HEARING OF THE SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE
SUBJECT: "REAUTHORIZATION OF SATELLITE HOME VIEWER EXTENSION AND REAUTHORIZATION ACT"
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REP. BOUCHER: (Sounds gavel.) The subcommittee will come to order.
On the occasion of the first meeting this year of this subcommittee, I want to welcome all of the members of the subcommittee, and encourage each member to share with me your ideas for matters that we should place on the subcommittee's agenda.
It's my determination that the subcommittee will operate in a completely bipartisan fashion, and I intend to consult colleagues on both sides of the aisle about each matter that the subcommittee will address. So please give me the benefit of what you would like for the subcommittee to achieve and share those suggestions with me over the coming several weeks.
The full agenda for the subcommittee is still under construction, but I can announce this morning that the next hearing for the subcommittee will be on March the 12th, during which we will begin our work on universal service reform. And that is a subject on which I hope that we can report legislation to the full committee during the coming months. After the hearing on March the 12th, the pace for having hearings for the subcommittee will accelerate.
The subcommittee has a long-standing tradition of bipartisanship, and over two decades I have enjoyed an ongoing partnership across a range of issues with the ranking Republican member of the subcommittee, the gentleman from Florida, Mr. Stearns. We have been the lead sponsors of privacy legislation in past years, and in this Congress we may well consider bringing that issue forward again, as well as other matters relating to information-technology policy.
And so, this morning, as I make general opening comments, I want to say that I very much welcome the position of Mr. Stearns as the ranking Republican on this subcommittee, given the long experience in technology related issues that he brings to this work and to that position. And I very much look forward to our work together, as I do with all members of the subcommittee on both sides of the aisle.
Today, the subcommittee takes the first step in reauthorizing the Satellite Home Viewer Act, which sets forth the terms pursuant to which satellite carriers retransmit distant signal broadcast programming. Certain provisions of the Communications and Copyright Acts expire at the end of 2009, making reauthorization of the Home Satellite Viewer Act and that compulsory license must-pass legislation during the course of this year.
This year marks more than two decades since Congress created the distant signal compulsory copyright license in 1988, and 10 years since it created the local-into-local compulsory license in the 1999 Satellite Home Viewer Improvement Act. Since 1988, direct broadcast satellite has grown to be a robust competitor to cable. Today, nearly one-third of all homes subscribing to a multi-channel video programming service choose a DBS provider, and DirecTV and EchoStar are the second- and third-largest multi-channel video programming service providers in the nation, respectively. This increase in a competitive video programming marketplace would not have been possible had it not been for a series of acts of this Congress, including the two licenses to which I previously referred, as well as the program access rules that were adopted in the early 1990s.
Let me state at the outset my desire that Congress proceed with the reauthorization before us in the most straightforward manner possible. I do not wish for us to get sidetracked by collateral issues, such as retransmission consent reform, that are relevant to all multi-channel video platforms, not just to satellite platforms.
However, there are several matters that I think we cannot avoid discussing in the hearing today and as we continue our work on this reauthorization. One is whether satellite carriers should provide local service in all 210 designated market areas nationwide as a condition of relying on the Section 122 local-into-local compulsory license. As I mentioned earlier, the Section 122 license was created 10 years ago. At that time, due primarily to the severe capacity constraints that were faced by satellite carriers in part because spot-beam technology had not been at that time widely deployed, Congress allowed satellite carriers to roll out local service on a market-by-market basis. Today, most of the country is served with local-into-local service. Today, DirecTV relies on that Section 122 license to offer local service in 150 markets, and EchoStar provides local service in 178 markets. But about 30 markets among the 210 nationwide do not have local-into-local coverage at all.
Most of the DMAs that lack local-into-local service are in rural areas such as the congressional district that I represent, and in fact, constituents in one of the four DMAs that comprise my congressional district still cannot get their local stations by way of satellite, a fact with which I am reacquainted on a regular basis as constituents in that area complain to me vocally whenever I'm in that region about their inability to get local signals delivered by satellite.
While I understand that the numbers of subscribers in these areas are small, these households, which often cannot receive local signals over the air because the DMAs in which they reside are large or because of terrain issues -- many of these regions are also mountainous -- these individuals are very vocal in their desire to receive the opportunities that those in more densely populated portions of the nation presently have.
Another matter for discussion is whether residents in one DMA should be able to receive broadcast programming from an adjacent DMA. DMAs in 45 states straddle state lines, which means that residents in one state are assigned to a DMA that is primarily located in a neighboring state. For many in that kind of situation, the local news, sports and public safety information they receive from the stations in their assigned DMA actually derive from another state and/or are more concentrated on events that occur in that other state. And so one possible arrangement might be to allow for the provision of adjacent market signals in those situations, with the people in the state that has a minority of the viewers in that straddle situation being able to subscribe to the adjacent market signals of the adjacent market within the state in which those individuals live.
In past year, the law -- past years, the law has been modified to allow adjacent market signal retransmission in certain specified markets.
Today, we begin a discussion about the potential of enacting a general rule on adjacent market signals for situations where the DMAs straddle state lines, about 45 markets in total across the country.
The Energy and Commerce Committee and the House Judiciary Committee share jurisdiction over the Home Satellite Viewer Act, and as a member of both of those committees, it's my desire that the subcommittees work closely together and create a common text which both committees can then process. In fact, the Judiciary Committee has its first hearing tomorrow morning on this subject, and we are already in discussions -- senior staff to senior staff -- about the kinds of coordination we can achieve in the work between these two committees
I want to welcome our witnesses this morning, and I want to thank each of them for taking the time to share their thoughtful comments with us. The prepared testimony is excellent. We appreciate you providing that. And after we've had an opportunity for other members to make their statements, we will turn to your testimony.
In accordance with the rules of the committee, any member who decides to waive an opening statement will have two minutes added to the time that member can propound questions to our witnesses this morning.
It's my pleasure now to recognize the ranking Republican member of our subcommittee, about whom I've already made some welcoming remarks, the gentleman from Florida, Mr. Stearns.
REP. CLIFF STEARNS (R-FL): Good morning, and thank you very much, Mr. Chairman, for having this hearing.
Obviously, we're all excited. Let me congratulate you on becoming the new chairman of this very important committee. It's -- as you pointed out, has had a long history of bipartisanship. So I look forward to working with you. You have the capability, you have the interest and the passion for telecommunications and Internet. So you and I have worked together on other things, and so I look forward to this great opportunity to work again with you on this important committee.
Obviously, we live in exciting times. Advances in broadband technology, health care, and how we produce and distribute electricity will spur long-term economic growth, increase international competitiveness, and improve the quality of life for all of Americans. Frankly, we're only limited by our imagination.
The topic of today's hearing, the Satellite Home Viewers Act, simply allows satellite companies to deliver broadcast television signals. The act should be updated and made more consumer-friendly. Its antiquated provisions are frustrating television viewers. At a minimum, we should revise the law to reflect the end of analog broadcasting, as well as to allow willing satellite operators and broadcasters to offer in-state signals to households whose local markets include only out-of-state stations. We should resist calls to expand the carry-one-carry-all requirements governing satellite delivery of local broadcast stations. Doing so would not only be bad policy, it would be unconstitutional.
My colleagues, over the past 20 years, technology has progressed beyond what most of us have ever or could imagine. Twenty years ago, the Internet was used as a mere fraction of what it is today. There are other signs of how much things have changed. For example, let me just give you this little statistic: in the United States today, more people earn their living on eBay than are employed by the entire steel industry.
Furthermore, in 1989 all of us remember the Tandy 5000. It was billed as the most powerful computer ever built. It had a lightning- fast 20-megahertz processor and a whopping two megabytes of RAM. All of this cutting-edge technology cost you almost $9,000; monitor and mouse were not included. Now, if you take and make that in today's dollars, that would be equivalent to $15,000. So we have seen how things have changed so dramatically.
This brings us to the subject of today's hearing. I'm looking forward to this committee moving forward on the Satellite Home Viewer Act reauthorization. This act has served multiple times to advance competition and, frankly, to give consumers more choices. I anticipate exploring market-based avenues for satellite providers to continue adding even more local stations, because all of us know local content is essential and the customers desire it.
I would add, though, I'm concerned about some interest in requirements that satellite TV providers serve all 210 media markets. Now, such an initiative not only challenges the laws of physics, but also challenges how one is able to go to the capital and credit markets to achieve and accomplish this goal. A better approach, I believe, is to make smaller markets more attractive by allowing them to be carried as an adjacent local market in addition to the market that Nielsen determines that you live in. That's a rational way to incentitize (sic) more carriage, and one that doesn't even go as far as the Internet-distribution model that the broadcast networks are already presently implementing.
The video marketplace has never been more competitive. In the past, cable was the only pay-TV option. Fifteen years ago, cable had 95 percent of the pay-TV market. Now that share has dropped to 68 percent. More than 32 million consumers now subscribe to a service other than cable. After Comcast, the second- and third-largest pay-TV providers are DirecTV and Dish Network. Phone companies are aggressively stealing subscribers with their video offerings. In fact, both AT&T and Verizon would rank in the top 10 of largest pay-TV providers today. Furthermore, local and national programmers alike are offering content to consumers over the Internet, either on websites for free or simply through services such as iTunes.
So as you can see, Mr. Chairman, consumers have a number of choices, and this competition will lead to new products and to new, better services. We no longer have the justification to deny America's households access to the programming of their choice, subject only to free-market negotiations by distributors and the content owners. Indeed, we should be reducing video regulation in this competitive environment, not increasing it. We need to innovate, not regulate.
So I look forward to the hearing, Mr. Chairman. And I look forward, again, with working with you on these important matters. Thank you.
REP. BOUCHER: Thank you very much, Mr. Stearns.
The gentleman from California, Mr. Waxman, chairman of the full Energy and Commerce Committee, is recognized for five minutes.
REP. HENRY WAXMAN (D-CA): Thank you very much, Mr. Chairman.
Today's hearing marks the first step of the 111th Congress towards its required reauthorization of the Satellite Home Viewer Extension and Reauthorization Act, known as SHVERA. Today is also the first hearing of the newly constituted Subcommittee on Communications, Technology and the Internet. The subcommittee has a new name, a new chairman, and some new members, and I'd like to congratulate Mr. Boucher on his chairmanship and welcome the new members to the subcommittee.
Mr. Boucher has a long history of service on this subcommittee and an exceptional command of telecommunications issues. And I look forward to working closely with him and Ranking Member Cliff Steams, and relying on their expertise as we consider the reauthorization.
SHVERA is a complicated bill. It grew out of competing policy goals: promoting competition for pay-television service and protecting our nationwide system of free over-the- air broadcast television. Achieving these competing goals, especially during a time of dramatic change in the communications marketplace, requires a careful balancing of interests. And the panel before us today represents a diverse group of stakeholders, so we're all anxious to hear their testimony. And we very much appreciate their participation.
Thank you very much, Mr. Chairman, for this opportunity to say a few remarks, and to express my desire to work with you and other members of this committee as we fashion this legislation.
REP. BOUCHER: Thank you very much, Chairman Waxman. And I appreciate your kind words and look forward very much to working with you as well.
The gentleman from Illinois, Mr. Shimkus, is recognized for two minutes.
REP. JOHN SHIMKUS (R-IL): Thank you, Mr. Chairman.
And I, too, am excited about your chairmanship of this committee. And let me just say, if you can have some hearings and regular order, you may be able to set the example for the rest of this Congress. So I'm applauding your attempt to do that.
Let me also report on the digital transition. Many of my broadcasters have turned off their analog signal, which I applaud, and we've heard very few complaints. In fact, I think my D.C. office got one call; I know one broadcaster may have had 40 calls, and that was just to set the scan button on the digital receiver. So it's -- I'm very excited to report that.
Yesterday, I was on a major St. Louis morning talk show. And the host there, a guy named McGraw Milhaven (ph), and I have had a 10- year relationship. And it started with the debate of SHVERA, which -- he was really a late-night guy, I think 1:00 in the morning, and had followed local -- and the local debate, was pleased with our passage, saw the benefits, and we've been friends ever since. So I mentioned it to him yesterday that I was going back to Washington to start the debate on reauthorization.
Which brings me to the aspect of reauthorization. We know it ties in with the digital transition and analog. There has to be some changes because of that technology. But I would also just caution us that we -- we be careful not to harm the multiple options that consumers have today. It is truly a phenomenon of all the ability to view and compete and receive signals from a multitude of area. It's very important in my congressional district that we have the local- into-local for the public safety debate. But again, I would just caution is that we move diligently. And with your promise to have hearings and move through regular order, I think that's the way in which we address the minute details of bills which could be very, very harmful.
And I thank you, and I yield back my time.
REP. BOUCHER: Thank you very much, Mr. Shimkus.
The gentlelady from California, Ms. Eshoo, is recognized for two minutes.
REP. ANNA ESHOO (D-CA): Thank you, Mr. Chairman.
First of all, my congratulations to you on assuming the chairmanship and the gavel of this really wonderful and important subcommittee. I've always enjoyed your insights, and I respect them, relative to technology and telecommunications issues, and I look forward to working with you and all of my colleagues on this subcommittee. I'm very pleased that we're starting out the discussion of this reauthorization early, so that we can flesh out all the issues surrounding it.
The week before last, many members were visited by their local public television stations. They expressed their concern that access to local public television stations' digital programming is denied to almost half of all direct broadcast satellite households. That's nearly 12 million households in our country, because one major DBS provider has failed to negotiate a long-term deal with public television.
I'm reintroducing legislation in this Congress, as I did in the last -- the Satellite Consumers Access to Public Television Digital Programming Act -- it's a mouthful -- to require DBS carriage of all public television stations' multicast digital stations. I'm very pleased that DirecTV, the Association for Public Television Stations and PBS announced that they reached an agreement whereby DirecTV would carry public television stations' digital signals. I think it's unacceptable for any household to be denied access to public television's digital programming.
So I'm looking forward to questioning the witnesses, certainly Dish Network. And I appreciate meeting Mr. Ergen this morning. I think the bill would be unnecessary if they would just come to a similar agreement as their competitor.
So thank you, Mr. Chairman, again, and congratulations. And look forward to a very full 111th Congress, where we will really distinguish ourselves on behalf of our constituents.
REP. BOUCHER: Thank you very much, Ms. Eshoo.
The ranking Republican member of the full Energy and Commerce Committee, the gentleman from Texas, Mr. Barton, is recognized for five minutes.
REP. JOE BARTON (R-TX): Mr. Chairman, I won't take too long. I appreciate you doing this hearing. I think we do need to reauthorize the Satellite Home Viewer Extension and Reauthorization legislation. And I think this may be an issue that we can work together on. So I'm supportive and look forward to hearing from the witnesses.
REP. BOUCHER: All happy thoughts.
REP. BARTON: Good.
REP. BOUCHER: Thank you very much, Mr. Barton.
The gentleman from Michigan, Mr. Stupak, is recognized for two minutes.
REP. BART STUPAK (D-MI): Thank you, Mr. Chairman. Congratulations being chairman of this committee. I want to waive my time and use it for questioning.
REP. BOUCHER: The gentleman from Michigan waives his opening statement.
The gentlelady from Colorado, Ms. DeGette, is recognized for two minutes. She's not here, is she?
The gentlelady from the Virgin Islands, Ms. Christensen, is recognized for two minutes.
DEL. DONNA CHRISTENSEN (D-Virgin Islands): Thank you, Mr. Chairman. I'll waive my opening statement.
REP. BOUCHER: Ms. Christensen waives her opening statement.
The gentleman from Ohio, Mr. Space, is recognized for two minutes.
REP. ZACK SPACE (D-OH): Thank you, Mr. Chairman.
I represent the 18th Congressional District in Ohio, a district that spans 16 counties and covers almost a fifth of the state's geographic area. This district is composed of small towns and villages in rural areas, and lies in the hills of Appalachia. Our largest town and throughout the district is Zanesville, Ohio, with about 25,000 people. And perhaps of most interest, pertaining to today's hearing, Ohio's 18th Congressional District encompasses five designated market areas. The Columbus market covers the majority of our counties, but in the north we pick up Cleveland and Akron, in the south two of my counties are actually part of the Charleston/Huntington, West Virginia market. In the east, two more of my counties are in the Wheeling/Steubenville market, and finally Muskingum County is the sole country comprising the Zanesville market.
This scenario makes the reauthorization of the Satellite Home Viewer Act of particular relevance to me and my constituents. I'm looking forward to working with the subcommittee to address the complicated issues, many of which you mentioned in your opening statement Mr. Chairman, that we'll be talking about further today, and specifically the local-into-local component of the legislation, as the Wheeling/Steubenville market is one of a few dozen -- I think 30 -- DMAs without local-into-local service.
Thank you, Mr. Chairman.
REP. BOUCHER: Thank you very much, Mr. Space.
The gentleman from Georgia, Mr. Deal, is recognized -- oh, I'm sorry. The gentleman from Oregon, Mr. Walden, is recognized for two minutes.
REP. GREG WALDEN (R-OR): Thank you, Mr. Chairman. And I appreciate your having this hearing.
I'll apologize up front; we also have an Energy hearing going on at the same time, so I'm going to have to bounce back and forth.
At the outset, Mr. Chairman, I'd like unanimous consent to insert into the record a(n) opening statement from our colleague from Wyoming, Ms. Lummis --
REP. BOUCHER: Without objection.
REP. WALDEN: -- that she would like in there regarding satellite issues.
And I would concur with my colleague from Illinois, Mr. Shimkus. Two of the markets that serve my district also converted to digital, although one station in each market remained analog because of their corporate ownership decisions. We didn't have a single phone call in my office about that conversion, and yes we are listed in the phone book. The managers of the stations, whom I spoke to repeatedly -- in fact, I was in one of the markets when it occurred -- they had a couple hundred phone calls. Predominantly it was about plugging in the box, rescanning the channels, and that was it. And so I hope in the -- in the very near future, Mr. Chairman, we might have a(n) oversight hearing on this issue, because I'm not convinced that we need to spend ($)90 million on community organizers and another ($)650 million on converter boxes. It appears, in markets where the conversion's taken place, it's done so rather seamlessly and with little problem.
In terms of this legislation, I look forward to working with you on the reauthorization of the Satellite Home Viewer Act. I know that I'm not alone in concern out in the country about the local-into-local issue. It seems like when you represent a rural district with rural communities, you're always sort of the last one considered. And I've got areas, for example in Bend, Oregon, that still have not been able to get local-into-local. This is not a subject that you all are unaware of, certainly, but it's one that I feel pretty strongly about. And so I hope you'll be able to address that in your comments or at some point in this legislation because I don't -- it seems to me whether you live in New York or Bend, Oregon or Medford, Oregon, when it comes to federal law you ought to be treated the same.
And so, Mr. Chairman, I look forward to working with you on this, and I yield back.
REP. BOUCHER: Thank you very much, Mr. Walden.
The gentlelady from Colorado, Ms. DeGette, is recognized for two minutes.
REP. DIANA DEGETTE (D-CO): Thank you, Mr. Chairman. Mr. Chairman, I'll waive my opening statement in favor of extra time during questions.
But I do want to mention that, underscoring the fact that Colorado is ground zero for -- for telecommunications, I have two constituents on this panel who I would like to welcome: Charlie Ergen, who will be testifying for Dish Network; and (Wick ?) Rowland, who will be testifying on behalf of public TV. He's the CEO of Colorado Public Television.
Thank you, Mr. Chairman.
REP. BOUCHER: Thank you very much.
REP. REP. DEGETTE: And welcome to both of our witnesses.
REP. BOUCHER: Thank you very much, Ms. DeGette. Two minutes will be added to your questioning time.
The gentleman from Louisiana, Mr. Melancon, is recognized for two minutes.
REP. CHARLIE MELANCON (D-LA): Thank you, Mr. Chairman. I'd wish to waive my opening statement.
REP. BOUCHER: Mr. Melancon waives his opening statement.
The gentlelady from Flordia, Ms. Castor, is recognized for two minutes.
REP. KATHY CASTOR (D-FL): Thank you very much, Mr. Chairman. I'll waive.
REP. BOUCHER: Ms. Castor waives her opening statement.
The gentlelady from California, Ms. Matsui, is recognized for two minutes.
REP. DORIS MATSUI (D-CA): Thank you, Mr. Chairman. And I also would like to congratulate you on assuming this chairmanship of this wonderful committee, and I look forward to working with you.
I would also like to thank today's panelists for sharing their expertise on this very complex issue. We're here today to begin the process to reauthorize the Satellite Home Viewer Expansion -- Extension and Reauthorization Act, which is set to expire on December 31st at the end of this year. In the past, Congress has tried to ensure that as many households as possible have access to local television programming while expanding competition and consumer choice in programming and service providers. As we move forward, we should continue to advance these principles. In today's marketplace, we should encourage carriers to provide local television stations and news broadcasts to more and more customers. It is particularly important that consumers have access to local emergency broadcasts.
Unfortunately, California is home to many natural disasters, such as earthquakes, flooding and wildfires. Consumers need access to local emergency information when such events occur. I look forward to hearing from each of today's witnesses about how we can advance solutions that are effective and efficient.
Thank you again for your leadership on this issue, Mr. Chairman. I yield back the balance of my time.
REP. BOUCHER: Thank you very much, Ms. Matsui.
The gentleman from Georgia, Mr. Deal, is recognized for two minutes.
REP. NATHAN DEAL (R-GA): Thank you, and I add my congratulations to you on your chairmanship.
And I also welcome the witnesses and thank them for their attendance today.
Glad we're considering the reauthorization of the Satellite Home Viewers Act because it brings into focus one of the issues that's concerned me for a very long time, and that is the lack of true consumer choice in television viewing. As we all know, because DMAs -- designated market areas -- cut across state lines, hundreds of thousands of television households have little or no access to broadcast TV stations from their own state, and therefore have very limited access to their state news, elections, government and weather programming. And likewise, individuals who may live across a state or a DMA line but are part of a community on the other side of the line cannot receive the programming that matters to them. And as we've heard already today in these opening statements, this is a common concern that many of my colleagues share.
Now, I understand the reasoning behind the drawing of the DMA maps, but it seems to me to be an archaic system. Depending on who you ask, broadcast TV viewers make up around 10 to 15 percent of the total viewing audience. It seems odd that the other 85 to 90 percent of the television viewing audience is constrained by a system that is based on the viewing habits of a fraction of that 15 percent. Now, I understand the desire of broadcasters to control the distribution of their programming, but it seems rather absurd to me that in this day and age, that consumers who are willing to pay are still prevented from watching the content that they desire. The free market has allowed technology to meet consumer demand, content in many ways outside of the world of cable, satellite and broadcast TV. We should strive to foster a framework that allows the free market to meet consumer demands in an equally efficient way for television viewers, and I hope that this hearing will be a step in that direction.
I yield back the balance of my time.
REP. BOUCHER: Thank you very much, Mr. Deal.
The gentleman from New York, Mr. Weiner, is recognized for two minutes.
REP. ANTHONY D. WEINER (D-NY): Waive my opening statement except to offer my congratulations to you, Mr. Chairman.
REP. BOUCHER: Thank you very much, Mr. Weiner. And we certainly welcome you as the new vice chairman of this subcommittee as well.
The gentleman from California, Mr. McNerney, is recognized for two minutes.
REP. JERRY MCNERNEY (D-CA): Thank you, Mr. Chairman. I want to offer my congratulations for assuming the chairmanship of this exciting committee.
As a person with a technical background, I'm looking forward to learning about this issue from experts such as yourselves. And this is a -- this is exciting, it's a dynamic, and it's a critically important area. So I'm looking forward to contributing to our national policy in this -- in this area.
Thank you very much.
REP. BOUCHER: Thank you, Mr. McNerney.
The gentleman from Nebraska, Mr. Terry, is recognized for two minutes.
REP. LEE TERRY (R-NE): Thank you, Mr. Chairman. Appreciate that.
And frankly, I want to start off by saying congratulations and I'm pleased that you are chairman. And you have a depth of knowledge and universal respect within the telecom community. So I really appreciate you accepting that role.
Digital conversion, I want to hear from you how that's going to impact or whether there should be policies we need to incorporate in this reauthorization. Like Mr. Shimkus, I have two stations out of five that converted on the 17th. Between station calls and then in Nebraska set up our 211 to receive calls, there is something around 550 calls. Like Mr. Shimkus mentioned, probably well over 50 percent was helping people with their setup in the sense of learning how to scroll through or setting up the -- I'm just drawing a blank on the word right now -- but easily resolved. And frankly, only about 10 were calls about "I don't have a box and I don't have a coupon." What we did is pooled coupons before, so every one of those people received a coupon and a box that same day. So we were able to resolve every issue on the conversion.
But I also, as I mentioned, want to hear how it impacts especially at the digital signal, and if there's still problems with the local broadcasters or is that being resolved with local-into- local. And look forward to your testimony, and thank you all for being here.
REP. BOUCHER: Thank you. Thank you very much, Mr. Terry.
The gentleman from Arkansas, Mr. Ross, is recognized for two minutes.
REP. MIKE ROSS (D-AR): Thank you, Chairman Boucher, for holding this hearing and for allowing me, as a member of the full committee but not this subcommittee, to be here and to participate and to raise an issue that is extremely important to so many of our constituents.
Across our nation, many satellite and cable subscribers cannot receive the local channels of their home state because the current law specifies that stations be transmitted primarily within their designated market area, or DMA. However, these boundaries, assigned by the Nielsen Media Research Company, were designated 50 years ago, and many of these DMA boundaries -- up to 47 percent by some estimates -- cross state lines. This leaves millions of subscribers watching the local news, weather and sports of their neighboring state and missing vital weather information about -- and other information about the state in which they live, work, and, may I add, pay taxes. We are essentially using 1950 laws to deliver 21st-century technology.
In the 110th Congress, I introduced legislation to remedy this problem, and I am currently drafting new legislation that will update our law and bring it into the 21st century by giving consumers access to their local channels. But let me be clear: I am not proposing to change the DMAs. I simply want to allow those who are receiving the local channels of a neighboring state the choice -- the choice -- to also receive local channels from their home state. Satellite and cable subscribers should not be denied the freedom -- the freedom -- to choose stations from their home state simply because of an outdated law, and I am hopeful that we can work together to provide all subscribers more choice and greater local content. I am also hopeful that the witnesses today will specifically address this issue in their comments, and I look forward to working with the committee and you, Mr. Chairman, to remedy this problem in this year's reauthorization.
Thank you again for allowing me to be here, and I yield back the balance of my time.
REP. BOUCHER: Thank you very much, Mr. Ross.
The gentlelady from Tennessee, Ms. Blackburn, is recognized for two minutes.
REP. MARSHA BLACKBURN (R-TN): Thank you, Mr. Chairman. And I add my congratulations to you.
I want to welcome our panelists and the return of some of our panelists, who are here to talk with us today on the issues that we've got in front of us. We've heard some of the problems that we are existing -- that we have existing with accessing local programming, so I'll submit my full statement, just add a couple of comments on this.
In Tennessee, my constituents in the metropolitan areas are well- served. There is no problem with accessing and having choices in expanded service. And Mr. Ferree, I like the way you illustratively pointed that out in your written testimony, and we thank you for that.
Let me mention, though, as some of my colleagues have, in our rural and underserved areas -- I've got two counties, Hardin and Henderson Counties, and there the citizens cannot receive the subscription video service from traditional cable programmers, and they're limited to a weak or nonexistent broadcast signal as we are making the digital switch. But you know, the DBS, the satellite service providers, they're the only game in town for some, and they don't extend the local programming option for a variety of factors, whether it is policy or market-driven factors.
But this is something that we are going to need to address. These constituents of ours are frustrated. We understand this. I share that frustration with them.
I also see it as an issue of safety, and this is one that I don't think my colleagues have raised yet today, so I will. We had a tornado last year, 30 dead, 150 that were injured. We know that local programming is important. We want to work with you as we look at reauthorization and see how we best address this issue. It is one of convenience and enjoyment, but it is also one of safety. So we do want to hear from you on this.
Thank you, Mr. Chairman, and I yield back.
REP. BOUCHER: Thank you very much, Ms. Blackburn.
The gentleman from Massachusetts, Mr. Markey, former chairman of this subcommittee, is recognized for two minutes.
REP. ED MARKEY (D-MA): Thank you, Mr. Chairman. I am chairing a hearing on energy upstairs, as the former chairman of the Energy Subcommittee.
A decade ago, Mr. Chairman, I successfully offered the local-to- local amendment that made it possible for direct broadcast satellite companies to offer consumers their local broadcast channels as part of a seamless satellite video service offering. This new legal ability dramatically increased the competitive prospects for the DBS companies against incumbent cable operators.
The rise in subscribership to satellite service in urban and suburban America as a result of my local-to-local amendment had another beneficial consequence: it induced cable operators to invest heavily in greater bandwidth for additional channel capacity, enhanced picture quality, and to offer broadband and voice services in a headlong effort to distinguish its services in competition with DBS satellite.
The point is that even if consumers stuck with their local friendly cable operator, such consumers have also benefited from the satellite competition this subcommittee fostered.
In previous legislative consideration of these issues, questions have been raised about out-of-market signal carriage of broadcast signals, as well as the applicability of syndicated exclusivity, sports blackout, and network non-duplication rules that were adopted originally decades ago to protect the interests of free over-the-air broadcasters and the viability of their services. As the march of digital technology moves inexorably forward, it is appropriate to once again examine all of these issues so that our laws and regulations not only keep pace with changes in technology, but so that we may reassert policy support for the long-held communications values of localism and diversity in a manner that embraces competition and innovation. The consumer ultimately should be the beneficiary of the policies we advance.
I want to commend you, Chairman Boucher, for calling this important hearing this morning and the excellent panel of witnesses that I see down here. It's like hall of fame weekend -- (laughter) -- as I look down: Mr. Ergen, Mr. Franks, Mr. Gabrielli, all of them who have helped us so much over the years in framing our policy.
I yield back the balance.
REP. BOUCHER: Thank you very much, Mr. Markey.
The gentleman from Connecticut, Mr. Murphy, is recognized for two minutes.
REP. CHRISTOPHER MURPHY (D-CT): Thank you very much, Mr. Chairman. I look forward to the testimony, and I will submit my statement for the record.
REP. BOUCHER: Okay. The gentleman waives his opening statement.
The chair asks unanimous consent for two matters: first, that a written statement prepared by the National Programming Service, which distributes distant network signals to the subscribers of the Dish Network, be submitted for the record -- without objection, so ordered -- and also that all members of this subcommittee may submit their prepared written statements for the record -- and without objection, so ordered.
We now turn to our panel of witnesses. And just as the gentleman from Massachusetts has welcomed our witnesses, I want to do the same and note that they have worked with us cooperatively and very constructively for a number of years as we have adopted the Home Satellite Viewer Act, the Home Satellite Viewer Improvement Act with its local-into-local opportunities, and now as we reauthorize the Home Satellite Viewer Act are with us again. So they are old hands at the subject matter, and we very much welcome them here this morning.
Mr. Charles Ergen is the chairman, president and chief executive officer of Dish Network Corporation.
Mr. Martin Franks is executive vice president of policy, planning and government relations for the CBS Corporation.
Mr. Bob Gabrielli is the senior vice president for broadcasting operations and distribution for DirecTV.
Mr. Willard Rowland is the president and chief executive officer of Colorado Public Television. He testifies today on behalf of the Association of Public Television Stations.
Mr. James Yager is the chief executive officer of Barrington Broadcasting Group. He testifies on behalf of the National Association of Broadcasters.
Ms. Gigi Sohn is the president of Public Knowledge, a very respected public interest group. She testifies today on behalf of Public Knowledge, the Consumers Union and Free Press.
Mr. Kenneth Ferree is the president of another respected public interest group, the Progress and Freedom Foundation.
And we welcome each of our witnesses. Without objection, your prepared written statements will be made a part of the record, and we would welcome your oral summaries and ask that you try to keep those to approximately five minutes so that we'll have plenty of time for questions, of which I'm sure there will be many.
And Mr. Ergen, we are pleased to begin this morning by hearing from you.
MR. ERGEN: Thank you.
Chairman Boucher, Ranking Member Stearns and members of the subcommittee, I appreciate the opportunity to testify today. My name is Charlie Ergen, and I'm the chairman and CEO of Dish Network, the nation's third-largest pay-TV provider.
We are in the middle of a digital transition that is changing the way people watch TV. It's pretty simple. People want to watch what they want to watch, when they want and where they want. And as TV evolves, there are some things that no longer make sense for consumers under today's laws.
First, many consumers can't get local news and sports in their home state, because of the way local markets are defined.
Second, many rural communities are missing one or more of the four major networks.
Third, consumers are losing their local stations during disputes over retransmission consent, and fourth, consumers suffer when most carrier stations have little or no local content.
It is our hope that all these challenges can be fixed as part of the SHVERA reauthorization this year. The digital age has arrived, and the laws need to catch up.
On DMA reform, many of your constituents are being denied access to news, weather and election coverage from their home state. For example, depending on where a customer lives in Indiana, from the map over here, they may get local news from Indiana, Illinois, Kentucky, or Ohio. As you can see from the map, defined local map based on DMA does not make sense from a consumer perspective. This is an issue in 45 states. The Copyright Office recognized this problem in their report last year.
Pay-TV providers should be allowed to bring in a neighboring broadcaster and consumers should be able to determine what local means to them.
With respect to missing networks affiliates, DISH Network provides local service in 178 markets today, reaching 97 percent of households nationwide. This translates in over 1,400 local broadcast stations, which is far more than any other pay-TV provider.
In most of the remaining markets, one or more of the four networks is missing. The Copyright Office has highlighted this problem in its report. We agree with the Copyright Office that all consumers should have access to NBC, CBS, ABC and FOX programming. If a local community is missing one of the big four network stations, pay-TV providers should be able to treat a nearby affiliate as the local affiliate, under copyright and communications law.
On Retransmission Consent Reform, our broadcaster used to negotiate with a single cable company, and the leverage was relatively equal.
But today DISH Network customers and others are held hostage, as broadcasters play their local monopoly off against multiple pay-TV providers.
In 2008 alone, consumers lost programming in approximately 15 percent of our markets because of retransmission consent disputes. This is a huge increase over prior years and the problem continues to get worse.
Today, stations in seven of our markets remain down because of unreasonable demands from Fisher Communications. Yet, broadcasters provide the same content for free on Internet, and those lucky enough to live within the shrinking areas of the digital over-the-air coverage. Because the broadcasters receive 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, which would apply to all broadcasters and all pay-TV providers. Treat a monopoly like a monopoly. Satellite providers already pay a fixed per subscriber copyright royalty rate, and we see no reason why a similar concept can't work for retransmission consent.
As a second alternative, we support the creation of an actual market. If a broadcaster threatens to drop programming, pay-TV providers should be able to get a nearby affiliate to fill the gap. Consumers should never have to wonder what happened to Sunday Night Football.
Finally, on must-carry: We are forced to carry of hundreds of stations today that have little or no local content. This increases our costs, 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 offering at least 20 hours of local programming each week. This is beneficial to consumers, and has no harmful effect on broadcasters that invest in their local market.
Each of those four issues can be addressed in the structure proposed by the Copyright Office. Specifically, a unitary compulsory copyright license for all pay-TV providers would give Congress the chance to make sure all consumers get the services they need in a digital world, in a manner that is fair to the copyright holders, broadcasters, cable and satellite.
The Copyright Office recognized that TV has changed fundamentally, and incremental changes to outdated rules are not good enough. We encourage you to review the recommendations and act boldly on behalf of your constituents.
Thanks again for allowing me to testify.
REP. BOUCHER: Thank you very much Mr. Ergen.
Mr. Franks, we'll be pleased to here from you.
MR. FRANKS: Thank you, Mr. Chairman.
REP. BOUCHER: And we need the microphone.
MR. FRANKS: Thank you, Mr. Chairman, members of the committee. First, let me congratulate the committee on a remarkable legislative success story.
Twenty one years ago, prodded by Chairman Boucher and others through the original Satellite Home Viewer Act, Congress began a process which has resulted in a robust video distribution and programming marketplace, which happily has made the local cable monopoly a relic of the past. There are many winners from Congress' vision in this aspect of the video market place, but none bigger than the American consumer.
The legislative issue on the table today is really a very narrow one. Whether to extend satellite's compulsory distant signal license once again. In contrast, the local-into-local license is permanent, and not part of this debate. Yet, during the course of congressional deliberation over the distant signal license, you will hear from parties seeking to exploit this legislation as a vehicle for a wish- list of unrelated items, such as changes to retransmission consent or DMA modification. Besides complicating the legislative process, the issues of retrans and DMA modification are not broken and do not need fixing.
Each year, CBS and other television broadcasters conclude hundreds of retransmission consent agreements with cable, satellite and telephone operators. In an overwhelming majority of such instances, agreements are reached quietly, amicably and in a mutually beneficial manner.
Infrequently, a dispute erupts, at least initially, and both sides threaten a disruption of service. Even more infrequently a very small handful of those disputes lead to a short term disruption. Legislating to deal with a few disputes against a pattern where there are literally hundreds of instances, where willing sellers and willing buyers successfully reach agreement, would be a solution in search of a problem. In the end, the retransmission consent regime works, and in the manner Congress intended.
As for DMAs, they are not a governmental creation. Rather, they are product of Nielsen Media Research, which groups counties by viewing patterns and the laws of physics and signal propagation, rather than geographic boundary.
DMAs are the center of a broadcaster's economic universe, and any tinkering with the system, even in good economic times, could be financially seismic, not only for smaller local broadcasters, but also for local merchants, who buy time on their local stations in order to reach potential customers in their local areas, without competing and confusing ads coming into the market from a station, 100 or 1,000 miles away.
But if the desired outcome is for viewers to access news from their out-of-market, but in-state television stations, right now, without the need to change any law or redefine any DMA, MVPDs may already import any stations newscast into any other market, simply by securing the imported station's permission to do so. Stations control the copyright of their news programming, and can make them available to multi-channel providers in nearby markets looking to augment news programming.
We are prepared to work on any problem areas where there may be issues with regard to local and in-state news, but please do not fall for the masquerade of those who are using DMA reform as a proxy for their real objective. A means for MVPDs to obtain bargaining leverage, in a retransmission consent regime that is now in nearly perfect balance.
Please also remember that television broadcasters have the right through the Copyright and Communications Act and private contracts, to control the distribution of the national and local programming they transmit. The CBS Television Network alone invests billions of dollars each year to deliver the highest quality news, sports and entertainment programming.
But we are not complaining. We strongly believe that our heavy investment in programming pays off. Superior programming generates viewing that helps not only the CBS Network and our owned and operated television stations, but also our affiliated stations nationwide.
When network programming is of high-quality and compelling, local stations benefit, because they sell advertising within the networked programming, that allows them to make significant financial investments in local news, sports, weather, and other programming, including syndicated shows, like Wheel of Fortune, Jeopardy and Oprah, some of your constituents' favorite programs.
This network affiliate, national and local arrangement of course, is not unique to CBS. It is also enjoyed by the other networks, including Univision and Telemundo, and their affiliated stations across the country. In the end however, it is local viewers who benefit most from this system.
Mr. Chairman, again I would like to thank the committee for helping to steer our industry through the complex, technical and market conditions to get us where we are today. A robust video delivery marketplace, where thanks to vigorous competition, broadcast television is still an integral player deeply valued by American viewers.
We look forward to working with the committee to preserve and advance the role of broadcast television in that extremely competitive marketplace. Thank you.
REP. BOUCHER: Thank you very much, Mr. Franks.
MR. GABRIELLI: Thank you. Chairman Boucher, Ranking Members Stearns, and Members of the Subcommittee, thank you for the opportunity to testify. My name is Bob Gabrielli, senior vice president for programming, operations and distributions at DIRECTV. On behalf of more than 17 million customers, I offer the following suggestions for updating SHVERA. First, Congress should retain and modernize the 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'd like to discuss the distant 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 subscribers rely on distant signals to receive network programming, and many will continue to do so into 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 and markets missing one or more local affiliates have access to network programming through distant signals.
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 D.C. 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 rules. The time is right for a more general approach. Congressman Ross has proposed allowing delivery of neighboring stations to households in these orphan counties like Fulton County. DIRECTV endorses this effort. Time and again, consumers tell us what local channels best meet their needs. Where possible, we should be able to meet those demands.
I'd like to now discuss local carriers. 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 the task when it created the "carry-one, carry-all" rule. We have, nonetheless, made extraordinary progress in offering local programming. Our track record speaks for itself.
We've spent billions of dollars to provide local service and now offer local television 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. This is because, unlike cable, we have to rebroadcast identical network programming hundreds of times throughout the country.
For the 5 remaining percent of households, we now offer a local seamless solution. We'll install a rooftop antenna and tuners that integrate local broadcasting into their set-top box. To our subscribers, offer signals will appear and function exactly as any other channel on the guide, in the DVR, et cetera.
If the broadcaster has made their signals available throughout the DMA, every DIRECTV subscriber could receive local channels in this fashion. The simple investment in repeaters and translators by broadcasters will be the fastest and most efficient way to achieve the goals of H.R. 927.
Last, I'd like to discuss the retransmission consent. Congress created the must carry/retransmission consent regime before we even offer 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, the market is tilted even more heavily in favor of broadcasters. Each has at least three competitors with whom to negotiate, government-protected exclusive control over their content; and public airways, they use for free.
At the same time, new private equity investors have pressured broadcasters to increase rates. 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, 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 are fair in reasonable compensation for the product they create, but it does not serve the American public if the 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 rate retransmission consent policy that compensates the broadcasters fairly for its investment in high-quality content, yet protects consumers from withheld services.
In closing, millions of your constituents throughout America, whether they are 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.
REP. BOUCHER: Thank you, Mr. Gabrielli.
MR. ROWLAND: Thank you, Mr. Chairman and Ranking Member Stearns, for inviting me to testify today on behalf of Colorado Public Television in Denver, and the Association of Public Television Stations.
As an aside at the outset, I might note that this is probably a first in the history of communications policymaking, in which our humble public broadcaster is sitting here, situated in the middle of the panel between all of these distinguished members of the broadcast and telecommunications media to my right and left. So, perhaps, indeed, this means change is in the air.
The reauthorization of SHVERA is of great importance to my station and the 364 local public television stations across the country.
KBDI is located in Five Points, the historically African-American and Latino neighborhood in North Denver, and over the years under the banner World View and Community Voice, we have developed a wide range of local and international programming, that serves 85 percent of Colorado's population.
There are three SHVERA reauthorization issues of particular interest to public television stations; multicast carriage, local- into-local, and the reach of public television statewide networks.
Public television stations nationwide were early adopters of digital technology and have been at the forefront of maximizing the new digital capacity to serve our core missions of localism, education and diversity.
My station in Denver currently offers three multicast streams and plans to offer more. In addition to our traditional mix of local and national public affairs and cultural programming on one channel, we provide a documentary service and an international stream featuring news, foreign affairs and arts programs.
Without multicast carriage, this rich educational content made available through digital technology is lost. Given the complexities of multicast carriage, we prefer voluntary market-driven arrangements with multichannel video proprietors, such as those we have already reached with Cable, Verizon and DIRECTV.
The DIRECTV agreement proves that a mutually beneficial creative approach is possible involving high-definition, multicast standard definition and video-on-demand options. Such an approach provides viewers with a full array of public televisions' high-quality digital content, while respecting the capacity constraints of DBS providers.
However, after years of unsuccessful attempts to reach a similar private agreement with DISH Network, we have no choice but to conclude that there is a market failure and it is time for the federal government to intervene to ensure that DISH's 40 million customers have access to the full benefits of their local public television stations' digital offerings.
As she noted today, Congresswoman Eshoo introduced H.R. 4221, which would mandate DBS coverage of public television stations' complete digital signals, where no private agreement between the DBS provider and the local station has previously been reached. We are delighted that Representative Eshoo is going to reintroduce this legislation. We applaud her initiative and urge that this important legislation be incorporated as part of the SHVERA reauthorization.
Turning to local-into-local -- SHVERA does not require the DBS providers carry local broadcasts in the all areas they serve. As a result, viewers in more than 50 smaller and often rural markets cannot receive even the primary offerings of their local public television stations through one or both DBS providers.
Public television is strongly and irrevocably committed to the principle of localism. As stations' transition to digital-only broadcasting and invest in greater local services, carriage by all multichannel video providers is critical.
Public television calls on Congress to ensure that DBS customers in every market are able to view through some mechanism, the offerings of their local public television stations as soon as reasonably practicable.
The final SHVERA issue for us involves statewide or regional public television networks, charged by statute or a mission with reaching all viewers in their state or region. Because the SHVERA carriage regime is based on the DMA system, many of these networks cannot be carried by DBS providers in certain portions of their states because they do not have full power transmitters in each DMA.
The most glaring example is with our neighboring Wyoming Public Television, which reaches only 45 percent of the state's population through DBS carriage. But this problem affects state or regional public television networks in at least 18 states. It is our hope that public television can work closely with the committee to solve this problem.
Finally, Mr. Chairman, I would be remiss if I did not stress the importance of federal funding for public broadcasters. Federal funding is more critical now than ever before as public stations are rolling out their new digital services, while simultaneously facing the greatest economic challenge in their 42-year history. We ask this authorizing committee to support increased federal funding to offset the projected 15 percent declines in other sources of funding.
Again, thank you, Mr. Chairman, for inviting me to participate in today's hearing, and I look forward to answering any questions you might have.
REP. BOUCHER: Thank you very much Mr. Rowland.
MR. YAGER: Chairman Boucher, Ranking Member Stearns, and Members of the Subcommittee, thank you very much for having me here today.
My name is Jim Yager and I am the CEO of Barrington Broadcasting, which owns and operates 21 television stations in 15 small to mid- sized markets. I'm also the chairman of the Television Board of the National Association of Broadcasters.
Ever since Congress crafted the original Satellite Home Viewer Act of 1988, it has worked to further two objectives.
First, that free over-the-air television, remain widely available to American households. And second, that satellite retransmissions will not jeopardize the strong public interest in maintaining vibrant local television services. Those two goals remain paramount today.
Our Barrington stations keep our communities informed and connected. We work everyday to embody the spirit of localism, which Congress has affirmed time and time again as a vital public policy goal.
We do not charge our viewers to watch our program, rely on payments from advertisers to deliver a free service to our constituents. Without free over-the-air television, cable and satellite companies would essentially be unrestrained in their ability to charge subscribers even higher prices.
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 500 primetime television programs were broadcast on over-the-air television.
While these stations represent a relatively small number of channels of those on cable and satellite systems, broadcast stations offer a unique and valuable service to their local markets that could be undermined by unnecessary changes to the law.
As Congress considers updates to SHVERA, it is vital that you uphold the strength and tradition of localism. Any changes should not impair enforcement of program market agreements that are essential to local broadcast service.
Furthermore, this committee should strengthen localism by phasing out satellite licenses for distant signals. The license should be replaced with a requirement for local-into-local carriage in all television markets, which would enhance localism, programming and price competition, and increase viewer choice.
To assist viewers in this difficult economic climate, Congress should mandate local-into-local satellite service in every market. I would like to thank Congressman Stupak for the introduction of legislation to accomplish this goal.
There are 31 of 210 television markets in small and rural areas like Marquette, Michigan that the satellite companies do not serve. They have said that this is a capacity issue, but I believe it is quite simply a business decision on their part.
I am certain that if Congress does not step-in, the satellite companies won't ever provide local service to every market in this country. Broadcasters have invested well over $1 billion in making the transition to digital television. So far there is very little economic return on that investment.
Nevertheless, those investments are still in the public interest. The satellite industries investment to provide local-into-local service to all Americans would also be in the public interest.
Localism is at the forefront of broadcaster operation. In emergency situations, it is the broadcaster, not the cable or satellite companies, who is on the scene providing the public with emergency lifesaving and timely information it needs.
Localism is not in cable or satellites DMA or their business models. Some members of Congress have expressed frustration that their constituents do not have access to in-state but out-of-market broadcast stations.
Current law allows cable and satellite systems to offer non- duplicating out-of-market programming to their subscribers, but many cable and satellite systems choose not to do so.
However, Congress should not change current law to allow cable and satellite companies to offer network and syndicated programming that is identical to programming already offered by the local broadcaster with rights to that market. Doing so would be inconsistent with the longstanding principle of localism and the carefully balanced system of retransmission consent that was established by Congress to further this principle.
If the retransmission consent rights of an in-market station were undercut by the importation of distant in-state duplicating signals, the economic basis for the local broadcaster service to the public would be eroded and the public, in my opinion, would be harmed.
Thank you for giving me this opportunity to testify, and I welcome your questions following the panel.
REP. BOUCHER: Thank you very much, Mr. Yager.
MS. SOHN: Chairman Boucher, let me extend my hearty congratulations to you, Ranking Member Stearns, Members of the Subcommittee, thank you for inviting me to give a consumer perspective on the reauthorization of SHVERA.
As Congress considers renewing satellite compulsory licenses, it should repair the current fragmented regulatory structure by accomplishing three goals.
One, treat all those who retransmit broadcast content and signals equally.
Two, ensure special protections given to broadcasters do not result in unfair licensing terms for multichannel video providers or MVPDs.
And three, move towards a world without restrictive distant signal regulations.
The current patchwork of laws and regulations unnecessarily differentiates between types of providers, restricts the availability of content to consumers, and sets the stage for discriminatory pricing. I have three recommendations.
First, unify the regulatory and licensing systems for MVPDs. While at one time there may have been justification for maintaining separate regulatory structures for cable and satellite retransmission that time has passed. Disparities in treatment of cable systems and satellite services are a result of historical and technical factors that are no longer relevant.
In its report on SHVERA, the Copyright Office emphasized that regulatory parity between MVPDs is "a good governmental goal of the first order."
It is time to level the playing field, not just between these services, but also for new types of MVPDs, including those who deliver content to the Internet. Allowing Internet based MVPDs to voluntarily join this regulatory scheme, could provide much needed competition.
Congress should therefore create a single unified structure for all MVPDs, extending the benefit of the compulsory license to any that opt in and meet their regulatory obligations, including local carriage requirement.
In addition, no provider should be subject to a five-year reauthorization cycle. This presumably means that satellite providers like cable providers would be required to carry all local broadcast stations, a fair trade for significant regulatory relief.
Second, reform retransmission consent rules to promote competition and eliminate unfair price discrimination. And Mr. Chairman, I would take issue that retransmission consent rules are unrelated to SHVERA. I would say that the problems with retransmission consent are directly related to restrictions on distant signals and the combination of the two produces anti-competitive results.
The rules create an imbalance that allows powerful broadcasters to engage in discriminatory pricing, or tying carriage of unrelated stations, raising prices for customers and harming the ability of smaller MVPDs to compete.
Unfortunately, most broadcaster-MVPD agreements are not public, preventing anyone from determining the scope of these discriminatory practices. Therefore, first and foremost, Congress' remedies should be transparency in retransmission consent deal.
But Congress should go farther. For instance, by requiring that retransmission content licenses be on reasonable and non- discriminatory terMs. Even more effective, would be a statutory retransmission consent license that parallels the copyright license for broadcast retransmission.
This would ensure price parity among MVPDs, eliminate troubling tying arrangement, and prevent broadcasters from withholding important local content as leverage against smaller video providers.
Third, move towards eliminating distant signal protection. Distant signal protection is an anachronism in the Internet age, where consumers who have Internet access can view content that is not restricted by state lines or artificial market areas. Attempts to force these subscribers to watch only local stations, is deemed to fail.
More pressingly, current rules create situations in which satellite providers are unable to provide customers with the local broadcast channels that are most relevant to their lives, because they originate in a different DMA.
Over the long term, Congress should work towards eliminating distant signal restrictions, MVPD should be free to respond to customer desires and offer in addition to local stations, other stations from wherever they broadcast. In the short term, however, Congress should fix the immediate problem caused by DMA based and distant based restrictions on MVPD retransmission.
At a minimum, the rules should be relaxed to allow retransmissions of any in-state signals, stations from neighboring areas, and any missing networks.
Finally, I urge the subcommittee to reject efforts to make SHVERA a vehicle for unrelated changes to copyright and communications law.
I would like to thank the Chairman, the Ranking Member and the sub-committee again for giving me the opportunity to testify today.
REP. BOUCHER: Thank you very much Ms. Sohn. Mr. Ferree?
MR. FERREE: Thank you, Chairman Boucher, Ranking Member Stearns and thank you to members of the committee. I'm Ken Ferree, president of the Progress and Freedom Foundation, a think tank here in Washington that's focused on studying the digital economy.
Today's hearing is about the reauthorization of the Satellite Home Viewer Act, but in fact this discussion we're having is really about a much larger debate, about how and whether traditional media platforms will thrive in the emerging media world.
The evidence is all around us. The days of force-feeding consumers, media selected for them by monopolistic or near monopolistic operators is over. The gems of traditional media, the dominant daily newspapers are losing subscribers at precipitous rates. The doyen of electronic media, terrestrial radio, has been in extremis for years. Its progeny, satellite radio too is struggling in a world of media abundance and consumer choice.
Broadcast television ratings are a fraction of what they once were, and prime content is now migrating not only to multichannel platforms, such as cable and DBS, but also to a platform with essentially infinite capacity and flexibility, the Internet of course.
And thus the relative newcomers in the media landscape, the multichannel systems, also have a sharp eye on technological developments that may threaten their business models.
So as we talk today about distant signal importation, DMA boundaries and the like, we need to bear in mind that the technological workarounds to most any restriction, already exist, and consumers are learning to use them with more and more facility everyday.
Allow me to highlight one example. Under existing rules, DBS systems make local signal determinations based on DMA boundaries. I don't pretend to understand the intricacies of how DMAs are developed or why they were chosen for this purpose, but I do know that because DMA boundaries and state political boundaries are not coterminous, there are a number of markets where television viewers receive their local broadcast service via satellite from neighboring states, rather than their home state.
As chief to the FCC's Media Bureau from 2001 to 2005, I heard numerous complaints about just this problem, and I have to say I have some sympathy for those subscribers.
As a practical matter of course, technological innovation is rendering obsolete many of the restrictions to protect market place exclusivity. A new class of Web sites and services, including Netflix, Hulu, Amazon Video On Demand, iTunes and Vuze are changing the way we view broadcast television.
Moreover, it is increasingly easy for consumers to view content from any geographic market directly on Internet-ready televisions, or through the use of set-top box devices such Netflix Player, TiVo or Slingbox, and through popular game consoles like the Xbox 360 and the PlayStation 3.
In short, time and geography, increasingly are meaningless concepts with respect to video content. If traditional platforms, including DBS systems are to thrive in this competitive market, it makes little sense to hamstring their ability to provide viewers in- state stations based on the vagaries of DMA boundaries.
Similarly, it is increasingly difficult to justify carriage burdens on traditional media. I've read recently of legislative proposals that would require satellite operators to carry local television stations in even the smallest markets using satellite capacity, rather than some other delivery mechanism.
Now, there are only two ways in which a satellite company might comply with such a mandate. It could add the capacity that is assuming, it is physically possible given spectrum constraints, or may convert capacity currently used for other more highly demanded programming services. Neither approach makes economic sense.
Moreover, carriage requirements impose significant burdens on the first amendment rights of those bound by them. In the current environment, imposing enhanced carriage mandates on DBS would be unwarranted, economically indefensible and unconstitutional.
Thank you Mr. Chairman for the opportunity to testify today, I look forward to your questions.
REP. BOUCHER: Thank you, Mr. Ferree, and thanks to each of the witnesses for your very thoughtful comments here this morning. And we look forward to continuing our conversations with you, as we continue with our work on reauthorizing the law.
Mr. Gabrielli, I am going to pose a question to you and I also intend to pose it to national programming service that delivers out- of-market signals as well. I understand that you have about 800,000 subscribers to your out-of-market signal service?
MR. GABRIELLI: That's correct Mr. Chairman.
REP. BOUCHER: And I wonder if you know and if you don't know this morning if you can do the research and inform us of the number of subscribers among that 800,000 who reside in places where there is currently local-into-local service?
There are two grandfather provisions in the law that under two different sets of circumstances allow the residents of markets that have local-into-local service to continue to receive distant signals, or to opt to receive them instead.
And I wonder if you know how many people living in those local- into-local markets are receiving distant signals or if you could find that out for us?
MR. GABRIELLI: I don't know offhand, but there is -- question there is the grandfathered customers who had distant signals before we carried locals and they have opt to keep them, but there's also those customers in markets like Lafayette who receive the one local station and receive the other networks via distant network.
I mean they are part of the 800,000, so I'll try to break out those that receive networks where they're fully covered by locals, but continue to receive distant throughout the
REP. BOUCHER: We call that latter situation, short markets, where there's really only -- where not all of the networks have local affiliates within that market, and that's a kind of a special case, but carve that out also, give us those numbers if you can?
And we're very interested in knowing the numbers of subscribers you have for out-of-market signals in areas where there is full local- into-local service with all networks represented in that market. So if you could send that to us, that would be helpful?
REP. BOUCHER: We surely can get that for you sir.
REP. BOUCHER: All right thank you very much.
Mr. Yager, you have recommended that the Section 119 license be eliminated, coincident with the statutory requirement that local-into- local service be provided in all of the 210 local television markets.
If that were to be adopted, what would you do in the situation where, as Mr. Gabrielli has just described, there are markets where not every network is represented by a local affiliate in that market, so-called short markets?
Would you permit the importation of a distant signal into those markets for the network that does not have a local affiliate in that market?
MR. YAGER: I'm unaware of all of these markets that supposedly don't have full network service.
REP. BOUCHER: Well there are a number of them.
MR. YAGER: But in regard to that let me say that I think we have to come up with a local service; we have to maintain local --
REP. BOUCHER: Well, I understand that Mr. Yager, but my time is limited. And the question is, today we don't have it everywhere, and even if you mandated, you're still going to have markets where not all networks are represented with local affiliates. What do you do in a situation like that?
MR. YAGER: Well, we have significantly viewed status right now for many of those.
REP. BOUCHER: Okay. Well, that doesn't cover it all either. Okay. Well, why don't you perhaps submit us an answer in writing?
MR. YAGER: All right fine.
REP. BOUCHER: And we will be happy to hear from you on that.
Mr. Ergen and Mr. Gabrielli I have a question for both of you. And it goes to the heart of what much of our debate in this committee on reauthorizing the law is going to be about.
It's been 10 years now since the local-into-local license was first granted, and in that 10-year period much has changed.
Most of the country now has the benefit of local-into-local service, but there are 30 markets that still do not and I actually represent one of those markets or at least part of it.
Spot beams were not commonly in use at the time this license was created 10 years ago, today spot beams are that makes for far more efficient use of your spectrum.
And in the mean time another major thing that's changed is that you are now adding high-definition service which consumes quite a bit of spectrum in the more populated markets. But we still have 30 markets around the country where there is no local-into local service.
And in these markets often times you have a very small number of television stations. Maybe it's the whole of the networks' represented nothing else, maybe you don't even have that many, maybe not all the networks are represented with local affiliates.
And these are often times geographically challenging areas, where people really need the satellite service, because they can't get service delivered over the air because of being a long way from the television station or because of terrain.
And so, the arguments from people in these 30 markets are very vocal that if you're going to get the benefit of a nationally granted license that lets you offer the local-into-local service, in return for getting that license you should be required to offer that service everywhere.
And the technology now has improved to the point that it's somewhat easier for you to do that. So that's the complaint we're hearing.
And I want to give you an opportunity, both of you, to respond to that. And my time is expiring so as soon as you conclude your answer I'll turn to Mr. Stearns.
But Mr. Ergen would you like to respond and then Mr. Gabrielli.
MR. ERGEN: Sure and it's a great questions. First of all our company delivers in the 178 DMAs, so there's only 32 DMAs that we don't deliver signaling.
I was a little bit shock that Mr. Yager was unaware. And all those markets -- those are short markets, Mr. Chairman, and our company as you may know, after long court battles is not allowed to bring in a non-broadcast network in those short markets. So we have -- not only do we have technical issues that we perhaps could overcome with enough time and money, but we have real economic issues that, without bringing in a short market station, without the ability to do so, there is no one -- no customer would buy it from us anyway.
So, it's a shame that the representative of the National Association of Broadcasters doesn't realize that we have this issue of short markets with all network stations in all markets.
We certainly believe that this shouldn't be mandated from a legislative point of view. What I'd like to see this committee do is bring the economic incentive, so that we could generate competition and that we would have the desire from an economic point of view to go out and do all 210 markets. And again, our company is certainly prepared to do -- to meet the challenges to do those kinds of things with the ability to actually bring in short market signals, and you have to balance that somewhat with the must-carry loss as well, which is why we suggested that where there's not local content, you free that bandwidth up for those local markets.
If you do those things, I think you have a good shot at getting most, if not all, by one or both of the DBS providers.
REP. BOUCHER: Thanks, Mr. Ergen.
Mr. Gabrielli? GABRIELLI: Yes. Mr. Chairman, I would like to make the point that both DISH Network and us -- we're secondary transmitters of a primary broadcast. So we're really doing what the television stations are supposed to do, which is cover their market. We haven't had the advantages of doing it, but it's not our primary business.
The covering of 210 markets, as Mr. Ergen has said, has got a number of technical difficulties. One is -- and we've picked up some stations like in Waynesville and in Lafayette, where it's a single station.
But getting the other networks is tough because we have to get agreements from all the locals around it, that bleed into it, and all have some right to claim that those are their customers and that we can't bring somebody else in. So we have to negotiate with everybody in the surrounding territory.
A technical issue at local station often is in a pretty remote place and we have a very tough time of getting the signal back to us. We have to get those signals, be it fiber in ground, and quite often there is no fiber to these stations, and that is a huge economic burden to take that. We have to go to try to get those signals.
REP. BOUCHER: Okay. Thank you very much.
REP. STEARNS: Thank you, Mr. Chairman. I remember when SHVERA -- when we had this act in 2004, and we marked it up. And I thought it was rather simple. We could do, but it became very complicated. And after hearing a little bit of the opening statements, I can see that this could perhaps be complicated again.
But the difference is, as I mentioned in my opening statement is, we now have not only a satellite and cable, but we have broadcasters, and we have the phone companies, Sprint and AT&T coming in, while we have the Internet, we have the iPhone, we have so much more.
So, is it possible some of the arguments we made back when Billy Tauzin was Chairman of this committee in a Republican majority, some of the arguments we made about letting the market decide, may be even more so today. And so, this is to follow-up a little bit on what Chairman Boucher has talked about in dealing with must-carry requirements.
When it was brought up, the argument was, ultimately, it was constitutional and must-carry had to be provided, because there was insufficient competition to ensure broadcast stations would gain carriage on the marketplace.
So this question is sort of fundamental to our whole debate this morning, and this is with Mr. Ergen, Gabrielli and Ferree, in light of what I mentioned with the satellites and broadcasting and the phone companies, the Internet and all these various new markets, and the multiple outlets for carriage, does the constitutional argument still apply? Is it still that the must-carry requirements have to be implemented because of law?
Start with Mr. Ferree first.
MR. FERREE: In my judgment, it would be unconstitutional without a doubt. I don't think you have to be Oliver Wendell Holmes to figure this one out.
The original must-carry rule was held up by a five-to-four majority in the Supreme Court, based on an extensive record, showing that broadcast stations -- some broadcast stations would fail without carriage on their local cable systems.
I don't think you could -- first of all, we don't have that record for satellite services, and I don't think you could create such a record. So I think without a doubt, it would be struck down as unconstitutional.
REP. STEARNS: Okay. And then we'll go to Mr. Gabrielli.
MR. GABRIELLI: I guess the answer would be we'd rather not have a must-carry.
I mean, the capacity we use to carry a number of stations that don't have any local content, we would love to use that capacity to carry local stations, and again, these smaller markets that we still can't carry right now.
REP. STEARNS: Okay.
MR. ERGEN: I don't know about the constitution now. But, again, I think I'm sympathetic to the local broadcaster who invest in his community and invest in his local content, that, when possible, we should carry him and we do that today.
I think we've got it where I think this committee has it wrong, is where you mandate must-carry when a broadcaster doesn't invest in his community and he gets the benefit without the investment. I'll give you a simple example. We carry home shopping channels and we carry national home shopping channel. We may carry it 20 different times in 20 different spot beams and it's exactly the same signal minute by minute, second by second, and there's not one local commercial and there's not one local newscast, right?
REP. STEARNS: But the argument is made that you should --
MR. ERGEN: In my opinion, if the broadcaster doesn't invest in his local community with local content, news, weather, sports, political, so forth and so on, there shouldn't be a requirement for cable or a satellite or phone companies that we have to carry their signal. Because we can carry -- we uniquely can carry it on a national basis and get the customer the same signal.
It happens sometime with the religious broadcast, shopping, some international channels --
REP. STEARNS: But you could argue then the religious broadcaster has to have local participation as community, before it meets your criteria. ERGEN: For example, we may carry national religious channel, we may give it to all 110 main homes, every square inch of the United States. But to duplicate that same signal on a local basis as the law requires us to do today, it doesn't make any economic sense if that local broadcaster only just rebroadcast the same national signal, because there is no local -- they don't have any local content, news, weather, sports.
So, it doesn't hurt them in anyway, but it adds cost to the satellite provider --
REP. STEARNS: What you are saying is with the must-carry mandate, we should stipulate some of the requirements that these stations have to participate in their local community.
MR. ERGEN: That's correct. I think it's a fair compromise.
REP. STEARNS: I think it's fair.
Mr. Ferree, what do you think of that comment?
MR. FERREE: I don't think that it gets to the underlying constitutional problem here. The original rule was held up again to protect over-the-air viewers from losing some broadcast service. I don't think you can be --
REP. STEARNS: -- Home Shopping Network is not -- doesn't fit that requirement -- what you're just saying?
MR. FERREE: No. It may fit that requirement, but I don't think you could make the case that absent carriage on DBS system that these stations would prevail. They're not being carried now and they're not failing.
REP. STEARNS: Okay.
MR. FERREE: So, over-the-air viewers would not lose the service.
REP. STEARNS: Anyone else would like to comment quickly? I have one more question, (inaudible).
MR. : Yes. I've got a thought sort of a grand bargain that --
REP. STEARNS: Here we go.
MR. : -- my work and actually also may perhaps result some of the constitutional issues. One never knows what the court is going to do. So I can't guarantee it. So, I think a local-into-local requirement is required if and only if you reform retransmission consent, because that's a monopoly problem for the broadcasters. You allow the importation of distant signals without restriction, and you have this unitary license.
So I wouldn't be in favor of just imposing local-into-local on satellite providers without those other three reforMs. In this way, the government is giving something to the DBS providers and asking in return, and that could resolve the constitutional problem.
REP. STEARNS: Okay. Let me go to my other question, Mr. Ergen and Mr. Gabrielli. There has been a delay in the DTV transition to -- because February 17 is no longer the date, and by June 12, we finally have reached the end of analog pool powered broadcast.
What do we need to be made in the television -- satellite television law after the completion of this digital TV transition? It's as simple as plugging a digital standard into the FCC predicted model and testing regime for distant signal eligibility or is there anything else that we need to do? Mr. Ergen?
MR. ERGEN: Well, assuming you keep the 119 license, it doesn't go into like a unitary license -- 122 as the Copyright Office has recommended, then you must go out.
The digital signal is much different than analog signal. As we all know, there's a waterfall effect. The signal normally doesn't go as far, and you either get it perfectly or you don't get it at all or it breaks up a lot on you.
So I think there has to be a new model. The predictive model has always been subject to interpretation, court battles and so forth. It seems there has to be a way. In the digital realm, a customer knows whether he gets a signal or not. In the analog world, what's always subjective is the picture quality, but in the digital world the customer knows. And I think there has to be a much better model in the digital world if you're going to keep the 119 license.
REP. STEARNS: Okay. Mr. Gabrielli?
MR. GABRIELLI: I agree with Mr. Ergen. I mean, the basis for this was a prediction where the customer could not get an over-the-air signal. So, as we go from analog to digital, we need to switch the model, from an analog model to a digital model, because that's now the signal that the broadcaster is producing.
It is a much more clear drop-off. There is less of this ambiguous, you know, you get a signal so much percent of the time and there is no snow and stuff like that. So we need to go to a digital model, if it's a little gap in the way of the law versus the digital transition has gone, and use that because there will still be customers who do not get in over-the-air signal and need some other way of getting network services.
REP. STEARNS: Thank you, Mr. Chairman.
REP. BOUCHER: Thank you very much, Mr. Stearns.
The gentleman from Michigan, Mr. Stupak, is recognized for seven minutes.
REP. STUPAK: Thank you, Mr. Chairman. My questions, of course, again, deal with local-into-local.
So let me ask Mr. Gabrielli and Mr. Ergen, do you believe local- into-local in all 210 markets, that's in the public interest and would promote localism?
REP. BOUCHER: Mr. Gabrielli?
MR. GABRIELLI: Okay. I'll take this one first. If it's truly local content, it will certainly help -- Mr. Ergen said, as we both rebroadcast the numerous stations locally that are equally available on a national basis.
REP. STUPAK: Yeah, but do you believe that's in the public interest to do this?
MR. GABRIELLI: We believe it's in the public interest. But again, I'll make my point is, you know, both of us are secondary transmitters of a primary broadcast that the broadcasters are supposedly putting out.
REP. STUPAK: Sure, sure.
How about you, Mr. Ergen? My time is limited, so I'm not going to let you filibuster.
MR. ERGEN: Yes. Yes, I -- yes, I do believe it's in the public interest. And we would love to be able to do it if the right incentives and legal things were able for us to do it. And of course, obviously the (time ?) and money.
REP. STUPAK: Why do you need incentives? Why do you need incentives?
MR. ERGEN: Well, because there's a huge cost to do this.
REP. STUPAK: What are the costs?
MR. ERGEN: About a million dollars for each beam that you put --
REP. STUPAK: So you got 32 more areas you said you have to cover, it's going to cost you $32 million?
MR. ERGEN: That's $32 million -- $32 million. It costs about $250,000 or more per year to receive the signal via fiber, so that's 32 times $250,000 per year. In a city -- in one DMA, like Glendive, Montana, there's 3,700 homes. If you got every single subscriber to Dish Network, you couldn't pay your cost to do it. And in our particular case --
REP. STUPAK: So what kind of incentives --
MR. ERGEN: Just hold up one second. In our particular case, we do not have a statutory 119 license to be able to bring in the missing short-market signals.
REP. STUPAK: So what incentives are you looking for?
MR. ERGEN: So we would look for a few things. One is some reform of the must carry legislation so that we can free up bandwidth that helps us from an economic point of view.
Second, we would look for some help with how do we get the signal back to our uplink size, perhaps we can even share that cost with DirecTV under -- in a trust exemption and so forth.
The third thing we would look for is a license -- compulsory license so that we can bring in short market signals where a network affiliate is missing in the particular short market. So, for example, in the cities that we don't do today, we've done every market that is not a short market. Otherwise, it makes no sense to do a short market if we can't also deliver the other networks. And so, we need to reform there from a licensing point of view.
REP. STUPAK: See, our constituents aren't asking for all four of them. We just want local-into-local. Like when my schools were closed yesterday, we want to know that. ABC isn't going to tell me that unless that's a local media, right?
MR. ERGEN: Give me the particular DMA, which is your DMA?
REP. STUPAK: Marquette.
MR. ERGEN: Okay. So Marquette is missing which networks?
REP. STUPAK: Well, we only one have one.
MR. ERGEN: Only have one network. So, for us to spend over $1,250,000 a year in Marquette where we only can bring in one network, our -- and we, as a company, are not able to bring in ABC, CBS and FOX. That doesn't make economic sense to us.
And every market where we, as a company, can bring in all four networks, we have done it. More than anybody else in this panel, we have done it. But we're in a situation where we do not have the ability to bring in all the networks --
REP. STUPAK: Well, you mentioned capacity.
MR. ERGEN: -- makes sense.
REP. STUPAK: Yes, you mentioned capacity. Would you be willing to provide to the members -- would you be willing to provide us responses as to your capacity to reach all 210?
MR. ERGEN: Yes, we would.
REP. STUPAK: Okay. And you'll provide that to us and we'll follow it up in writing.
MR. ERGEN: Yes. We would like to work with you Congressman. We'd like to work with you.
REP. STUPAK: How about you, Mr. Gabrielli?
MR. GABRIELLI: Yes, we will provide that to you, sir.
REP. STUPAK: Okay. Well, I'd like more out of you guys too, but the part that bothers me is like when DirecTV -- when News Corp bought you out, if you look at the September 22, 2003 document page four, you said as early as 2006 and no later in 2008 all 210 DMAs would be covered, and I understand you're not owned by liberty. But we keep getting these promises that we're going to have our local-into-local and we never get it. So we have no choice but to enter into a mandatory requirement.
I actually have not just Marquette, but also Alpena, where my district is not being covered, and you can point to your Indiana example, but that's not the upper peninsula of Michigan. That might work in Indiana but certainly not the upper peninsula of Michigan.
So all these promises we get from you guys, never seems to fulfill it. Same thing was said back in '99, give us 10 years, because technology will come down, we'll do it, it's never been done.
MR. GABRIELLI: But -- to respond to that, very respectably, I don't think it's a fair characterization, it was News Corp, not DIRECTV which no longer owns part of DIRECTV. That main --
REP. STUPAK: News Corp buying DIRECTV, right?
MR. GABRIELLI: News Corp owned a percent of DIRECTV.
REP. STUPAK: Right.
MR. GABRIELLI: That was -- News Corp -- and really wasn't --
REP. STUPAK: That was your application? To do it, right?
MR. GABRIELLI: The promise was for a seamless integrated local solution in these markets, which we think with our integrated off air- tuner, which literally connects to our set-top boxes. It receives over-the-air signals. It puts them on the guide. You can control them just like you can control any other channel.
REP. STUPAK: Sure. But see, you promised to do in 2003, now you're telling me here in 2009 you can't do it for all the reasons.
MR. GABRIELLI: No, we do -- we can do. We have a --
REP. STUPAK: So, why didn't you do it then? You said you'll do it by the end of 2008.
MR. GABRIELLI: By the end of 2008, last year, we had this product. We have a product that the consumers can get, plug it in with our box, put an outdoor antenna on it to receive over-the-air signals. It integrates the two, the customer doesn't have -- has no idea that which ones' come over-the-air versus which ones' come from satellite.
REP. BOUCHER: Sure. Mr. Yager, you want to say something on it?
MR. YAGER: Well, again -- and this is my personal opinion, from a public perspective, what gentleman from DIRECTV says is correct, but from a public perspective, it doesn't really work. I think people want it via satellite, because the picture quality is better, and you can always guarantee the customer a signal.
I think from our perspective, what we need is, we need the right -- in Marquette for example; to bring in the neighboring DMA channels' networks that aren't available in Marquette. So when you give a full complement of ABC, NBC, CBS, and FOX, one of those being Marquette, that would give us the economic incentive to go and do the 32 markets that we don't do today.
REP. STUPAK: If DISH is doing more than DIRECTV, how come you are doing more than DIRECTV then? Why aren't you both at 178 as opposed to --
MR. YAGER: Well, I can't speak for DIRECTV and I'll let Mr. Gabrielli do it. But we've made different choices, for example; Mr. Gabrielli has done more with PBS. He's done more. So that takes care of these issues.
So he has made a choice to do some additional PBS high definition channels. We've taken that spectrum and said, "We can do more local markets because that's what the vast majority of our consumers have asked us to do."
But what happens is, it's difficult to do both. I think I've heard apart from the congressmen, the people who would like all 210 markets, saying all -- everybody would like must-carry, and people would like all HD, which takes four times the capacity of standard definition. And, by the way, I think from PBS, they wanted all the multicast channels, which could be another 8 or 10 sub-channels for every channel that you have. The laws of physics won't allow us to do that from a satellite -- .
REP. STUPAK: Those of us in the rural areas just want to be treated same as those in the urban areas. Why should we be treated any less after repeated promises and we license it, so why do we --
MR. YAGER: I tend to agree with you, because I kind of grew up in rural America, and we started a business from rural America, so I have real sympathy there. What happens is, it becomes a zero sum game. You'd like to have capacity for Marquette, fair point. PBS would like to have capacity for high-definition PBS and 10 sub- channels. Other people would like to have capacity for must-carry channels, even if there's no local content. And what happens is, we can't -- physically law physics, do all that stuff.
We've made huge strides, and as Mr. Gabrielli pointed out, 80 percent of our capacity -- 80 percent of our capacity today is just for local.
REP. STUPAK: Well, that's why I asked the question, and you said you'd provide that capacity issue, because we keep hearing that but no one ever can directly point to what it is --
MR. YAGER: What I would suggest is, I'd like to come -- work with your staff, and I would like to -- I think I understand your issue, and I would like you to understand our capacity issues, and would certainly come and open the kimono and show everything, and I'd like to work with you to solve the problem that you're addressing, because I think it's a real problem.
REP. BOUCHER: We'll follow up with written questions as a capacity, because I think it's important for all members of the committee to understand this capacity issue. Thank you.
REP. STUPAK: Thank you.
REP. BOUCHER: Thank you very much, Mr. Stupak.
The gentleman from Illinois, Mr. Shimkus is recognized for five minutes.
REP. SHIMKUS: Thank you Mr. Chairman. And I appreciate my colleague from Michigan to comment. He's an ardent fighter for rural America, and I appreciate that.
But I just want to get a clarification Mr. Ergen, in this debate or a discussion you had with Mr. Stupak, and I saw another panelists wanted to get the attention. Are you saying that if -- since Marquette has one local station, and that's the Marquette reason why it's difficult, but if you're allowed to broadcast the additional networks that may not now serve that area, that that would make an economic argument for doing so. Is that, did I hear that right?
MR. ERGEN: That's correct.
REP. SHIMKUS: Mr. Yager, you were jumping out of your seat on that. And I just kind of want to know why?
MR. YAGER: I'm afraid I didn't totally understand the Chairman's question when it came to me about the short markets. That's a rather new term to me. Marquette, Michigan is a very interesting market.
There are four affiliated stations in Marquette, Michigan. Two of them are doing news. One is a satellite, full-fledged satellite, CBS station out of Green Bay. And, yes, I think that should be carried and should be part of the carriage.
The Fox station there is in terrible economic shape, but if they were carried, I think it might improve its economic condition. So I am sorry I misunderstood the chairman when he talked about short markets. I wasn't quite aware if that's the way you were terming the market.
REP. SHIMKUS: But you are agreeing with Mr. Ergen's statement on broadcasting the four networks?
MR. YAGER: Well, I am surprised Mr. Ergen doesn't know that there are four network stations in Marquette. It's not --
MR. ERGEN: Yes, I don't know what you all are getting at. I am just trying to get clarification here. We are all among friends here. What I have learned in the digital transition, not the satellite debate is that, there is going to be some communities, that because of the length of analog signal, they are going to assume that that is their local station, where when we do a digital broadcast, the local affiliates are going to say, this is our market area and this how far we are going to service.
And people are going to say, "Hey, I lost," where they have another region. I know before -- when we started -- we, the state of Indiana was up there in the placard of all the different DMAs, and two of those bleed into my congressional district, so we have this, where Vincennes is the major market for southeastern Illinois. Paducah is the major market, and that's where they get all their -- or Cape Girardeau, Missouri or Springfield or the St. Louis, well I have five markets that cover my congressional district.
Let me ask a question to all the panelists and the time is short, so if you kind of keep in -- this is not a got you one, this is just -- I do some got-you questions every now and then, but even apart from specific substantive changes to this legislation, could we improve things by simplifying the law? The current law that is written -- is there things that we can simply that make it easier versus any major rewrite?
REP. BOUCHER: Lets just go left there, Mr. Ferree?
MR. FERREE: Gee, I am not sure how to answer that question. Simpler is always better, but right now I don't have an obvious answer.
REP. SHIMKUS: That's fine.
MS. SOHN: I advocate for one unitary license. There is no rationale technologically or for any other reason to have satellite and cable under two different compulsory licenses.
I think in the short term, a DMA fixed allowing the importation of signal from adjacent DMAs or in-state DMAs. That's pretty simple, that's not hard, and in the future getting rid of distant signal protection altogether.
REP. SHIMKUS: Thank you. Mr. Yager?
MR. YAGER: My answer would be yes. Local-into-local would simplify it correctly.
MR. : Okay. Yes, it's simply from a public television standpoint we would prefer to have carriage in all markets and want to have conditions that maximize our digital multicast carrying capacity, the actually bill would be useful way of making that happen.
REP. SHIMKUS: Mr. Gabrielli?
MR. GABRIELLI: Simple answer is, "yes," it would greatly help. Just an example is those stations that actually bleed over into another market, that doesn't have that network affiliate. It's not part of their DMA, but yet they have rights under us that we can't bring somebody else and that'd be a very simple fix.
MR. : None of these other issues are simple, congressman. The simplest, most straightforward thing for the committee to do is a straight reauthorization of the distant signal license.
REP. SHIMKUS: Great, thank you. Mr. Ergen?
MR. ERGEN: Well, an obsolete signal is to treat television like newspapers, which means you can -- in Washington, you can buy the New York Times, you can buy the Miami Herald, you can buy the Washington Post. Let customers buy any network signal they want to.
REP. SHIMKUS: Okay. I would ask another one, Mr. Chairman. My time has expired so I yield back.
REP. BOUCHER: Thank you very much, Mr. Shimkus.
The gentlelady from Colorado, Ms. DeGette is recognized for seven minutes.
REP. REP. DEGETTE: Thank you very much, Mr. Chairman. There seems -- I want to go to this issue of the local-to-local transmission, and there seems to be some agreement on the panel that -- at least among Mr. Gabrielli and Mr. Ergen that it's a good goal to try to carry these channels if they have local content.
Mr. Gabrielli, I'd like to ask you, how many of the channels you are being asked to carry under the local-to-local do not have local content?
MR. GABRIELLI: Offhand, I really -- I don't know, I know there is --
REP. DEGETTE: Can you give me a percentage? Is it a large percentage?
ABRIELLI: It's a significant percentage. I would say 30 percent of the channels are --
REP. DEGETTE: Thirty percent of the local channels have no local content?
MR. GABRIELLI: That would just be a guess from dealing with --
REP. DEGETTE: Why is that? Is it channels that are being rebroadcast?
MR. GABRIELLI: For a large majority, yes. The shopping channels that Mr. Ergen talked about, certainly these channels are just strictly delivered by satellite to a facility, and just rebroadcasted out to that local channel.
REP. DEGETTE: Mr. Ergen, would you agree with that percentage, 30 percent?
MR. ERGEN: The channels that have no local content is between 15 and 20 percent.
REP. DEGETTE: Fifteen and 20 percent. Okay. And does that provide a real burden on you folk, because I know you share their goal if it's truly a local content, and you want to be able to rebroadcast that right?
MR. ERGEN: Well, I agree with Congressman Stupak that we'd be much better off to free up that 15 of 20 percent of channels that have no local content, and go get Marquette and get them up on the satellite and --
REP. DEGETTE: Right.
MR. ERGEN: And some of these other locations -- the other 33 markets that we don't do today.
REP. DEGETTE: So that's --
MR. ERGEN: To me, that's an economic tradeoff where the local broadcaster suffers zero, and the 33 markets that we don't do today get a great benefit, and then therefore the consumer gets a great benefit.
REP. DEGETTE: Yes, I hear what you're saying, and that kind of goes to the heart of the issue, how are you going to determine and who determines whether there is local content?
MR. ERGEN: My suggestion would be that probably the broadcasters submit their -- to the FCC or so forth and they determine -- and beside the cutoff that you're allocated is just as they define in network today. I believe the FCC could define a local content hurdle, so that would --
REP. DEGETTE: Okay. So you think it should be up to the FCC?
MR. ERGEN: I mean I prefer this committee do it, but I think that the actual expert now would probably be FCC.
REP. DEGETTE: What's the determining charge do it -- of determining that? I wanted to ask you Mr. Rowland -- I want you to -- ask you to comment on that, because it seems to me to make sense on the one hand to require transmission of shows truly with local content, but if you have these retransmitted shows that don't have any local content that seems to be cluttering up the problem, what's your response to that? ROWLAND: Well I think from a public television standpoint there is a tremendous amount of local content in all of the licensees. The stations across the country are not just retransmitters of the PBS signal.
REP. DEGETTE: So I don't think that that's the problem that Mr. Gabrielli and Mr. Ergen are identifying that was the -- there is a different problem they see with that, what I would get to in a minute, but what they are saying is, there's a lot of other shows, shopping shows, and other shows that have no local content, but they are being asked to -- I mean for example with Colorado Public Broadcasting, if they were transmitting that, sure they might have some of the national PBS shows.
But they would also be substantial local content. So I think you'd be, okay. What about these shows that are just being rebroadcast by local TV stations that really don't have any local content at all?
MR. ROWLAND: Yes, that is a very difficult issue and I don't have a real clear sense of the dimensions of that problem.
REP. DEGETTE: Well as Mr. Ergen just said it's 15 to 20 percent.
MR. ROWLAND: Yes. I haven't seen the statistics on that and I have looked at it a little more closely.
REP. DEGETTE: What's the view of the public broadcast systems, I don't know if you are here representing them or just Colorado Public Broadcasting, but of that 15 to 20 percent, what would your view be, if we could somehow find some standard to take that out, wouldn't that free up space for you folks to get broadcast?
MR. ROWLAND: Yes, it might.
REP. DEGETTE: Have you thought about that issue?
MR. ROWLAND: No I haven't so.
REP. DEGETTE: Then that might be worth doing that. What about this point that Mr. Gabrielli was making about it's not just public broadcast system, but it's also high-definition and then there's all of these sub-stations. I didn't really understand that issue so much. Is that something that the public broadcasting system is shooting for?
MR. ROWLAND: Well I think what has happened of course is that this digital has advanced and it's always a moving target. Its dynamic is changing with compression technologies. We're no longer in a world of a single HD channel opportunity any longer. You can get more multicast capacity. And many of those are very, very valuable.
So to think of them as sub-channels sometimes, demeans them when, in fact, they are very, very important in the eyes of the viewers who use them. And I think that's what we're talking about, is broadening out the range of the multicast stream capacity.
REP. DEGETTE: Well, so that's a very interesting question then. And that question is, as we broaden out the HD capacity of the local shows and the public broadcasting, how much of that should these folks be required to carry?
MR. GABRIELLI: Well, I think, ultimately, the objective would be to have as much as we are otherwise putting out over our free over- the- air transmitters, in fact, the full 19.4 megabits capacity that we have.
REP. DEGETTE: Mr. Ergen, what's your view on that?
MR. ERGEN: Well, you guys put a really good question there.
REP. DEGETTE: Thanks.
MR. ERGEN: To tell you, the technology, that 19.4 megabits could be 15 channels. And so, I don't think it's realistic to pass a legislation that will require cable and satellite and phone broadcaster companies to retransmit 10 or 12 or 15 PBS sub-channels.
We are supportive of the core PBS signal, and we do believe it does in almost every case, have a lot of local content and needs the local fundraising. So we are very supportive of the national PBS -- main PBS, but the multicast is not a requirement that anybody has burdened us with today and we would be against that.
REP. DEGETTE: Mr. Rowland, what's your response to that? Does is -- that you should really look at the number of channels, not the number of --
MR. ROWLAND: Yes, and evaluate the services that are being provided. In Colorado, as you know, we've got two public television stations. Traditionally, in the analog world, they've been quite differentiated from one another. They have been value-added in the public broadcasting firmament of television services.
Between us now, we offer six multicast streams that are all differentiated from one another, ranging from Latino-oriented programming, through to international news and public affairs. That together adds up to a considerable services, not otherwise available in the market.
And so, it seems reasonable to argue that those services should be made available.
REP. DEGETTE: Yes. You didn't exactly answer that, but I get the sense that, frankly, the public broadcasters and the company shares sort of some of the core values, and the question is, how do we make it work?
So I will reiterate, at least, for my own industries what I did before, which is why I would be happy to convene a meeting of you folks to talk about what we should do and if there's some kind of resolution. I had done that before that never came about.
MR. ROWLAND: We would relish that.
REP. DEGETTE: Thank you.
MR. ROWLAND: And just understand -- we understand there are some capacity issues in the PBS world.
REP. DEGETTE: Right.
MR. ROWLAND: And we're willing to work around that, we have with DIRECTV already.
REP. DEGETTE: Thank you.
REP. BOUCHER: Thank you very much, Ms. DeGette.
The gentleman from Georgia, Mr. Deal, is recognized with five minutes.
REP. DEAL: Thank you, Mr. Chairman. There are issues here that some people want to talk about, some people don't.
Mr. Franks, I was somewhat amazed when you made the pronouncement that the DMAs and the retransmission consent are not broken and we shouldn't tamper with it and that a straight reauthorization is what this committee should be dealing with.
I'm sure that was spoken with the same conviction that King George dismissed the taxation without representation of our early colonial revolutionaries. It is a statement of a monopolist.
Now, I'm more inclined to agree with Ms. Sohn's analysis here that retransmission is tied into it. And I know the chairman would prefer us not to get into that, but apparently your panelists didn't have that information, because almost all of them in some form or fashion have mentioned it. And I think ultimately it is one of those things we have to deal with.
So let me talk about some of the other issues. Mr. Yager, what percentage of the viewing population, of your broadcasters, receive their signal now over-the-air?
MR. YAGER: Well, it varies by market.
REP. DEAL: Well, average overall. Now, I'm told that the 2006 FCC study showed that it was about 15 percent.
MR. YAGER: That's probably a good average.
REP. DEAL: Do you expect that percentage to increase or decrease with the digital transition?
MR. YAGER: I'm hoping it decreases.
REP. DEAL: All right. So less and less people are going to get their signal from your broadcasters free of charge. They're going to have to go through some of these other mediums, cable, etcetera.
MR. YAGER: Well, no. The over-the-air signal will still be very, very strong, and I think it will be superior in digital than it has been in analog. DEAL: But you said it was going to decrease in percentage of viewers.
MR. YAGER: Well, I think that's true because, right now, the preferred delivering message for digital has been through cable and satellite. But as we get the converter boxes out, as we see more conversion to digital on the part of the home set, I think you'll see about the same kind of 15, 16 percent.
REP. DEAL: So you think it may go up then? I thought you just said a minute ago it would go down.
MR. YAGER: What I'm really saying is I think it will go down because second sets are not included in anything we're doing.
REP. DEAL: Okay. You like the DMA system, is that right? You like what DMAs give you in terms of protection?
MR. YAGER: I believe in the DMA system as a way to designate a marketing area where there's kind of a commonality of interest of the people that serve.
REP. DEAL: Well, that's all well and good, but over the years, it doesn't serve the needs of constituents and the DMAs. What are your broadcasters doing to increase or enhance the ability to reach those viewers without the necessity of going through some of the multichannel providers?
MR. YAGER: I am sorry. I'm not quite sure I understand question.
REP. DEAL: Well, there are places in my district, and I think everybody we've heard from, places in their district they can't get your broadcaster signal over-the-air.
Now, going to digital may or may not enhance that spread. In fact, I'm inclined that may decrease it rather than increase it. If you are not doing anything to enhance the ability to expand the over- the-air, why would you object to us looking at the issue of DMAs as to the problems they present?
MR. YAGER: Well, we think first of all that local-into-local will solve, is the problem of people not being able to get a signal.
REP. DEAL: All right. Let me ask --
MR. FRANKS: Mr. Deal, may I interrupt? You may not hold my opinion in high regard, but I would like to express it.
REP. DEAL: Maybe you can enhance my opinion.
MR. FRANKS: I will try valiantly. Actually, we're spending hundreds of millions of dollars on the digital transition to try and perfect that signal. In many instances we're still not on the designated channel. But well beyond, we're not at the tower height.
So, as soon as we do make those switches, we know for a fact that KCBS in Los Angeles is not going to as easily reach the full market as the KCBS analog.
We're prepared to spend millions of dollars trying to enhance that signal, change the antenna height, if need be, go to translators and repeaters so that we do -- it's in our interest. We do better in over-the-air homes. We get higher ratings in over-the-air homes.
So it's very much in our effort --
REP. DEAL: But you don't get the retransmission money?
MR. FRANKS: You know what? I would happily go back to a three channel universe, no retransmission. That was a wonderful business, congressman, and I'd go back.
REP. DEAL: All right. Well, let me ask you this. I don't think we're going back to that.
MR. FRANKS: I swear off retrans. If we could back to an over- the- air regime; purely over-the-air.
REP. DEAL: We may go to a consideration of allowing some of your CBS affiliates to cross the DMA boundaries.
MR. FRANKS: They can do it today. I keep hearing this concern about local news. I grew up -- well, the map's not -- I grew up in that corner of Indiana, Michigan City. We were served by the Chicago market. My father commuted to Chicago. So we had an economic affinity with Chicago.
But if there is a desire to bring South Bend news into Michigan City -- that can be done today. It can be done this afternoon with no change to the law, no change to regulation.
REP. DEAL: So you are saying then the issue of joining DMAs or in- state DMAs crossing those lines is not an issue?
MR. FRANKS: I think it's only an issue for people who are masquerading either to evade retrans or to bring in competing program, competing network -- a second source of network programming. But what I hear from this committee is that the desire is for news. If the desire is for news that is controlled by the local station, they control the copyright, they can authorize it this afternoon.
MR. : I got to jump in there a little bit. I can't let Mr. Franks get away with that. He is talking just about news and it's not practical. That means we'd be turning on and off that channel six, eight, 10 times a day. It means when a senator runs his political commercial, you don't get it across state lines. And we obviously know people think about the weather and their news and their sports and everything else. So it just doesn't work from a practical point of view.
What Mr. Franks and the broadcasters were saying here is that, "We're not going to build the towers out. So you have to build your satellites and your cable systems and your playing equipment, right, and we want you to build the towers. And then we're going to charge you for the signal on top of that.
And then, in a satellite perspective, you got to pay the fiber cost to get the signal back to your uplink center, right? And we're just going to sit back in one little building and have a signal that we kind of send out to get to you."
And I don't think the economics of that's quite fair and I think you've pointed that out correctly.
REP. DEAL: Thank you, Mr. Chairman.
REP. BOUCHER: Thank you very much, Mr. Deal.
The gentlelady from the Virgin Islands, Ms. Christensen is recognized for seven minutes.
DEL. CHRISTENSEN: Thank you, Mr. Chairman, and I recognize that this is the first hearing of our newly constituted subcommittee. I want to applaud Chairman Waxman for creating it, and thank you, Chairman Boucher and Ranking Member Stearns, for holding this hearing.
What for me, who is new to this depth of the communications world, are very complex issues, as we prepare to reauthorize the Satellite Home Viewer Act.
Hopefully, by the end of this hearing, I will understand why I have to have one TV on satellite and another on cable, so that I can get network as well as local stations and distant programming at home. And also why I have to try to find an excuse not to go home during baseball playoffs, so I won't be bombarded by all of the complaints on why it's blacked out in the U.S. Virgin Islands?
I have a lot to learn, but it's clear that the disparities remain between the satellite and cable providers, and also, importantly, in the ability of consumers based on where they live to have access to programs that they want to see.
It's also clear that we are reauthorizing this act in a time of a changing landscape, in terms of how broadcast programming is provided and the move to digital. So, I want to thank my colleagues and the panel for this baptism by fire, but I'm learning.
Mr. Franks, I'm still trying to get clear on all of the issues around DMA.
MR. FRANKS: It's okay. It's all my --
DEL. CHRISTENSEN: Okay. But as I was reading last night, I guess Mr. Yager also feels similarly too. But I thought that you were the only one that didn't want to change the system. And I just want -- I have a very simple question on that. Is that the position of all of the network stations or is that just CBS?
MR. FRANKS: I can only speak for CBS and the stations we own, congresswoman. I can't speak for the other networks.
DEL. CHRISTENSEN: Okay. Thank you. Ms. Sohn, do you think that being able to obtain regional sports programming is critical to competition in the multichannel video programming distribution marketplace? Or put another way, is a consumer less likely to subscribe to services of a MVPD provider if the services don't include regional sports programming?
There isn't any substitute for that is there or is this is a situation that's harmful to consumers?
MS. SOHN: Well, absolutely. I mean I'm a huge sports fan. So I can safely say that when viewers can't see their local sports teams, they are harmed. And it might make them more or less inclined to buy service from an MVPD. So, absolutely.
Unfortunately, the one entity that's missing from this panel are the sports leagues themselves because they have an awful lot of power to say yes or no to an MVPD carrying their programming. It is a shame that we don't have anybody from the NFL or Major League Baseball here to talk about that.
DEL. CHRISTENSEN: Then I could ask them my question about the Virgin Islands too? Thank you.
Who's from cable, not the cable witness, okay? Well, to Mr. Gabrielli and Mr. Ergen, one of the problems that occurred in the past with satellite operators was around the issue of the underserved homes and how program was or was not provided to them.
You've got -- satellite TV is advocated -- adopting a policy whereby satellite operators would be permitted to offer a distant high-definition digital signal to consumers who currently only have access to local over-the-year HD signals.
Given our past history with the satellite television industry that I referred to what if this stops the industry from trying to -- I don't know what word to use -- poach or just get around this with local broadcast stations subscribers?
MR. ERGEN: Okay. I think, again, the reason for a distant network signal is to deliver to a customer a service that he can't get locally. We carry a lot of markets in HD as DISH Network does, and in those markets, if we offer HD locally, they get HD locally, we don't offer distant.
In places where either we don't carry it or a station is not yet HD, and our customer wants HD, we feel it right that we should offer him HD and we had agreements way before, we started offering HD locally that we turned on a number of networks for customers because we were the only national carrier.
As those markets became local HD markets, we've turned off those customers. And the number of different network service subscribers has decreased, not because of them reaching over-the-air broadcast, but because we carry both the SD and HD versions, and as we do that we'll turn off the distant networks.
DEL. CHRISTENSEN: Okay. Ms. Sohn or anyone else who might want to answer this, I'm informed that the Communication Act permits cable companies to refuse permit access to certain programming if it's provided terrestrially, the so-called terrestrial loophole.
It seems that the FCC thinks the current law prevents it from taking action on this, is the commission right or -- and do you think -- would you recommend the fix as we reauthorize this act?
MS. SOHN: Well I would love to see Congress close the terrestrial loophole. There is an ambiguity as to whether an MVPD can avoid the program access rules by sending programming terrestrially, as opposed to via satellite, because the 1992 Cable Act says that, if a vertically integrated cable operator sending programming via satellite does not make that programming available on reasonable and non- discriminatory terms, then somebody can file a program access complaint to the FCC.
But because at the time the Cable Act was passed, it wasn't -- the programming wasn't sent terrestrially, it was sent via satellite. So therefore, Congress used those words, I think not recognizing that the technology would change, which is of course a good warning to Congress when they do pass laws to try to be as technologically neutral as possible.
So, that's a long-winded answer to your question to say, I do think that Congress should make it clear that however vertically integrated cable operator provides programming, it should be subject with the program access rules.
DEL. CHRISTENSEN: I don't know if anyone had another comment, I've got about five seconds.
MR. FRANKS: I guess we just agree the same thing; there are only a couple of cases where these loopholes have being used and specifically being used to keep both, the DISH Network and us from carrying that content. There is really no reason for gaining more.
DEL. CHRISTENSEN: Thank you. Thank you Mr. Chairman.
REP. BOUCHER: Thank you very much, Ms. Christensen. The gentlelady from Tennessee, Ms. Blackburn is recognized for five minutes.
REP. BLACKBURN: Thank you, Mr. Chairman and I just have a couple of questions. Mr. Ferree, I want to come first to you. In your testimony you had specifically said that you believe consumers should be permitted to access whatever programming they desire, so long as distributors and right holders can negotiate an agreement in the free market?
(Off mike) -- and you get some of this to me in writing, because what I'd like is for you to elaborate on how you think we could best approach and realize that result, and what recommendations that you may have for improving that DMA system and that would spark an extension of the DBS provided local programming, many of us have talked about rural areas, I specifically mentioned Hardeman County is in my district and the problems that we have there with accessing the program, and that being again a security issue. So I'd love to hear an expansion or an elaboration on those comments from you, if you will. And very briefly, if you want to add one or two points?
MR. FERREE: Well I appreciate the opportunity to do it in writing later, when I've had more of a chance to reflect on the question. The problem with this area is that -- several of the members have mentioned this -- that is an incredibly complex Web of rights and consumer expectations.
And there is no simple way to untangle this Web and just say, okay, I wish there were an ideal simple free marketing and here's how everybody would strike a deal, I don't think --
REP. BLACKBURN: I think Ms. Sohn has an idea or two on that.
MR. FERREE: And I -- in fact I actually was very close on most of these issues. I tend to disagree that it's as easy as unifying the licensing standards between all MVPDs, because one law for the lion and ox is oppression.
You are do not all similarly situated to begin with, and again, I think there'd be tremendous practical difficulties in trying to just come up with a simple unified compulsory license. So I will endeavor to come up with something, but I don't have it for you right now, off the cuff.
REP. BLACKBURN: Okay. Thank you. I appreciate that and I look forward to your response.
Mr. Yager, I want to come to you if I may please, sir. Thank you for your testimony. I know you favor that DMA system and I wonder if you had favored it in a digital world, but the question I really want to ask you goes to what I think is one of the yanks, bedrock principles, which is section 122 of the Copyright Act.
Which gives you a compulsory license for satellite carries to retransmit your programming in a local market and it allows all of you broadcasters to maintain control over that programming to protect those advertising revenues and then to ensure appropriate compensation to you for that signal and its content.
And that makes sense to me and I agree with that, because I think that it is an appropriate intellectual property protection. And using that same logic, what I want to ask you is this: Do you or do you not believe that creators of musical works, deserve that same protection when the terrestrial radio stations broadcast creative content over the air and it's not applying (ph), you would not agree extending that?
And I'd also ask you sir, if you do not think this is a mirror image argument. And why do you think that the cable, satellite and telephone subscription video providers provide similar royalty compensation while the radio broadcasters do not.
MR. YAGER: That's an excellent question congresswoman. Unfortunately, my side of the isle, the national association of broadcasters is television. The side of the isle you are talking about there is radio, and I understand that radio does have hearing coming up in front of maybe this committee or the judiciary.
REP. BLACKBURN: So you not think that they are the same arguments, sir?
MR. YAGER: No, I don't, I think they are quite different.
REP. BLACKBURN: So, you think they are very different intellectual property.
MR. YAGER: I don't really profess to be an expert.
REP. BLACKBURN: Mr. Franks?
MR. FRANKS: If I can speak on behalf of CBS Radio and CBS Television. With all due respect, I think you are making an apples and oranges comparison.
On the television side of things, we spend a great deal of money procuring our programming, procuring that content from which we then seek compensation. In our radio businesses, A -- in TV business we don't have an exclusive right to that program. In our radio -- at our radio stations, the same record is played on seven or eight different stations and it is aggressively pushed by the record companies and by the artists to the stations asking us, "Please, please, to play this station -- to play the music."
Five weeks from now we will broadcast probably the Academy of Country Music Awards. Every one of those winners is going to stand up and say thank you to Country Radio for making their music known.
MS. SOHN: Okay. So here is the question -- I think here is the better question. You ask great questions Ms. Blackburn, but here is a better question. Why does satellite radio play pay public performance royalties to their artists and the recording industry? Why do webcasters who -- lot of whom are going out of business, pay those royalties, but over-the-air broadcasting does not?
That's the comparison that makes absolutely no sense, because those satellite radio and webcasting promote the heck out of music just the same as broadcaster do. And if those two have to pay in my opinion, broadcasters should pay as well.
REP. BLACKBURN: Thank you, ma'am. I yield back.
REP. BOUCHER: Thank you very much, Ms. Blackburn.
The gentleman from the Louisiana, Mr. Melancon is recognized for seven minutes.
REP. MELANCON: Thank you, Mr. Chairman, I appreciate it. Most of my questions have been probably Deal -- Mr. Ergen and Mr. Gabrielli, I have this distinct issue that raised its head around the end of May, and kind of hangs around till November of each year; it's called hurricane season.
And because of that and the alignment of my district along the coast, I kind of live in what I call black zone. They know we're out there, because they want to get TV and such to us, but they don't want to cover our news very much.
I've got a low power station, which I understand creates a dilemma from the standpoint of getting broadcast vis-a-vis satellite. Prior to the storm, this station, low power has been on local cable.
When the storm came, six weeks, he's got a dragline out there with his tower with signal, sending the signal off top of the dragline -- at least he had been for several months until he could get a new tower built.
In the mean time, satellite people came in and started advertising throughout the community, doesn't matter when the power goes down; if you got a generator, you could get TV coverage.
So the only problem is, you couldn't get this low power station. If you went to the tuner, then in fact the tuner is -- if my understanding is correct, only gives him several mile radius, because it's local reception through the satellite. Is that a correct statement?
MR. GABRIELLI: His territory is depicted or controlled by his power.
REP. MELANCON: Yes.
MR. GABRIELLI: So the tuner can pick it up if he's got the power to the tuner.
REP. MELANCON: Okay. On cable, he was carrying approximately several hundred thousand people, who were receiving in his -- on the cable network that he has been carried on.
When the storms hit, the satellite company's guys said, we can get you all your stations, but in fact couldn't provide them. My dilemma is, I've got this black area that's in between Lafayette, Louisiana and New Orleans, Louisiana and Baton Rouge, Louisiana and none of them reported what was going on down there on a daily basis.
Which people who had evacuated, want to know when they can come back, how they can get back, what the circumstances were. And let me just say Mr. Gabrielli your have people -- we've been working with them, talking to them, trying to figure out some ways in serving your people to see if there's some help.
Is there something that can be done in this reauthorization that provides for a station, that provides more public service, and 100 percent local content to the community in which I am, that New Orleans doesn't help them, Baton Rouge doesn't help them other than for network coverage stuff -- and Lafayette doesn't even get there.
Is there anything that we can do in this field that allows for me to help this -- it's a business to this guy, but it is an information source to several hundred thousand people that I can inject into this bill that will allow us to get them onto satellite or some mechanism where those people will be able to get the information particularly after disasters or hurricanes have been through?
MR. ERGEN: You bring up a really good point. And as I've said in my testimony -- and in answer to previous question -- I think the best thing you could do is relax the must-carry obligation on cable and satellite broadcasters and eliminate any kind of must-carry agreement where there is not local content flowed by the local broadcaster.
In your situation it's just the opposite your local broadcaster provides a 100 percent local broadcasting and can't get carriage. He's been bumped off the satellite by somebody who doesn't have any local carriage at all, because they are a bigger company or part of the big conglomerate or whatever.
And the way the law is situated today it doesn't make the -- doesn't recognize the value of the local broadcaster that you have in your situation. So that's what I would recommend.
MR. GABRIELLI: And yes, but the limiting resource for both of our companies is really the satellite capacity.
MR. ERGEN: Right.
MR. GABRIELLI: It takes three years to build and launch a satellite $250 million and they are up there for a long time. It's not like you can launch them every couple of years to update the capacity, so that is our limiting resource.
In this case it's -- Mr. Ergen is probably right, there's a full power shopping channel New Orleans, that we have to carry and we can't -- no longer have the capacity to carry a truly local station like yours.
So not having that mass must-carry for those non-local stations like that, freeze up the capacity where we can now pick up these truly local stations that fit within existing spot beam capacity.
REP. MELANCON: Now, is that your prerogative on the must-carry? Or can you take the option QVC --
MR. GABRIELLI: No there's no option there. If that's full power QVC station, New Orleans says carry me we have to carry it.
REP. MELANCON: The local tuner as I appreciate is just like a local adapter with rabbit ears if he would. I have a -- (inaudible) -- camp 15 miles from this place, I can get the station.
I live 30 miles away I can't get the station and of course 30 to 50 miles is where all the people have going to -- moved away after the hurricane.
Is there some other technology that's out there that vis-a-vis the DISH Networks, the DIRECTV network -- satellite actually that might be able to give them more distance this particular station. GABRIELLI: The two options are, well if that's an integrated tuner that receives an over-the-air broadcast, if you can add a repeater or a translator to reach farther, our systems will pick it up.
The only other option is to be on the satellite, we need to find the capacity to do that.
REP. MELANCON: Okay. Thank you, Mr. Chairman.
REP. BOUCHER: Thank you very much Mr. Melancon.
The gentleman from Oregon, Mr. Walden is recognized for five minutes.
REP. WALDEN: Thank you very much, Mr. Chairman. To our satellite providers, I'm just curious, again as I mentioned in my opening comments, Bend, Oregon, that's B-E-N-D, Oregon, do not have the local- into-local yet on your services, and I'm curious of two things.
One, if you have a time line, and I don't imagine have every market memorized as to where you stand, but you do local-into-local, it's the second biggest community in my district, but it's also a rural district. So a lot of people use your services and I'm just curious if you have a timeline there?
And second, on that similar point, I understand that you will go or assist in terms of putting up an antenna for people to receive the local signal, and then it comes seamlessly through, in-effect, the tuner. And I'm curious, how you market that? What kind of awareness there is, in terms of your marketing strategies for that service? I don't think people are fully aware how that works.
MR. : When customer calls us we know by his phone number approximately where he lives. And in those markets, we don't offer a local solution, we do tell them we have another off-air solution that's integrated with it. I'm very familiar with Bend. I'm an Oregon State grad, so I know about this.
REP. WALDEN: You seem to have turned out okay, despite that.
MR. : Yes. You must be (inaudible).
REP. WALDEN: As an old grad. The Duck/Beaver rivalry.
MR. : Yes. There is a station in Eugene, a guy calls me probably every other month and asks the same question. And with Bend, it's an interesting marketing because when I first started, there was I think one local station. And then when the stations or other stations went to digital now and said, well instead of now just being a Fox there on my digital secondary channels, I'm going to be an NBC and a CBS.
And so, now I have rights (ph). Instead of being one station, I'd have to worry about one seat in the bus. Now, I have to worry about more seats. So that really kind of complicated situation of -- he was for years thinking of, okay, we'll find us one seat available for Bend, oops, now it's three seats. WALDEN: Now it's three. Delay has its cost, Mr. Ergen.
MR. ERGEN: Thank you. We recognized that Bend now has all -- the sub-carriers of all four networks, and so we have under construction a satellite that will allow local-to-local in Bend, Oregon in January of next year. So as we sit here next year, year from now, when I see you with our kids at college (inaudible), then we'll hopefully be celebrating the launch of Bend.
REP. WALDEN: That's terrific, I'll be happy to help for it to switch. Mr. Yager, and I appreciate that, and there's good example role model to your left. Mr. Yager, talk to me about DTV in the remaining two minutes I have. Medford market shifted except one station, (inaudible) my district shifted, we didn't get a single phone call. Do you know -- did any of your stations -- ?
MR. YAGER: None of ours shifted. We did apply for a couple of shifts. We were turned down by the FCC.
REP. WALDEN: Really.
MR. YAGER: Yes. For whatever reason, they didn't want all the stations in the market. In one of our markets, Quincy, Illinois, which is not far from Congressman Shimkus' district, one station did go, we did not.
REP. WALDEN: I understood that the FCC had decided on that policy, Mr. Chairman, I'd be curious -- I don't know if you are planning a hearing on this DTV, what I mean post --
REP. BOUCHER: Will the gentlemen yield?
REP. WALDEN: Yes.
REP. BOUCHER: Thank you, for yielding. We do indeed intend to have an oversight hearing on the DTV transition. We will probably wait until such point in time as the new money in the stimulus bill has made its way into the system, and the converter box program, the coupon program has been reenergized with those new funds.
So it will not be the most immediate thing that we do. But certainly in the spring of this year, well before the June 12 transition date, we will have an oversight hearing on that. Thank you, gentleman, for yielding.
REP. WALDEN: And I'm glad we're going to do the hearing. I would actually argue just the opposite, maybe it's because I'm now sinking with our new President who wants us to reduce spending where we can. Maybe if this transition worked okay and the markets were to occur, we wouldn't need to spend all that money and this would be a great place and time to save.
One other comment -- and Mr. Yager maybe you can address this fairness doctrine. Congressman Pence and I succeeded in getting an amendment in to prevent the FCC from using its funds to promulgate some versions of fairness doctrine.
I understand in the Omnibus Bill that we're about to bode on, that that restriction has been stripped out.
And so now the FCC, if this is the case, could use their funds to promulgate fairness doctrine or some, it won't come up under those terms, it will be called something else if they do it. Is that a concern you have, and do you think it should apply to cable and satellite if it does come back?
MR. YAGER: It will.
REP. WALDEN: It's a major concern to me and I hope it doesn't come back, and if it doesn't apply to us, then it certainly shouldn't apply to cable or satellite.
REP. BOUCHER: Gentlemen, from satellite distributors, what's your view on fairness doctrine? Mr. Yager?
MR. YAGER: (Off mike.)
MR. : I also agree.
REP. WALDEN: Thank you. Anybody else who want to comment, even though I've overshot my time?
MS. SOHN: I spent a lot of first part of my career defending the fairness doctrine. I think it's a doctrine whose time has come and passed -- long passed. But that doesn't mean that the whole public trustee doctrine shouldn't be reviewed to see whether broadcasters aren't getting a few too many government (pennies ?).
REP. WALDEN: Really.
MS. SOHN: Yes, including free spectrum, in exchange for not the best local program.
REP. WALDEN: What if you got your spectrum allocation in an auction? Is that free?
MS. SOHN: They don't. They didn't get this -- an allocation on it.
REP. WALDEN: In the radio business they do.
MS. SOHN: What's that?
REP. WALDEN: In the radio business --
MS. SOHN: Broadcaster got the -- get the spectrum for free.
REP. WALDEN: No, no, Ms. Sohn, in the radio, where you have competing applications in market, you go to auction.
MS. SOHN: Okay.
REP. WALDEN: And the highest bidder --
MS. SOHN: Oh, license.
REP. WALDEN: Right.
MS. SOHN: I just think the entire public trustee doctrine needs to be looked at again.
MR. : Well, we are getting a little bit far --
MS. SOHN: Far field.
UNKNOWN: I am just trying to give new ideas.
MS. SOHN: I think the fairness doctrine is a far field but --
REP. BOUCHER: Mr. Walden certainly gets the award for covering the largest number of issues during the course of five minutes in this hearing today. Thank you, Mr. Walden.
The gentleman from California, Mr. -- or is that -- Mr. Buyer is here, yes?
The gentleman from Indiana, Mr. Buyer, is recognized for five minutes.
REP. BUYER: Thank you. First of all, since we are going to bring up other issues, while we are investigating this particular one, a couple of things of note. In Indiana last fall, it appeared that LIN Broadcasting sort of went first out there in the marketplace in the retransmission, negotiations with cable i.e. Comcast, of which LIN Broadcasting in their local, went dark in Indianapolis.
Not a good thing, okay? So when we talk about free market principles in a market that really is also highly regulated, this is really hard, and I don't believe that was very good in the public interest for a station to go dark.
It was one of these things where, who is going to blink first? And I just want you to know that was not a good thing. It was not healthy. So, we -- I guess like to use terms about serving the public interest, that didn't do it at all, that's a CBS affiliate. And so, I got that story of and I kind of hold that thought, because I recognized there are many retransmission agreements that are coming online.
So I don't know what -- if that was sort of posture about what's to occur. And then I noticed that Mr. Franks, I don't want to pick on you, but I had noticed in December, that the -- your CEO of CBS had made some comments about how the model of the network broadcast is changing. you have to change with the landscape. And he talked about, that perhaps even in the future, that the network will move toward cable, and that with regard to all these affiliate agreements, but also they are going to be coming up for renewal here relatively soon, that you are going to cut the affiliates out of the retransmission money to go directly with cable, and then cut out the local broadcasters.
Now, for a lot of members of Congress who have close relationships with their localities, I have a strong curiosity here of what are those interests? So we can talk about the spirit of this hearing today about trying to get the local programming, while there are some big issues out there in front of us.
So I almost got a sense that -- I don't want to get lost in the high weeds. So I'm going to do my opening, and ask you Mr. Franks, if you could sort of explain what your boss meant.
MR. FRANKS: Well first, Congressman, he was asked a hypothetical question, and he gave a --
REP. BUYER: That's dangerous. Oh yes.
MR. FRANKS: I'd be happy to send to you the full context of the question and the answer, because it has been reported in a number of places as if it was something that was being contemplated in the very near term, and I think his answer made clear, that this is something that may happen over the course of 10 or 15 years.
I mean, local broadcasting, we own a number of stations, so -- they are amongst the most valuable assets of the corporation. So the notion that we are going to abandon any time soon, local broadcasting, is I think counterintuitive. So he was responding to a hypothetical. And in fact, we continue to support our affiliates there -- any number of legislative arenas, maybe even this one, where we could take a more selfish course than we do, we do not do that, because we believe in the system, we believe in our local affiliates, our network is a four- and-a-half billion dollar business that we are not going to walk away from quickly.
REP. BUYER: And what if it -- would this article have been accurate that you want a percentage of the retransmission fees from the local broadcaster?
MR. FRANKS: Other networks have talked about that. I mean, a large part of what drives the retransmission consent value is the national programming. And in order to compete for the NFL, in order to compete for March Madness, we spend billions of dollars; and we may need help from our affiliates, we may need a share of their retransmission consent money, in order to remain competitive for those rights.
REP. BUYER: Okay. They're out there in tough negotiations.
I mean, we'll take the Indianapolis for example --
MR. FRANKS: And two months later we reached an agreement with Time Warner, and the LIN situation was -- it was unfortunate for the network. It hurt the networks ratings. So we were monitoring it very closely, but we also respected LIN's right. It is their right. We didn't big foot them. We didn't cut them off. They are the licensee, and under the law, they have the retransmission consent right. What deal we then negotiate with them, in an affiliation agreement, is a matter between us and LIN.
REP. BUYER: All right. I know my time has exhausted. May I --
MR. : (Inaudible.)
REP. BUYER: Mr. Chairman, may I ask a quick one more?
REP. BOUCHER: Go ahead, Mr. Buyer.
REP. BUYER: I want to now I am going to pull back into the stream market. I'm well aware that the CBS affiliate through LIN Broadcasting, which was the Lafayette, finally after many years had learned that there really were no legal ramifications as to why an affiliate in Illinois could sort of block that signal.
And I appreciate Mr. Gabrielli for you to finally get this negotiated and on line. But as of curiosity, if we're willing to say, okay, really don't do this Stupak bill, let the marketplace work.
But why then, Mr. Ergen, would you then get on board and do the very same thing that DIRECTV is doing in Lafayette. This is almost 150,000 households, so don't give me the 1400 household answer?
MR. ERGEN: Yes, it's a unique problem to DISH Network. We don't have a compulsory license to bring in -- I think in Lafayette there's a CBS affiliate. But they are an ABC -- there is not an ABC, NBC, or CBS that's what we call a short market. We don't have the license to bring in those networks.
So just to have one station and go to expense for one station, without the ability to bring in the other markets. DIRECTV does have a license, so they can bring in any other one. So that's why we haven't done it.
REP. BUYER: So that's a money answer?
MR. ERGEN: No, it's a regulatory -- it's an issue where we -- after a long court battle, we don't have a license so do it. So if that doesn't get -- if we had a license to do it, then the economics would make sense for us.
REP. BUYER: Can we let Mr. Franks answer, and then I'm done.
MR. FRANKS: It's a little off point, so you may be sorry that you let me back in. But in the context of all the talk about DMA reform, I understand the problem of the short markets. I truly do, I understand Lafayette, I am for Michigan City. But why it is then preferable to bring in our station from New York to Lafayette, as opposed to figuring out a way to bring the Indianapolis stations into Lafayette.
Here we're talking about -- we need more help on getting in-state signals, and then you're going to bring in New York City. I understand the attractiveness of providing the network programming. But it sure isn't localism.
REP. BOUCHER: On that note thank you Mr. Buyer. Thank you, members of the panel for what has been a very constructive and informative conversation. We will be having further discussions with each of you, I'm sure, as we construct the legislation. And members of this panel will perhaps be sending some additional questions to you. In fact, if with Mr. Stearns' consent, I will ask unanimous consent that all members of the subcommittee have the opportunity to propound in writing questions to the witnesses for a period of, shall we say, 10 days. So without objection, and you probably will be getting questions from a number of our witnesses.
So your responses today have been very helpful to us. This has been a truly constructive discussion. And when you get questions sent by members of the panels, please the return the answers as quickly as you can.
With the of the chair to all participants, this hearing is adjourned.