[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
COPYRIGHT LICENSING IN A DIGITAL AGE: COMPETITION, COMPENSATION AND THE
NEED TO UPDATE THE CABLE AND SATELLITE TV LICENSES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 25, 2009
__________
Serial No. 111-3
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida STEVE KING, Iowa
STEVE COHEN, Tennessee TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr., LOUIE GOHMERT, Texas
Georgia JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico TED POE, Texas
LUIS V. GUTIERREZ, Illinois JASON CHAFFETZ, Utah
BRAD SHERMAN, California TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]
Perry Apelbaum, Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
C O N T E N T S
----------
FEBRUARY 25, 2009
Page
OPENING STATEMENTS
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Chairman, Committee on the
Judiciary...................................................... 1
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Ranking Member, Committee on the Judiciary. 3
The Honorable Rick Boucher, a Representative in Congress from the
State of Virginia, and Member, Committee on the Judiciary...... 4
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Member, Committee on the Judiciary.. 6
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Member, Committee on the Judiciary 7
WITNESSES
Ms. Marybeth Peters, Register of Copyrights, U.S. Copyright
Office
Oral Testimony................................................. 7
Prepared Statement............................................. 9
Mr. Fritz Attaway, Executive Vice President, the Motion Picture
Association of America (MPAA)
Oral Testimony................................................. 28
Prepared Statement............................................. 30
Mr. Bob Gabrielli, Senior Vice President, DIRECTV, Inc.
Oral Testimony................................................. 48
Prepared Statement............................................. 51
Mr. Chris Murray, Internet and Telecommunications Counsel,
Consumers Union
Oral Testimony................................................. 66
Prepared Statement............................................. 68
Mr. Kyle McSlarrow, President and CEO, the National Cable &
Telecommunications Association (NATA)
Oral Testimony................................................. 77
Prepared Statement............................................. 79
Mr. David K. Rehr, President and CEO, the National Association of
Broadcasters (NAB)
Oral Testimony................................................. 89
Prepared Statement............................................. 91
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Chairman, Committee on the Judiciary........................... 2
APPENDIX
Material Submitted for the Hearing Record........................ 151
COPYRIGHT LICENSING IN A DIGITAL AGE: COMPETITION, COMPENSATION AND THE
NEED TO UPDATE THE CABLE AND SATELLITE TV LICENSES
----------
WEDNESDAY, FEBRUARY 25, 2009
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:13 a.m., in
room 2141, Rayburn House Office Building, the Honorable John
Conyers, Jr. (Chairman of the Committee) presiding.
Present: Representatives Conyers, Boucher, Nadler, Lofgren,
Cohen, Baldwin, Schiff, Sanchez, Smith, Sensenbrenner, Coble,
Goodlatte, Issa, King, Franks, and Jordan.
Staff present: Stacy Dansky, Majority Counsel; and David
Whitney, Minority Counsel.
Mr. Conyers. Good morning. The Committee will come to
order.
The purpose of our hearing today is to assess the Satellite
Extension and Reauthorization Act and to consider what
direction we are going in.
We are delighted to have the Chairman of a Subcommittee of
the Energy and Commerce Committee, who is on the Judiciary
Committee as well, Rick Boucher, who had hearings on this same
subject yesterday, and I am going to ask him, after Lamar Smith
makes some comments, to review with us and make any additional
statements that he might.
We are indebted to Stacey Dansky and David Whitney who for
the first time put out a single bipartisan document describing
the issues and challenges that are involved in this satellite
extension provision, and we are reminded that David Whitney was
the person when Chairman Caldwell was the head of the
Committee, who on this same subject had done so much work. And
we are delighted that our staffs are working together so well.
I merely want to indicate that we are all sensitive to the
importance of this particular form of communication in our
society. It is the primary source of information for the
government, local events, weather, political considerations,
emergencies--and so we are trying to determine how we sort out
from a group of laws on copyright that have been inactive over
a period of time where some of them did not anticipate the
other, some are obsolete, some are overlapping, some are
something else, and what I am suggesting, Members of the
Committee, is that this is a quite long-range proposition that
is going to be before us.
True enough we are talking about the satellite extension,
but it is hard not to involve some of the other issues that are
before us. As you know, the Title 17 contains the Copyright
Act. Section 122 licenses satellite, Section 111, bless its
heart, cable, and then, of course, we come to the one that is
expiring, 119, and so I am so happy that we have the six people
that are with us.
And it seems to me that what we are doing and thinking here
is strikingly different from 1976 when the cable license was
enacted and 1988 which was satellite license. Competition has
grown between cable and satellite providers, there are a
greater range of options for consumers, and so some of the same
rationale that we likely agreed on 30 years ago are not as
relevant now, and it is in that spirit that I have been talking
to Lamar Smith and Jim Sensenbrenner and Rick Boucher about
strategies that we may employ that would get everybody deeper
into the real challenges that are before us.
So we are looking and listening today for some of the very
ideas which are already all over the map for us to begin to
turn around and pull together. So it is in that spirit that we
open this discussion, and I am going to put the rest of my
statement in the record and recognize the Ranking Member, the
gentleman from Texas, Lamar Smith.
[The prepared statement of Chairman Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Chairman, Committee on the
Judiciary
The purpose of today's hearing is to assess the Satellite Home
Viewer Extension and Reauthorization Act of 2004 (SHVERA), to begin
formal consideration of what changes, if any, Congress should make to
this law as we evaluate how and whether to reauthorize the act.
One cannot overstate the importance of television in our society.
It is the primary source of information about government, weather,
local events and emergencies. In a time of where most Americans have
less money to spend, many rely on television as the most affordable
entertainment for their dollar.
That is why my critical test of this legislation will be whether it
protects consumers and adapts their interests to this new digital age
of broadcasting.
First, for the consumer, we must preserve competition. Satellite
television continues to be the main competitor to cable television in
most areas, and helps to drive down prices and improve customer
service. In some areas, satellite television is the only way a consumer
can get television reception. A key question is whether we need to
change the law to give satellite companies the ability to provide lower
prices and more choices for consumers.
For example, should we allow satellite companies to offer signals
from adjacent markets--or markets that are next door to the market
where a consumer lives--so that a consumer has more choices? This would
also allow the satellite company to increase its bargaining power in
negotiations with network affiliates.
But we must also ask whether both of these changes would begin to
erode local broadcasting and result in a loss of local weather, news,
and emergency information? There can be little doubt that local
stations play a critical role in educating the public about local
government, community activities, and public safety information.
Second, with the digital transition delayed, and the broadcasting
world in transition, for how long should we extend the Satellite Home
Viewer Act? Although we have traditionally done 5 year extensions in
the past, this time we may need to revisit the law sooner to ensure
that the changes we make today still make sense for consumers as we see
the results of the digital transition. For example, what is considered
a poor quality signal in today's analog world, may be a better quality
signal in the digital world. The reverse may also be true. This will be
a critical question in determining whether a consumer is entitled to a
distant signal.
Third, do we need to further level the playing field between cable
and satellite by streamlining the licensing system? There is a
patchwork of different royalty structures that satellite and cable
companies are required to pay and I think it is time to ask whether
this helps or hinders competition for consumers.
Fourth, to ensure consumers have quality programming, we must
protect copyright owners. They create the programming that people want
to watch. Without the programming there is no cable or satellite
television.
For thirty years, we have used compulsory licenses to compensate
creators of content. Under sections 119 and 111 of the Copyright Act,
this has allowed the cable and satellite companies to broadcast
programming and pay the copyright owner at a rate set by the
government--a rate that most content owners would say is grossly below-
market.
I think it is time to ask--should we continue to require creators
to take the rate that the government gives them, or should they be free
to get a better deal through individual negotiations? Or is that
unworkable?
I intend to consider each of these options and want to take a broad
and expansive look at the different possibilities. This means every
single issue is on the table at this point. I want each of the
witnesses to approach this hearing with that in mind, and I look
forward to a robust conversation among all of you.
__________
Mr. Smith. Thank you, Mr. Chairman, and I certainly agree
with you on the need to stay this issue.
Fortunately, the license does not expire until the end of
the year, and as you and I discussed a few minutes ago, that
gives us ample time to educate ourselves a little bit more and
make sure that we have study all the issues that you have
mentioned and come to a good conclusion in plenty of time
before the end of the year. So the informal task force that you
have proposed, I think, is a good idea, and I thank you for
suggesting that.
Mr. Sherman, one thing we can all agree on, for better or
for worse, is that Americans care passionately about their TV.
Today, consumers want to have more rather than fewer options
for determining how, when, and what programs to watch. A recent
example of this was reported just last week in Joplin,
Missouri, where Walter Hoover decided to shoot his TV set after
he lost his cable and was unable to get his new digital
television converter to work. After a brief standoff with
police, Mr. Hoover was apprehended, placed under arrest, and
charged with unlawfully discharging a firearm. After his
arrest, I suspect Mr. Hoover found his TV choices were even
more limited than before. [Laughter.]
Mr. Chairman, I hope when we complete the process of
evaluating the compulsory copyright licenses that no one will
feel compelled to shoot their TV set--or anything else, for
that matter.
Absent congressional action, similar provisions of the
distant satellite license in Section 119 of the Copyright Act
will expire at the end of 2009. First enacted in 1988, this
license was extended for 5 years when last reauthorized in
2004. This license is one of three that permits cable and
satellite providers to retransmit copyrighted broadcast
programming to subscribers without negotiating and reaching
separate agreements with each affected copyright owner.
Unlike the Section 119 license, the other two licenses,
which regulate the retransmission of local broadcast
programming via satellite in both local and distant broadcast
programming over cable, are permanent. It is due in part to
this permanency that these licenses have not undergone a
serious review by the Committee. Today's hearing presents an
excellent opportunity to begin a comprehensive examination of
the policies embodied in these licenses and the challenges of
adapting these laws to the emergence of new technologies and
new competition.
The starting point for our analysis is the Copyright
Office's Section 119 report which stated, ``The current
versions of Section 111 and Section 119 are arcane, antiquated,
complicated, and dysfunctional.'' The office recommended
Congress adopt a new forward-looking unified statutory license
with a view toward encouraging the development of free market
alternatives to compulsory licensing. This hearing is an
important first step to educate ourselves on what steps
Congress ought to contemplate addressing this year and what
steps, though desirable, may take a little longer to achieve.
Mr. Chairman, thank you for having this hearing, and I will
yield back the balance of my time.
Mr. Conyers. Rich Boucher has been working on this subject
and related ones from a very unique vantage point by being on
Energy and Commerce. He is now Subcommittee Chairman of that
part of the Energy and Commerce Committee that is involved with
us in these considerations. We consider it a privilege to have
him working with us now, and I would yield him as much time as
he needs.
Mr. Boucher. Well, Mr. Chairman, thank you very much for
recognizing me this morning, and I also want to commend you for
organizing what I think is a very timely hearing on the
reauthorization of the Satellite Home Viewer Act.
The legislation expires at the end of this year, and if it
is not reauthorized within the course of this year by a new
statute passing, then the Section 119 license, which enables
the importation of distant network signals into households that
cannot get local television signals over the air from a local
TV station, would also expire, and that expiration would
operate to the disadvantage of hundreds of thousands of viewers
across the country, mostly in rural areas, who would be
adversely affected by it. So I appreciate your very timely
scheduling of the hearing this morning.
As you have indicated, the jurisdiction over this matter is
shared between the House Judiciary Committee and the House
Committee on Energy and Commerce, and we began our process
yesterday by having our first hearing on the reauthorization of
the act, and some of the same witnesses who are with us this
morning and many of the same organizations were represented at
our hearing yesterday, and I am sure many of the issues we
explore today will be somewhat similar to the conversation we
had in the Commerce Committee yesterday.
It is my hope, Mr. Chairman, that working with you and Mr.
Smith and our excellent staff here on the House Judiciary
Committee, Stacey Dansky and David Whitney--and we are very
fortunate to have their expertise--that we can agree through
our conversations and our work together on a coordinated text.
And then a common text, perhaps at the proper time, could be
introduced by both of us, and then we could proceed very
quickly to process that agreed upon legislation through both of
our Committees. I hope that process can work, and from our
vantage point on the Commerce Committee, we would be fully
committed to doing that.
And I want to say thank you to you and Mr. Smith and your
very excellent staffs for the outstanding cooperation you have
provided so far to me and to my staff as we have undertaken our
preliminary conversations.
I thought I would take just a moment this morning to
highlight a couple of the key issues that surfaced during the
course of our hearing yesterday. These are matters that Members
of our Committee had expressed particular interest in, and I
know these issues will be the focus of our ongoing
considerations. Our focus necessarily is more on the
communications aspect of the law, and the focus here will be
somewhat more directed toward the copyright aspects of the
legislation, and I would just indicate two key areas of
conversation that we had yesterday suggesting that our
principal debate is likely to be on these subjects.
The first of these is a measure that has been separately
introduced by our colleague, Mr. Stupak from Michigan, that
would require that local-into-local television service be
delivered in all of the 210 television markets across the
United States. Today, there are about 30 of those markets that
do not have local-into-local service delivered through the
Section 119 copyright license.
That license is now 10 years old. Technology has improved.
Spot beams are now in much more common usage, and that allows
for a far more efficient use of the satellite spectrum, and so
many are saying, including those who represent these 30 rural
markets, that the time has come for the satellite carriers to
offer those markets through the local-into-local service also.
Many of those are very rural, they are mountainous, and the
viewers in that area cannot get a local television signal over
the air because it is blocked by the mountains and because of
distance from the station. And that means that in the absence
of local-into-local service delivered by satellite, that those
viewers simply do not have access to local television service
at all and the kind of emergency information about natural
disasters that typically comes from the local TV station. And
so many are saying the time has come to add that feature to the
law and make sure that service is available in all of the 210
television markets.
The other key concern that was raised is the circumstances,
if any, under which there should be a permission for residents
in a given television market to be able to access the local
television stations in an adjacent market within that same
state, and two circumstances have been highlighted.
The first of these is where the market in which that
individual resides does not have a full complement of local
affiliates for the major networks. So, for example, a market in
which a person resides might have an NBC affiliate. It might
have an ABC affiliate, but it might not have the CBS and FOX
affiliates. And the argument is that in that kind of situation,
rather than have a distant network signal imported from the
East Coast or the West Coast in order to complement network
affiliates that are already there and fill in the gap, it might
be better to allow the local TV station from the adjacent
market in the same state to be accessible by that individual as
a gap filler, so that the full complement of local network
affiliates is made available, the thought being that that
provides more relevant information because it is in-state news
and programming and weather that might be relevant, certainly
more so than a distant network signal imported into that
market.
So we call these short markets, and so the situation would
be in short markets to allow the adjacent local stations to be
uplinked to fill the gap.
The other situation that was raised is markets that
straddle state lines, and in many of these instances, you have
viewers in one state receiving television service that
originates in another state, and under the existing law, they
are therefore restricted in terms of local-into-local delivery
to out-of-state television programming. And that means the
local news is more oriented to a state other than the one they
live in, and the argument has been raised that in that narrow
circumstance, it might also make sense to allow the adjacent
market in that person's state of residence and the local
signals in that market to be available to that resident so that
his local service carries in-state news.
We had a number of more technical issues that were
addressed, and I know some of those are on our list for
conversation here today. But those two matters are the primary
things that we focused on during our hearing yesterday, and I
would predict that those would be two matters that would be
subject to our debate as this consideration progresses.
Well, Mr. Chairman, you are very kind to recognize me this
morning. I do appreciate the promptness with which the House
Judiciary Committee is beginning to examine this subject, and I
look forward to close cooperation with you, Mr. Smith, and your
staffs as we undertake this exercise with the hope that we can
agree on a uniform text that you and I at the proper time can
then process together.
Thank you, Mr. Chairman. I yield back.
Mr. Conyers. Thank you, Rick Boucher, Subcommittee Chair,
and we will be depending on your long work in this area.
Bob Goodlatte has asked to express an opinion. I recognize
him at this point.
Mr. Goodlatte. Thank you, Mr. Chairman. I very much
appreciate your holding this hearing, and I look forward to
working with you and Ranking Member Smith on this very
important legislation.
I, too, was very involved, along with Mr. Boucher, in the
creation of the original license that allows satellite
providers to retransmit local broadcast stations via satellite
back into their local DMAs. And I continue to have a keen
interest in ensuring that consumers have access to their local
stations and, thus, local news and emergency information. And I
applaud the efforts so far by the satellite providers to get
local-into-local service deployed to the vast majority of
areas. But I, along with Congressman Boucher, have a keen
interest in the rural areas and areas with geographical
obstacles to clear broadcast signal transmission.
One topic I am particularly interested in is examining why
significantly viewed stations are not more frequently offered
by satellite companies, especially in areas where there is not
a full complement of local stations. Another important topic we
need to address is how the mandatory transition to digital
television broadcasting will affect the statutory licenses for
retransmitting television signals.
The transition is an exciting time, but, as we have seen,
all too often, it is very challenging to enact static laws in
the area of technology because of its dynamic and ever-evolving
nature. We need to make sure that we are taking the necessary
steps to anticipate and address any necessary challenges that
the digital transition will bring.
I look forward to hearing from our expert witnesses today
on these topics and to hear their ideas for how we can continue
to ensure that creators have the incentive to continue
producing quality television programming and that consumers
continue to have ready access to that programming.
Thank you, Mr. Chairman.
Mr. Conyers. Thank you very much, Bob.
I would like to recognize the former Chairman of the
Intellectual Property Committee, Howard Coble, for any comments
he might have before we call our witnesses.
Mr. Coble. Thank you, Mr. Chairman. I will be very brief.
I want to thank you and Mr. Smith for having arranged this
very significant hearing, and it is real good to see old
friends back at the title table.
Thank you, Mr. Chairman.
Mr. Conyers. All right. You are welcome.
We welcome Mr. Rehr, Mr. McSlarrow, Mr. Murray, Mr.
Gabrielli, Mr. Attaway, and I introduce, of course, our
continual leadoff witness who has been before us more than
anybody else I can remember, Marybeth Peters, the Register of
Copyrights for many years and, before that, the policy planning
adviser to the Register for over a decade, served as acting
general counsel to the Copyright Office, and is the author of
``The General Guide to the Copyright Act of 1976.''
So start us off again on the path we are going to be taking
between now and December 31, 2009. Welcome, again, Ms. Peters.
TESTIMONY OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, U.S.
COPYRIGHT OFFICE
Ms. Peters. Thank you, Mr. Chairman.
Mr. Chairman, Ranking Member Smith, distinguished Members
of the Committee, I appreciate the opportunity to appear before
you to testify on our recent comprehensive report to Congress
on the cable and satellite statutory licenses found in Sections
111, 119, and 122.
Our report and this hearing today are part of an important
debate on the continuing viability of these statutory licensing
regimes and their relevancy in today's ever-evolving digital
marketplace.
Sections 111, 119, and 122, as you have already mentioned,
were enacted in 1976, 1988, and 1999, respectively, and they
govern the retransmission of distant and local broadcast
signals by cable operators and satellite carriers. These
provisions cover the public performance of copyrighted works
transmitted by broadcast stations licensed by the Federal
Communications Commission.
Cable operators under Section 111, and satellite carriers
under Section 119, pay distant signal royalties to the
Copyright Office as a condition of the licenses. Section 122,
which permits the retransmission of all those signals by
satellite carriers, is a royalty-free license. Sections 111 and
122 are permanent. Section 119, however, is limited to 5 years,
and it expires on December 31 of this year unless you
reauthorize it.
We are required to examine the licenses and recommend
legislative changes. That was the charge that we got by
Congress. We were instructed by you to analyze the differences
among the three licenses and consider whether they should be
eliminated, changed, or maintained with the goal of harmonizing
their operation. We released our report to Congress as required
on June 30 of 2008.
The main factival findings in our report, which provided
the basis for all of our recommendations, are as follows:
One, the distant signal licenses whose foundations were
built upon analog broadcast technology cannot readily
accommodate digital television.
Two, changes in the structure, size, program offerings of
the cable and satellite industries cast doubt on the continuing
need for the distant signal licenses.
Three, new video distribution systems, such as AT&T's U-
verse, test the scope of the Section 111 statutory license.
Four, the economic rationales for the distant signal
licenses are less justifiable in light of the success of
marketplace models for video program distribution over the
Internet.
And, five, statutory royalties for the retransmission of
distant broadcast signals are lower than the license fees paid
to comparable non-broadcast networks, such as USA and TNT.
We also examined the historical technical and regulatory
disparities between Sections 111 and 119. We noted that while
communications technology and media marketplaces have evolved
and converged, the statutory licenses remain separate and
unequal. For example, under Section 119, satellite carriers pay
a flat royalty fee on a per-subscriber basis, while under
Section 111, cable operators pay royalties based on a complex
gross-receipts system tied to the cable system's size and based
on FCC rules that were repealed 30 years ago.
Satellite carriers are only permitted to market and sell
distant network signals to unserved household, while cable
operators are not so restricted and can serve every household
with distant signals as long as they pay the required
royalties.
These and other significant differences affect competition
between the cable and satellite industries and the provision of
video services, especially in the distant signal context. In
fact, the current statutory licensees not only pay copyright
owners below market rate, they also create distortions in the
delivery of distant broadcast signals.
Our personal recommendation to you is that you should move
toward abolishing the Section 111 and 119 licenses. The cable
and satellite industries are no longer considered nascent
entities in need of government subsidies through statutory
licenses. They have a substantial market presence. They are
able to negotiate private distant signal programming
agreements, as they now do for basic cable networks. Moreover,
the Internet video marketplace is robust and is functioning
well without a statutory license. We do believer however, that
a royalty-free, local-into-local license should be retained.
We believe, however, that a transition period is necessary,
and we suggest that the transition period should be from
January 1, 2010, through December 31, 2014, and we suggest
that, for that period, you create a unified statutory license
covering the retransmission by cable operators and satellite
carriers of local and distant broadcast signals. This license
should incorporate the best elements of the existing statutory
licenses while at the same time address the unique
characteristics of digital television signals. Such a license
would establish parity between cable operators and satellite
carriers as they both would operate under the same terms and
conditions.
However, if Congress decides that the existing separate
statutory licenses should be maintained, we believe a number of
changes should be made to those licenses, and our
recommendations are set forth in our report.
This is the beginning of your process. You will receive
many other recommendations for changes, and you no doubt will
need to consider and address the issues presented to you, and
we would be pleased to assist you in any way that you deem
appropriate.
One final note: As you move forward in this debate, you, of
course, should be cognizant of and address the challenging
economic conditions confronting each of the industries
represented on this panel. However, this should not be a bar
from examining what works, what does not work, and what needs
to be fixed.
Thank you.
[The prepared statement of Ms. Peters follows:]
Prepared Statement of Marybeth Peters
APPENDIX 1
__________
Mr. Conyers. Well, I am glad you got your recommendations
in first, as usual, and we are happy to have you here as we
have this, I think, initial discussion which will be very
interesting.
The Motion Picture Association is normally represented by
Dan Glickman, but the vice president is here today, Fritz
Attaway. Dan was a Member of the Committee on Judiciary, so we
hope we will be seeing him before too long. But Attorney
Attaway was the advisor in the cable television bureau of FCC,
he is a current member of the Advisory Committee on
International Communications and Information Policy in the
State Department, and he is vice president of the Motion
Picture Association.
Thank you for being here.
TESTIMONY OF FRITZ ATTAWAY, EXECUTIVE VICE PRESIDENT, THE
MOTION PICTURE ASSOCIATION OF AMERICA (MPAA)
Mr. Attaway. Thank you, Mr. Chairman. And I want to thank
you in particular for not mentioning how long ago it was that I
was at the Federal Communications Commission.
As you mentioned, Dan Glickman had a longstanding
commitment with Diversity Kansas in Wichita and could not be
here, and thank you for accepting me as, I am sure, a poor
substitute.
I would also like to express particular appreciation for
old friends being here who have heard this presentation many
times before in the last 20 years, and, Mr. Coble, Mr.
Goodlatte, Mr. Smith, Mr. Boucher, I am really pleased to see
you once again here.
Chairman Conyers, Ranking Member Smith, Members of the
Committee, I want to thank you for allowing me this opportunity
to present the views of creators and distributors of
prerecorded entertainment programming that constitute the
largest category of television programming retransmitted by
satellite carriers and cable operators under the statutory
compulsory licenses in Sections 111, 119, and 122 of the
Copyright Act.
MPAA represents its six member companies and some 200 other
producers and syndicators of programming in proceedings
relating to the distribution of cable and satellite compulsory
license royalties. To stay in business, these program creators
and distributors, big and small, along with the tens of
thousands of people they employ, rely on revenues from
exhibition of their creative works, including the
retransmission of those works by cable and satellite companies.
Mr. Chairman, as you examine the cable and satellite
compulsory licenses, I urge you to focus on programming and the
people who create it because that programming is why consumers
subscribe to cable and satellite systems. Consumers do not pay
monthly fees because they love headends or satellites or fiber-
optic cables. They want access to creative, entertaining
programming. The actions you take today or you will take as a
result of this hearing should be designed to promote the
overarching public interest in maintaining a steady supply of
quality programming to consumers.
The cable and satellite compulsory licenses, as Ms. Peters
mentioned, were enacted a long time ago under very different
marketplace circumstances. They were fashioned to meet the
needs of then emerging industries. But, today, cable and
satellite are well entrenched, mature industries that can and
do acquire programming without government assistance.
In today's cable and satellite market environment, the
compulsory licenses are historic anachronisms, no longer needed
or justified. The government-imposed subsidies that they confer
on cable and satellite industries, which are borne by program
creators and distributors, should be eliminated in favor of
negotiated marketplace licenses similar to those governing the
vast majority of programming now provided by cable and
satellite companies.
If the compulsory licenses are nevertheless retained, their
statutorily imposed subsidized royalty fees should be replaced
by marketplace compensation to program owners. By any objective
standard, the current compulsory license fees do not fairly
compensate program owners. Yet, despite widespread recognition
of the inadequacy of the current royalties, there will be calls
to lower compulsory license royalty payments further and also
to broaden the scope of the licenses.
The end result of such actions should be obvious: even more
meager compensation to programs creators and further lessening
of their ability to obtain market fees from new and existing
delivery systems, and, of course, reduced incentives to create
the programming that viewers find most attractive and on which
the cable and satellite industries are built.
Mr. Chairman, whatever you do, please do not further hinder
the ability of program creators to produce the programming that
consumers want to see. The drive to harmonize the cable and
satellite rates is nothing more than tinkering around the edges
of the existing compensation schemes. To be sure, harmonization
will create some short-term winners and losers among those who
pay, but, more important, it will do nothing to encourage the
creation of abundant and affordable television programmers that
consumers want to watch.
Current compulsory license royalties constitute a miniscule
portion of the cable and satellite operational costs, roughly
one-tenth of 1 percent of their revenues. Based on past
experience, increases or decreases in the royalty fees have a
negligible impact on the monthly subscriber fees paid by
consumers. On the other hand, many program suppliers,
particularly the smaller ones, depend on these compulsory
license royalty fees to sustain their business.
Finally, program owners should be able to verify that
whatever royalty payments are due them under the compulsory
licenses are, in fact, paid. The current licenses provide no
verification mechanism. Program owners should be afforded the
right to audit cable and satellite records to ensure compliance
with the compulsory licenses. In addition, marketplace
licensing alternatives to the statutory plan should be
encouraged.
Thank you, once again, for the opportunity to be here
today, and I look forward to responding to your questions.
[The prepared statement of Mr. Attaway follows:]
Prepared Statement of Fritz Attaway
__________
Mr. Conyers. Thank you so much.
From DIRECTV satellite, Mr. Bob Gabrielli, senior vice
president, who is now leading the biggest satellite
organization in the country.
We welcome you here to discuss that portion of the
copyright law that we are beginning to tackle and try to
unravel, along with our friends on the Energy and Commerce
Committee. Welcome to our hearing.
TESTIMONY OF BOB GABRIELLI, SENIOR VICE PRESIDENT, DIRECTV,
INC.
Mr. Gabrielli. Thank you, Chairman Conyers, Ranking Member
Smith, and Members of the Subcommittee. Thank you for the
opportunity to testify here today.
My name is Bob Gabrielli. I am the senior vice president
for programming operations and distribution at DIRECTV, and on
behalf of our more than 17 million customers, I offer the
following suggestions for updating SHVERA.
First, Congress should retain and modernize the existing
satellite distant signal statutory license.
Second, Congress should improve consumer access to local
stations.
Third, Congress should not require satellite subscribers to
bear the burden of nationwide mandatory carriage.
And, fourth, the retransmission consent system should be
modernized to protect consumers from high prices and withheld
signals.
To begin, I would like to discuss the digital signal
license. Today, the vast majority of subscribers get network
programming from local, not distant stations. Only about 2
percent of satellite subscribers receive distant signals, but
those rely on distant signals to receive network programming
and many will continue to do so in the future.
Congress should thus renew the distant signal license. It
should also modernize the license to make it simpler and to
protect consumer access to network programming. In particular,
it should ensure that consumers in markets missing one or more
local affiliates have access to network programming through
distant signals.
The Copyright Office has proposed harmonizing the satellite
and cable licenses. While this is a laudable goal, we recommend
repeating the separate licenses as they reflect fundamental
technological differences between the two platforms. For
example, the harmonization program will replace the unserved
household test that satellite uses with the cable exclusivity
rules. This would be completely unworkable for DIRECTV because
we cannot block out thousands of programs from across the
country 24 hours a day.
Next, let me discuss DMAs. Millions are unable to receive
truly local news, sports, and entertainment because they live
in one state, while their DMA is mostly in another state. For
example, viewers in Fulton County, Pennsylvania, are assigned
to the Washington, DC, DMA. As a result, they do not receive
any Pennsylvania-based local programming. Five years ago,
SHVERA addressed a handful of these situations by creating
special results.
The time is right for a more general approach. Congressman
Ross has proposed allowing delivery of neighborhood stations to
households in these orphan counties, like Fulton County, and
DIRECTV endorses this effort. Time and again, consumers tell us
what local channels best meet their needs and, where possible,
we should be able to meet those demands.
I would like now to discuss local carriage. Satellite is an
excellent medium for distributing national programming to even
the most remote locations, but it is far more difficult to
deliver thousands of local network stations from a handful of
satellites in space. Congress recognized the difficulty of this
task when it created the carry-one-carry-all rules.
We have nonetheless made extraordinary progress in offering
local programming. Our track record speaks for itself. We have
spent billions of dollars to provide local service. We now
offer local television stations by satellite to 95 percent of
households, and we intend to add six more markets by the end of
this year.
Using the FCC calculations, over 80 percent of our
satellite capacity is now devoted to this local service, nearly
triple the amount cable operators are required by law to carry.
For the remaining 5 percent of the households, we now offer a
local seamless solution. We will install a rooftop antenna, a
tuner that integrates broadcasting into the set-top box to our
subscribers off their signals, and it will now appear and
function exactly as any other channel. It will be on the guide
function, in the DVR, et cetera.
If the broadcasters made their signals available throughout
the DMA, every DIRECTV subscriber could receive local channels
in this fashion. This would be a simple investment in repeaters
and translators by broadcasters. It would be the fastest and
most efficient way to reach all markets.
Last, I would like to discuss the retransmission consent.
Congress created the must-carry retransmission consent regime
before we ever offered local channels. The regime functioned
until recently, in part because of the equilibrium that existed
between monopoly broadcasters and monopoly cable operators. But
as satellite emerged, broadcasters found their relative
bargaining power increased.
Today, with satellite and telephone companies in the mix,
broadcasters now routinely demand fees three times those
previously paid, and it does not appear that this additional
money is being used to provide more or better local
programming. In fact, the opposite appears to be true. Many
broadcasters are producing less and less local news, while
others have replaced local programming with national
infomercials.
DIRECTV willingly pays for high-quality content. We think
programmers do get fair and reasonable compensation for the
products they create, but it is not fair to the American public
if broadcasters have the unfettered ability to raise rates
without any obligation to provide local content. We would like
to work with you to establish a new retransmission consent
policy that compensates the broadcaster fairly for its
investment in high-quality content, yet protects consumers from
withheld service.
In closing, millions of your constituents throughout
America, whether they subscribe to satellite or not, are better
off because of the legislation this Committee has championed
over the years. I ask you to keep those consumers in mind as
you consider SHVERA reauthorization this year.
Thank you.
[The prepared statement of Mr. Gabrielli follows:]
Prepared Statement of Bob Gabrielli
__________
Mr. Conyers. Thank you. We will keep those recommendations
in mind.
We will turn to Chris Murray, Consumers Union, publisher of
the magazine, and has been before the Committee repeatedly, and
we welcome you today to share with us your concerns about
satellite TV and the licensing issue that is before us and any
other related matters.
Welcome to the Committee.
TESTIMONY OF CHRIS MURRAY, INTERNET AND TELECOMMUNICATIONS
COUNSEL, CONSUMERS UNION
Mr. Murray. Chairman Conyers and Ranking Member Smith as
well as the distinguished Members of the Committee, I do
appreciate the opportunity to appear before you once again.
Today's question is whether or not we should extend the
license that allows satellite services to be a robust
competitor for pay television services. We submit that the
answer is an easy and emphatic yes. Since we have deregulated
the pay television market in 1996, we have seen consumer prices
for television service go up and up at nearly twice the rate of
inflation, and while I do not believe that competition from
satellite is a perfect solution to counterbalance the problem
of market power for pay TV services, it is probably the best
partial solution we have by a mile.
I have heard a little bit about challenging economic
circumstances that are facing some industries here today, but I
would also like to submit that the challenging economic
circumstances facing consumers are quite severe.
So the question is: What can be done to ensure that
satellite and other competitors for pay TV services can be as
robust a competitor as possible? And I will submit three quick
suggestions.
The first, as we have heard not only from Mr. Gabrielli,
but also I think we heard from a number of witnesses at
yesterday's Commerce hearing, we need to reform the distant
signal qualification process. We think that there is no good
reason to prevent consumers from having greater choice in local
broadcast content, and we applaud efforts to move toward a
greater number of DMAs that are served by satellite.
I think some study is also warranted as to what percentage
of capacity do they have to put up in order to get those local-
into-local signals in all 210 markets. I think we would find
that it is a significant percentage of capacity and that we
would be loathe to require other services at the table, such as
cable television, to dedicate as much of their capacity as we
are asking of the satellite guys. But I do believe that that is
something that needs to be looked at.
The second important thing is how do video competitors get
video programming and what do they pay for it, and perhaps as
importantly, what happens when the process of negotiation for
those channels breaks down. What do we do? We have all seen an
instance, if we have satellite TV or another service, where
because a negotiation is not going well, consumers actually
lose a television signal for a while, and we see consumers
being used as a bargaining lever in order to get a higher price
for programming.
We think that fresh scrutiny is warranted to look at how
can we fix program negotiation processes, how can we close
things like the terrestrial loophole, and how can we ensure
that exclusive programming arrangements are not being used with
those who have a vertical arrangement where they own both the
content and the distribution for that to shut out competition.
We think that if Congress has decided that competition is going
to be the way that we are going to keep consumer prices down,
we have to be sure that we are making competition function as
fully as possible.
My final suggestion is regarding rate transparency. We see
a lot of finger-pointing at the table and a lot of name-calling
for why consumer rates continue to go up, and I cannot tell you
exactly what the reason is that they do continue to go up, but
what I can tell you is that we need more transparency in the
rates that cable programming providers are paying for content,
that satellite providers are paying for content. We need to see
the whole input process to understand where is it that
consumers are being price gouged and where is it perhaps that
they are being undercompensated.
I am frankly astonished at the suggestion that we should
not extend this compulsory license because if you want to see
the marketplace break down almost instantaneously and you want
to see consumer prices go through the roof almost
instantaneously, then let's consider just allowing, you know,
market-by-market, copyright-by-copyright negotiation. It is
almost an unthinkable mechanism.
But we look forward to any questions that the Committee may
have, and thank you again for the opportunity to appear before
you.
[The prepared statement of Mr. Murray follows:]
Prepared Statement of Chris Murray
__________
Mr. Conyers. Thank you for your testimony.
The president and CEO of the National Cable and
Telecommunications Association is Kyle McSlarrow, and he is
here. We are delighted. He has been on the advisory committee
and has been the deputy secretary of the U.S. Department of
Energy, chief of staff for Senator Paul Coverdell, vice
president of political and government affairs for
grassroots.com, and assistant to the general counsel of the
Army.
We welcome you here today, sir, and look forward to your
suggestions.
TESTIMONY OF KYLE McSLARROW, PRESIDENT AND CEO, THE NATIONAL
CABLE & TELECOMMUNICATIONS ASSOCIATION (NATA)
Mr. McSlarrow. Thank you, Mr. Chairman, Ranking Member
Smith, and distinguished Members of the Committee.
Let me just say at the outset I understand that this
Committee and the Energy and Commerce Committee have several
different options in terms of the path you want to go down with
reauthorization of SHVERA, and whatever path you choose, you
have my commitment that our industry will work constructively
with you as with other stakeholders represented at the table.
I should also say, as odd as it may sound, we support the
reauthorization of SHVERA. We support continuing what has been
a success story in a rough, competitively neutral balance among
us and our competitors, principally the satellite industry and
now the telephone industry. It is very clear that competition--
and it is very intense competition now--among cable, satellite,
and telephone providers, in video has produced great benefits
for consumers.
I guess there are three things that I would--I would break
it down--ask you to consider.
First, the notion of the compulsory license itself: I have
to admit, as I prepared for this hearing and started examining
the cable compulsory license, it is horrifyingly complex, and
the quite natural reaction, as was mine, is to say, ``Let's
clean it up. Let's make it simpler. Let's harmonize it,'' and
that is just the natural reaction. But I would ask you to
consider two things that make that very tough.
The first is, even though on average, there may only be two
distant signals that an average cable subscriber gets, there
are something like 25 million households that have two or more
distant signals available to them and another 25 million that
have one distant signal. There are really settled expectations.
So we have to be very careful as we go through this process.
And all of us are living through the digital transition that is
taking place right now and understand the great length that all
the stakeholders and Congress have gone to ease that
transition.
The second point I would make about it is that, as complex
as it is, the compulsory license for us and for satellite has
basically worked. It is actually a great public policy success
story. So, even though it may look arcane, if you step back and
you ask the question: ``Is the consumer being served?''--yes,
because we are disseminating content that the consumer wants as
widely as possible; ``Are the distributors being helped?''--
yes, because we are at a rough competitive balance in terms of
how we are treated; ``Are the copyright holders being
compensated fairly?''--our answer would be yes.
So, on the one hand, one direction this Committee can go
would be--and we would urge you to consider this--
straightforward reauthorization with some modest reforms.
One reform that we would ask the Committee to consider is
reforming what we call the phantom signal policy where you
actually have an interpretation of the statute where consumers
who do not receive a distant signal actually have to pay for
other consumers receiving a distant signal.
Nonetheless, the Copyright Office, as Congress asked it to
do, has come forward with a report and has made a number of
fairly far-reaching reform proposals, and harmonization or
suggestions of a flat fee at first blush are very appealing,
but one has to understand that you cannot solve those issues in
the context of just the Copyright Act itself. You have to open
up the Communications Act in significant ways, particularly on
the carriage side.
And I would identify just one provision which I think
illustrates this, and that is that the cable industry has an
obligation that every broadcaster we carry must be shown to
every consumer before they can go on to buy any other service,
any other cable network, any other premium channel. The
satellite industry does not have a similar obligation. For
them, the choice of carrying the broadcaster is an optional
one. So, if you move to a flat fee, which sounds appealing at
first blush, by definition, because we have a must-buy
requirement, every one of our consumers is paying for the
signals, whereas, for a satellite customer, they would have a
choice.
It is not a question of right or wrong. It is just
different, and it has a huge significant impact.
The other point that I would make is that if you are
looking at the Copyright and Communications Act in tandem, to
some extent, we would be focusing on the wrong issue. A couple
of folks have already mentioned that if you are looking at
carriage obligations and how we compensate copyright holders,
it would be odd not to think about taking a hard look at
retransmission consent, which is a Communications Act
provision, but I would submit is at odds with the theory behind
the compulsory licenses.
Compulsory licenses work because they provide an efficient
and seamless way to get programming out while fairly
compensating copyright holders, and it does so with a minimum
of disruption, whereas the retransmission consent provision, by
definition, increasingly poses a threat of disruption where
broadcasters can threaten to withhold or actually do withhold
signals from consumers in order to extract more compensation in
some form or another.
Again, those two are in conflict with one another. So, if
the Committee does choose to examine both these statutes and
the carriage obligations in their entirety, we would urge that
you examine retransmission consent as well.
Thank you, Mr. Chairman.
[The prepared statement of Mr. McSlarrow follows:]
Prepared Statement of Kyle McSlarrow
__________
Mr. Conyers. Thank you very much.
We have three short votes, but we will save the biggest
witness for last, maybe the one in the most trouble.
Mr. Rehr, we will be looking forward to your testimony when
you get back.
We will stand in recess now.
[Recess.]
Mr. Conyers. Mr. David Rehr is the president and CEO of the
National Association of Broadcasters, NAB, and has led in his
field of expertise for nearly 25 years on Capitol Hill. He has
worked with us across the years. We are delighted to have him
today and we are going immediately into the questions following
his statement.
Welcome, sir.
TESTIMONY OF DAVID K. REHR, PRESIDENT AND CEO,
THE NATIONAL ASSOCIATION OF BROADCASTERS (NAB)
Mr. Rehr. Thank you, Mr. Chairman.
Chairman Conyers and Congressman Gonzalez, thank you very
much for having me here today. My name is David Rehr, and I
serve as the president and CEO of the National Association of
Broadcasters.
The NAB proudly represents over 8,300 diverse television
radio stations across the United States, employing nearly
250,000 hardworking Americans. Our member companies keep their
communities informed and connected. We work every day to embody
the spirit of localism, which Congress has embraced and
affirmed time and time again as a vital public policy goal.
We do not charge our viewers to watch our programming. We
rely on payments from advertisers to deliver a free service to
your constituents. Without free over-the-air television, pay TV
models would be unrestrained their ability to attempt to
maximize their profitability.
Broadcast television stations remain the primary source of
the most diverse and popular entertainment, news, weather, and
sports programming in the country. In fact, according to data
from Nielsen Media Research, in the 2007-2008 television
season, 488 of the top--that is most watched programs--500
primetime television programs were broadcast over the air.
While these stations represent a relatively small number of
channels on pay systems, broadcasters offer a highly demanded
and desired unique and valuable service to local markets and to
your viewers.
I would like to make two points. Number one, localism must
remain central to any policy deliberations with respect to
satellite and/or cable compulsory licenses. Two, the Copyright
Office recommendations must be evaluated individually for both
intended and unintended consequences.
Starting with my first point. One, localism must remain
central to any policy deliberations with respect to satellite
and/or cable compulsory licenses--unlike other countries that
only offer national television channels, the United States has
succeeded in creating a rich and varied mix of local television
service providers so more than 200 communities, including towns
as small as Glendive, Montana, which has fewer than 4,000
television households, can have their own voices. This is the
genius of the American system and should be celebrated.
The pillars of this system are the availability of signals
to viewers throughout the market and the ability to offer
exclusive programming in that market, often through a network
affiliation relationship. We urge this Committee to view any
changes through the prism of localism and the core principles
of localism.
Two, the Copyright Office recommendations must be evaluated
individually for both intended and unintended consequences.
Broadcasters and cable have been working under the cable
compulsory license for over 30 years and, by and large, this
system has worked well. The experience under the satellite
compulsory licenses has been more challenging. Here are a few
reactions to some of the report's recommendations.
We agree with the office on the retention of a local-into-
local compulsory license. We agree with the office on the call
for phasing out the distant signal license for satellite
providers. Beyond that, in fact, broadcasters believe that the
license should be replaced with a requirement for local-into-
local carriage in all television markets.
There are 31 of the 210 television markets in small and
rural areas that satellite companies do not serve. The
satellite companies have said that this is a capacity issue,
yet it is more likely a simple business decision.
Broadcasters, including those in the 31 smallest markets,
have invested well over a billion dollars in making the
transition to digital television, and I think we have done a
pretty good job educating America. So far, there is very little
economic return on that investment. Nevertheless, those
investments were made and are in the public interest.
The satellite industry investment in providing local-into-
local to all Americans is also in the public interest. I am
certain that if Congress does not step in, local service will
never be provided.
We disagree with the Copyright Office on the
recommendations to harmonize cable and satellite licenses. They
are very different business models, different technologies, and
have different evolutions. We are unsure of all the unintended
consequences of that harmonization, particularly in this
difficult economic period.
We share the concerns of the Copyright Office as expressed
in their report regarding compulsory licenses to permit
retransmission of broadcaster signals on the Internet as well
as the requirements they would impose. As you know and as you
have heard here today, the reauthorization is complicated, yet
extremely important to American television viewers.
The underlying principle or focus, which I encourage this
Committee to use as its guide in its deliberations, is
localism. Localism continues to provide Americans a connection
to their communities.
Thank you for giving me the opportunity to testify, and I
welcome any questions you might have.
[The prepared statement of Mr. Rehr follows:]
Prepared Statement of David K. Rehr
__________
Mr. Conyers. Thank you, Mr. Rehr.
I am going to ask Judge Charles Gonzalez of Texas to begin
questioning.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
Mr. Rehr, I love the fact that you start off with a dilemma
that I face--and I am sure Mr. Boucher and others that serve on
Energy and Commerce--and we are on Judiciary and we talk about
retransmission, and I thought I understood retransmission, but
this is a totally different and distinct issue. It is really
kind of difficult.
So if I ask an Energy and Commerce question, forgive me,
Mr. Chairman. I really did not mean to do that.
The delivery system appears to determine policy many times,
and the delivery system on the box can be an Internet delivery
system and such and what that means. But, Ms. Peters, you said
something--or you may not have actually covered it. I am not
real sure--on page 7 of your testimony, ``On a related subject,
it must be noted that the Copyright Office is not in favor of a
statutory license for retransmission of broadcast signals over
the Internet.'' The last sentence is interesting. ``An Internet
statutory license, in fact, would likely remove incentives for
individuals and companies to develop innovative business
models.''
Now why wouldn't that same reasoning apply to what we have
in not the newcomer, but the existing technologies and delivery
systems of cable and satellite?
Ms. Peters. Actually, the point I was actually trying to
make was that because there is no statutory license and because
Internet deals are being made every day, it actually proves the
point that you do not need the statutory licenses for cable and
satellite.
So I was actually trying to say you do not need to go
there. And I think that if, in fact, we took away the cable and
satellite, they would be able to do the same kind of things,
kind of deals that they are doing today with regard to the
Internet and mobile phones and all kinds of mobile devices, as
well as service to your computer at home.
I do not know. I mean, I just really believe that the
Internet is where more and more people are going, more and more
of these mobile devices are what people have and the way they
are getting things, and the licensing seems to be working in
that area.
Mr. Gonzalez. Yes. And you are probably right that we are
not going to do anything that we do not have to do at this
point, and then harmonization is probably between cable and
satellite, and most of our attention, I think, would be
directed in that manner.
Mr. Murray, I think you indicated a position that I think
would be contrary to Mr. Attaway. And that is if you do not
have statutory licenses and you do not have some uniformity--
and that is the concept and that is the model--and then if you
break it down and you do not have it, that would open the door,
obviously, to a lot of individual and separate transactions,
negotiations, and so on. What is wrong with that? And, in fact,
is it the model that is defective, or is it just that component
of trying to establish adequate compensation?
Mr. Murray. It is certainly not a problem of establishing
adequate compensation. I think if you ask consumers who have
had, let's say, a satellite channel withheld from a programmer,
what is the problem with the situation that you are in?
So what I am talking about here is the situation where
satellite companies try to negotiate with a program provider,
and because the program provider cannot get exactly the terms
that they do, they use the lever of withholding that content
from consumers. So consumers, you know, have American Idol go
dark or something like that.
Now if you take that model and extend it to the point where
now what you have basically set up is a marketplace where
market-by-market, broadcaster-by broadcaster--because this is
not just a national broadcaster negotiation, this is a local
broadcaster-by-local broadcaster negotiation--you have a market
destined for gridlock, destined for higher prices for
consumers. And I do not think that is the result that Congress
wants here.
I think that this--the compulsory license here has served
as a very positive model. It is the only force that has kept
cable television prices in check, and I cannot see any
rationale for undoing that system.
Mr. Gonzalez. Mr. Attaway?
Mr. Attaway. Well, as you indicated, we certainly do have a
difference of opinion. I am just astonished that Mr. Murray
thinks that eliminating the compulsory licenses would be
unthinkable when, if you look at the program schedule for a
cable or satellite provider--I happen to have DIRECTV's right
here--you go down the list of offering. And the vast majority
of channels that are being offered, all of the programming is
negotiated for in the marketplace, channel by channel, and it
works quite well to serve the interests of the consumers as
well as the satellite and cable companies and as well as
program producers.
There is no reason to think that the marketplace cannot
work. Maybe in 1976, there were problems. Those problems do not
exist today, and if you look at the Internet, that is a perfect
example of how the marketplace is working to meet the needs of
consumers. Almost every television program available today on
broadcast television is also being made available on the
Internet. The marketplace works.
Mr. Gonzalez. Thank you very much. I yield back, Mr.
Chairman.
Mr. Murray. I was just going to say and yet we see
proposals right now to make broadcast programming available
exclusively. So, if we are talking Internet here, I am talking
about--and this is a very recent thing that has just come up
this week where there is a proposal out there to take cable
programming, put it on the Internet, and then the only place it
could be available is to subscribers of that particular pay
cable television service.
So we see this marketplace closing. We have seen instances
of folks blocking content because it might be a competitor,
and, you know, clearly, if I am the content industry, I would
love to have the maximum lever over consumers and over other
vendors in the marketplace, but does that serve consumers? I
submit that it does not. I think it is going to result in
higher prices and an absolute gridlock of copyright clearance.
Mr. Conyers. Ms. Peters, you okay on that?
Ms. Peters. No, I actually disagree. I think the
marketplace is the best place to resolve these issues. Nobody
produces a program not to sell it. They really want to make it
available. It may be that the terms and conditions, you know,
are at issue, but you don't not license your program, and any
business that is not meeting the expectations of its consumers
is not going to last very long. So I happen to be a very strong
advocate of the marketplace and consumer choice.
Mr. Murray. And I am an advocate of the marketplace, but
isn't our counterfactual here that many instances of
programming exclusives--because this cuts exactly against what
you are saying, that, of course, you produce content, you want
to sell it to the maximum amount of people, maybe, unless what
you can do is really price gouge some folks with exclusives.
And that is what we see this marketplace trending towards, you
know, and so I think the existence of exclusives is the proof
that we have these problems, and that it is going to get worse
if we allow the content industry to have greater leverage over
consumers.
Ms. Peters. I would argue that with the Internet, it is
becoming less exclusive, that you see content in many different
forums throughout the world on many different devices. The
exclusivity of only giving it to one person, I think, is
exactly the opposite of the trend today.
Mr. Conyers. Help us, Lamar Smith.
Mr. Smith. Thank you, Mr. Chairman.
Ms. Peters, on the way to larger issues, I wanted to ask
you about a specific provision. You mentioned in your written
testimony that you felt that the unserved household requirement
had basically outlived its usefulness. Real quickly would you
explain why?
Ms. Peters. The whole purpose of the unserved household
piece was that if you cannot get the full complement, and you
prove yourself to be unserved, then you can bring a distant
signal in. With more and more local signals being made
available, I think the need is less.
I am a strong advocate of serving consumers their local
programming. That seems to be where the push is. Now I heard
people testify and say people still get two distant signals and
they still get one. I still think that that could be licensed
content if that is what they really want, but I do not think
you need a compulsory license for it.
Mr. Smith. Okay. Thank you.
Did you want to respond, Mr. Gabrielli, really quickly?
Mr. Gabrielli. I would. And for DIRECTV, because we have
spent the billions of dollars and do cover 95 percent of the
country with local channels, our number of distant subscribers
has gone down by more than half in the last 4 years. But there
still are a couple of cases where customers need distant
signals. They need them where we do not cover the market yet
and the broadcaster does not cover that. This is----
Mr. Smith. Is that the 5 percent you are talking about?
Mr. Gabrielli. That is the 5 percent.
Mr. Smith. And, Ms. Peters, what about the 5 percent? I am
sure that is millions of people, but anyway----
Ms. Peters. Well, I am not sure. I still do not get who is
not served and why that could not be licensed content from some
provider.
Mr. Smith. Okay.
Mr. Gabrielli----
Mr. Gabrielli. Well, again, the satellite is a secondary
transmission of a primary broadcast. If the broadcaster covered
the entire market, there would be no need for distant signals.
Mr. Smith. Right.
Mr. Gabrielli. So we only get the license where they do not
cover. We have done a great job of covering 95 percent of those
with local channels. There is still 5 percent. There are
markets that are missing networks. We have to bring in a
network from another market. That is a distant signal.
Otherwise, you would have some markets that have one or two
stations. That is all we could provide if we did.
You still have RVs, long-haul trucks, airplanes, and ships
that are not in any market that we use a distant signal license
for, and there is always the public safety officials given in
any country that, you know, or county that need these----
Mr. Smith. Okay. All right. Thank you. Two sides on that
issue.
Mr. Attaway, you mentioned in your oral testimony--or was
it in your written testimony which you sourced--that royalty
payments are only one-tenth of 1 percent of revenues. I am
going to ask some of the witnesses to your left what they think
about that. What do you think is the significance of the fact
that, as you claim, the royalties are only one-tenth of 1
percent?
Mr. Attaway. Well, I think that goes to illustrate that the
royalties that are paid by cable and satellite providers are de
minimis. There is certainly no consumer issue here because, in
terms of their overall cost structure, they are de minimis. If
you are really concerned about prices being passed on to
consumers, you ought to be looking at postage rates because the
cost of sending out monthly invoices is almost four times what
cable and satellite systems may----
Mr. Smith. Let me ask the other witnesses if they agree
with your one-tenth of 1 percent and the significance that you
just mentioned.
Mr. Gabrielli. I am assuming you are strictly talking about
the royalty payments, and I actually do not know about
percentages, but, overall, we pay 50 percent of our gross
revenue for programmer payments to the broadcast stations, to
the cable networks. So we are at a 50 percent number from our
opinion.
Mr. Smith. From your point. Okay.
Anyone else on the panel want to comment?
Mr. McSlarrow?
Mr. McSlarrow. Well, the situation for cable operators is
the same as Mr. Gabrielli just described. The only additional
point I would make is that under this regime, we are
essentially paying for distant signals. On average, a cable
system has hundreds of channels and only on average two of them
are distant signals. So the fact that our two industries
together plus the telephone companies are paying a quarter of a
billion dollars a year in copyright royalties suggests to me
that content owners are probably not underpaid here.
Mr. Smith. Okay. Mr. McSlarrow, I am going to have time for
one more question, which I am going to direct to you. You
mentioned in your testimony a few minutes ago that you favor a
straight reauthorization with modest reforms, compulsory
licenses work, and so forth. I wonder if you might explain part
of the reasoning for your stand as being that there is a
technological difference between satellite and cable, and if
you want to explain what those technological differences might
be that would support your position.
Mr. McSlarrow. Part of it is a technological difference,
and I think the technology differences play out in carriage
obligations. So, for example, I made the point in my oral
testimony that we have an obligation to carry every broadcaster
on the must-buy a tier. That is something the satellite
industry does not have. We also have a difference with must-
carry obligations where we have to carry every must-carry
station. The rule for DBS is carry one, carry all.
So I think over time, interestingly enough, the
technological differences have actually diminished, but they
are still present. But I would also say that I think it is
actually the regulatory differences today that are probably the
larger issue.
Mr. Smith. Thank you.
Thank you, Mr. Chairman.
Mr. Conyers. Thank you.
Rick Boucher?
Mr. Boucher. Well, thanks very much, Mr. Chairman.
I am going to be directing questions to Ms. Peters.
And, Ms. Peters, welcome again. We are delighted to have
you here today. Before I ask you some questions about areas in
which we might consider amending the statute, let me just
briefly comment on your proposal to phase out the Section 119
license, and I really do not want to spend my 5 minutes on
this. So I am not going to ask you to respond. I have heard
carefully what you have had to say and others have had to say.
The purpose of this license was never to subsidize
satellite service. It was always to serve people who could not
get a distant network signal any other way. They could not get
it from the local station. In the days when we originated this
license back in 1988, there was no local-into-local service.
Today, we have local-into-local service, but it only
serves--well, it does not serve 30 markets. I cannot do the
math in my head. There are 210 and 30 are not served. So what
is that, 180 are served and 30 are not, and within those 30
markets not served by local-into-local, you have, I am sure,
more than a million people who cannot get that network signal
by any means other than the import under Section 119.
And my sense is that negotiating the clearance rights in
the absence of the 119 license might be somewhat more difficult
than some of the conversation here has suggested. I suspect it
is not as simple a matter as dealing directly with the networks
themselves. There are probably syndicated programs and other
things contained within that network signal that would require
a multiplicity of negotiations with a variety of parties, and
that might be quite complex.
So that is my comment. We need to keep this 119 license,
and it would be my goal strongly to defend it.
The questions I have for you are these. Under the existing
Section 111 license, the cable compulsory license, is there any
doubt in your mind about whether the telephone companies that
are now seeking to offer multichannel video using an IP-based
platform to do that would be entitled to use the Section 111
compulsory license, and if you think the statute is unclear in
that regard, should we amend it to clarify it?
Ms. Peters [continuing]. Talking about AT&T and Verizon, or
are you talking about----
Mr. Boucher. Yes.
Ms. Peters [continuing]. Cable----
Mr. Boucher. Yes. No. I am talking about specifically
AT&T----
Ms. Peters. Right.
Mr. Boucher [continuing]. And perhaps also Verizon is in
that category, but I know AT&T intends to use an Internet
technology solution, an IP solution, to offer its multichannel
video service. Do you believe that the statute clearly makes
them eligible for the 111 license, or should we clarify it to
ensure that?
Ms. Peters. My recollection, what was in the study, was
that the definition of cable system in 111 would cover AT&T in
general, but the definition of cable system in other contexts
may not fit exactly. I know that our recommendation is that one
of the things is the issue of whether or not they comply with
FCC regulations, and so, in our study, we recommend that if
they are going to take advantage of the 111 license, they
should also be required to comply with FCC regulations.
Mr. Boucher. Okay. Does your report answer this question,
or do you address the subject in your report?
Ms. Peters. Yes, we do.
Mr. Boucher. I will turn to the report for the answer then.
Thank you.
The second question I have is this. The Section 119 license
allows the import of distant signals to households that cannot
receive an analog over-the-air television signal from the local
station, and with the DTV transition, obviously, the analog
signals are going to be turned off. The natural consequence of
that with the statute unamended is that the entire Nation will
be a white area, and distant network signals could be imported
into every home once the DTV transition is complete. I assume
you would agree we should amend the statute to replace analog
with the digital.
Ms. Peters. Yes.
Mr. Boucher. Okay.
Ms. Peters. I do agree.
Mr. Boucher. Next question: Should we, in your opinion,
move the significantly viewed provisions from the current
Section 119 license to the Section 122 local-into-local
license?
Ms. Peters. Yes, we do.
Mr. Boucher. Thank you.
And then the fourth question: The Section 119 license says
that if local signals are offered in a given market, then
distant network signals cannot be imported into that market,
say, for some special grandfathering situations.
But there are markets in some rural areas, largely out in
the West, where the markets are extremely large and where the
new spot beam technologies that the satellite carriers are
using do not cover the entire market. So you will have homes
within these very large DMAs served with spot beans where
local-into-local is offered on the spot beam, but it does not
reach all the homes.
Now, in those instances, should those homes that are not
served with the local-into-local service be permitted to import
a distant signal, and should we amend the statute to permit
that?
Ms. Peters. I am not sure what we said in the study, so, at
the moment, I am not sure. If I can get back to you--I think
the answer is yes, but let me get back to you.
Mr. Boucher. Okay. I will look forward to your response to
that.
And then finally, do you have any comment on whether or not
we should amend the statute to permit adjacent local signals to
be brought into DMA in instances where that DMA is short from a
network affiliate, so that the gap is filled, in essence not by
an imported network signal, but by a local signal imported from
the adjacent market for that missing affiliate?
And then, secondly, for markets that straddle state lines
where the television coverage originates out of state and is
serving people who live in another state in that DMA, should
the people who live in the state where the TV stations are not
located be able to get local signals imported from an adjacent
market in the state where they live?
Ms. Peters. I think the premise that we believe in is that
everybody should be able to get their local signals, and I
think we do cover that situation in our report. Yes.
Mr. Boucher. So just to take these one by one, with regard
to the short markets, today under the law you could bring in a
distant network signal. Do you think it would be better to let
a local television signal from an adjacent market to be brought
in to fill the gap in that instance?
Ms. Peters. Mr. Boucher, I am going to be honest and
basically say that I am not an expert in communications policy
and those kind of issues. We do have those people on my staff--
--
Mr. Boucher. Okay.
Ms. Peters [continuing]. So we would be happy to respond to
your question----
Mr. Boucher. Thank you. I realize the question----
Ms. Peters [continuing]. In an accurate way.
Mr. Boucher [continuing]. Is a little bit beyond the
purview of copyright.
Thank you very much. I appreciate your answers.
Ms. Peters. Okay. Thank you.
Mr. Boucher. Thank you, Mr. Chairman.
Mr. Conyers. You are welcome.
Before we go to vote, because Mr. Rehr, David, has been so
cooperative, I want to ask him has there been any
reconsideration of whether broadcasters should pay artists for
performance of their copyrighted works since you want everybody
else to get it. Thinking about it?
Mr. Rehr. Yes. No. Thank you, Mr. Chairman. I expected to
get that question today.
The performance fee which our member stations consider by
many to be a fee, a royalty, a tax really is not part of this
SHVERA discussion. The suggestion that NAB's opposition to
performance rights in sound recordings is inconsistent with its
support for the compulsory license in SHVERA notwithstanding.
Cable and satellite systems, unauthorized third-party
Internet retransmitters, and others seeking to exploit
broadcasters' signals are competitors to broadcasters for
programming, advertising, and for our viewers. In some
instances, these unauthorized retransmissions from distant
markets result in broadcasters having to compete against their
own programming.
By contrast, it is a different matter with radio. Radio
stations do not compete with record companies. Rather, radio
stations use the records, promotes their sale, a fact reflected
in industry practice, in some instances, of radio stations
being provided complimentary copies of records. Unlike the
recording industry, which provides its product for sale to
consumers, television programming has no retail market enhanced
by earlier broadcast play.
So, in essence, I think that there is a difference between
radio broadcasters and television broadcasters on this issue. I
know we are hoping to more fully explore this with you in the
upcoming weeks, and I look forward to it.
Mr. Conyers. I could not have you come before me without
tossing that out. You know that.
Mr. Rehr. I know that.
Mr. Conyers. All right.
We are going to have a vote on the rule, one vote. We will
be right back.
All right. Sheila Jackson Lee?
Ms. Jackson Lee. It will not be a question, Mr. Chairman. I
want to thank you for holding this hearing, and I am conflicted
because I am in between Homeland Security, but this is very
important to me.
What I would just leave on the table for a question to be
answered in writing is the importance of consistent
modernization in our reauthorization, why wouldn't that be the
right approach, that we reauthorize all of the facets together.
And then, secondly, how much of an expanded outreach would come
about through the modernization and putting the different
facets together?
So I hope that I can get an answer, and I will look forward
to working with you, Mr. Chairman, on the question you
previously asked.
Thank you. I yield back.
Mr. Conyers. Thank you.
Lady and gentlemen, because of the scheduling, we are going
to ask--if you are in agreement, we will submit the remainder
of the questions to you and free you up. I feel badly keeping
all of you here for a few more hours. So just count this as the
first opening salvo of a discussion that is probably going to
go a little bit longer into the spring. And I thank you all for
your attendance.
The Committee stands adjourned.
[Whereupon, at 12:09 p.m., the Committee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Committee on the Judiciary
Mr. Chairman, thank you for convening today's very important
hearing on copyright licensing in a digital age. This hearing will
examine competition, compensation, and the need to update the cable and
satellite TV licenses. The Committee on the Judiciary will conduct an
oversight hearing on the copyright compulsory licenses that govern the
``retransmission'' of broadcast television programming. Central to this
inquiry is consideration of the Satellite Home Viewer Extension and
Reauthorization Act (SHVERA), which contains provisions that are
scheduled to expire December 31, 2009.
SHVERA was enacted in 1988 and created a copyright compulsory
license for the benefit of the satellite industry to retransmit distant
television signals to its subscribers. The license, codified in section
119 of the Copyright Act, was originally intended to ensure the
availability of broadcast programming to satellite providers. This was
intended to assist the satellite industry which was then in its infancy
in the 1980s. As discussed above, Section 119 is about to expire in
December 2009.
The Committee is likely to consider both modernizing and
simplifying the statutory licenses governing the retransmission of
over-the-air broadcasting television stations, including sections 119
and 111 (for cable retransmission) and 122 (local-into-local) of the
Copyright Act.
Three of the most common methods consumers use to receive
television signals are broad cast, cable, and direct broadcast
satellite. Broadcast television is free to consumers. In the broadcast
context, consumers receive signals via over-the-air, either via rooftop
or ``rabbit ear'' antennas. Cable and direct broadcast satellite
compete in the multichannel video programming distribution marketplace.
In this situation, providers offer packages of video and sometimes
audio programming for a monthly subscription fee. These media tend to
offer consumers diversity of programming and better signals than over
the air broadcasting but they are costly. There is considerable
competition in this area and it is encouraged by Congress. Each
requires compulsory licenses. The purpose of these compulsory licenses
is to provide a mechanism for the retransmission of over-the-air
broadcast signals by cable and satellite operators without those
operators incurring the transaction costs associated with marketplace
negotiations for the carrying copyrighted programs. In exchange for
these licenses to perform copyrighted works, the users of the license
pay royalty fees at government regulated prices, which are distributed
by the Copyright Royalty Judges to the Copyright Owners.
Section 119 contains the satellite distant signal license and is
set to expire in December 2009. It lays out the terms and conditions
that govern the ability of satellite providers to retransmit distant
network and superstation programming. Recently, Section 119 was amended
to permit satellite providers to retransmit certain ``significantly
viewed'' stations from nearby local markets. This change was made to
form parity between broadcasts between satellite and cable providers
and to provide more viewing options for subscribers.
Section 111 allows a cable operator to retransmit both local and
distant radio and television signals to its subscribers. Today's
hearing will address whether these compulsory licenses have outlived
their utility, whether the licenses should be unified, and what should
be done to illegal subscribers, among other significant issues.
I am delighted to hear from today's witnesses. The witnesses are
distinguished and include: Marybeth Peters, Register of Copyright, Bob
Gabrielli, Sr. Vice President of DIRECTV, Kyle McSlarrow, President and
CEO of NCTA, Fritz Attaway, Vice President of the MPAA, Chris Murray,
Internet Counsel for Consumers Union, and David Rehr, President and CEO
of the NAB. I welcome today's witnesses and I look forward to their
testimony.
Thank you, and I yield the balance of my time.
Prepared Statement of Charles W. Ergen, Chairman and Chief Executive
Officer of DISH Network Corporation
The U.S. Copyright Office has provided this Committee with a
roadmap for updating the cable and satellite compulsory copyright
licenses to reflect the changing video landscape. We agree with the
Copyright Office that the digital age has arrived and the laws need to
catch up. I would like to highlight three issues from the 2008
Copyright Office Report:
First, the separate cable and satellite copyright regimes no
longer make sense. We compete for the same customers and should
have the same rules;
Second, many consumers cannot get local news and sports from
their home state because of the way local markets are defined;
and
Third, many rural communities are missing one or more of the
four major networks.
In addition, Congress should also address the interrelated issues
of retransmission consent and must-carry when updating the compulsory
copyright licenses this year.
With respect to the first issue, the Copyright Office recommended
folding the existing licenses into a unitary digital copyright license
to reflect changes in technology and place all providers on a level
playing field. We support that approach. Specifically, a unitary
license for all pay-TV providers would ensure that all consumers get
the services they need in a digital world, in a manner that is fair to
the copyright holders, broadcasters, cable, satellite, and new entrants
such as the telcos.
Absent a unified license, we agree with the Copyright Office that
there should at least be parity going forward between cable, satellite,
and telco regimes. Consumers should have the benefit of the same bundle
of rights under the law regardless of the pay-TV provider they select.
It should not be harder or more expensive for one pay-TV provider to
carry a local, significantly viewed, or nearby broadcaster than a rival
platform because of distinctions in copyright law.
With respect to the second issue, the Copyright Office also
recognizes the need for DMA reform and enhanced competition between
video providers.para.itizens living in DMAs that straddle state borders
are often denied access to news, weather, and election coverage from
their home state. This is an issue in 45 states.
Indeed, this has been a key constituent concern for many years.
During the last reauthorization, the stranded-county issue was
addressed for four specific DMAs. Importantly, these fixes helped
consumers and did not cause any actual harm to broadcasters. Building
off the hard work started in 2004, we recommend a more global DMA fix.
Specifically, a broadcast station from a neighboring DMA should be
treated as ``local'' for purposes of the copyright laws, particularly
if it furthers the concept of ``state unity.'' With this change,
citizens living in DMAs that straddle state borders would no longer be
prevented from receiving local news from their home state.
Third, we agree with the Copyright Office that all consumers should
have access to NBC, CBS, ABC and FOX programming. Today, DISH provides
local service in 178 markets, reaching 97 percent of households
nationwide. This translates into over 1400 local broadcast stations,
which is far more than any other pay-TV provider. In most of the
remaining markets, one or more of the big four networks is missing. If
a local community is missing a broadcast station, pay-TV providers
should be able to treat a nearby affiliate as the ``local'' affiliate
under copyright and communications law.
* * *
Finally, Congress should use this opportunity to examine
retransmission consent and must carry, given that those issues have
been tied to our compulsory license. Technology and competition have
come a long way in the past five years since the last reauthorization
of the Satellite Home Viewer Act. Today, there are multiple pay-TV
providers in every DMA. Broadcast stations electing retransmission
consent hold DISH customers hostage, as they play their local monopoly
off multiple providers to extract huge license fees. In 2008 alone,
consumers lost programming in approximately 15 percent of our markets
because of retransmission consent fee disputes. Yet the same
broadcasters provide their content for free on the Internet and to
those lucky enough to live within the shrinking areas of digital over-
the-air coverage.
Because the broadcasters received billions of dollars of spectrum
for free, we think retransmission consent should be free. Failing that,
we support the creation of a national retransmission consent rate.
Satellite providers already pay a fixed, per-subscriber copyright
royalty rate, and we see no reason why a similar concept would not work
for retransmission consent. Alternatively, we support the creation of
an actual market. If a broadcaster threatens to drop programming, pay-
TV providers should be able to go get a nearby affiliate to fill the
gap. Consumers should never have to wonder what happened to Sunday
Night Football.
With respect to must carry, we are forced to carry hundreds of must
carry stations that have little or no local content. This increases our
costs, and raises our prices to consumers at a time when consumers need
all the disposable income they can get. Must carry stations should be
required to earn carriage by airing 20 hours of local programming every
week. This would be beneficial to consumers and would have no harmful
effect on broadcasters that invest in their local market.
* * *
We are in the middle of a digital transition that is changing the
way people watch TV. It is pretty simple: people want to watch what
they want, when they want, where they want. The Copyright Office
recognizes that TV has changed fundamentally and concludes in its
report that incremental changes to outdated rules are not good enough.
We encourage you to build on the hard work of the Copyright Office and
act boldly on behalf of your constituents.
Prepared Statement of Mike Mountford, CEO,
National Programming Service
National Programming Service (NPS) submits this testimony for
inclusion in the record as part of the Subcommittee on Communications,
Technology, and the Internet's oversight hearing entitled
``Reauthorization of the Satellite Home Viewer Extension and
Reauthorization Act.''
introduction
NPS is a small business located in Indianapolis, IN that has been
serving the direct-to-home satellite industry for the past two decades
by offering satellite reception equipment, consumer electronics and
programming to customers through its website. Since 2006 NPS has been
offering DISH subscribers that qualify as unserved households distant
network signals. The company has approximately 108,000 subscribers
nationwide. That is the part of NPS' business that is the subject of
this hearing.
The Satellite Home Viewer Act and its subsequent reauthorizations
have been very successful in creating an alternative way for consumers
to receive multi-channel video programming. Initially, the Act's focus
was on rural and exurban households that utilized the big C-band
satellite dishes to receive multiple channels of television
programming. As technology has evolved the Act has been revised to keep
pace with the latest developments in satellite technology. The dish
sizes have gotten smaller, the technology has improved and all of these
benefits have been passed on to the satellite consumer.
Throughout the 20-plus year history of the Satellite Home Viewer
Act, however, one category of satellite subscriber has seen little
change. Satellite households that cannot receive a viewable picture of
their local network station continue to face barriers and limited
choices. Even in markets where local signals are available via
satellite, many households are unable to get their local signals
because of the limitations of the technology. As the nation converts to
all digital television programming there is a concern that the number
of households unable to receive a local network signal over-the-air may
actually increase. An examination of the Satellite Home Viewer Act
should include a discussion about changes to the law that could benefit
the unserved household.
satellite home viewer act: the need for change
Many of the changes to the Satellite Home Viewer Act over the last
20 years have benefited the broadcaster at the expense of the consumer.
As Congress considers legislation to reauthorize the Act it should be
mindful that there will continue to be households that must rely upon
distant network signals to access network programming.
Picture Quality Standard--Unserved households are disserved by the
law's current methodology for determining an acceptable television
signal. The Committee should take the opportunity to revise this
methodology to ensure that all consumers have access to a viewable
television picture. This is particularly important as the nation moves
to all digital television.
The law currently defines an acceptable television signal as 90% of
the time the consumer receives 60% of the picture. Understandably most
consumers are unhappy watching a signal with such low quality
transmission but at least with an analog signal it is possible to
follow the content being presented and to hear the audio accompanying
the pictures. Digital television will operate quite differently.
Applying this methodology for determining a viewable picture to digital
transmissions doesn't make sense. With a digital picture the signal is
either 100% on or the consumer sees nothing. A standard that accepts
only 60% of a picture as viewable will not be acceptable to most
television viewers. Nor will consumers stand for a picture that goes
out 10% of the time. With digital transmissions even very short
interruptions in the signal make it impossible to follow the content or
to hear the action. Congress should ensure that a viewable digital
picture is 100% of the signal 100% of the time with exceptions for
periodic interference.
Revise the Predictive Model--The predictive model now in use to
qualify subscribers for distant network signals is based on the analog
signal contour of each television station. To be relevant for digital
transmissions, the predictive model must be based on the new digital
contours of broadcast stations. The model should also take into account
all of the anomalies and differences that occur between the two
different types of transmissions. While the predictive model has been
extremely helpful in ensuring that only those consumers who are truly
unserved receive access to distant network signals, the current fails
to recognize that by its nature the model is only a prediction of
whether a particular household should be able to receive an over-the-
air signal. It is not 100% accurate. When the predictive model is
wrong, the current law provides consumers with a difficult path to
overcome the presumption that the consumer gets a viewable picture.
Signal Testing Requirement--The requirement that consumers get a
signal strength test at their home has not worked in the past and
should be eliminated. While it makes sense in theory, the reality is
that this provision is never used. The high costs of the tests and the
difficulty in finding someone to perform the tests have resulted in the
consumers not using this provision.
The Waiver Process--The current system of consumers' obtaining
waivers from their local broadcasters if they want to receive a distant
network signal has not worked. NPS hears from frustrated subscribers
every day who have attempted to get a waiver from their local
broadcaster with no success. While some broadcasters are diligent in
evaluating waiver requests, hundreds of broadcasters either reject them
outright or worse--they don't even respond to the customer. Waivers
haven't worked in the past and they won't work in the future if they
are structured as they have been under the present Act.
The waiver provisions of the Act are in need of revamping. The
burden under the current law is on the consumer to prove that they are
unable to receive a viewable picture. NPS's experience shows that
consumers want access to their local broadcast stations. They view
distant network signals as a last resort to obtain access to network
programming. Unserved households, eligible to receive distant network
signals make up a small percentage of the total satellite television
households. For this reason NPS believes the burden should be shift to
the broadcaster to prove that the consumer is receiving a viewable
signal. The broadcaster is in a better position to know the where the
signal goes and where it doesn't.
NPS supports changing the law so that a consumer can sign a legal
affidavit that declares the inability to receive a network signal. This
affidavit would be sent to the satellite carrier. The consumer would be
authorized to receive the signal. The affidavit would be filed and
forwarded to the broadcaster. The broadcaster would have the option of
challenging the affidavit and if successful there could be a fine and
legal costs could be recovered by the broadcaster from the consumer.
This is essentially the current process that is used to qualify owners
of recreational vehicles to receive distant network signals. NPS is
unaware of any abuse of process or unaware of any charges that
consumers have falsified data on the affidavits.
distant signal limitations
The world today is much different than it was when the Satellite
Home Viewer Act was first enacted. Consumers have more access to
content than before from a variety of sources. Today consumers can
access television programming remotely through a Sling Box. You can be
at any place in the world and watch local television with a broadband
connection and the Sling Box. Networks are streaming much of their
content over the Internet. With a computer and an Internet connection
consumers can access local news programming as well as network
programming from a variety of free and subscription sources. The
digital video recorder allows consumers the flexibility and convenience
to watch television programming when they want rather and studies show
consumers are watching more television as a result.
Americans expect to have access to information and do not
understand when that access is denied them. If you live in Washington,
DC you can subscribe to the New York Times or the Chicago Tribune but
you can't watch a Chicago or New York local network station. Our
democratic society depends upon an informed electorate. Government
policies have been designed to create more access to information not
less. Rights holders should be compensated for the increased
distribution of their works and as we have seen in other industries,
such as radio and music licensing, there are schemes that facilitate
payment and ensure adequate compensation.
Lifting the distant signal limitations would afford consumers' the
same opportunity to access television programming that they currently
enjoy for other sources of news and information like newspapers and
radio. Opening the skies to consumers is an important improvement for
consumers, especially consumers on a limited budget, that is justified
given the way that technology is changing the way consumers access
information. While some may resist that change, as we have learned from
the past, technology ultimately will win. Congress should use the
reauthorization of the Satellite Home Viewer Act to make fundamental
changes to law to benefit the consumer.
conclusion
The Satellite Home Viewer Act's provisions authorizing the
retransmission of network signals to households otherwise unable to
obtain access to a local broadcast network signal have ensured that
hundreds of thousands of homes can watch network television
programming. The need for this provision continues today despite the
many technological advances that have given most consumers more choices
in how they receive television programming. Congress should use the
reauthorization process to make needed pro-consumer improvements in the
Act such as eliminating the signal testing requirement, creating an
accurate digital predictive model and shifting the burden of proof in
the waiver process. Satellite households that cannot receive local
over-the-air television signals should not be penalized but rather the
government should assist these consumers by making the process of
obtaining distant network signals less burdensome.