Hearing of the Senate Judiciary Committee - Ensuring Television Carriage in the Digital Age

Hearing of the Senate Judiciary Committee - Ensuring Television Carriage in the Digital Age

CHAIRED BY: SENATOR PATRICK J. LEAHY (D-VT)

WITNESSES: CHARLIE ERGEN, CHAIRMAN AND CEO, DISH NETWORK, L.L.C., ENGLEWOOD, CO; K. JAMES YAGER, CEO, BARRINGTON BROADCASTING GROUP, L.L.C., NAB TELEVISION BOARD CHAIR, HOFFMAN ESTATES, IL; MARTIN D. FRANKS, EXECUTIVE VICE PRESIDENT, POLICY, PLANNING AND GOVERNMENT RELATIONS, CBS CORPORATION, NEW YORK, NY; DAVID L. COHEN, EXECUTIVE VICE PRESIDENT, COMCAST CORPORATION, PHILADELPHIA, PA; ROBERT M. HARTWELL, VERMONT STATE SENATOR, BENNINGTON DISTRICT, MANCHESTER CENTER, VT.

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SEN. LEAHY: Good to see everybody here. We seem to have some interest in this hearing, and I thank you all for coming. Last week in Vermont our broadcast television stations turned off their analog signals and began broadcasting only in digital. And by June 13th, of course, all the television stations across the country will have completed this transition.

And with the digital era upon us, consumers are, of course, given the video content in ways that were unimaginable just a couple decades ago. Network programs are available online. Consumers are increasingly viewing broadcast television stations through cable and satellite systems rather than using an antenna. Congress has facilitated the growth of the cable and satellite industries by providing a statutory license to retransmit broadcast television to consumers. And we all know -- and I think why the interest in is -- that parts of that license expired this year, important parts.

Congress first passed the Satellite Home Viewer Act in 1988. With each reauthorization we sought to improve it in a manner that protects content owners, but also improves the ability of consumers to access local television stations. In 1999, I introduced legislation with Senator Kohl and Senator Hatch and others that led to the creation of a license for satellite companies to provide local cast stations in local markets for the first time.

The provision has been tremendously successful. Both DISH Network and DirecTV use this license to provide local service in Vermont. I thank them for making their service available. I live in a rural area in Vermont. Nearest neighbor is a half a mile away, and it -- I have what is sometimes referred to as the state flower in Vermont, the satellite dish on my roof.

The local television plays a key role in cities and towns across the country. Local television, of course, provides relevant news and weather, sports. It's the place where people hear first of emergencies in the area and helps create a sense of community.

Now, I appreciate that Bob Hartwell is here from Vermont to testify today. He's a state senator from Bennington County, which is in the southwest corner of our state. He can talk about the importance of receiving home state television stations. Bennington County is one of two countries in Southern Vermont that -- not considered part of the Burlington television market where our -- area where our three major television stations -- now a fourth -- are located.

Residents in Bennington were unable to receive the local Vermont broadcast stations by satellite for many years during the 2004 reauthorization. I included a provision that made it possible for the Southern Vermont counties to receive Vermont stations by satellite. Senator Hartwell knows firsthand that for a Bennington County resident seeing news of a fire in Cliffton Park, New York is not seeing the same news for Rutland, Vermont or Bennington, Vermont.

So the provision (that I ?) put in to help to keep Vermonters in all corners of the state connected -- I appreciate that DirecTV took advantage of it to serve Southern Vermonters, but there's still more to do. For instance, DISH is currently not allowed to provide this service. And I understand that other states have similar issues in which residents are unable to access stations from their home states.

A healthy satellite industry promotes competition between video providers, benefits consumers across the country. And it's particularly important in rural areas that they not be out of reach of broadcast television and even cable access. They are, of course, in these rural areas. I could not receive our Vermont stations with an antenna, and I'm very typical of many, many Vermonters. And cable would not be available because of the lack of density in the area I live in.

So we have satellite that fills that role. We are not a -- we are not flat in Vermont, and the topography blocks other signals. But a healthy satellite and a healthy cable industry take on a renewed importance because of the digital television transition, which has left many consumers unable to access stations over the air. So we're going to need to refocus on modernizing and simplifying the licenses for the digital age.

The United States Copyright Office released a report last summer that made recommendations for updating these licenses. One of their recommendations harmonize the satellite and cable licenses, which currently operate very differently, and I'm interested in hearing the views on how that's going to affect competition. And I look forward to working with the senators on this committee and a number of other committees that have jurisdiction to bring out legislation that's going to improve service to consumers, but it's also going to allow cable and satellite providers and broadcast television stations and content creators to thrive in the digital age, because if they all do well, then the consumers do well.

Senator Specter.

SEN. ARLEN SPECTER (R-PA): Thank you, Mr. Chairman. This is a very important hearing to ensure television coverage in the digital age, and we find that people are relying more and more upon satellite and cable. This committee has delved very deeply into a number of collateral issues relating to the controversies between the National Football League and the cable companies. And I've been concerned about arrangements where fans in the local areas of -- The Eagles and the Steelers, the two pro teams in my state -- have been denied access because of complexities.

And I don't know that this legislation will provide any opportunity to deal with those subjects, but candidly, I've been looking for a vehicle which would address those matters. Disconcerting with the high intensity of interest in the really premiere teams like the Steelers and the Eagles that they're denied coverage.

But we're dealing with some very, very technical subjects here. While cable and satellite providers may enter into private agreements with broadcasters for retransmission -- in the absence of the agreements that's governed by the Copyright Act. And these licenses are very important to enable cable and satellite providers to retransmit over the air broadcast without obtaining the broadcaster's permission with the compensation provided by the statute.

Our inner workings of the Congress make it complicated because there's jurisdiction, both by this committee and the Commerce Committee, which means you have to go to four hearings, two in the House and two in the Senate. But at least you're covered by C-SPAN, so what you say here will be carried far and wide.

Senator Leahy and I have a special spot reserved on C-SPAN. They put us on at 3:00a.m. So he and I have a --

SEN. LEAHY: (Laughs.)

SEN. SPECTER: -- tremendous following among America's insomniacs. (Laughter.) We'll be watching this very closely. I regret that I'm going to have to excuse myself early to join the Environment and Public Works Committee where we're pushing ahead to try to find a legislative answer to global warming at an early stage, but I'm leaving behind Ryan Triplett (ph) in company with some very high-powered lawyers on the Hill, knows more about this subject than anybody else. I want to give a special word of greeting to David Cohen, who's executive vice president of Comcast and a longstanding friend, real activist in community affairs and commercial affairs.

MR. DAVID COHEN: Thank you.

SEN. SPECTER: Thank you, Mr. Chairman.

SEN. LEAHY: Thank you. Thank you very much. And unfortunate -- is -- so Senator Specter was referring to -- everybody has about five different committees going on at once, and I -- but I -- Senator Specter and I always work together in putting up the agenda for this committee, so I appreciate you being here.

Senator Kohl, did you want to say a -- (inaudible) --

SEN. HERB KOHL (D-WI): Yes, just a word or two. Thank you, Mr. Chairman, for holding this hearing as we revisit the Satellite Home Viewer Act. The simple goal of this law at the time we passed it was to level the playing field between satellite and cable companies in order to give consumers greater choice and better value. Now that satellite has established itself in many markets as a competitor to cable, it's essential that we reauthorize parts of the law that are set to expire at the end of this year. Where necessary, we should take stock of the changes that have occurred over the past five years to see whether adjustments are necessary to enhance and expand competition between cable and satellite.

I look forward to continue working with you, Mr. Chairman, as we have each of the last two times this bill was considered as we reauthorize and improve the Satellite Home Viewer Act. I want to thank the witnesses for being here. I also have to leave because I'm chairing a hearing in the Aging Committee, but it is a delight to see you, and I've enjoyed working with you over the years. Thank you so much.

SEN. LEAHY: Be careful, and those of us who are aging -- Senator Kohl, I do appreciate -- (laughs) -- that.

SEN. KOHL: (Off-mike.)

SEN. LEAHY: (Laughs.) Our first witness is going to be Charlie Ergen. He's the founder, chairman and CEO of DISH Network. And what I'm going to do is ask each one of -- I'll introduce each one of you separately, and if you testify -- and then we'll -- I'll ask questions afterward.

But he is the founder and he's the chairman and CEO of DISH Network, is one of the nation's largest satellite television companies. He founded the original company, EchoStar, in 1980, as I recall, and launched DISH Network in 1996. He's the co-founder of the Satellite Broadcasting Communications Association. He was named one of the world's best CEOs by Barron's Magazine in 2007, named the Forbes Magazine's top ten CEO list, received his bachelor's degree from the University of Tennessee, holds an MBA from the Babcock Graduate School of Management at Wake Forest University.

And Mr. Ergen, please go ahead, sir.

MR. ERGEN: Thank you. Chairman Leahy, Ranking Specter, and members of the committee, I appreciate the opportunity to testify today. My name is Charlie Ergen. I'm the chairman and CEO of DISH Network, the nation's third largest pay TV provider.

The Copyright Office has provided this committee with a roadmap for updating the cable and satellite compulsory copyright licenses to reflect the changing video landscape. We agree at the Copyright Office that the digital age has arrived, and the laws need to catch up. I'd like to highlight three issues from the 2008 Copyright Report.

First, the separate cable and satellite copyright regimes no longer make sense. We compete with the same -- for the same customers, and we should have the same rules. Second, many consumers cannot get local news and sports in their home state because of the way local markets are defined. And third, many rural communities are missing one or more of the four major networks. In addition, Congress should also address the interrelated issues of retransmission consent and must carry when updating the compulsory copyright licenses this year.

With respect to the first issue, the Copyright Office recommended enfolding the existing licenses into a unitary digital copyright license to reflect the changes in technology and place all providers in the same level playing field. We support that approach. Specifically, a unitary license for all pay TV providers would ensure that all consumers get the services they need in a digital world in a manner that is fair to copyright holders, broadcasters, cable and satellite, and new entrants, such as telcos.

Absent a unified license, we agree with the Copyright Office that there should at least be parity going forward between cable, satellite and telco regimes. Consumers should have the benefit of the same bundle of rights under the law regardless of the pay TV provider they select. It should not be harder for one or more expensive for one pay TV provider to carry a local, significantly viewed, or nearby broadcaster than a rival platform because of distinctions in the copyright law.

With respect to the second issue, the Copyright Office also recognizes the need for DMA reform and enhanced competition between video providers. Citizens living in DMAs that straddle state borders are often denied access to news, weather, and election coverage from their home state. State Senator Hartwell, here today, represents one of -- one such community in Vermont where DMA lines forces constituents to watch local news from the wrong -- from the neighboring state.

Overall, this is an issue in 45 states. As you can see from the map of Iowa, which is over here, depending on where a customer lives, they may get local news from Iowa, Minnesota, Nebraska, South Dakota, or Missouri. This is just one example.

Now, senators have been receiving complaints from their constituents about this concern for many years. Mr. Chairman, you took the lead on this issue five years ago with two DMAs in Vermont and championing -- for two DMAs in Vermont and championing similar effort in additional states. Importantly, these fixes helped consumers and did not cause any actual harm to broadcasters. Building off that forward-looking policy, we recommend a more global DMA fix.

Specifically, a broadcast station from a neighboring DMA should be treated as local for purposes of copyright laws, particularly if it furthers the concept of state unity. With this change, citizens living in DMAs that straddle home borders would no longer be prevented from receiving their local news from their home state.

Third, we agree with the Copyright Office that all consumers should have access to NBC, CBS, ABC and FOX programming. Today, DISH Network provides their local service in 178 markets out of the 210 total, reaching 97 percent of households.

This translates into 1,400 local broadcast stations, which is far more than any other pay TV provider. And most of the remaining markets -- one or more of the big four networks are missing, and so it hasn't been economical-- to provide the service for them. If a local community service is missing a broadcast station, providers should be able to treat a nearby affiliate as the local affiliate under copyright communications law.

And finally, Congress should use this opportunity to examine retransmission consent and must carry given that those issues have been tied to our compulsory license. Technology and competition have come a long way in the last five years, but today there are still multiple TV providers -- today there are multiple pay TV -- paid TV providers in every DMA. Broadcast stations electing retransmission consent hold DISH Network customers hostage as they play their local monopoly off multiple providers to extract huge license fees.

In 2008 alone, consumers lost programming in approximately 15 percent of our markets because of retransmission consent disputes. Yet, the same broadcasters provide their consent -- content for free on the Internet and to those luckily enough to live within the shrinking age -- areas of digital, over-the-air coverage.

Because broadcasters received billions of dollars of spectrum for free, we think the retransmission consent should be free as well. Failing that, we support the creation of a national retransmission consent rate. Satellite providers already pay a fixed rate per copyright (royalty ?) rate, and we see no reason why a similar concept would not work for retransmission consent.

With respect to must carry, we are forced to carry hundreds of must carry stations that have little or no local content. This increases our costs and raises our prices to consumers at a time when consumers need all the disposable income they can get. Must carry stations should be required to earn carriage by airing at least 20 hours of local programming each week. This would be beneficial to consumers and would have no harmful effect on broadcasters that invest in the local markets.

We are in the middle of a digital age that is changing the way people watch TV. It's pretty simple. People want to watch TV anywhere, anytime. The committee put down a marker five years ago to give consumers the flexibility to get truly low content.

Again, thank you for inviting me to testify this morning.

SEN. LEAHY: Thank you very much, Mr. Ergen. I appreciate you being here. James Yager is the chair of the Television Board for the National Association of Broadcasters. He's also the CEO of the Barrington Broadcast Group, which he founded to manage small and midsized market TV stations. Mr. Yager began his broadcasting career in 1960, WISTV in Columbia, South Carolina, and he's held numerous managerial positions in multiple broadcast companies since.

But addition to his role with the NAB and Barrington Broadcasting, Mr. Yager serves on the boards of Broadcast Music Incorporated, Television Operated (Scarcus ?), Maximum Service for Television, graduate of Colgate University.

Yager, we're delighted to have you here. Please go ahead, sir.

MR. YAGER: Well, Mr. Chairman, thank you for that introduction, and members of the committee, I'm delighted to be here today. The chairman has given you my background, so let me just begin by saying 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 will remain widely available to American households, and second, that satellite retransmissions will not jeopardize local television service in any market. Those two goals remain paramount today.

Our Barrington stations keep our communities informed and connected. We work every day 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 programming. We rely on payments from advertisers to deliver a free service to your constituents. Without free, over-the-air television, cable and satellite companies would essentially be unrestrained in their ability to charge subscribers even higher rates.

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 the over-the-air television. While these stations represent a relatively small number of channels of those on cable and satellite system, broadcast stations offer a unique and valuable service to their local markets that could be diminished by unnecessary changes to the law.

As Congress considers updates to SHVERA, it is vital that you uphold and strengthen the tradition of localism. Any changes should not impair the 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 placed with a requirement for local-into-local carriage in all television markets. This would enhance localism, program diversity, price competition, and increase choices for the viewer.

Congress should mandate local-into-local service in every market in the country. There are 31 of the 210 television markets in small and rural areas that satellite companies have chosen not to serve. They have said this is a capacity issue. I believe it is pure and simply a business decision on their part. I am certain that if Congress does not step in, the satellite companies will never provide local service to every market in this country.

Broadcasters have invested a billion dollars and more in making the transition to digital television. So far, there has been little economic return on that investment for broadcasters. Nevertheless, those investments, in my opinion, were in the public interest. The satellite industry's investment in providing local-into-local service to all Americans would also be in the public interest.

Localism is at the forefront of the broadcaster's operations. In emergency situation, it is the broadcaster, not the cable or satellite companies, who is on the scene providing the public with emergency, life saving, and timely information it needs. Localism is not he DNA for business models of either cable or the satellite companies. Some members of Congress have express frustration that their constituents do not have access to in-state, but out-of-market television 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, who has negotiated to have those rights in their markets. Doing so would be inconsistent with the longstanding principle of localism and the carefully balanced system of retransmission consent that is established by Congress to further this principle.

If we import a distant, in-state duplicating signal, it could undercut the retransmission consent rights of an in-market station and seriously erode the local broadcaster's service to the public.

Thank you for giving me the opportunity to testify, and I look forward to answering any questions you might have.

SEN. LEAHY: Thank you very much, and our next witness is Martin Franks, the executive vice president for Planning, Policy and Government Relations with the CBS Corporation. He's responsible for overseeing the corporation's activities in Washington as well as with the state and local government. He also oversees CBS corporate philanthropy.

He joined CBS in 1988 following extensive experience in Washington, including service on the staffs of President Jimmy Carter, Congressman Tony Coelho, as well as having to serve a sentence as my chief of staff for a period of time. He also serves as vice chair of the Board for Advertising Council and Maximum Service Television and is a graduate of Princeton University.

Mr. Franks, please go ahead.

MR. FRANKS: Mr. Chairman, it is a very real pleasure to be working with you once again on an issue of crucial importance to Vermonters.

The industry appreciates your leadership and your efforts to preserve the broadcast network affiliate relationship while promoting competition in today's video marketplace. And CBS will always be grateful to you and Senator Specter for your courage and leadership on S. 852, the FAIR Act in the 109th Congress.

Mr. Chairman, Senator Kaufman, I want to thank the committee for the opportunity to appear and to express CBS's view that the legislative issue on the table today is really a very narrow one; whether to extend satellites' compulsory distance 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 distance 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 retransmissions consent, or DMA modification.

Besides complicating the legislative process, the issues of retransmission consent 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.

Legislating to deal with a very 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.

DMAs are not a governmental creation. Rather, Nielsen groups counties by viewing patterns and the laws of physics and signal propagation rather than geographic boundaries. 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 markets, never anticipating that competing and confusing ads could be coming into the market from a station 100 or even 1,000 miles away.

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 station's 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 face absolutely no restriction in making them available to multi-channel providers in nearby markets looking to augment news programming.

While we are prepared to work on any problem areas where they may be -- (clears throat) -- excuse me -- there may be issues with regard to local and in-state news, please do not fall from 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.

Television broadcasters have the right through the Copyright and Communications Acts 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 in order to be able to deliver the highest quality news, sports, and entertainment programming.

Three weeks from tomorrow, the national phenomenon known as March Madness will tip off. Each year, CBS spends hundreds of millions of dollars just for the rights to the three weeks of March Madness alone. It is a hefty investment, but one that in partnership with the NCAA and our affiliates gives us the right to determine how the content can be distributed in a way that produces a return on that investment and a benefit to American viewers.

That expensive investment in high quality programming pays off. Superior programming generates viewing that helps not only the CBS network in the stations we own, but also our affiliated stations nationwide. High quality network programming benefits local stations because they sell advertising within the network 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 mutually beneficial network affiliate national and local arrangement, of course, is not unique to CBS. It is also enjoyed by the other networks 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 you and the committee for helping to foster today's robust video delivery marketplace where, thanks to vigorous competition, broadcast television is still an integral player deeply valued by American viewers. Thank you.

SEN. LEAHY: Thank you very much. And our next witness -- David Cohen, executive vice president for the Philadelphia-based Comcast Corporation, senior counselor and CEO, well-known to this committee. Prior to joining Comcast, Mr. Cohen was in a partner and chairman at Ballard, Spahr, Andrews and Ingersoll, one of the largest law firms in the country, serves on several distinguished boards and committees, including the Greater Philadelphia Chamber of Commerce where he serves as chairman -- (inaudible) -- Penn Medicine, the trustees at the University of Pennsylvania, bachelor's degree from Swarthmore, and his law degree from the University of Pennsylvania Law School.

Mr. Cohen, it's nice to see you again. Please go ahead, sir.

MR. COHEN: Thank you, Mr. Chairman, and thank you for the opportunity to testify. While acknowledging the slight alteration from Senate protocol, I want to take a small piece of personal witness privilege and say what a pleasure it is to testify before your newest member, who I've had the opportunity to work with for -- on a wide variety of matter for over 20 years, and what a pleasure it is to say Senator Kaufman. So real pleasure to be here and to see you, senator.

SEN. LEAHY: And I'll certainly give extra time for this. I must say also, Mr. Cohen, how glad I am that Senator Kaufman is here, and just -- (inaudible) -- Senator Klobuchar, two new members of this committee. Makes my life a lot easier.

MR. COHEN: Right.

SEN. LEAHY: Please go ahead, sir.

MR. COHEN: Thank you. So I'd like to focus my oral comments today on two basic points relating to the Section 111 Compulsory Copyright License. First, cable's compulsory license works for consumers, for the copyright holders, and for cable. It is still necessary, and it should not be repealed or substantially altered. And second, in light of a recent Copyright Office ruling, cable's compulsory license should be clarified to ensure that royalties are not paid on so-called phantom signals, which I'll describe a little later.

The compulsory license is critical to the cable industry and to our customers and your constituents. Without this license, it would be all but impossible as a practical matter for cable operators to secure the necessary clearances for each copyrighted program included in their cable lineups; an estimated 500 million separate copyrighted programs every year.

With the license, we get these rights, our customers get the programming they expect and value, and the underlying copyright owners get appropriate compensation. In fact, since 1976, the inception of the compulsory license, the cable industry has paid almost $4 billion in royalties, including well over $150 million last year alone.

In a report to Congress last year, the Copyright Office suggested that the compulsory copyright license could be repealed and that some replacement mechanism would likely emerge. I think that's wishful thinking. No better model has emerged anywhere in the world, and as strongly as I believe in free markets, the Cable Compulsory License is meeting the needs of consumers, copyright owners, and cable operators. And so I think we're confronted with a clear case of if it ain't broke, don't fix it.

Another idea that some have raised is whether Congress should consider harmonizing cable's compulsory license with the satellite industry's statutory license.

The cable and satellite license are different -- licenses are different largely because the FCC rules that determine how they can offer broadcast programming are very different. For example, cable operators are required to put all broadcast signals on the basic tier and make every subscriber buy that tier. That requirement doesn't apply to satellite companies.

And there are additional important differences as well. Parity or harmonization of the cable and satellite licenses could not be achieved without major modifications to the cable and satellite regulatory and legislative schemes. And all of these changes will likely result in the disruptive loss of some broadcast signal retransmissions to your constituents. We strongly recommend against any such plan.

There's one discrete area, however, where legislative action would be important to deal with the so-called phantom signal issue I mentioned earlier. Let me use a simple example to explain the problem. Assume we have two communities, A and B, served by two separate Comcast cable systems. Community A has 5,000 subscribers and has historically received a distant signal that we call WZZZ. Community B has 100,000 subscribers and does not receive that channel. Under existing copyright law, Comcast would sensibly play the distance signal charge associated with WZZZ only for the 5,000 subscribers in community A, the customers who actually receive the signal.

But if Comcast were to connect the two cable systems with a fiber link to permit the more efficient delivery of advanced services, even though it made no changes to the channel lineups in either community A or community B, the Copyright Office now says that Comcast should pay royalties on WZZZ as if it were delivered not just to the 5,000 customers in community A which actually received the signal, but also to all 100,000 subscribers in community B who are not receiving this signal. In essence, Comcast would suddenly be paying 20 times more just to deliver the signal to the same 5,000 people. This phenomenon is called phantom signals, and I respectfully suggest it's an absurd result.

The Copyright Office itself acknowledges that the result is illogical and probably not intended by the statute, but it insists that the existing language gives them no choice and that this is a problem for Congress to fix. So we consider -- we request that Congress consider a modest change to Section 111 to clarify that royalty fees need only be calculated on distant broadcast signals that are actually available to subscribers and not on phantom broadcast signals.

Thank you again for inviting me to testify, and I will -- I'll look forward to your questions.

SEN. LEAHY: Thank you very much, and our last witness, Senator Bob Hartwell, is the Vermont state senator for the District of Bennington. That includes Bennington County and Wilmington, Vermont, as I mentioned before, in the Southwest corner of our state, a part where for some time television was mostly out of Albany, New York, and Vermont news was left out.

Prior to beginning his service in the Vermont State Senate in 2007, Senator Hartwell was active in his community. He served in the Bennington County Regional Planning commission from 1997 to 2007, the town of Dorsett Select Board from 2001 to 2004. He continues to serve in the New England Association of Regional Councils and formally and private law practice.

Senator Hartwell, good to have you here. Please go ahead, sir.

MR. HARTWELL: Thank you, senator, and thank you, members of the committee for allowing me the time to testify today. As Senator Leahy has said, I am in the Vermont State Senate. I serve on the Senate Committee on Natural Resources and Energy and on the Senate Committee on Finance. And I reside in the town of Dorsett. There are 17 towns in Bennington County that I represent, and the one town, Wilmington, in the County of Windham immediately to its east.

I'm testifying as to the importance of providing local television access to residents in rural areas and rural states like Vermont. These areas are exemplified by Bennington and Windham counties, and I am requesting that the committee assure that Vermont commercial and public television will be available in Bennington and Windham counties.

Many of the towns in my district are exemplified by the -- as rural villages and residences clustered across the rural landscape, some of it farms, much of it working forests. These residences are separated in many instances by great distances. Nine of my towns have populations of less than 1,000 people each, and for many of these people, satellite is their only access to television news, weather and advertising. Most of these towns are located in mountainous areas accessible by one state secondary highway and a maze of local roads, many of them dirt roads.

My constituents remind me that they are unable to receive cable television due to the prohibitive cost of bringing cable to rural homes given the distance, and even in cases in which cable is available in the area, the cost of bringing it to a few isolated residences is prohibitive. These same people, again, have access to television only through satellite, and -- but many have no access to Vermont television programming whatsoever because Windham County has been assigned to the Boston DMA and Albany -- and Bennington County has been assigned to the Albany, New York DMA. My own home is an example of this. Even as a state senator, I do not see Vermont news on my television.

Thanks to the Leahy provision added in the 2004 reauthorization, DirecTV subscribers in Bennington and Windham counties do have access to Vermont television stations, but many of our subscribers are DISH Network subscribers, as I am, and do not have access to Vermont television or Vermont programming of any kind. I have constituents in this situation who are relegated to leaving home in search of the newspaper, which is likely to be a more prompt source of news for them.

A good example of this is during an election. They have access to television, but to the national results, but when it comes to local and state results, they do not have access at all and don't learn about it until one or two or even three days later, some of these areas being served only by weekly newspapers, which usually come out on a Friday. This search is frustrated somewhat further by the absence of what would be called a statewide newspaper.

To put all of this in perspective, many of my constituents have served on their own select boards, school boards and other commissions and agencies, many of which are elective offices, as I have. Many of these proceedings now in these boards and commissions are now available through local cable access, and those who have that can see them, but many of my constituents who have served on these commissions never see this. They can't get access to cable, and there is nothing for them whatsoever on satellite if they are DISH network subscribers.

This is frustrating for them, and they seem to feel, or seem to express some sense of discrimination, since they simply don't have access. Many of these people are retired. My constituents in Bennington County tend to be older than the rest of the state, and they have misgivings about going out at night to proceedings of this nature, and they usually occur at night.

The placement of Windham County in the Boston DMA and the placement of Bennington County in the Albany DMA precludes the receipt of any Vermont news, weather and advertising. A specific example of this would be when we watch the weather channel at my house and houses similarly situated. We see the national weather. We know what's going on, but there is no current status and no forecast for the immediate area, which you would find if you had access to cable. You would have this -- have a local status and forecast for Bennington area, and you would have one for the Brattleboro area and Windham County. We cannot see that status from our televisions at this time.

I believe that all residents, including those in rural areas, have a reasonable expectancy of access to news, weather, and other programming relative to their home state, and therefore of interest to them. I urge the committee to work to assure that residents of rural areas, such as the area I represent, receive satellite television at reasonable cost with programming relevant to the state of Vermont, the state in which they live.

Again, I want to thank you, Mr. Chairman and members of the committee, for allowing me to testify about this important issue of public policy, and certainly a very important issue to my constituency in Vermont.

SEN. LEAHY: Thank you, senator, and, of course, you have the situation where Vermont is having a major debate in the legislature right now, as many other states have, what to do with -- in this economy the changes in the state budget, the changes in -- they're going to affect your constituents (who are in the ?) -- Southern Vermont, as well as all other parts of Vermont. And without this kind of coverage, your constituents are more apt to hear what's happening in Albany with the New York legislation there about what's happening in Vermont. Is that correct?

MR. HARTWELL: Yes, senator. That is correct. I think it's -- certainly in -- they will receive a lot more information about what's going on in Albany -- (they will ?) -- than what's going on in Montpelier, but they want to know what's going on in Montpelier.

SEN. LEAHY: Congress created the local license for satellite television -- has been talked about today -- in 1999. Let me ask each of you. How has authorizing satellite companies to provide subscribers with local stations affected competition among video service providers from your view, and if you could keep it fairly brief, and certainly I'll give everybody time to expand their testimony in the record.

Mr. Ergen?

MR. ERGEN: Thank you, senator. It's been great I think for consumers. They were asking for it for -- when we started back in 1994 in this business, in the direct-to-home business, and it took us five years to get a law, and it's been one of the great success stories of this committee. To provide competition, the FCC has shown that where local channels are provided, customers have benefited from increased competition and lower rates for their TV programming and more choice.

SEN. LEAHY: Mr. Yager?

MR. YAGER: Well, I believe in competition, and I think the satellite and cable industries have proven to all of this that good competition offers choice as long as we have local service and don't differentiate against our local stations.

SEN. LEAHY: Mr. Franks?

MR. FRANKS: It's been nothing but a boon to the video marketplace, but more important to consumers. I would just stress, though, on Senator Hartwell's point -- there is nothing in the law or regulation today that prevents a cable or satellite operator from bringing Burlington news into the Southern Vermont counties.

SEN. LEAHY: Mr. Cohen?

MR. COHEN: Mr. Chairman, I agree with everyone on the panel. I think this has been a boon in the competition, and I think it has made the cable industry a better competitor. And I think I'd almost -- I mean, price is one thing, but I think if you look at the quality and the variety of services that are now being delivered by cable, by satellite, and now by the telcos as they go into that space -- I think all that was stimulated by the -- by bringing local television onto satellite.

SEN. LEAHY: Senator Hartwell?

MR. HARTWELL: I would just reemphasize, senator, that for us it's an availability issue right now, but certainly satellite has been very important. Without the satellite, we would have no communication where I live.

SEN. LEAHY: The Copyright Office in their report has recommended that Congress either unify or harmonize the cable and satellite licenses. I've received a lot of mail from your industry on this. And each of you has a different perspective on the licenses. So let me ask you your views. Are there aspects of the satellite licenses that do not work in the cable world? How would the broadcasters and content owners view such a change?

Start with you, Mr. Ergen.

MR. ERGEN: As Mr. Cohen pointed out, there are some differences between the -- between what cable does and satellite primarily because satellite has the ability to do a national signal and cable is only capable of doing a local signal. Having said that, I do believe that if we -- that it is something that we should do, and we should be able to get to a unitary license. Mr. Cohen does -- thought it was too complicated to do that. That's typically because they have several advantages over us in terms of how much they pay for copyright. On a percentage basis, we've paid much more than -- in the satellite industry we paid much greater percentage of our revenue to license fees.

So we think that it needs to level the playing field. In addition, things like phantom subscribers are things that should be fixed, and there are some things that work for cable and some things that work for satellite. But I believe that with enough effort, it was relatively easy to get to a unified license.

SEN. LEAHY: Mr. Yager?

MR. YAGER: Mr. Chairman, they are obviously very different technologies. The satellite technology and the cable technology are not the same. I would be concerned that trying to harmonize them might have unintended consequences, but the NAB really does not have a position on this issue.

SEN. LEAHY: Thank you.

Mr. Franks.

MR. FRANKS: I practiced -- I promised our general council I wouldn't practice law without a license again, senator. I'm far from a copyright expert. I would just say, though -- the current system works pretty well, and to Jim's point and Mr. Yager's point about unintended consequences -- when we try and change things to make them better, sometimes we don't make them better. And my temptation would be, as I testified, to do simply a straight reauthorization of the satellite license.

SEN. LEAHY: Mr. Cohen.

MR. COHEN: Mr. Chairman, just to be clear, I think I heard two questions in your question, which are the two --

SEN. LEAHY: (Inaudible.)

MR. COHEN: -- possible recommendations from the Copyright Office, one to eliminate the license, and I don't think there's any appetite by anyone on this panel to eliminate the license. I'm happy -- I addressed it somewhat in my oral testimony, more in my written testimony, but I think that calls for the likelihood of chaos, massive disruption to customers, and is definitely not a recommendation that should be pursued.

Second half of the question is okay, if we're going to keep the license, should the provisions -- should the cable versus satellite provisions be harmonized? And it is our position that they should not be. Again, the base -- the current structure basically works. There are differences, but those differences I would suggest are rooted in technology and different regulatory treatments, and that if you're trying to level the competitive playing field, you can't just look at the compulsory copyright license. You have to look at the entire playing field, which is a considerably more complicated endeavor that involves a wide variety of regulatory restrictions, some of which are imposed on us, some of which are imposed on satellite.

I'd also note that it's not at all clear that, in fact, in the aggregate cable, quote, unquote, pays more and satellite, quote, unquote, pays less. And again, the potential disruptions that could come from change I think are something this committee has to be concerned about.

And I'll close with one --

SEN. LEAHY: So you wouldn't agree with the Copyright Office that Congress should either unify or harmonize with cable.

MR. COHEN: We disagree with both those recommendations. But I want to make clear -- this is actually not a cable versus satellite issue.

It happens to be an issue on which Mr. Ergen and I disagree, but I want to quote you from some interesting testimony that was given on the other side of the capitol, which I think is still in the same jurisdiction, if not in the same committee yesterday. That testimony -- I'll read -- just read a very brief portion of it. Quote, "Harmonization is better in theory than in practice. Imposing cable rules on satellite is problematic. Imposing satellite rules on cable cannot be any better. In the real world harmonization would almost certainly result in consumer disruption. The source of that testimony was DirecTV testifying against harmonization of the cable and satellite licenses."

SEN. LEAHY: Thank you. My time is up, and I'll yield to Senator Hatch, unless you wanted to add something to that, Senator Hartwell.

MR. HARTWELL: Thank you, senator. For me, it's -- the --

SEN. LEAHY: You just want to get the service.

MR. HARTWELL: Signal's coming from the satellite, senator, yes.

SEN. LEAHY: Okay.

MR. HARTWELL: That's what I want. Right.

SEN. LEAHY: Thank you.

Senator Hatch.

SEN. ORRIN HATCH (R-UT): Well, thank you, Mr. Chairman. And on Section 109 of the -- or SHVERA, the Satellite Home Viewer Extension and Reauthorization Act -- required the Copyright Office to examine and compare the statutory licensing systems for the cable and satellite television industries under Sections 111 and 119 and 122 of the Copyright Act and recommend any necessary legislative changes no later than June 30th of 2008. Now, I know some of you referenced the report in your remarks, but I'd like to just ask this question and for anybody who cares to answer it. Did the Copyright Office get it right, or didn't it?

Mr. Ergen?

MR. ERGEN: (Let me ?) start with that. I think in general they got it right. We all have our different constituencies. Some of us are public companies. We all have our own self interest here. The Copyright Office really is an independent party, really doesn't get into shareholders and differing constituencies, and so I think in general they got it right, and most of the panel here other than myself has said we don't want to change anything. And that's usually indicative of a marketplace where somebody's pretty comfortable. They don't want to change anything because they don't want additional competition and so forth. And I think in general the copyright place is a good place for this committee to start, as it is written by a third party objective observer.

SEN. HATCH: Okay, anybody else care to comment? Yes.

MR.: I think, senator, as I said -- I think Copyright Office got some things right. I think they got some things wrong. And one of the reasons for that is that I think when you look at the purposes of the compulsory copyright license, there were a number of stakeholders that -- of stakeholder interests that needed to be examined; copyright owners, distributors and the consumer interest. And I think where the Copyright Office fell down is that they didn't properly value the consumer interests and the risks of disruption to our customers and your constituents to some of the changes that they proposed, and I think that's the underlying reason why they reached some contrary conclusions, or conclusions that I don't think are supported by the overall public policy objectives that this committee has in front of it.

SEN. HATCH: Okay, the 2008 Copyright Office report states that "cable and satellite industries are no longer dependent upon distant signals as they were at the outset of the licenses, so repealing the distant signal licenses will not have the dramatic effect that it would have had years ago. I'd just like to know what your thoughts are on this finding, and what's your response to the argument made by the Copyright Office that current distant licenses have impeded the development of the sublicensing system? And how would repealing the distant signal licenses affect viewers?

Yes, Mr. Yager.

MR. YAGER: Repealing the distant signal license is just part, I think, of the progress we have made in technology in terms of the satellite industry, as well as the cable industry. The NAB supports repeal of the distant signal license. We support the local-into-local in all small markets, and they're all small markets that don't have local-to-local today. So we would support local-into-local, but we think basically the Copyright Office got it pretty right the first time.

SEN. HATCH: Okay. Now, Mr. Yager, the Internet has opened up a whole new world of how television networks offer news, sports, entertainment, and other types of programming. Now, online video aggregators, like iTunes and Hulu, allow us to download or share their content over the Internet. Now, Slingbox technology allows one to redirect local network streams remotely. Of course, not to be forgotten, they're digital recorders, which allow viewers to watch programs at their leisure.

Now, with everything available to the consumer today, why are you opposed, if you are, to importing TV station signals from adjacent DMAs, especially in areas where those DMAs cross state lines? Let me give you an example. My fellow Utahns are receiving their local channels either through their cable or satellite providers, but want to pay an additional fee to receive a Las Vegas, Nevada channel or a Denver, Colorado channel. Why would you oppose that option, and do agree that in light of the emerging technologies a new approach would be necessary to address how consumers are accessing TV programming?

MR. YAGER: I think the issues of DMAs in in-market/out-of- market stations are much more complex. Let me just give you an example of a station we own in Amarillo, Texas. It serves three counties in Oklahoma up in the Oklahoma panhandle. We are in the Texas panhandle. The closest in-state station to those three Oklahoma counties is 334 miles away. In an omnibus change to the definition of DMAs -- could gigantically impact the service we provide to those three small counties in the panhandle of Oklahoma. We're the ones who put emergency information on the air for them. We're the ones who report their school closings, we're the ones who cover their high school football games, and we're the ones that cover their local political institutions.

It's hard for me to believe that a station that's 335 miles away would do the same for those three counties that we would do. That's the essence of the DMA structure we've had in this country for now about 45 years. I strongly believe that there are exceptions certainly to let DMA in. There are four exceptions currently to the in-state, out-of-market regime. But if we're going in to DMAs, we've got to look at each one as an individual kind of situation.

Let me give you just one other; North Carolina. For years I managed a station in Spartanburg, South Carolina that served the northwestern part of the state of North Carolina. We had 40 translators up in the North Carolina area. If we couldn't serve that area, that market would've lost its viability in terms of its North Carolina audience. And the Asheville station would then be competing if they brought in in-market stations against much larger stations from Charlotte, North Carolina.

So I really think when we get into the DMA situation, it is a much more complex situation than just saying let's bring in out-of- state markets, out-of-state stations to in-market stations, markets.

SEN. HATCH: Yup.

MR.: Senator, Hatch, may I -- let me address two points, I believe. As one of the networks that is providing content over the Internet, let me point out that we don't do that until a considerable period of time after it is aired live on the network. So that is one issue. And another is we don't put our full compliment of programming -- either because we don't have the rights, or for another business reason. But if, as we enter into the Internet distribution of our programming, it's done as a private contractual agreement, either with our affiliates, or with -- we supply video-on-demand to Comcast, or we are about to start supplying video-on-demand to Mr. Ergen. Those are private contractual arrangements that, frankly, work just fine and I don't think need congressional intervention.

On the out-of-market question, I think the biggest -- as I say, out-of-market news can be provided today.

Once you get beyond news into either the entertainment programs or the sports programming, you enter a whole new web of copyrights, of rights holders, and it's a very complicated world. But even more important than that -- if Las Vegas starts coming into Southern Utah, you're going ultimately undermine not only the economics of the stations in Salt Lake or St. George or other parts of the state, but you're also going to hurt the local businesses that advertise on that station. A car dealer in St. George is buying an add to reach that region. If a Las Vegas card dealer add is coming in, I don't think too many people from St. George are going to Las Vegas to buy their car. And you're going to undermine that local economy, not just the station.

MR.: You never know.

SEN. HATCH: Thank you.

MR. ERGEN: Senator, if I may, I just -- I'd like to give an opposing view, perhaps that our customers tell us about. You heard that it was too complicated, that these DMAs are too complicated and so forth. If we listen to -- with all due respect -- to the broadcasters here, we'd be -- we'd still be the horse and buggy. As you correctly point out, technology has changed. You can watch any of the -- any of these channels on the Internet. Why can't you watch them on your satellite or cable system?

And consumers -- you can't just put the news on and turn it on and off. It would be disruptive to consumers. And as Senator Hartwell said, people in Vermont in March Madness that's coming up -- they want to watch the University of Vermont when they're in Southwest Colorado. They don't want to watch the University of Rutgers because they're getting the Albany station. And at some point I hope that the desires and the rights of consumers and what people want to see -- (inaudible) -- they can get other technologies that we bring to the broadcasting world and to the 21st century and to the digital age. And I think we have to keep the consumer in mind.

SEN. HATCH: (Off-mike.)

SEN. LEAHY: We've gone way over time, and we're going to have to -- and now there's supposed to be another hearing, but Mr. Franks, I'd give you -- very, very brief --

MR. FRANKS: What Mr. Ergen just said is not that he can't deliver the local news. It's that he doesn't want to deliver the local news without also being able to deliver the primetime programming.

MR. ERGEN: Well, I'll just -- let me just put on the record that that's not true. I have gone to the broadcaster to deliver local news, and what they say is, well, our local news have national content in it, so when we do the local news from NBC, we may carry a national feed of NBC during the middle of the news, and we don't have the rights to do that. So we can't give you the rights to do that. And so it's beyond news. It's also -- but it's really people in Vermont want to see Vermont, and it's simple as that. It's not complicated. And when you start -- when people on a committee up here start talking about complicated, that's code for we don't want competition.

SEN. LEAHY: We're going to go to Senator Feingold and then Senator Kaufman, Senator Klobuchar, and Senator Cardin depending upon which ones are here. I'm going to step out briefly and turn the gavel over to Senator Feingold.

SEN. RUSSELL D. FEINGOLD (D-WI): Thank you, Mr. Chairman. Thanks for having this hearing on television in the digital age, and I know that the focus of this hearing is primarily on the SHVERA reauthorization. But I did want to take a minute to focus on some concerns of my constituents. Let me start with a comment on the digital transition itself, which has been a stressful time for many of my constituents who rely on the over-the-air television for information and entertainment. I want to acknowledge the hard work of many of your companies in helping to get the word out about the transition. I know that the Wisconsin broadcasters were diligent about setting up regional call centers, and also believe that other industry segments were involved as well.

Well, clearly, there were problems with the converter box coupon program that are now being resolved. I remain concerned about individuals on the edges of markets that are going to be unable to receive over-the-air digital signals and are facing the prospect of significant expense to either subscribe to a pay TV service or invest in an antenna that may or may not fix their situation.

Similarly, the shift from analog to digital and paid television services can also have ramifications as channels are shifted and compatibility issues arise with older television sets. These burdens can be especially daunting for low-income individuals and seniors living on a fixed income. And we have to make sure that the -- we keep these populations in mind, particularly because many of them rely so heavily on television for entertainment.

The other main area of concern I hear about in Wisconsin regards content. I go to every one of Wisconsin's 72 counties every year for a public town hall meeting. I can't say that television is one of the top topics, but in the northwestern part of Wisconsin it is a consistent concern. No offence to Senator Klobuchar who was just here, but as was just being indicated by some of you folks, my constituents want to know why they can only get news about what's happening in Minnesota's government rather than what -- about the laws and budget of Wisconsin.

And while they can understand that some football fans might want to see the Vikings -- we do have a little bit of dissention in that part of the state -- most of my constituents only want to watch them when they lose to the Packers. (Laughter.)

And they are extremely frustrated by what they see as an arbitrary decision on a map that prevents them from seeing their favorite team. So let me turn to my questions.

Mr. Ergen, in your testimony you mentioned the need to find a way to address this situation. Tell me a little bit more about how you envision this working. The consumers have to subscribe to an additional in-state station and pay a fee. Would copyright holders and broadcasters be compensated?

MR. ERGEN: Yes, I think the solution is very simple, and Copyright Office addresses in part. I think we need to expand the local -- the definition of local-to-local. So we all know that in a DMA we can broadcast the local stations. We need to expand that local-in-local definition to include the adjacent DMA. I believe that you -- to do that, to protect broadcasters, as Mr. Yager had said, you must first broadcast the local market DMA, and then you would have the right to bring in the adjacent market.

You then should compensate the adjacent market through retransmissions and private agreements. That way the copyright holder is also protected. There will be -- difference in sports leagues that would -- and so forth and so on, and I think that once you set -- once you expand local-to-local, the copyright holders will do their negotiations around that expanded local-to-local. And think it's a very, very simple solution.

SEN. FEINGOLD: Okay. Mr. Yager, Mr. Franks, Senator Hatch, and Senator Leahy sort of touched on this I think, but I noticed in your prepared testimony that you would oppose modification of DMAs to allow my constituents to watch the Packers and receive local news. Believe me, it won't go over well at my next town hall meeting during football season in Northwestern Wisconsin. Do you have another solution to the issue in your minds? Is it simply not a problem?

MR.: Well, first off, senator, we're willing -- and like what Mr. Yager said a few minutes ago, the CBS Television Network is willing to sign off any rights in our news programming to allow our local affiliates to give the right to an adjacent market to carry their local news. Local news is not really an issue in this hearing I don't believe.

The sports questions, though, are a very different question because there you're dealing with a very powerful rights holder, in this case the National Football League.

And with all due respect, I think it's a question you really need to address to them because even if we wanted to allow that adjacent market in, we don't have the contractual right from the league to do that, and, in fact, we are regularly called upon by the league to enforce their territorial blackouts as part of our contractual obligation to them.

SEN. FEINGOLD: Mr. Yager?

MR. YAGER: Well, I agree with my colleague from CBS. They're the ones who negotiate for the national rights for major sporting events, and they negotiate with the NFL. The local station has very little it can do to carry an NFL game other than work with its network on what they offer. I understand the problem from -- I happen to be a Bears fan, so I don't totally understand the problem, but that anybody would want to watch both the Packers --

SEN. FEINGOLD: Well, we have problems with that on another board. (Laughter.)

MR. YAGER: But it really is something you should be addressing with the NFL, because it is a contractual --

SEN. FEINGOLD: All right, my time is up. I turn to Senator Cardin for his round and turn the gavel over to him.

SEN. BENJAMIN CARDIN (D-MD): Well, let me thank you all. I really came to this hearing to try to learn more about this issue. I represent Maryland, as you know, and we really haven't seen the problems that have been expressed by those senators who represent states to have a larger rural community. I represent rural areas of Maryland, and they do have this issue, but it has not been a dominant issue. So I really wanted to try to understand more about the challenges.

I was pleased to hear the last response, and I just hope that we can clarify that, because local content news is perhaps the most single important issue that we want to make sure communities can receive. And it seemed like there was more agreement than the information that we had received before. So perhaps we've made some progress on that as a result of this hearing.

The other matter that I find challenging is that we have technology changing all the time. And with the use of the communications through the Internet, competition is not what it was when these laws were developed. And I think as we look at trying to harmonize and modernize the laws as it relates to different ways in which families receive their video communication, we have to be realistic that technology is not static and will continue to change and that what we put in law will be able to allow for fair competition and access as we move forward on these issues.

So with that in mind, I'm going to just ask a general question as to -- is -- are there changes that we should be looking at because of the technology changes that are currently taking place as it relates to what -- the way individuals can get video communication today? It's not from the conventional television set, but it's from so many different -- other sources. Do you have any advice for us in that regard?

MR. ERGEN: I think I'll start with that. And I was privileged to testify yesterday in the House side, Commerce Committee, where a representative from Consumers' Union, Ms. Sohn, talked about this particular subject, and also a representative from one of the think tanks talked about this subject. And the big thing is that geographic lines no longer mean anything. In fact, almost -- they don't even mean anything around the world, but they certainly don't mean much anymore with today's technology from a geography DMA line that's randomly drawn through a Nielsen rating from 50 years ago on a map. And, you know, we showed a map earlier from Iowa that shows just how convoluted those DMA maps are.

So with the advent of the Internet, it's ludicrous that you could watch any TV on your computer, but on your TV set you have to be -- some DMA line that was broadcast from broadcasters. So what I hope doesn't happen is we don't go another five years with restrictions that don't keep up with the technology, and I think you have to look at that. Your point is well taken.

SEN. CARDIN: I appreciate that.

Mr. Yager?

MR. YAGER: I would hate to mix technology with the DMA issue. The DMA issue is one that is voted upon by the viewers in their community. And by the way, DMAs change every year. So let's -- but your point on technology is a very valid one. It doesn't really impact, I think, the DMA issue, as Mr. Ergen would suggest.

Where we think technology is going is -- look what we can do with digital. Look what we will be able to do with digital. Today we can probably multicast two channels other than the major channel we have. We think this is going to solve a lot of local problems and local service problems in the communities we serve. And we agree with you. We think technology is growing very rapidly. And when we get out of MPEG 2 to an MPEG 4, which allows us to probably multicast four or five channels in the local market, Mr. Ergen is going to have further problems because we're going to say we want those carried as well on satellite.

MR.: Senator Cardin, let me put on a slightly different hat, if I may. Instead of television network per se, let me be a program producer. For instance, we own the three CSI programs, the -- three of the top ten most popular programs in the country. If you -- a challenge for us is that technology is indeed breaking down the windows and the business models in which we air that programming. But the technology is ahead of the economic models. So while, yes, we put the CSIs on the Internet on a delayed basis for a video-on-demand experience for consumers, our network business is a $4.5 billion business. And attracting the advertisers to that simultaneous national viewing of a Thursday night CSI episode is what allows us to spend millions of dollars to create just that single episode.

The revenues from the Internet are still in comparison de minimis, and it is why we are very careful in how we manage our Internet business so that it doesn't completely cannibalize the economic model that allows us to produce this popular programming. That's the threat we feel from technology. We'll sort out our business as usual with Mr. Ergen and Mr. Cohen. You know, we're all big companies. We can protect ourselves pretty well.

It's this attack on the economic model, the disruptive technology in that sense, the economic model, and it becomes a problem because if we don't figure that out, then it's going to be very hard. I mean, who's going to produce that programming? The Internet itself can't produce the programming. And how do you know that you want to go watch a program on the Internet? Well, you know because a demand has been created by the dinosaur network.

SEN. CARDIN: Is that factored into your negotiations today, that economic reality of current technology?

MR.: It is why we try so hard to protect our windows. It's why -- (laughs) --

SEN. CARDIN: Yeah.

MR.: -- it's little things like DMAs. That $4.5 billion dinosaur network business, if you will, is what fuels all of that program creation and makes it possible for people like Mr. Ergen to resell our signal.

SEN. CARDIN: Senator Wyden, the gavel is yours.

SEN. RON WYDEN (D-OR): Thank you, Mr. Chairman. And I want to apologize to all our guests. We had a very long hearing in the Finance Committee, and I'm coming in late, and I'm going to try not to plow over too much that people have already pummeled.

My concern is born out of what I hear at home, and what I hear at home is tens of thousands of Oregonians get up every day to see their television broadcast, television that is important, coming from somewhere else, and coming largely with news that they don't have a great interest in. And it might be Washington. It might be Idaho. But it certainly isn't Oregon. And I have been pushing for a great many years. I was also on the Commerce Committee. My spouse said the other day dear, what committee are you not on? And now that I have picked up this Judiciary Committee assignment, I come to the Satellite Home Viewer Act with a perspective from a judicial outlook.

And from my vantage point, it is hard to see how just putting Band-Aids on this issue, the question of reforming the Satellite Home Viewer Act, is going to really address the concern. You need to create what is in effect a bright line fix that can't involve manipulation and ensures that people can get broadcasts that they really care about that represent the concerns and interests that they aspire to hear about on a daily kind of basis.

So I think what I'd like to do for a few minutes is touch on these issues. Mr. Ergen, you've had strong views on these topics for a lot of years, and let me start by getting your view with respect to the importance of these kinds of concerns, in-state news, weather, emergency notices. You've been in this business a long time. What's your sense about how people look at this?

MR. ERGEN: I'm 100 percent confident how they look at it. They look at it in the state of Oregon that they want to see the news, weather and sports of Oregon. And these randomly drawn lines on a map 50 or 60 or 70 years ago by a Nielsen company who doesn't even want to take ownership for these lines today in today's digital world don't make sense. Mr. Yager earlier said that the consumer voted on these lines.

I know of not one consumer who has ever voted in Oregon to watch Washington when he could watch Oregon. The technology exists, both through cable and satellite, for the people of Oregon to be able to watch channels in Oregon.

SEN. WYDEN: And so your argument is that these rules are simply outdated. I mean, you talk about health reforms, something you and I have talked about. There you're dealing with the 1940s, a day when people stayed somewhere at the workplace for 20-25 years until you gave them a gold watch and a big, big steak dinner, and we're talking about reforming the health system to modernize these health rules, and you're talking about I think much the same thing as it relates to the Satellite Home Viewer Act.

MR. ERGEN: I just think we -- again, I don't want to live in the horse and buggy age. I think that the Internet and satellite technology, along with digital cable -- these are fantastic technologies that are able to now deliver consumers what they want to watch where they want to watch it, and only the incumbent generations of people who don't want competition -- you missed a -- you know, early in the panel everybody said things are too complicated. We don't want to change anything. Well, nobody wants to change anything when they make good money and don't have competition. Of course you don't want to change it.

But as you know, the consumer is saying you should change because the technology does allow us -- we can watch it on our phone. We can watch it on our computer. Why can't we watch it on our TV?

SEN. WYDEN: Now, how would an adjacent DMA fix -- which is largely the concept that is being discussed here that allows all satellite providers to offer state-specific stations to their customers -- solve these problems? What are the implications of an adjacent DMA fix, I guess would be the way to characterize it.

MR. ERGEN: Well, it's a very simple fix for consumers. It just allows you to bring in the adjacent DMA along with the local DMA. I think you should be required to do the local DMA. I do think -- and we don't -- and we don't have a representative from sports leagues here or other copyright holders, and I don't want to speak for them. I think that they would have to renegotiate their contracts around what I call expanded local, which is to expand the definition of local to include your current local DMA and an adjacent DMA. That would solve the in-state problem where every -- where the 45 states import signals -- I mean, from different states than their own state. That would solve that problem and give customers a choice. We can protect the local broadcaster by requiring the local broadcaster to be broadcast as well.

MR. FRANKS: Senator Wyden, may I jump in?

SEN. WYDEN: Yeah. In fact, go ahead, Mr. Franks. And we're going to have some questions for you too.

MR. FRANKS: I look forward to them as always. With regard to local -- the news problem, there is nothing in today's law or regulation that prevents a cable operator or a satellite operator in the state of Oregon from providing that local news. The local station controls that copyright. And so there is no reason right now that your constituents couldn't be delivered the in-state local news product that you want. There is no impediment in the law or regulation to doing that now.

SEN. WYDEN: Mr. Ergen?

MR. ERGEN: I don't believe that's true. I have tried. I've met with Kennett Broadcasting and I've tried to bring in the local news. I even talked about doing regional concepts. Ultimately, what they said was -- and this is an NBC affiliate, so I don't want to speak for Mr. Franks or CBS. They said well, we -- or we own the copyright to our local news, but we don't own the copyright to the national news, and our local news feeds are interlaced with national stories. So when President Obama is talking last night -- that's a national story that NBC -- national -- NBC owned the copyright. The local broadcaster did not have the right to give that news to me.

Secondly, the consumer is interested in more than just news. He's interested in sports. So March Madness comes up in Oregon. They may want to watch the University of Oregon. They may not want to watch Gonzaga, which is what they may be shown by the CBS affiliate that comes from Yacima or Spokane into Oregon. So it's a broader issue than that, and I -- look, it's a question -- do we want to be on the side of consumers, or do we want to be on the side of special interests that I represent and other people at this panel represent? And that's a choice that this Congress has to make.

SEN. WYDEN: Mr. Franks I think is chomping to say some more.

MR. FRANKS: I just don't quite understand how I'm representing the special interests here. If there's a problem in Oregon that involves the CBS Television Network and a local CBS affiliate in providing local news product to your constituents, I'd be happy to start working on it this afternoon because it's not a problem.

SEN. WYDEN: That may be what it comes to under Chairman Leahy's auspices sending you all out to do some negotiating so that we get this resolved, because this has gone on for too long. And as I look at this question -- I mean, adjacent DMA -- nobody's talking about doing this everywhere on the planet, only where there is not otherwise available state-specific affiliate broadcasting. So we may have to send good people like Mr. Franks and Mr. Ergen out to have their own kind of negotiation and put this together, because it's time to get this done.

Franks.

MR FRANKS: Well, I doubt that your constituents really care where they get their CSI, but part of what Mr. Ergen is also trying to do is to be able to import CSI into that market. And then we do begin to have a problem because then you are undermining the local station. But to the extent that this is about news, it's a -- it's not a problem. I mean, it is a problem. I understand. But the solution to the problem exists right now.

SEN. WYDEN: You want to bat this around some more, Mr. Ergen?

MR. ERGEN: Well, I think -- I'm pleased to hear Mr. Franks say CBS would give us the rights to the -- would give their national rights to their affiliates. I think that's --

MR. FRANKS: I didn't say I'd give them to you, but I would give them to our local affiliate. (Laughter.)

MR. ERGEN: Yeah -- (laughs) -- to the local -- that's right, local affiliates. And I think Mr. Yager wanted to jump in here because --

SEN. WYDEN: We're --

MR. ERGEN: -- I didn't want to --

SEN. WYDEN: -- T-ing you up, Mr. Yager.

MR. YAGER: (Laughs.) Okay. Number one, our company would be happy -- we have never been asked to give the rights to any of our newscast, special programming to -- by any satellite or cable company. I can say without question here -- I would be more than willing to work with our NBC, FOX, and ABC affiliates to get the rights to carry their news. Mr. Franks said we could always do that, so our CBS affiliates are available to Mr. Ergen to cross state lines at any time he wants as of this hearing.

That's what's in the law, and we want to abide by the law. I wasn't aware that other affiliates might be using the network news angle in saying we don't have the copyrights. I think that's a simple problem to work out.

SEN. WYDEN: That's promising.

MR.: I think that's great. I mean, I think that's great, and I'm glad to hear that CBS would take the lead, and hopefully they can convince some of their other constituents of the other networks to do something similar, and I think Mr. Yager made a kind offer as well, and I think that would be an important step.

SEN. WYDEN: That's real progress. You can take the rest of the day off. (Laughter.) Listen, can I ask you one other question?

MR.: Well -- but I do think it's significant, senator, that no one's ever asked him. How long have you been in the business, Jim?

MR. YAGER: You don't want to know. (I should be at Senator Kohl's hearing ?).

SEN. WYDEN: I guess I just did, so -- (Laughter.)

MR.: No, but I mean that no satellite or cable operator has ever asked. So, I mean, if there is this pressing need and this urgent desire to meet the needs of customers and -- because this constituent -- in some ways we're hearing about it relatively late in the game.

SEN. WYDEN: I'm going to quit while I'm ahead. I think we are on our way to making some progress.

Just one other question for you, Mr. Yager. When our country switches over to digital on the 12th of June, obviously, broadcast -- you know, TV changes dramatically. Folks in rural areas like rural Oregon who used to make do with a weak signal and a little snow on their TV screens are going to end up sometimes with no picture, no sound at all, unless the local broadcaster takes steps to improve signal strength and coverage. What's being done on this point to make the necessary investments so that these communities get the kind of quality service they deserve?

MR. YAGER: Well, I think most responsible local broadcasters are taking steps to -- if they've had a side mounted digital antenna -- and I think this is what you're referring to where the digital signal might not be totally at this point in time replicating the analog signal in a given market. That can well be because of a power kind of being deficient to what they're going to have on analog, or because they've got a side mounted antenna. I can only speak for my company. We intend to fully replicate the analog signal, and the beauty of that is, is that when you replicate the analog signal, it's not a snowy picture. It will be a picture that that viewer can see without distortion.

SEN. WYDEN: And for you, Mr. Cohen and Mr. Hartwell -- we've largely spared you -- (laughter) -- the grilling here today. Would you all like to add anything? In fact, what's really timely about this in the comments of Mr. Franks, Mr. Yager, and Mr. Ergen is that I think it's fair to say that the Administration, the Obama Administration, with all they've had on their plate has not exactly laid out all of their goals for satellite home viewer reauthorization, and I think it's helpful to have been able to have the three of you respond to some questions, because I think it suggests that there may be more of a consensus here than people thought. And I want to give Mr. Cohen and Mr. Hartwell a chance in effect to make any comments they want, and we'll wrap this up.

Mr. Cohen, anything you want to add?

MR. COHEN: Senator, I think all I would say is that although I'll plead guilty to being one of the folks on the panel who said that the adjacent DMA issue was complicated, I -- what I also said was I think that there is dialogue that can occur. We have found some fixes around this problem, for example, in -- (we ?) -- Comcast, and so I have some familiarity with it in Southern Vermont, and it doesn't help Senator Hartwell's constituents who are living in the most rural areas of Southern Vermont where cable just can't economically extend.

We do currently carry WCIX, which is the CBS affiliate in Burlington. We bring that in as a distant signal under the compulsory copyright license. It happens to be the network affiliate, I'm told, that has the most local news and the most local coverage. And it has been a way for us to satisfy, or at least largely satisfy, our customers in Southern Vermont, who were complaining to us, as well as to Senator Hartwell, Senator Leahy, about the absence of local news and local news content in Southern Vermont.

So we're prepared -- we as an industry are prepared to sit at the table, to be at the table, to look -- whether there are business solutions or legal solutions to these issues, and are happy to be a partner in trying to help resolve those.

SEN. WYDEN: Mr. Hartwell, anything you want to add?

MR. COHEN: Yes. Thank you, Senator Wyden. I appreciate your introductory remarks. They go right to the point that -- the issue that's bothering many Oregonians, the same issue that's bothering many Vermonters. I look forward to what would be a novelty in my case. I turn on the television set in my home in Dorsett, Vermont and see the Burlington, Vermont television. And we don't do that. We don't see that, but that's what we want.

SEN. WYDEN: Well, I appreciate the panel. I mean, the fact of the matter is if you have these states -- and Vermont and Oregon are particularly concerned. I mean, we've got large swaths of our state that simply aren't able to watch news and information that we feel strongly about because they are, quote, "market areas" somewhere else. And I think we've been able to make some progress today in terms of our witnesses looking at some ways to bridge the differences.

So there's been constructive -- again, I apologize to our panel for coming in late and having to try to pick on some of the earlier comments, but I like the tone of the outcome and where we're headed, and we'll look forward to following up under the leadership of Chairman Leahy and Senator Specter.

With that, we're adjourned.

END.

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