries, that 
                                        the subscriber is 
                                        eligible under 
                                        subsection (e) to 
                                        receive the distant 
                                        signals.
                            (ii) For those not receiving 
                        distant signals.--In the case of any 
                        subscriber of a satellite carrier who 
                        is eligible to receive the distant 
                        signal of a network station solely by 
                        reason of subsection (e) and who did 
                        not receive a distant signal of a 
                        station affiliated with the same 
                        network on July 1, 2004, the statutory 
                        license under paragraph (2) shall not 
                        apply to secondary transmissions by 
                        that satellite carrier to that 
                        subscriber of that distant signal.
                    (B) Rules for other subscribers.--In the 
                case of a subscriber of a satellite carrier who 
                is eligible to receive the signal of a network 
                station under the statutory license under 
                paragraph (2) (in this subparagraph referred to 
                as a ``distant signal''), other than 
                subscribers to whom subparagraph (A) applies, 
                the following shall apply:
                            (i) In a case in which the signal 
                        of a local network station affiliated 
                        with the same television network is 
                        made available by that satellite 
                        carrier, on January 1, 2005, to the 
                        subscriber pursuant to the statutory 
                        license under section 122, the 
                        statutory license under paragraph (2) 
                        shall apply only to secondary 
                        transmissions by that satellite carrier 
                        to that subscriber of the distant 
                        signal of a station affiliated with the 
                        same television network if the 
                        subscriber's satellite carrier, within 
                        60 days after such date, submits to 
                        that television network a list, 
                        aggregated by designated market area 
                        (as defined in section 122(j)(2)(C)), 
                        that identifies that subscriber by name 
                        and address (street or RFD number, 
                        city, State, and zip code) and 
                        specifies the distant signals received 
                        by the subscriber.
                            (ii) In a case in which the signal 
                        of a local network station affiliated 
                        with the same television network is not 
                        made available by that satellite 
                        carrier, on January 1, 2005, to a 
                        subscriber pursuant to the statutory 
                        license under section 122, the 
                        statutory license under paragraph (2) 
                        shall apply only to secondary 
                        transmissions by that satellite carrier 
                        of the distant signal of a station 
                        affiliated with the same network to any 
                        person--
                                    (I) who is a subscriber of 
                                that satellite carrier on such 
                                date, or
                                    (II) who becomes a 
                                subscriber of that satellite 
                                carrier after such date but 
                                before the local signal is 
                                available,
                        but only until such time as the 
                        subscriber elects to receive the local 
                        signal from that satellite carrier.
                    (C) Future applicability.--The statutory 
                license under paragraph (2) shall not apply to 
                the secondary transmission by a satellite 
                carrier of a primary transmission of a network 
                station to a subscriber who--
                            (i) does not receive such secondary 
                        transmission as of the date of the 
                        enactment of the Satellite Home Viewer 
                        Extension and Reauthorization Act of 
                        2004; and
                            (ii) resides in a local market 
                        where the satellite carrier makes 
                        available a network station affiliated 
                        with the same television network 
                        pursuant to the statutory license under 
                        section 122.
                    (D) Other provisions not affected.--This 
                paragraph shall not affect the applicability of 
                the statutory license to secondary 
                transmissions under paragraph (3) or to 
                unserved households included under paragraph 
                (12).
                    (E) Available defined.--For purposes of 
                this paragraph, a local signal has been made 
                available by a satellite carrier to a 
                subscriber or person if the satellite carrier 
                offers that local signal to other subscribers 
                who reside in the same zipcode as that 
                subscriber or person.
            [(3)] (5) Noncompliance with reporting and payment 
        requirements.--Notwithstanding the provisions of 
        paragraphs (1) and (2), the willful or repeated 
        secondary transmission to the public by a satellite 
        carrier of a primary transmission made by a 
        superstation or a network station and embodying a 
        performance or display of a work is actionable as an 
        act of infringement under section 501, and is fully 
        subject to the remedies provided by sections 502 
        through 506 and 509, where the satellite carrier has 
        not deposited the statement of account and royalty fee 
        required by subsection (b), or has failed to make the 
        submissions to networks required by paragraph (2)(C).
            [(4)] (6) Willful alterations.--Notwithstanding the 
        provisions of paragraphs (1) and (2), the secondary 
        transmission to the public by a satellite carrier of a 
        performance or display of a work embodied in a primary 
        transmission made by a superstation or a network 
        station is actionable as an act of infringement under 
        section 501, and is fully subject to the remedies 
        provided by sections 502 through 506 and sections 509 
        and 510, if the content of the particular program in 
        which the performance or display is embodied, or any 
        commercial advertising or station announcement 
        transmitted by the primary transmitter during, or 
        immediately before or after, the transmission of such 
        program, is in any way willfully altered by the 
        satellite carrier through changes, deletions, or 
        additions, or is combined with programming from any 
        other broadcast signal.
            [(5)] (7) Violation of territorial restrictions on 
        statutory license for network stations.--
                    (A) Individual violations.--The willful or 
                repeated secondary transmission by a satellite 
                carrier of a primary transmission made by a 
                network station and embodying a performance or 
                display of a work to a subscriber [who does not 
                reside in an unserved household] who is not 
                eligible to receive the transmission under this 
                section is actionable as an act of infringement 
                under section 501 and is fully subject to the 
                remedies provided by sections 502 through 506 
                and 509, except that--
                            (i) * * *

           *       *       *       *       *       *       *

                    (B) Pattern of violations.--If a satellite 
                carrier engages in a willful or repeated 
                pattern or practice of delivering a primary 
                transmission made by a network station and 
                embodying a performance or display of a work to 
                subscribers [who do not reside in unserved 
                households] who are not eligible to receive the 
                transmission under this section, then in 
                addition to the remedies set forth in 
                subparagraph (A)--
                            (i) * * *

           *       *       *       *       *       *       *

                    (D) Burden of proof.--In any action brought 
                under this paragraph, the satellite carrier 
                shall have the burden of proving that its 
                secondary transmission of a primary 
                transmission by a network station [is for 
                private home viewing to an unserved household] 
                is to a subscriber who is eligible to receive 
                the transmission under this section.

           *       *       *       *       *       *       *

            [(6)] (8) Discrimination by a satellite carrier.--
        Notwithstanding the provisions of paragraph (1), the 
        willful or repeated secondary transmission to the 
        public by a satellite carrier of a performance or 
        display of a work embodied in a primary transmission 
        made by a superstation or a network station is 
        actionable as an act of infringement under section 501, 
        and is fully subject to the remedies provided by 
        sections 502 through 506 and 509, if the satellite 
        carrier unlawfully discriminates against a distributor.
            [(7)] (9) Geographic limitation on secondary 
        transmissions.--The statutory license created by this 
        section shall apply only to secondary transmissions to 
        households located in the United States.
            [(8) Transitional signal intensity measurement 
        procedures.--
                    [(A) In general.--Subject to subparagraph 
                (C), upon a challenge by a network station 
                regarding whether a subscriber is an unserved 
                household within the predicted Grade B Contour 
                of the station, the satellite carrier shall, 
                within 60 days after the receipt of the 
                challenge--
                            [(i) terminate service to that 
                        household of the signal that is the 
                        subject of the challenge, and within 30 
                        days thereafter notify the network 
                        station that made the challenge that 
                        service to that household has been 
                        terminated; or
                            [(ii) conduct a measurement of the 
                        signal intensity of the subscriber's 
                        household to determine whether the 
                        household is an unserved household 
                        after giving reasonable notice to the 
                        network station of the satellite 
                        carrier's intent to conduct the 
                        measurement.
                    [(B) Effect of measurement.--If the 
                satellite carrier conducts a signal intensity 
                measurement under subparagraph (A) and the 
                measurement indicates that--
                            [(i) the household is not an 
                        unserved household, the satellite 
                        carrier shall, within 60 days after the 
                        measurement is conducted, terminate the 
                        service to that household of the signal 
                        that is the subject of the challenge, 
                        and within 30 days thereafter notify 
                        the network station that made the 
                        challenge that service to that 
                        household has been terminated; or
                            [(ii) the household is an unserved 
                        household, the station challenging the 
                        service shall reimburse the satellite 
                        carrier for the costs of the signal 
                        measurement within 60 days after 
                        receipt of the measurement results and 
                        a statement of the costs of the 
                        measurement.
                    [(C) Limitation on measurements.--(i) 
                Notwithstanding subparagraph (A), a satellite 
                carrier may not be required to conduct signal 
                intensity measurements during any calendar year 
                in excess of 5 percent of the number of 
                subscribers within the network station's local 
                market that have subscribed to the service as 
                of the effective date of the Satellite Home 
                Viewer Act of 1994.
                    [(ii) If a network station challenges 
                whether a subscriber is an unserved household 
                in excess of 5 percent of the subscribers 
                within the network station's local market 
                within a calendar year, subparagraph (A) shall 
                not apply to challenges in excess of such 5 
                percent, but the station may conduct its own 
                signal intensity measurement of the 
                subscriber's household after giving reasonable 
                notice to the satellite carrier of the network 
                station's intent to conduct the measurement. If 
                such measurement indicates that the household 
                is not an unserved household, the carrier 
                shall, within 60 days after receipt of the 
                measurement, terminate service to the household 
                of the signal that is the subject of the 
                challenge and within 30 days thereafter notify 
                the network station that made the challenge 
                that service has been terminated. The carrier 
                shall also, within 60 days after receipt of the 
                measurement and a statement of the costs of the 
                measurement, reimburse the network station for 
                the cost it incurred in conducting the 
                measurement.
                    [(D) Outside the predicted grade b 
                contour.--(i) If a network station challenges 
                whether a subscriber is an unserved household 
                outside the predicted Grade B Contour of the 
                station, the station may conduct a measurement 
                of the signal intensity of the subscriber's 
                household to determine whether the household is 
                an unserved household after giving reasonable 
                notice to the satellite carrier of the network 
                station's intent to conduct the measurement.
                    [(ii) If the network station conducts a 
                signal intensity measurement under clause (i) 
                and the measurement indicates that--
                            [(I) the household is not an 
                        unserved household, the station shall 
                        forward the results to the satellite 
                        carrier who shall, within 60 days after 
                        receipt of the measurement, terminate 
                        the service to the household of the 
                        signal that is the subject of the 
                        challenge, and shall reimburse the 
                        station for the costs of the 
                        measurement within 60 days after 
                        receipt of the measurement results and 
                        a statement of such costs; or
                            [(II) the household is an unserved 
                        household, the station shall pay the 
                        costs of the measurement.]
            [(9)] (10) Loser pays for signal intensity 
        measurement; recovery of measurement costs in a civil 
        action.--In any civil action filed relating to the 
        eligibility of subscribing households as unserved 
        households--
                    (A) * * *

           *       *       *       *       *       *       *

            [(10)] (11) Inability to conduct measurement.--If a 
        network station makes a reasonable attempt to conduct a 
        site measurement of its signal at a subscriber's 
        household and is denied access for the purpose of 
        conducting the measurement, and is otherwise unable to 
        conduct a measurement, the satellite carrier shall 
        within 60 days notice thereof, terminate service of the 
        station's network to that household.
            [(11)] (12) Service to recreational vehicles and 
        commercial trucks.--
                    (A) * * *

           *       *       *       *       *       *       *

            [(12)] (13) Statutory license contingent on 
        compliance with fcc rules and remedial steps.--
        Notwithstanding any other provision of this section, 
        the willful or repeated secondary transmission to the 
        public by a satellite carrier of a primary transmission 
        embodying a performance or display of a work made by a 
        broadcast station licensed by the Federal 
        Communications Commission is actionable as an act of 
        infringement under section 501, and is fully subject to 
        the remedies provided by sections 502 through 506 and 
        509, if, at the time of such transmission, the 
        satellite carrier is not in compliance with the rules, 
        regulations, and authorizations of the Federal 
        Communications Commission concerning the carriage of 
        television broadcast station signals.
            (14) Waivers.--A subscriber who is denied the 
        secondary transmission of a network station under 
        paragraph (4)(C), or is denied the secondary 
        transmission of a network station or a superstation 
        under paragraph (3)(B), may request a waiver from such 
        denial by submitting a request, through the 
        subscriber's satellite carrier, to the network station 
        or superstation in the local market where the 
        subscriber is located. The network station or 
        superstation shall accept or reject the subscriber's 
        request for a waiver within 30 days after receipt of 
        the request. If the network station or superstation 
        fails to accept or reject the subscriber's request for 
        a waiver within that 30-day period, that network 
        station or superstation, as the case may be, shall be 
        deemed to agree to the waiver request. Unless 
        specifically stated by the network station or 
        superstation, a waiver under section 339(c)(2) of the 
        Communications Act shall not constitute a waiver for 
        purposes of this paragraph.
    (b) Statutory License for Secondary Transmissions for 
Private Home Viewing.--
            (1) Deposits with the register of copyrights.--A 
        satellite carrier whose secondary transmissions are 
        subject to statutory licensing under subsection (a) 
        shall, on a semiannual basis, deposit with the Register 
        of Copyrights, in accordance with requirements that the 
        Register shall prescribe by regulation--
                    (A) * * *
                    [(B) a royalty fee for that 6-month period, 
                computed by--
                            [(i) multiplying the total number 
                        of subscribers receiving each secondary 
                        transmission of a superstation during 
                        each calendar month by 17.5 cents per 
                        subscriber in the case of superstations 
                        that as retransmitted by the satellite 
                        carrier include any program which, if 
                        delivered by any cable system in the 
                        United States, would be subject to the 
                        syndicated exclusivity rules of the 
                        Federal Communications Commission, and 
                        14 cents per subscriber in the case of 
                        superstations that are syndex-proof as 
                        defined in section 258.2 of title 37, 
                        Code of Federal Regulations;
                            [(ii) multiplying the number of 
                        subscribers receiving each secondary 
                        transmission of a network station or 
                        the Public Broadcasting Service 
                        satellite feed during each calendar 
                        month by 6 cents; and
                            [(iii) adding together the totals 
                        computed under clauses (i) and (ii).]
                    (B) a royalty fee for that 6-month period, 
                computed by multiplying the total number of 
                subscribers receiving each secondary 
                transmission of each superstation or network 
                station during each calendar month by the 
                appropriate rate in effect under this section.
        Notwithstanding the provisions of subparagraph (B), a 
        satellite carrier whose secondary transmissions are 
        subject to statutory licensing under paragraph (1) or 
        (2) of subsection (a) shall have no royalty obligation 
        for secondary transmissions to a subscriber who resides 
        outside the station's local market (as defined in 
        section 122(j)(2)) but within a community in which the 
        signal of that station was determined by the Federal 
        Communications Commission, on or before the date of the 
        enactment of the Satellite Home Viewer Extension and 
        Reauthorization Act of 2004, to be significantly viewed 
        in accordance with the provisions of section 76.54 of 
        title 47, Code of Federal Regulations, as in effect on 
        such date of enactment.

           *       *       *       *       *       *       *

    (c) Adjustment of Royalty Fees.--
            [(1) Applicability and determination of royalty 
        fees.--The rate of the royalty fee payable under 
        subsection (b)(1)(B) shall be effective unless a 
        royalty fee is established under paragraph (2) or (3) 
        of this subsection.
            [(2) Fee set by voluntary negotiation.--
                    [(A) Notice of initiation of proceedings.--
                On or before July 1, 1996, the Librarian of 
                Congress shall cause notice to be published in 
                the Federal Register of the initiation of 
                voluntary negotiation proceedings for the 
                purpose of determining the royalty fee to be 
                paid by satellite carriers under subsection 
                (b)(1)(B).
                    [(B) Negotiations.--Satellite carriers, 
                distributors, and copyright owners entitled to 
                royalty fees under this section shall negotiate 
                in good faith in an effort to reach a voluntary 
                agreement or voluntary agreements for the 
                payment of royalty fees. Any such satellite 
                carriers, distributors, and copyright owners 
                may at any time negotiate and agree to the 
                royalty fee, and may designate common agents to 
                negotiate, agree to, or pay such fees. If the 
                parties fail to identify common agents, the 
                Librarian of Congress shall do so, after 
                requesting recommendations from the parties to 
                the negotiation proceeding. The parties to each 
                negotiation proceeding shall bear the entire 
                cost thereof.
                    [(C) Agreements binding on parties; filing 
                of agreements.--Voluntary agreements negotiated 
                at any time in accordance with this paragraph 
                shall be binding upon all satellite carriers, 
                distributors, and copyright owners that are 
                parties thereto. Copies of such agreements 
                shall be filed with the Copyright Office within 
                30 days after execution in accordance with 
                regulations that the Register of Copyrights 
                shall prescribe.
                    [(D) Period agreement is in effect.--The 
                obligation to pay the royalty fees established 
                under a voluntary agreement which has been 
                filed with the Copyright Office in accordance 
                with this paragraph shall become effective on 
                the date specified in the agreement, and shall 
                remain in effect until December 31, 1999, or in 
                accordance with the terms of the agreement, 
                whichever is later.]
            (1) Applicability and determination of royalty 
        fees.--The appropriate rate for purposes of determining 
        the royalty fee under subsection (b)(1)(B) shall be the 
        appropriate rate set forth in part 258 of title 37, 
        Code of Federal Regulations, as in effect on the date 
        of the enactment of the Satellite Home Viewer Extension 
        and Reauthorization Act of 2004, as modified under this 
        subsection.
            [(3)] (2) Fee set by compulsory arbitration.--
                    (A) Notice of initiation of proceedings.--
                On or before January 1, [1997] 2005, the 
                Librarian of Congress shall cause notice to be 
                published in the Federal Register of the 
                initiation of arbitration proceedings for the 
                purpose of determining a reasonable royalty fee 
                to be paid under subsection (b)(1)(B) by 
                satellite carriers [who are not parties to a 
                voluntary agreement filed with the Copyright 
                Office in accordance with paragraph (2)]. Such 
                arbitration proceeding shall be conducted under 
                chapter 8.

           *       *       *       *       *       *       *

                    (C) Period during which decision of 
                arbitration panel or order of librarian 
                effective.--The obligation to pay the royalty 
                fee established under a determination which--
                            (i) * * *

           *       *       *       *       *       *       *

                shall become effective [as provided in section 
                802(g) or July 1, 1997, whichever is later]  on 
                January 1, 2006.
                    [(D) Persons subject to royalty fee.--The 
                royalty fee referred to in subparagraph (C) 
                shall be binding on all satellite carriers, 
                distributors, and copyright owners, who are not 
                party to a voluntary agreement filed with the 
                Copyright Office under paragraph (2).
            [(4) Reduction.--
                    [(A) Superstation.--The rate of the royalty 
                fee in effect on January 1, 1998, payable in 
                each case under subsection (b)(1)(B)(i) shall 
                be reduced by 30 percent.
                    [(B) Network and public broadcasting 
                satellite feed.--The rate of the royalty fee in 
                effect on January 1, 1998, payable under 
                subsection (b)(1)(B)(ii) shall be reduced by 45 
                percent.
            [(5) Public broadcasting service as agent.--For 
        purposes of section 802, with respect to royalty fees 
        paid by satellite carriers for retransmitting the 
        Public Broadcasting Service satellite feed, the Public 
        Broadcasting Service shall be the agent for all public 
        television copyright claimants and all Public 
        Broadcasting Service member stations.]
            (3) Cost of living adjustment.--The royalty rates 
        set forth in subsection (b)(1)(B), as adjusted under 
        paragraph (2) of this subsection, shall be adjusted by 
        the Librarian of Congress--
                    (A) on January 1, 2005, to reflect any 
                changes occurring during the period beginning 
                on January 1, 2000, and ending on November 30, 
                2004, in the cost of living as determined by 
                the most recent Consumer Price Index (for all 
                consumers and items) published by the Secretary 
                of Labor during that period; and
                    (B) on January 1, 2007, and on January 1 of 
                each year thereafter, to reflect any changes 
                occurring during the preceding 12 months in the 
                cost of living as determined by the most recent 
                Consumer Price Index so published.
            (4) Reductions.--The rate of the royalty fee 
        determined under paragraph (2)--
                    (A) for superstations shall be reduced by 
                30 percent; and
                    (B) for network stations shall be reduced 
                by 45 percent.
    (d) Definitions.--As used in this section--
            (1) * * *

           *       *       *       *       *       *       *

            [(9) Superstation.--The term ``superstation''--
                    [(A) means a television broadcast station, 
                other than a network station, licensed by the 
                Federal Communications Commission that is 
                secondarily transmitted by a satellite carrier; 
                and
                    [(B) except for purposes of computing the 
                royalty fee, includes the Public Broadcasting 
                Service satellite feed.]
            (9) Superstation.--The term ``superstation'' means 
        a television broadcast station, other than a network 
        station, licensed by the Federal Communications 
        Commission that is secondarily transmitted by a 
        satellite carrier.
            (10) Unserved household.--The term ``unserved 
        household'', with respect to a particular television 
        network, means a household that--
                    (A) * * *

           *       *       *       *       *       *       *

                    (D) is a subscriber to whom subsection 
                [(a)(11)] (a)(12) applies; or

           *       *       *       *       *       *       *

            [(12) Public broadcasting service satellite feed.--
        The term ``Public Broadcasting Service satellite feed'' 
        means the national satellite feed distributed and 
        designated for purposes of this section by the Public 
        Broadcasting Service consisting of educational and 
        informational programming intended for private home 
        viewing, to which the Public Broadcasting Service holds 
        national terrestrial broadcast rights.]
    (e) Moratorium on Copyright Liability.--Until December 31, 
[2004] 2009, a subscriber who does not receive a signal of 
Grade A intensity (as defined in the regulations of the Federal 
Communications Commission under section 73.683(a) of title 47 
of the Code of Federal Regulations, as in effect on January 1, 
1999, or predicted by the Federal Communications Commission 
using the Individual Location Longley-Rice methodology 
described by the Federal Communications Commission in Docket 
No. 98-201) of a local network television broadcast station 
shall remain eligible to receive signals of network stations 
affiliated with the same network, if that subscriber had 
satellite service of such network signal terminated after July 
11, 1998, and before October 31, 1999, as required by this 
section, or received such service on October 31, 1999.
    (f) Expedited Consideration by Justice Department of 
Voluntary Agreements to Provide Satellite Secondary 
Transmissions to Local Markets.--
            (1) In general.--In a case in which no satellite 
        carrier makes available, to subscribers located in a 
        local market, as defined in section 122(j)(2), the 
        secondary transmission into that market of a primary 
        transmission of one or more television broadcast 
        stations licensed by the Federal Communications 
        Commission, and two or more satellite carriers request 
        a business review letter in accordance with section 
        50.6 of title 28, Code of Federal Regulations (as in 
        effect on July 7, 2004), in order to assess the 
        legality under the antitrust laws of proposed business 
        conduct to make or carry out an agreement to provide 
        such secondary transmission into such local market, the 
        appropriate official of the Department of Justice shall 
        respond to the request no later than 90 days after the 
        date on which the request is received.
            (2) Definition.--For purposes of this subsection, 
        the term ``antitrust laws''--
                    (A) has the meaning given that term in 
                subsection (a) of the first section of the 
                Clayton Act (15 U.S.C. 12(a)), except that such 
                term includes section 5 of the Federal Trade 
                Commission Act (15 U.S.C. 45) to the extent 
                such section 5 applies to unfair methods of 
                competition; and
                    (B) includes any State law similar to the 
                laws referred to in paragraph (1).

                           Markup Transcript



                            BUSINESS MEETING

                        WEDNESDAY, JULY 7, 2004

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the committee] presiding.
    Chairman Sensenbrenner. The committee will be in order.
    [Intervening business.]
    Chairman Sensenbrenner. Now, pursuant to notice, I call up 
the bill H.R. 4518, the ``Satellite Home Viewer Extension and 
Reauthorization Act of 2004'', for purposes of markup and move 
its favorable recommendation to the House. Without objection, 
the bill will be considered as read and open for amendment at 
any point.
    [The bill, H.R. 4518, follows:]

  


    Chairman Sensenbrenner. The chair recognizes the gentleman 
from Texas, Mr. Smith, the Chairman of the Subcommittee on 
Courts, the Internet, and Intellectual Property to explain the 
bill.
    Mr. Smith. Mr. Chairman, 2 months ago, the Subcommittee on 
Courts, the Internet, and Intellectual Property reported 
favorably a Committee print of the Satellite Home Viewer 
Extension and Reauthorization Act of 2004.
    In early June, I introduced H.R. 4518, which contained the 
core provisions of the Committee print, and I introduced it, 
along with Ranking Member Conyers and Subcommittee Ranking 
Member Berman. Over the past several weeks, we have worked 
together to make changes that are largely technical. At the 
appropriate time, I will offer an amendment in the nature of a 
substitute that incorporates these changes.
    Mr. Chairman, our goal was a bill that serves not the 
narrow interests of one constituency, but the broad public 
interest. The bill before us balances the interests of 
television viewers, satellite and cable television providers, 
broadcasters and copyright owners. The urgency is the year-end 
expiration of a distant-signal statutory copyright license that 
permits the satellite carriers to retransmit programming to 
subscribers in unserved households.
    The specific goal of the distant-signal license is to allow 
for a lifeline network television service to those homes beyond 
the reach of their local television stations. The principal 
beneficiaries of the license are DirecTV and EchoStar's DISH 
Network, which together provide TV programming to more than 22 
million households.
    The distant-signal license permits these companies to 
retransmit programming to otherwise unserved subscribers at 
fair market value without having to enter into expensive and 
time-consuming negotiations with individual content owners. The 
last time the rates were adjusted for content owners was 1999.
    Over the last year, the two dominant satellite companies 
have combined to sign up more than 8 in 10 new television 
subscribers, and together they have grossed nearly $14 billion 
in revenue. They provide formidable competition to the cable 
industry, and competition provides consumers with more choices, 
improved services, higher quality and greater technological 
innovation.
    However, there is also no denying the fact that the 
satellite companies who rely on the distant-signal license have 
benefitted tremendously from a royalty rate that has been 
frozen for nearly 5 years. The bill's royalty provision 
includes the first Cost of Living Adjustment in 5 years, 
provides for a new Copyright Arbitration Royalty Panel--called 
CARP--to determine the fair market value of programming and 
institutes annual Cost of Living Adjustments in 2007.
    Unfortunately, one of the satellite companies has misled 
the public by claiming that Congress is approving an increase 
in subscriber rates. Let's put the facts regarding EchoStar's 
royalty payments in context.
    In 2003, the company grossed $5.7 billion, while paying 
less than $26 million or less than one-half of 1 percent to 
copyright owners. Last year, three executives at the company 
cashed out stock options that together exceeded EchoStar's 
total payment to all content owners under the license. I cannot 
agree with their position that content owners should be denied 
a Cost of Living Adjustment in 2005 which reflects inflation 
over the last 5 years.
    But this legislation, Mr. Chairman, is not just a royalty 
bill. It will allow satellite companies to expand subscriber 
choice and give them an incentive to make local signals 
available to all Americans.
    Finally, this bill will require the Copyright Office to 
conduct a comprehensive study of the three licenses--111, 119 
and 122--that affect the cable and satellite industries and to 
make recommendations on whether to harmonize those licenses.
    This bill, and the amendment in the nature of a substitute, 
strike an appropriate balance between the interests of 
intellectual property owners and the interests of the satellite 
companies who use their copyrighted programming.
    I urge my colleagues to support the bill and the amendment 
and, Mr. Chairman, I yield back the balance of my time.
    [Intervening business.]
    Chairman Sensenbrenner. Getting back to the Satellite Home 
Viewer Act reauthorization, the gentleman from Michigan?
    Mr. Conyers. Thank you, Mr. Chairman.
    Our Ranking Member, Mr. Berman, hasn't arrived yet, but we 
are in agreement on this side about the bill. The gentleman 
from Virginia, Mr. Boucher, has a comment about antitrust that 
I'm sure that we will approve of. Former Chairman Hyde has left 
us breathless, as usual, about his disposition on this matter.
    And before I yield to Mr. Berman, I wanted to observe that 
the satellite companies feel better--exactly, specifically, 
DirecTV and EchoStar--about the gray areas in terms of what 
satellite service customers can get when local-to-local 
satellite television is available, and the copyright owners, 
with respect to royalty rates, will receive an adjustment that 
I think has been worked out very fairly by all of the staff 
members, and the Committee, and particularly its ranking 
Subcommittee Member, Mr. Berman, to whom I yield the remainder 
of the time.
    Mr. Berman. Thank you very much, Mr. Chairman. I 
appreciate--and, Mr. Conyers, I appreciate your yielding to me.
    H.R. 4518, I'm pleased to cosponsor. While the bill doesn't 
do everything I might have wanted, I think it represents a 
good-faith compromise, which has been meticulously hammered out 
among interested parties, and I would ask this Committee and my 
colleagues on the Committee to report it favorably.
    I think the bill has been summarized by the Chairman of the 
Subcommittee. Basically, H.R. 4518 reauthorizes section 119 of 
the Copyright Act. It should be noted that the legislation is 
of enormous benefit to satellite TV companies. In essence, it 
provides them with a valuable Government subsidy. It allows 
them to use copyrighted broadcast programming without the 
permission of the copyright owners. It guarantees that 
satellite TV companies will pay a Government-set rate which is 
far below the fair market rate.
    The Government subsidy embodied in section 119 was 
originally justified as necessary to make satellite television 
an effective competitor to cable television. With 22 percent of 
the pay TV market, you could say that satellite television has 
become a strong and credible competitor to cable. But while the 
policy rationales beyond section 119 Government subsidy have 
weakened, the companies' desire for its extension have remained 
remarkably steady.
    If we are going to reauthorize this section 119 license, I 
think this bill represents a reasonable approach for doing so, 
and that's why I support it.
    I would ask, Mr. Chairman, that the entire statement be 
included here. And while I would have preferred to talk about 
it privately, I want to throw out the idea that since we have 
unanimously, in this body, passed CARP reform, since key parts 
of this bill are geared on a CARP process, I would like to at 
least throw out the idea of placing our CARP reform bill 
already passed by this House into this bill, in this Committee, 
to make sure that were the parties not to negotiate a rate and 
were this to go to a CARP process, it would be the new 
reformed, more efficient and more effective CARP process that 
we spent a great deal of time working on and passing earlier 
this year.
    And, with that, I yield back.
    [The prepared statement of Mr. Berman follows:]

Prepared Statement of the Honorable Howard L. Berman, a Representative 
     in Congress From the State of California, and Ranking Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property
    Mr. Chairman, I am pleased to join you in cosponsoring H.R. 4518. While this bill does not contain all that I had hoped, it represents a good-faith 
compromise meticulously hammered out among interested parties. Thus, I 
ask my Judiciary colleagues to report it favorably.
    The Chairman of the Subcommittee has admirably summarized the 
purpose and effect of H.R. 4518. As he noted, H.R. 4518 reauthorizes 
Section 119 of the Copyright Act. In doing so, it enables satellite TV 
companies to retransmit distant superstation and network signals to 
subscribers who cannot obtain those signals over the air.
    This legislation is of enormous benefit to satellite TV companies. 
In essence, it provides them with a valuable government subsidy. It 
allows them to use copyrighted broadcast programming without the 
permission of the copyright owners. It also guarantees that satellite 
TV companies will pay a government-set rate far below the fair market 
rate.
    The government subsidy embodied in Section 119 was originally 
justified as necessary to make satellite television an effective 
competitor to cable television. With 22% of the pay TV market, you 
could say that satellite television has become a strong and credible 
competitor to cable. But while the policy rationales behind Section 119 
government subsidy have weakened, the satellite companies' desire for 
its extension has remained remarkably steady.
    If Section 119 reauthorization must occur, H.R. 4518 represents a 
reasonable approach for doing so.
    As did the 1994 and 1999 reauthorizations of the Section 119 
license, H.R. 4518 addresses the royalty fees that DBS providers will 
pay for the right to retransmit distant signals under the Section 119 
license. While these fee provisions explicitly deny fair compensation 
to copyright owners, they represent a carefully-crafted compromise, and 
for that reason I will support them.
    Specifically, H.R. 4518 establishes a process for determining 
royalty rates that closely mirrors the approach embodied in the 
Satellite Home Viewer Improvement Act of 1999 (SHVIA). The bill directs 
that a Copyright Arbitration Royalty Panel, or CARP, establish royalty 
fees according to the same ``fair market'' standard utilized by 
previous CARPs. As was the case in 1999, the ``fair market'' rate 
established by the CARP will be reduced by 30% for superstation 
signals, and 45% for network signals. Thus, H.R. 4518 ensures that 
satellite companies will pay royalties that represent a huge discount 
to marketplace rates.
    While this approach is very similar to what we did in 1999, several 
differences do exist.
    Regardless of when H.R. 4518 is enacted, a CARP will not be able to 
establish a new rate before the current rate expires on December 31, 
2004. In order to hasten establishment of a new rate by a CARP, the 
legislation eschews an official, voluntary negotiating period prior to 
the CARP, and directs that the CARP be concluded by December 31, 2005. 
This means that the new royalty rates cover the years 2006 through 
2009. It also means, in effect, that the months between now and 
enactment of this legislation become the voluntary negotiating period 
for licensors and licensees.
    Because the CARP won't be completed until December 31, 2005, the 
Committee Print has to set forth a rate that will be in effect during 
2005. The language directs that this ``interim'' royalty rate will be 
the prior, statutorily-reduced royalty rate adjusted for the cumulative 
change in the Consumer Price Index (CPI) since 2000.
    H.R. 4518 also provides that the rates payable in 2007, 2008, and 
2009 shall be adjusted to reflect changes in the CPI over the preceding 
12 months. These annual CPI adjustments ensure that, if Congress 
chooses to reauthorize Section 119 yet again, there will be no need for 
a 5 year CPI adjustment in 2010, and thus that rates will adjust more 
gradually over time.
    Because the CARP reform bill unanimously passed by the House 
earlier this year has yet to become law, it has been pointed out that 
the old, flawed CARP process may be used to establish the new royalty 
rates under Section 119. I think this is a legitimate concern, and 
understand the Senate may address this concern by combining CARP reform 
with the satellite bill. I would support such an outcome.
    I yield back the balance of my time.

    Chairman Sensenbrenner. Does the gentleman from Michigan 
yield back his time?
    Mr. Conyers. Yes, sir, I do.
    Chairman Sensenbrenner. The chair recognizes--without 
objection, all Members' opening statements will be placed in 
the record at this point.
    [The prepared statement of Mrs. Blackburn follows:]

Prepared Statement of the Honorable Marsha Blackburn, a Representative 
                in Congress From the State of Tennessee

    Mr. Chairman, I want to thank you, Chairman Smith and your staff 
for working with me as we seek to reauthorize the ``Satellite Home 
Viewer Extension and Reauthorization Act of 2004.''
    The laws that govern who can and cannot receive certain satellite 
signals are intricate and they have many nuances. I am sure that my 
office is not the only one with a unique story.
    For constituents of mine who live in Henderson County, TN, however, 
the story is not pleasant. Folks who reside in rural Henderson County 
cannot receive stations over the air, and they live in a Designated 
Market Area, the Jackson DMA, that has only one network affiliate, an 
ABC station.
    Since their DMA is ``unserved'' by NBC, CBS and Fox, the law 
permits satellite carriers to deliver distant network signals. 
Unfortunately, DirecTV and EchoStar have chosen to deliver the distant 
signals from Denver, Atlanta and New York stations rather than stations 
in Nashville or Memphis. As a result, my constituents are forced to 
watch the Atlanta Falcons and the Colorado Buffaloes rather then the 
Tennessee Titans and Volunteers. On a more serious note, they are also 
deprived of local news, weather and public safety information relevant 
to their lives and communities.
    One of my constituents called me and said, ``My buddy has a lake 
house over in Decatur County and just uses that box in his house in 
Henderson County and gets the local signals just fine. I want to play 
by the rules but I want to see the Volunteers and the Titans.''
    We should be working to help those people that play by the rules. 
The solution should be fairly simple. Since nothing in the law appears 
to prohibit DirecTV and EchoStar from delivering an in-state distant 
signal to unserved subscribers in Henderson County, I contacted 
representatives of both companies to ask that they replace the Atlanta 
and Denver stations with in-state signals. After considering my 
request, DirecTV officials committed to me that they will begin to do 
so as soon as they start offering local-into-local service in the 
Jackson DMA. Unfortunately, EchoStar, which owns the DISH Network, has 
yet to make a similar commitment. It is my hope that EchoStar will 
follow DirecTV's example and agree to do the same.

    Chairman Sensenbrenner. The chair now recognizes the 
gentleman from Texas for purposes of offering an amendment in 
the nature of a substitute.
    Mr. Smith. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment in the nature of a substitute to H.R. 
4518, offered by Mr. Smith of Texas.
    Chairman Sensenbrenner. Without objection, the amendment in 
the nature of a substitute is considered as read.
    [The amendment follows:]
      
  


    Chairman Sensenbrenner. Are there any second-degree 
amendments to the Smith amendment in the nature of a 
substitute?
    The gentleman from Illinois, Mr. Hyde?
    Mr. Hyde. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to the amendment in the nature of a 
substitute to H.R. 4518, offered by Mr. Hyde.
    Mr. Hyde. Mr. Chairman, I ask that reading of the amendment 
be dispensed with.
    Chairman Sensenbrenner. Without objection, so ordered.
    [The amendment follows:]
      


    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Hyde. Mr. Chairman, what I propose is a simple matter 
of parity. The lone remaining national superstation issue is 
Chicago's WGN retransmitted nationwide to over 60 million 
homes. That number is growing. I understand that Comcast, the 
dominant cable provider, is adding WGN in millions of 
subscriber homes, including many thousands in the Washington, 
D.C., area.
    WGN is also available to patrons of commercial 
establishments that subscribe to cable, but not to the many 
restaurants and other businesses that subscribe to satellite 
services. This is due to a disparity in the statutory licenses 
under the Copyright Act.
    If two restaurant patrons want to see the Cubs play the 
Milwaukee Brewers this Thursday night or the newscast that 
follows the game, the patron in the restaurant is hooked up to 
cable, and he will be able to see the game, but the customer in 
the restaurant with the satellite dish will not.
    The same holds true for the White Sox games, the Chicago 
Bulls telecasts and other programming on WGN. This programming 
is not available elsewhere on broadcast or basic networks to 
satellite viewers. Even Major League baseball's premium Extra 
Innings service blacks out Cubs and White Sox telecasts within 
the teams' exclusive territory created by baseball under its 
antitrust exemption: Northern Illinois, Iowa and Indiana.
    As all here might guess, I have been a long-suffering Cubs 
baseball fan for many unrequited years and never in my lifetime 
have the Cubs and Sox been the legitimate pennant contenders 
they are this season. With all the tension in the world--and I 
am biased, I concede--watching day baseball from Wrigley Field 
is one of life's simple and enduring pleasures. To do so 
amongst fellow fans at a local sports hangout is equally 
enjoyable for the many who cannot be there in person.
    Part of our policy objective in renewing the Satellite Home 
Viewer Act is to balance the playing field to ensure that cable 
and satellite compete on an equal footing. My amendment 
encourages competition between the two pay TV services. My 
amendment does not set rates. All I seek is parity and for you 
to support the legions of sports fans nationwide that seek the 
lifting of this unnecessary restriction.
    Now, I understand that Mr. Smith, the Chairman of the 
Subcommittee, has agreed to include in the Committee report 
clarifying language that creation of a compulsory license to 
permit carriage of WGN telecasts to sports bars must be an 
integral part of the ongoing royalty discussions. And if that 
is so, I will ask leave to withdraw my amendment, and I yield 
to Mr. Smith.
    Mr. Smith. I thank the gentleman from Illinois for 
yielding.
    And the quick response is, yes, the gentleman from 
Illinois, with this amendment, has raised some very serious 
issues that have far-reaching implications, and I would welcome 
the opportunity not only to discuss those issues with him, but 
to try putting clarifying language in report language that 
would satisfy the gentleman from Illinois as well.
    Mr. Hyde. I thank the gentleman for his remarks, and I ask 
leave to withdraw the amendment.
    Chairman Sensenbrenner. Will the gentleman yield for a 
second?
    Mr. Hyde. Surely.
    Chairman Sensenbrenner. I certainly think that the offer 
that has been made by the gentleman from Texas is a very good 
one. Now, I can understand why Cubs fans would need to go to 
the bar to watch their team, which has now just lost twice in a 
row to the poor, hapless Milwaukee Brewers.
    I yield back. [Laughter.]
    Mr. Hyde. The gentleman has an unkind streak in him. 
[Laughter.]
    Chairman Sensenbrenner. The amendment is withdrawn.
    Are there further amendments?
    Mr. Boucher. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Virginia?
    Mr. Boucher. Thank you, Mr. Chairman. I have an amendment 
at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to the amendment in the nature of a 
substitute to H.R. 4518, offered by Mr. Boucher and Mr. 
Goodlatte.
    Chairman Sensenbrenner. Without objection, the amendment 
will be considered as read.
    [The amendment follows:]
      
      



    Chairman Sensenbrenner. The gentleman from Virginia will be 
recognized for 5 minutes.
    Mr. Boucher. Thank you very much, Mr. Chairman. I am 
pleased to offer this amendment with our Virginia colleague, 
Mr. Goodlatte, with whom I have long been working to bring 
local television signals delivered by satellite to the Nation's 
211 local television markets.
    Today, we are taking another step in that effort by 
proposing that any agreement entered into between the satellite 
carriers to share satellite capacity solely for the purpose of 
delivering local signals be considered quickly by the 
Department of Justice when a business review letter is 
submitted to the DOJ. Specifically, our amendment directs that 
the review by DOJ be completed within 90 days of the date of 
receipt by the DOJ of a business review letter.
    At the present time, EchoStar is serving about 120 of the 
211 local television markets across the Nation. DirecTV serves 
approximately 60 local markets with local TV signals, but soon 
will match the 120 markets that EchoStar is serving with local 
delivery.
    Unfortunately, due to constraints in satellite capacity and 
the very high cost of building and launching new satellites 
valued at about $500 million per satellite, neither carrier has 
announced plans to expand local service to additional markets 
any time in the near future. And the result is that the less-
densely populated markets, the rural markets ranging in 
population to thinner levels from 120 to 211, including many 
small cities across the United States, are not going to be 
getting local television delivery by satellite any time soon.
    If the carriers agree to share their satellites solely to 
deliver the local signals, they can accomplish twice as much 
with the existing satellites already in orbit. They would be 
able to serve all 211 local markets very soon after a capacity 
sharing plan is put into effect.
    Separately, the chief executive officers of both EchoStar 
and DirecTV have indicated a strong interest in entering into a 
satellite capacity sharing arrangement very similar to what I 
have just described. In fact, Mr. Murdoch testified that he 
would like to have such an agreement negotiated with EchoStar 
at the time that he testified before the Energy and Commerce 
Committee in support of his acquisition of DirecTV last year. 
Mr. Ergen, on behalf of EchoStar, had said something very 
similar on a previous occasion.
    The amendment that we're offering would assure that if a 
satellite sharing agreement is achieved, the antitrust review 
would occur quickly and remove any concern that the review 
would be held up for a lengthy period by the antitrust 
authority.
    I want to thank Mr. Goodlatte, Mr. Smith, Chairman 
Sensenbrenner, Mr. Conyers, and the members of their staffs who 
have assisted in the review and drafting of this measure, and I 
very much hope it will be the Committee's pleasure to adopt an 
amendment that will well serve the interests of television 
viewers in rural America.
    Thank you, Mr. Chairman. I yield back.
    Chairman Sensenbrenner. The gentleman from Texas, Mr. 
Smith?
    Mr. Smith. Mr. Chairman, I'd like to thank Mr. Goodlatte 
and Mr. Boucher for offering this amendment. What they have 
tried to achieve, and have succeeded in achieving, I believe, 
is trying to make sure that satellite signals are available 
particularly to the small markets in the rural areas. And I 
thank them for this constructive amendment and urge my 
colleagues to support it.
    And I will yield the balance of my time to the gentleman 
from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. I thank the gentleman for yielding, and I am 
pleased to offer this amendment with my friend and colleague, 
Mr. Boucher of Virginia. And I want to thank Chairman Smith, 
Chairman Sensenbrenner and others who have worked closely with 
us to fashion this amendment.
    This is something that I have worked on, Congressman 
Boucher has worked on, and we have been joined by the 
overwhelming majority of the Members of the House over the past 
several years in our efforts to get local-to-local service to 
every community in America so that everyone can have the 
opportunity to have their local news, weather, emergency 
information, sports, community affairs information available to 
them by satellite. It provides access to information that many 
in remote areas would not have otherwise. It provides 
competition for those who do have access to an antenna or a 
cable system.
    And I think it is vital that the effort be pushed forward 
to continue to reach all of these markets. The smaller the 
market, the more difficult this becomes. The House, in fact, 
the Congress, passed legislation a few years ago to create 
incentives to do this. Market activities have, in some 
respects, overtaken that effort.
    And this effort to encourage those in the market--the major 
satellite companies--to have the ability to cooperate and get 
antitrust exemptions, as need be, to be able to share these 
very, very expensive pieces of equipment--satellites mainly--is 
an important step forward, and it will continue to show the 
Congress's strong support for having rural America included in 
a new technology that is being enjoyed by the overwhelming 
majority of American citizens today at least having access to 
local service on their satellite.
    Mr. Chairman, I have a full statement that I would ask be 
made part of the record.
    Chairman Sensenbrenner. Without objection.
    [The prepared statement of Mr. Goodlatte follows:]
Prepared Statement of the Honorable Bob Goodlatte, a Representative in 
                  Congress From the State of Virginia

    MR. CHAIRMAN, I AM PLEASED TO OFFER THIS AMENDMENT WITH MY FRIEND 
AND COLLEAGUE, MR. BOUCHER OF VIRGINIA.
    WITH MANY RURAL CONSUMERS STILL MISSING OUT ON LOCAL-INTO-LOCAL 
SERVICE, SATELLITE COMPANIES NEED INCENTIVES TO ROLL OUT THIS SERVICE 
INTO RURAL AREAS SO THAT RURAL CONSUMERS CAN ENJOY THE SAME QUALITY 
PROGRAMMING THAT THOSE IN MORE URBAN AREAS ALREADY ENJOY. LOCAL-INTO-
LOCAL SERVICE IS THE ONLY WAY THAT MANY PEOPLE IN RURAL AREAS WILL HAVE 
ACCESS TO THE LOCAL NEWS AND EMERGENCY INFORMATION PROVIDED BY THEIR 
LOCAL TELEVISION BROADCAST STATIONS.
    THIS AMENDMENT WOULD REQUIRE THAT THE DEPARTMENT OF JUSTICE PROVIDE 
AN EXPEDITED REVIEW OF APPLICATIONS SUBMITTED BY SATELLITE PROVIDERS 
WHO SEEK ADVICE AS TO WHETHER THEIR COLLABORATION EFFORTS TO PROVIDE 
LOCAL-INTO-LOCAL SERVICE TO UN-SERVED MARKETS WOULD VIOLATE THE 
ANTITRUST LAWS.
    UNDER THE PROVISIONS OF THIS AMENDMENT, THE DEPARTMENT OF JUSTICE 
MUST RESPOND TO ANY SUCH APPLICATION WITHIN 90 DAYS AFTER IT IS FILED. 
THIS EXPEDITED PROCESS WILL HELP ENSURE THAT SATELLITE PROVIDERS 
SEEKING AN OPINION AS TO WHETHER THEIR PROPOSED ACTIVITY WOULD VIOLATE 
THE ANTITRUST LAWS WILL RECEIVE AN ANSWER IN A TIMELY MANNER, THUS 
PROVIDING CERTAINTY THAT THESE COMPANIES NEED WHEN DECIDING WHETHER TO 
WORK TOGETHER TO ROLL OUT LOCAL-INTO-LOCAL SERVICE TO CONSUMERS.
    THIS AMENDMENT IS SIMPLY AN ADDITIONAL STEP IN THE EFFORT TO GET 
LOCAL-INTO-LOCAL SERVICE TO ALL 210 MARKETS AS SOON AS POSSIBLE, AND I 
ENCOURAGE THE MEMBERS OF THE COMMITTEE TO SUPPORT THIS IMPORTANT 
AMENDMENT.

    Mr. Goodlatte. I yield back.
    Mr. Smith. I yield back, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Watt?
    Mr. Watt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. And I won't take 5 minutes, unless the answer to 
my question takes longer than I anticipate.
    I'm just wondering what are the consequences if there is a 
failure to respond to this request letter within the 90-day 
period that this amendment says. And I will yield to Mr. 
Boucher to educate me on that. I'm a little concerned that we 
might be putting the Antitrust Division or the Department of 
Justice in an untenable position here.
    Mr. Boucher. Well, I thank the gentleman for his inquiry, 
and I thank him also for yielding.
    There is no penalty contained within the amendment if the 
Department of Justice fails to respond within the allotted 
time. And if they did, it certainly wouldn't be the first time 
that an agency failed to observe a requirement passed by the 
Congress that an agency act within a certain time frame.
    On the other hand----
    Mr. Watt. So the word ``shall'' on line 5, Page 2, doesn't 
really mean ``shall.'' I mean, there are no--if there is a 
failure to respond, it doesn't automatically occur is what is 
the question that I'm----
    Mr. Boucher. That is correct. There would be no automatic 
approval of the business review of the business plan simply 
upon the failure of DOJ to respond within the allotted time 
frame. That would not be the effect of the amendment.
    Mr. Goodlatte. Would the gentleman yield?
    Mr. Watt. I yield to Mr. Goodlatte.
    Mr. Goodlatte. I would add, and I hope the gentleman from 
Virginia would agree with me, that ``shall'' does mean 
``shall,'' when the Congress says that. If somebody does not 
abide by that, then that's an issue we have to address when we 
confront that. But we should not put in the record here a 
suggestion that ``shall'' does not mean ``shall.''
    Mr. Watt. Well, I think I'll--I guess the Court would take 
judicial notice that the word ``shall'' does mean ``shall,'' 
but I think we would be--could possibly be doing a disservice 
if the word ``shall'' automatically resulted in a consequence 
that might be counterproductive to the public interest, and 
that's the only concern I had. And as long as--do you agree 
that there's no automatic consequence, there's no automatic 
granting or approval of the agreement if they don't respond 
within the 90 days? That's the only question I'm concerned 
with.
    Mr. Goodlatte. I do agree with that, but I don't want to 
leave the impression that the congressional intent is other 
than that they should act in that time frame.
    Mr. Watt. Okay. I think that satisfies my inquiry, and I 
will yield back.
    Chairman Sensenbrenner. The question is on the Boucher 
second-degree amendment to the Smith amendment in the nature of 
a substitute.
    Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it. The amendment 
to the amendment in the nature of a substitute is agreed to.
    Are there further second-degree amendments to the amendment 
in the nature of a substitute?
    [No response.]
    Chairman Sensenbrenner. If not, the question occurs on the 
amendment in the nature of a substitute, as amended, offered by 
the gentleman from Texas.
    All in favor, say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it, and the 
amendment in the nature of a substitute is agreed to.
    A reporting quorum is present. The question occurs on the 
motion to report the bill H.R. 4518 favorably, as amended.
    All in favor, say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it. The motion to 
report favorably is agreed to.
    Without objection, the bill will be reported favorably to 
the House in the form of a single amendment in the nature of a 
substitute incorporating the amendments adopted here today. 
Without objection, the Chairman is authorized to move to go to 
conference pursuant to House rules. Without objection, the 
staff is directed to make any technical and conforming changes. 
Then, all Members will be given 2 days, as provided by the 
rules, in which to submit additional, dissenting, supplemental 
or minority views.
    This concludes the items on the agenda today. The chair 
would like to thank the Members for their prompt attendance. We 
were able to get all this done in 33 minutes. Hopefully, that 
will set an example for the rest of our consideration this 
year, and the Committee stands adjourned.
    [Whereupon, at 10:32 a.m., the Committee was adjourned.]

                                  
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