Text: S.Hrg. 108-571 — THE SATELLITE HOME VIEWER EXTENSION ACT
[Senate Hearing 108-571]
[From the U.S. Government Publishing Office]
S. Hrg. 108-571
THE SATELLITE HOME VIEWER EXTENSION ACT
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 12, 2004
__________
Serial No. J-108-75
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas JOHN EDWARDS, North Carolina
Bruce Artim, Chief Counsel and Staff Director
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
C O N T E N T S
----------
STATEMENTS OF COMMITTEE MEMBERS
Page
DeWine, Hon. Mike, a U.S. Senator from the State of Ohio,
prepared statement............................................. 70
Feingold, Hon. Russell D., a U.S. Senator from the State of
Wisconsin, prepared statement.................................. 91
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 1
prepared statement........................................... 104
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin... 4
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 3
prepared statement........................................... 110
WITNESSES
Attaway, Fritz, Executive Vice President and Washington General
Counsel, Motion Picture Association of America, Washington,
D.C............................................................ 13
Carson, David O., General Counsel, Library of Congress Copyright
Office, Washington, D.C........................................ 6
Ergen Charles W., Chairman and Chief Executive Officer, EchoStar
Communications Corporation, Littlewood, Colorado............... 7
Hartenstein, Eddy, Vice Chairman, The DirecTV Group, Inc., El
Segundo, California............................................ 11
King, John, President and Chief Executive Officer, Vermont Public
Television, Colchester, Vermont................................ 15
Reese, Bruce, President and Chief Executive Officer, Bonneville
International Corporation on behalf of the National Association
of Broadcasters, Salt Lake City, Utah.......................... 9
QUESTIONS AND ANSWERS
Responses of Fritz Attaway to questions submitted by Senators
Durbin, Kohl, and Leahy........................................ 23
Responses of David Carson to questions submitted by Senators
Leahy, Kohl, and Durbin........................................ 27
Responses of Charles Ergen to questions submitted by Senators
Durbin, Kohl, and Leahy........................................ 29
Responses of Eddy Hartenstein to questions submitted by Senators
Durbin, Kohl, and Leahy........................................ 35
Responses of John King to questions submitted by Senators Kohl
and Leahy...................................................... 41
SUBMISSIONS FOR THE RECORD
American Society of Composers, Authors and Publishers and
Broadcast Music, Inc., Marilyn Bergman and Frances W. Preston,
letter......................................................... 44
Attaway, Fritz, Executive Vice President and Washington General
Counsel, Motion Picture Association of America, Washington,
D.C., prepared statement....................................... 47
Carson, David O., General Counsel, Library of Congress Copyright
Office, Washington, D.C., prepared statement................... 58
Ergen Charles W., Chairman and Chief Executive Officer, EchoStar
Communications Corporation, Littlewood, Colorado, prepared
statement...................................................... 72
Gottsch, Patrick, President on behalf of RFD-TV, prepared
statement...................................................... 93
Hartenstein, Eddy, Vice Chairman, The DirecTV Group, Inc., El
Segundo, California, prepared statement........................ 98
King, John, President and Chief Executive Officer, Vermont Public
Television, Colchester, Vermont, prepared statement and letter. 106
Orlando, John, Executive Vice President, Government Relations,
National Association of Broadcasters, Washington, D.C.......... 112
THE SATELLITE HOME VIEWER EXTENSION ACT
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WEDNESDAY, MAY 12, 2004
United States Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 2:35 p.m., in
room SD-226, Dirksen Senate Office Building, Hon. Orrin G.
Hatch, Chairman of the Committee, presiding.
Present: Senators Hatch, Leahy, and Kohl.
OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
THE STATE OF UTAH
Chairman Hatch. We apologize for being here late.
Good afternoon and welcome to today's hearing on the
Satellite Home Viewer Extension Act. Today, we will be
discussing some very important issues relating to the
reauthorization of Section 119 of the Copyright Act which
provides a statutory license for the retransmission of distant
network signals.
The extension of Section 119 has far-reaching implications
for the satellite and broadcast television industries, as well
as for those who create video content, and I am sure that this
tremendous panel of witnesses that we have here today will do
their best to make this somewhat difficult subject matter
accessible to all of us, while also providing us with some
insight into the economics of providing direct broadcast
satellite, or DBS, service.
Television has come a long way since it was invented by a
Utah native, Philo T. Farnsworth, in 1927. The first television
image was nothing more than a straight line that rotated 90
degrees from a vertical to a horizontal position on the screen.
I think that most people would agree that television
programming has, at the very least, become more interesting
than Philo's rotating line, although based on all the letters I
have received about the last Super Bowl halftime show, I am not
sure that all of my constituents think that the taste in
programming has improved all that much.
I would like the transcript to reflect that I used that
same joke about television programming at the last hearing on
the Satellite Home Viewer Act 5 years ago, and I am pretty sure
I got a bigger laugh last time.
Senator Leahy. Ha ha.
Chairman Hatch. That is typical. That is just typical,
isn't it?
[Laughter.]
Chairman Hatch. Luckily for all of you, if Congress passes
the Satellite Home Viewer Extension Act, I will have another 5
years to perfect my delivery before you hear it again.
I will keep my remarks brief today and submit a longer
statement for the record, but I do want to take some time to
describe in a general way the approach that I believe Congress
needs to take on this legislation. And before I do that, I want
to emphasize that I have been impressed by the degree of
bipartisan and bicameral cooperation that has been apparent
thus far in our work on this legislation.
I want to thank Senators Leahy, Kohl and DeWine for their
efforts on this bill, and I hope that we will continue to work
together to pass legislation that appropriately balances the
interests of the affected parties and industries, while
advancing sound public policy and consumer choice.
With that in mind, I will outline some of the larger policy
objectives that I believe should be important in guiding us to
a resolution of a number of issues that have been raised in
connection with this particular piece of legislation.
First, we need to bear in mind that compulsory licenses are
strongly disfavored due to the market distortions they create
and then perpetuate. Although I support extending the statutory
license in Section 119 for another 5 years, Congress needs to
think carefully about how to begin minimizing the overall
distorting effect of this compulsory license on the market,
while retaining its central purpose of providing broadcast
network signals via satellite to households that cannot receive
them over the air.
With local stations now available from DBS providers in
over 110 markets, which I am told encompass roughly 85 percent
of U.S. television households, one obvious approach is to
create appropriate incentives that will further encourage a
transition from the Section 119 distant signal license to the
Section 122 local-into-local license.
Second, I believe that we need to have a reasonable
adjustment of the copyright royalty rates that are paid under
the Section 119 license. Once we depart from rates that are set
at or near fair market value under a compulsory license, not
only do we introduce substantial and potentially increasing
market distortions, but Congress eventually finds itself
without any clear guiding principle to apply in determining the
proper rate.
For this reason, unless the affected parties can move
toward some resolution on the rate issue, the Senate should
consider an approach similar to the approach taken in the House
Judiciary Committee in which a Copyright Arbitration Royalty
Panel would determine the rate and it would then be subject to
Congressionally-mandated discounts.
Third, Congress should carefully consider ways to increase
parity between cable and DBS to ensure that consumers continue
to benefit from competition and have increased programming
choices. For example, I believe satellite providers should be
allowed to provide significantly viewed stations to their
subscribers in the same way that cable companies do.
Finally, I want to mention the two-dish issue. I believe
that the Senate should prohibit the discriminatory placement of
certain stations on a second satellite requiring subscribers to
obtain a second dish to receive them. I am particularly
concerned that Spanish language, religious and public broadcast
stations have been singled out for this treatment.
Now, with that, I am going to turn to Senator Leahy for his
opening statement.
[The prepared statement of Chairman Hatch appears as a
submission for the record.]
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Senator Leahy. Well, thank you very much.
My friend, Senator Hatch, and I have worked very closely
together on satellite television issues for many years. Many of
you have been here for some of these hearings and you know that
in November of 1997 we joined together to find a way to avoid
cutoffs of satellite TV service to millions of homes and to
protect the local affiliate broadcast system.
In early 1998, working with members of this Committee,
especially Senator Kohl and Senator DeWine, we forged a
bipartisan alliance behind a strong satellite bill to permit
local stations to be offered to viewers by satellite,
increasing competition between cable and satellite providers.
We worked with the Public Broadcasting System so that they
could offer a national feed as they transitioned to having
their local programming beamed up to satellites and then beamed
back down to much larger, new audiences. I am pleased that my
friend, John King, of Vermont Public Television, will testify
today about how local-into-local television benefits
Vermonters, as well as residents of other States. He will talk
about how VPT is now available in Bennington and Windham
Counties through the EchoStar Dish Network.
I want all other Vermont broadcast stations to be available
in those two counties. Those are the two southernmost counties,
one on the eastern side of our State and one on the western
side of our State. They haven't been able to receive television
news about what is happening in Vermont. If you live in
Vermont, if you hear about a school fire or a traffic jam or a
flood in Framingham, Massachusetts, it is not the same if you
hear about the same school fire, traffic jam or flood in
Rutland, Vermont.
We have worked together in this Committee and we have made
it possible for millions of viewers to receive all their local
network broadcast stations over satellite. Millions of
consumers now have a choice between cable service or satellite
service, which is important because consumers then have
competition.
We started working on this in 1997. Millions of viewers
across America couldn't even receive signals from the four
broadcast networks over the air. In my own State, a small State
with a whole lot of mountains, we have many towns in the
saddles of these mountains and they get no signals at all.
In that regard, Mr. Chairman, I want to thank Charlie
Ergen, who is here. His Dish Network has been offering local-
into-local service in Vermont since 2002. Vermont is also
looking forward to DirecTV satellite service in the near
future.
This Committee worked with other committees in the Senate
and the House during the past 7 years on this. It is
interesting in working with them that you find so many members
of both parties who have common interests in this because they
are the interests of their constituents. We have helped to
create vast viewing options and alternatives for consumers, but
we have also helped to expand a tremendous new industry.
I will work with Chairman Hatch and all members of this
Committee to go the next step forward as we reauthorize the
Satellite Home Viewer Act, our original legislation, which I
think both the Chairman and I would agree was a homerun. Now, I
want to build on that.
Mr. Chairman, I am happy to see that our bill, S. 2013,
that we introduced with Senators Kohl and DeWine is on the
agenda for tomorrow's markup. I understand, as we often do with
something that significant, we will put it over until the next
meeting, which I totally agree with. It will help us draft a
necessary consensus substitute bill, but it also forces
everybody on the Committee to step up to the plate and decide
just what we want.
So I just wanted to mention that and thank you for setting
up that procedure.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Chairman Hatch. Well, thank you, Senator.
We will turn to Senator Kohl, and if Senator DeWine comes,
we will be glad to hear his statement because both of them have
worked extensively in this area as well.
STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF
WISCONSIN
Senator Kohl. Thank you, Mr. Chairman.
Today, we revisit the Satellite Home Viewer Improvement
Act, a law we passed just a little less than 5 years ago.
Having participated in that conference, we appreciate how
complicated this issue can be.
The simple goal of this law was to level the playing field
between satellite and cable companies to give consumers greater
choice and better value. We must bear that principle in mind
when working on the reauthorization of the legislation this
year.
Most importantly, by permitting local-into-local service,
we made satellite an even better competitor to cable. A 2002
GAO study requested by Senator DeWine and myself concludes that
satellite subscribership was 32 percent higher in markets where
satellite companies offered local broadcast signals. Moreover,
satellite subscribers have more than doubled since the passage
of the Satellite Home Viewer Improvement Act.
It is therefore essential that we reauthorize the parts of
the law that are set to expire at the end of this year, and
where necessary we should tweak the law to further spur
competition between cable and satellite. One section that will
soon expire involves distant network signals. Until local-into-
local service is introduced in all 210 media markets, we should
continue to permit distant signals for those consumers who are
legally entitled to them, and consider extending this privilege
to those who were grandfathered in 1999.
We hope that as local-into-local rolls into more markets,
this issue will become obsolete. After all, local-into-local
has been very successful in Wisconsin, with local channels
being offered in Milwaukee, Green Bay, Madison, and with other
markets on the way.
To further level the playing field for cable and satellite
competition and to bring more benefits to consumers, we should
let satellite companies retransmit significantly viewed
stations into local markets on a royalty-free basis. Cable
companies have enjoyed this privilege for years and it is time
to extend this right to the satellite industry. By doing so,
satellite companies will be able to craft a local channel
lineup more similar to what cable currently offers.
We must pass this legislation this year. Indeed, it would
benefit consumers and satellite companies alike if we acted
quickly to reauthorize and improve the Satellite Home Viewer
Improvement Act. It has worked well, and only a minor tune-up
is needed at this time. We look forward to working hard to get
this bill passed before we adjourn.
I thank you, Mr. Chairman.
Chairman Hatch. Thank you, Senator.
We are first going to hear testimony from David Carson,
general counsel of the Copyright Office. We look forward to
hearing your perspective as an authority on copyright policy
matters.
Next, we will listen to Charlie Ergen. We welcome you, Mr.
Ergen, again, founder and CEO of EchoStar Communications
Corporation, one of the pioneering forces in satellite-
delivered television, a person we have a great deal of respect
for.
Third, we will hear from Bruce Reese, president and CEO of
Bonneville International Corporation. Mr. Reese is from my home
State of Utah, the same State that Philo T. Farnsworth came
from, and we expect you to be just as important as Philo T.
Farnsworth has been to all of us.
Senator Leahy. But with a better picture.
Chairman Hatch. Yes, a better picture.
Bruce, we are happy to have you here. We know it is a long
trip for you, but we also know that this testimony you are
about to give is important.
Next, we have Eddy Hartenstein, vice Chairman and board
member of the DirecTV Group, from El Segundo, California, the
State where Philo T. Farnsworth lived when he invented
television. So we have got to give you credit, Eddy, too. We
are glad to have you here and appreciate the expertise that you
bring to this Committee year after year.
After Mr. Hartenstein, we have Fritz Attaway, executive
vice president and Washington general counsel of the Motion
Picture Association of America. I was at Jack's reception last
night, which was really good, and appreciate all you folks do
down there.
Fritz now lives in D.C., but he is actually from the State
of Idaho which, according to some historians, is the State in
which Philo T. Farnsworth first came up with the idea of
inventing television while working in a potato field, of all
places.
Senator Leahy. I have heard you really stretch for some of
these, Orrin, but my God.
[Laughter.]
Chairman Hatch. Look, it isn't just Vermont that is
permitted to stretch.
Last but not least, we have John King, president and CEO of
Vermont Public Television. Now, as far as I can tell, Vermont
has no connection to Philo T. Farnsworth, although my staff did
try to come up with one. But we know that Vermont has a beauty
all its own that doesn't need television. At least that is what
Senator Leahy tells me anyway.
With that, we will go to our first witness, Mr. Carson.
STATEMENT OF DAVID O. CARSON, GENERAL COUNSEL, U.S. LIBRARY OF
CONGRESS COPYRIGHT OFFICE, WASHINGTON, D.C.
Mr. Carson. Thank you, Mr. Chairman, Senator Leahy, Senator
Kohl. I am pleased to appear before you to present the views of
the Copyright Office on the extension of the satellite carrier
Section 119 statutory license.
Statutory licenses represent a complex, detailed area of
the law. In my written testimony, I have laid out the history
and operation of the Section 122 and Section 119 statutory
licenses covering the retransmission of local and distant over-
the-air broadcast signals by satellite carriers, as well as the
Section 111 statutory license dealing with retransmission of
broadcast signals by cable operators.
In a nutshell, Mr. Chairman, our message is that if there
is one piece of copyright legislation that must be enacted this
year, this is it. Section 119 of the copyright law will expire
at the end of this year unless it is extended. Failure to
extend it would mean that millions of subscribers to satellite
TV services will lose their access to broadcasts of network
stations and superstations. While there are many differences of
opinion as to what the terms and conditions of the statutory
license should be, virtually everyone agrees that the license
should continue.
Congress and the Copyright Office have had to face the
issue of extension of this license on two previous occasions in
1994 and again in 1999. Our position remains the same. In
principle, the Copyright Office disfavors statutory licenses. A
statutory license should be a last resort. The Office strongly
favors marketplace solutions.
On the other hand, the cable compulsory license has been a
part of the law since 1978 and is permanent. Believing in
parity among providers, the Office supports reauthorization of
the Section 119 license for satellite carriers. While we
believe that, in principle, the satellite license should
continue for as long as the cable license is in place, we also
believe that we are in a period of transition.
Issues such as the transition from analog to digital
broadcasts and the projected expansion of local-into-local
service to virtually all households mean that only a few years
from now it may be necessary to reexamine the terms and
conditions of the satellite license again. Therefore, at this
point we favor a 5-year extension of the Section 119 license.
During those 5 years, consideration should be given to
whether the two statutory licensing regimes for cable and
satellite should continue in existence, and if so, whether they
should be harmonized as much as possible, as recommended in the
1997 report of the Register of Copyrights that at your request,
Mr. Chairman, reviewed the copyright licensing regimes covering
retransmission of broadcast signals.
Although the legislation that you have introduced, Mr.
Chairman, is a simple 5-year extension that amends Section 119
only by extending its sunset date, we understand that it is
likely that the legislation that is ultimately enacted will
amend Section 119 in a number of respects, and we agree that
several amendments are advisable.
We note that the House Subcommittee on Courts, the Internet
and Intellectual Property has marked up a bill that contains
several such amendments, and we anticipate that this Committee
will consider such amendments as well. Therefore, I would like
to spend a moment addressing some of these amendments.
First, we agree that the royalty rates paid by satellite
carriers need to be adjusted. At a minimum, the royalty fees,
which have not changed since 1999, should be increased to take
into account the rise in the cost of living over the past 5
years and should continue to receive an annual cost of living
adjustment. It is hard to argue against this provision.
We note, however, that the current royalty fees represent a
significant discount--30 percent for superstations and 45
percent for network stations--from the marketplace rates
determined by a Copyright Arbitration Royalty Panel in 1997.
Because we strongly believe that royalties for the statutory
licenses should reflect marketplace rates, we recommend that
the royalties be brought back to fair market value either by
reinstating the CARP determination with a cost of living
increase or by conducting a new rate-setting proceeding based
on fair market value.
There has also been discussion about harmonizing the
satellite license with the cable license by permitting a
satellite carrier to transmit a television station's signal
outside the station's local market and into a locality in which
the signal is significantly viewed over the air, typically in
certain adjacent localities. The FCC maintains a list of
significantly viewed stations for each locality.
The amendment proposed in the House would permit
transmission of a significantly viewed signal only to
households that also receive the signal of the local network
affiliate under Section 122's local-into-local license. We
think this is a reasonable proposal.
As always, Mr. Chairman, the Copyright Office stands ready
to assist you in any way as you craft legislation that will
reauthorize the satellite license.
Thank you.
[The prepared statement of Mr. Carson appears as a
submission for the record.]
Chairman Hatch. Well, thank you.
Charlie Ergen, we will turn to you at this point.
STATEMENT OF CHARLES W. ERGEN, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, ECHOSTAR COMMUNICATIONS CORPORATION, LITTLEWOOD,
COLORADO
Mr. Ergen. Thank you, Chairman Hatch, Senator Leahy,
Senator Kohl. On behalf of EchoStar Communications, I want to
thank you for inviting me to testify on the Satellite Home
Viewer Improvement Act.
The reauthorization of SHVIA offers Congress an excellent
opportunity to preserve and extend the pro-competitive measures
in the current Act, as well as to improve the regulatory parity
between cable and satellite TV providers. While SHVIA has been
a good first step in addressing the huge disparities between
DBS and dominant cable operators, it has not gone far enough.
Congress should take steps to eliminate those differences and
ensure that satellite carriers can better compete with cable.
At the same time, it is important that you not impose new
requirements on satellite carriers that might further
disadvantage our industry relative to the dominant cable
providers. I would like to suggest a few ways to improve the
law.
The lack of parity in royalty rates and the mechanism for
establishing those rates between satellite and cable is a major
problem for our industry and our customers. First, cable enjoys
a permanent compulsory license that includes a permanent
copyright structure, but the royalty rates that satellite pays
are subject to review by Congress every few years, along with
the temporary licenses that Congress has been enacting since
1988. The lack of permanence fosters great uncertainty.
Second, the royalty rates under the cable compulsory
license are calculated according to a statutory formula and may
be adjusted for inflation only once every 5 years. Satellite
carriers, on the other hand, have been subject to a process of
rate adjustments by Copyright Arbitration Royalty Panel, or
CARP. In 1997, this process led to excessively high rates that
Congress had to step in and reduce.
Third, while it is difficult to compare the rates that
cable and satellite carriers pay because of complexities in the
cable formula, the net effect has been that satellite carriers
pay much more than cable systems in the majority of cases.
There is a simple way to resolve this problem. Whatever rates
you decide to impose on satellite carriers, impose the same
rates on cable systems as well. A regime of uniform rates and a
uniform method for adjusting them would automatically achieve
parity between satellite and cable.
I strongly urge you not to relegate rate-setting to the new
CARP process. CARP proceedings are cumbersome and protracted.
The outcome is uncertain. They hamper business decisions and
planning. In addition, the last CARP implemented the statutory
standards in a misguided way. It derived excessive rates mainly
by looking at the rates paid by cable systems not for the same
distant broadcast networks, but rather from the most popular
cable networks such as CNN and ESPN.
Among other factors, cable networks give distributors
valuable ad avails and free time in exchange for the fees they
receive. By contrast, in the case of distant broadcast
networks, satellite carriers are prohibited by the terms of
Section 119 licenses from deleting any content. By relegating
the rate-setting function to the CARP process, you could be
paving the path for another unreasonable result where you might
have to step in again and try to rectify it, as you did in
1999. I urge you not to go down this path.
As you look forward to renewing SHVIA, I would like the
opportunity to talk about a fundamental part of the law that
has not worked well--retransmission consent. The law directed
the FCC to establish good-faith obligations for retransmission
consent bargaining arrangements, but it has not been enough to
adequately police the unreasonable behavior of several powerful
media conglomerates.
Companies with multiple video programming properties now
control many local broadcast stations. In our experience, the
retransmission consent negotiations provide those companies
with the opportunity every three or 4 years as a condition for
retransmission to force us to pay for channels that we do not
want and our customers do not want to pay for. The good-faith
requirement has not been effective in preventing such practices
and it should be strengthened. We do believe that it has some
influence on bargaining behavior and, at a minimum, should be
preserved.
Looking to the future, we believe that reauthorization of
SHVIA offers Congress a unique opportunity to speed up the
stalled transition to digital television. Today, 2 years before
the transition deadline, we still have a Satellite Home Viewer
Act that addresses only analog unserved households. Consumers
who cannot receive an over-the-air HD signal either because a
local broadcaster has only built a low-power facility or
because he has not built any facility should be allowed to
receive HD via satellite.
We are now more than 2 years past the May 1, 2002, deadline
Congress established for local TV broadcasters to convert
digital signals, and still more than half of the 1,600
broadcasters are not providing full-power digital signals. But
Congress can stimulate local broadcasters to speed up digital
transmission by allowing TV providers to offer digital high-
definition programming to households that are not served with a
local over-the-air signal.
In conclusion, while SHVIA has helped create a more level
playing field between cable and satellite, there are many
significant differences in the regulatory treatment that affect
DBS' value to consumers. In reauthorizing and revising SHVIA,
Congress should eliminate those differences so that satellite
can compete more vigorously, and impose no new requirements
that would further disadvantage us relative to cable
competitors.
We believe you have a unique opportunity with SHVIA to
further the transition to digital. We hope you will seize it in
order to achieve the transition policies you have already
enacted to benefit consumers who are being ill-served by the
currently digital delay.
Thank you.
[The prepared statement of Mr. Ergen appears as a
submission for the record.]
Chairman Hatch. Thank you.
Mr. Reese, we will turn to you now.
STATEMENT OF BRUCE REESE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, BONNEVILLE INTERNATIONAL CORPORATION, SALT LAKE CITY,
UTAH, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS
Mr. Reese. Thank you, Mr. Chairman.
As the legislation process on SHVIA reauthorization has
begun, in keeping the interests of consumers foremost NAB has
attempted to work with all affected parties to find reasonable
compromises on a number of thorny issues. In that vein, we
endorse the common ground we have found to date with DirecTV.
We will continue seeking accord as the Senate approaches SHVIA
reauthorization.
As you know, SHVIA contains two compulsory licenses. The
first, the local-to-local license, allows satellite to deliver
local stations to local viewers. It has been a tremendous
success, allowing many of your constituents to receive local
news, weather and sports via satellite. DirecTV should be
commended for its pledge to provide local-to-local in all 210
markets no later than 2008.
While DirecTV's aggressive expansion has forced EchoStar to
move forward with local-to-local carriage, unfortunately in
many markets EchoStar requires consumers to obtain a second
satellite dish in order to receive some stations, most often
Spanish-language, religious and public stations. We hope
Congress ends this discriminatory two-dish practice.
The second license, the distant signal license, has been a
recipe for abuse. For decades, satellite ignored the rules
governing eligibility for distant signals, signing up anyone
and everyone willing to say they were unhappy with their over-
the-air reception. Even after broadcasters filed a series of
lawsuit--and won, I would add--EchoStar continues providing
illegal service to hundreds of thousands of subscribers.
A Federal judge recently found EchoStar broke a sworn
promise to the court by failing to disconnect those illegal
subscribers. With this sordid record, EchoStar now asks that
you expand the distant signal license by creating a digital
white area. The Committee must reject this proposal.
Let's dispel some myths being spread about the status of
the DTV transition. According to the FCC, 1,411 television
stations are on air in digital today in 203 markets that serve
over 99 percent of U.S. households. Broadcasters are close to
replicating their analog coverage areas, already reaching 92
percent of the populations they will be required to serve.
EchoStar's assertion that the 771 stations operating at
special temporary authority power levels are not serving their
full market area in digital is false and misleading. Many of
these digital stations are not only serving their market area,
but exceeding their analog coverage areas, even at lower
authorized power levels. While digital white areas would do
nothing to stimulate the DTV transition, it would have a severe
consequence in the few remaining markets where broadcasters are
struggling with bureaucratic and technical obstacles.
A couple of examples. Our market, Salt Lake City, covers
not only the entire State of Utah, but also counties in
Wyoming, Nevada and Idaho. To serve viewers in this enormous
DMA, Salt Lake City stations use 622 translators, more than 90
percent of which are licensed to local governments and civic
organizations, not to the stations.
Moreover, the FCC has not yet authorized upgrading the
translators to digital. Salt Lake City stations have been on
the forefront of the DTV transition. Our station, KSL, went
digital in 1999, broadcasting, I would add, Senator Hatch, from
Farnsworth Peak, continuing your theme, and has been a leader
in local digital wide-screen news. Utah stations have been
active in working with the industry and the FCC to find a
solution to the translator issue. Under a digital white area
regime, EchoStar would steal our viewers, your constituents, by
bringing Los Angeles stations to San Juan, Kane and other rural
Utah counties.
The five Vermont television stations spent 7 years working
with State authorities and other parties to place their DTV
facilities at a common site atop Mount Mansfield. The stations
have also negotiated a new lease with the site owner. These
preparations, now close to completion, have been further
complicated by the difficulties of obtaining the necessary
Canadian clearances. If digital white area becomes law,
EchoStar will siphon off these stations' viewers as well.
And make no mistake, EchoStar has no intention of returning
these viewers to their Salt Lake, Burlington, or any other
local broadcast service. EchoStar's digital white area scheme
would do nothing to accelerate the transition. If EchoStar
really wishes to be a partner in the DTV transition, it should
bring local HD signals to local television markets.
Mr. Chairman, since the first Satellite Home Viewer Act was
enacted in 1988, Congress has repeatedly affirmed two goals.
First, the preferred method to provide network programming is
through local affiliate stations. And, second, importing
distant signals should only be used as a last resort in extreme
circumstances where there is no alternative.
Over the years, EchoStar has repeatedly misused and abused
this second, last-resort option. I strongly urge the Committee
to reauthorize a SHVIA that recognizes the paramount importance
of localism, takes heed of the mistakes of the analog past, and
does not repeat those mistakes in the digital future.
Thank you.
[The prepared statement of Mr. Reese appears as a
submission for the record.]
Chairman Hatch. Thank you so much.
Mr. Hartenstein.
STATEMENT OF EDDY HARTENSTEIN, VICE CHAIRMAN, THE DIRECTV
GROUP, INC., EL SEGUNDO, CALIFORNIA
Mr. Hartenstein. Chairman Hatch, Senator Leahy, Senator
Kohl and members of the Committee, my name is Eddy Hartenstein.
I am the vice Chairman of the DirecTV Group and it is my honor
to be here today. Thank you for allowing me to testify on
behalf of DirecTV regarding SHVIA.
The members of this Committee deserve a great deal of
credit for their role in creating competition in the
subscription television industry. SHVIA, which you helped
enacted, extended a compulsory copyright license to the
retransmission of local television signals within each
station's local market, known as local-in-local. This, combined
with improved technology, has allowed satellite operators such
as ourselves and EchoStar to offer programming service much
more comparable to that offered by cable.
For us, with last week's launch of our DirecTV 7S spot beam
satellite, we will in a matter of days begin the process of
providing local-into-local service in just over 100 DMAs
nationwide. And we also have pending in front of the FCC
another proposal which will extend our capacity to reach 130
DMAs as soon as this summer. At that point in time, we will be
offering local broadcast channels in markets serving 92 percent
of American television households. And in coming years, we plan
to continue rolling out the rest of the DMAs into the remaining
markets.
In other words, SHVIA has been an extraordinary success and
we hope Congress will build on its success. But we know SHVIA
is a complex issue in these complex times, and we realize that
with today's world events of last week and going forward, this
is a very busy legislative session and Congress and this
Committee do not have a lot of time to act.
With that realization in mind, and putting things in proper
perspective, we have been meeting with representatives of the
broadcast industry to see if we could reach some common ground
on some of the issues associated with SHVIA reauthorization.
These discussions are still ongoing, but we have been able to
agree on several basic points. Among them are the following.
Legislation should extend satellite operators' ability to
import distant signals for up to 5 years or longer; permanently
would be nice, but again we would be willing to settle for 5
years. The legislation should also, subject to some
limitations, allow satellite operators to offer the same out-
of-market significantly viewed stations that cable operators
already offer today.
That same legislation should extend for 5 years the
satellite carrier retransmission consent exemption for distant-
signal stations, and we should extend for the same period of
time the provision prohibiting television stations from
entering into exclusive retransmission consent agreements.
The legislation should extend the good-faith negotiating
requirement to all distributors and it should provide a
mechanism for grandfathered distant-signal subscribers to
choose between distant and local signals. We should also
gradually implement a ``no distant where local'' concept
whereby satellite operators can't offer new subscribers distant
signals where local-into-local signals are available. But in
doing so, however, I think we should ensure that the
legislation allows existing subscribers who have both distant
and local-into-local to keep them.
Finally, the legislation should clarify what ``carry one,
carry all'' means, and we believe that satellite carriers may
not split local analog or local digital signals, respectively,
in one market between two dishes.
Now, do these principles reflect everything that DirecTV
would like from a SHVIA reauthorization? Of course not. But all
and all, we think that these principles represent a reasonable
compromise. There is, however, another issue to discuss that
lies at the heart of this Committee's jurisdiction.
We are deeply troubled by the prospect of rate increases,
particularly if there is no such increase in the rates paid by
cable operators. We are also concerned with the prospect of
participating in an admittedly flawed, distracting, extremely
expensive and time-consuming CARP process, and that is a
process that cable operators are not even subjected to.
You may hear a lot this afternoon about whether the
satellite industry pays more or less in royalty fees than
cable. The fact is one cannot make an apples-to-apples
comparison because the two royalty regimes are so very
different. So I would take with a grain of salt any analysis
claiming that cable operators pay more than satellite
operators.
To the extent that copyright-holders are really saying that
neither cable nor satellite fees adequately compensate them, I
would note that Congress must balance the goal of reimbursing
copyright-holders with the goal of giving consumers access to
programming at a reasonable price.
Most importantly, I would remind the Committee that
satellite operators control, in aggregate, only about 20
percent of the subscription television market. And in nearly
every town in America, we compete against a cable operator with
at least 70-percent market share. In such a market structure,
any effort to raise only satellite royalty rates would be a
competitive disaster. If Congress truly believes it is time to
raise royalty rates, and thus pay TV prices, it should do so
only in the context of harmonizing the cable and satellite
royalty rate regimes.
In conclusion, Mr. Chairman and members of the Committee, I
would like to thank you for all that Congress has done to
nurture the satellite industry as a vibrant competitor to
subscription television and cable, and with your help we will
continue to do this and provide the highest quality, best,
competitive service to consumers.
Thank you.
[The prepared statement of Mr. Hartenstein appears as a
submission for the record.]
Chairman Hatch. Thank you, Eddy.
Fritz, we will turn to you.
STATEMENT OF FRITZ ATTAWAY, EXECUTIVE VICE PRESIDENT AND
WASHINGTON GENERAL COUNSEL, MOTION PICTURE ASSOCIATION OF
AMERICA, WASHINGTON, D.C.
Mr. Attaway. Thank you, Mr. Chairman, Senator Leahy,
Senator Kohl. I appreciate you affording me this opportunity
today to speak on behalf of content owners, without which, I
should point out, none of the people at this table would be in
business.
The Satellite Home Viewer Act was enacted in 1988 and
extended for 5-year periods in 1994 and 1999. In 1999, in
response to fierce lobbying by the satellite industry, Congress
imposed a substantial discount on market-based compulsory
license rates set a year earlier by an independent arbitration
panel and approved by the Copyright Office and the Librarian of
Congress.
These discounts--30 percent for superstation programming
and 45 percent for network and PBS programming--went into
effect in July of 1999. Since the reduction of royalty rates in
1999, there have been no further adjustments of the compulsory
license rates. In the 5 years since the last extension of the
satellite compulsory license, the cost of programming that
satellite companies license in the free market for resale to
their subscribers has increased substantially, as have the fees
charged by satellite companies to their subscribers. The only
financial figure that has not increased is the compensation
provided to owners of retransmitted broadcast programming.
Satellite carriers now pay 18.9 cents per subscriber, per
month, for all of the programming on a distant independent
broadcast station like WGN in Chicago and KTLA in Los Angeles.
The satellite carriers then sell this programming to their
subscribers for many times that amount. The royalty rates for
the year 2004 should increase to reflect increases that
satellite companies have paid in the marketplace for comparable
programming.
Some satellite carriers--I say ``some'' now because Mr.
Hartenstein was absolutely correct; you cannot compare cable
and satellite. They are apples and oranges. Any claim that
cable systems pay more now than satellite is simply not true.
The cable compulsory license is so completely different from
the satellite compulsory license formula that any attempt at
comparison is likely to be misleading. As I said, it is
comparing apples and oranges.
But with that disclaimer in mind, let me give you some
comparisons. EchoStar charges $34.99 for its basic package that
includes WGN as a distant signal. It pays 18.9 cents in
compulsory license royalties. Under the cable formula, it would
pay 33.5 cents. DirecTV charges $39.99 for its Total Choice
package, which includes WGN. It pays 18.9 cents under the
satellite compulsory license formula. It would pay 38 cents
under the cable formula.
EchoStar sells its add-on Dish Net Superstation Package,
which includes five distant independent stations, for an
additional $5.99 a month. It pays 94.5 cents for these five
stations under the satellite formula. Under the cable formula,
for these same five distant independent stations, the cable
system in Ogden City, Utah, would pay $1.57. The cable system
in Provo would pay $2.33. The cable system in Salt Lake would
pay $1.66. The cable operator in St. Johnsbury, Vermont, would
pay only $.52, actually less than the satellite carrier would
pay. But the cable operator in Montpelier would pay $2.27, and
the cable operator in Burlington, Vermont, would pay $5.79.
The cable operators that we have looked at would pay more
than satellite would pay. However, the truth is we are
comparing apples and oranges. I think the point to be made here
is that in the past 5 years, satellite carriers have
experienced cost increases. I suspect the cost of transponders
has gone up, as has the cost of parabolic dishes.
Certainly, the cost of programming on the 100-or-so non-
broadcast channels carried by satellite operators has gone up.
But in none of these cases have the satellite carriers come to
the Congress and asked for a subsidy. Only in the case of
retransmitted broadcast programming do these carriers say that
they should be insulated from market forces.
Mr. Chairman, Senator Leahy, Senator Kohl, by any
reasonable market analysis the cable compulsory license rates
should be adjusted upward. I trust that you will help make that
happen.
Thank you very much.
[The prepared statement of Mr. Attaway appears as a
submission for the record.]
Chairman Hatch. Thank you.
Mr. King, we will take your testimony last here.
STATEMENT OF JOHN KING, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
VERMONT PUBLIC TELEVISION, COLCHESTER, VERMONT
Mr. King. Thank you, Mr. Chairman, and thank you for
inviting me to appear today to testify on behalf of the
Satellite Home Viewer Extension Act. I would like to thank you
and the members of your Committee for the work that you have
done for satellite viewers, and a special thank you to Senator
Leahy for all he has done especially in Vermont to get
satellite signals to our State. It has been extremely important
to us.
Today, I would like to speak to the importance of local-to-
local satellite carriage for educating, informing and
connecting viewers, especially in rural States like Vermont.
And I will ask help from this Committee so that Vermont
stations will be available by satellite in Vermont's two
southern counties.
Vermont Public Television is proud to be a PBS station
broadcasting national PBS programming, but what really makes us
Vermont Public Television is the local programming we produce
about Vermont's public affairs, culture, nature and history.
We are more than a TV station. In our programming and
community outreach, we are a unifying force helping Vermonters
understand one another and fostering participation in civic
life. Although Vermont Public Television operates four
transmitters, our State's mountainous terrain makes over-the-
air reception difficult, particularly in the southern area of
the State.
In Vermont, there are many daily and weekly newspapers, but
no single statewide newspaper. Public broadcasting and the
commercial TV stations are the only statewide media, and access
by satellite is crucial for all Vermonters. When satellite
service began, Vermonters embraced it. The one drawback was the
absence of local channels. There was great excitement 2 years
ago when EchoStar began offering local channels. Satellite
subscription spiked and now more than 30 percent of the
households in the Burlington DMA have satellite.
I would like to thank you, Mr. Ergen, for that service.
Viewers were delighted. One woman from a small town in
Vermont wrote, quote, ``We are happy to say that as of today we
now have truly local Vermont TV channels through Dish Network.
We have felt disconnected and alienated from the State of
Vermont as far as the news is concerned. Once we heard that
local Vermont TV, including Vermont Public Television, was
available in our county, we immediately signed up.''
One of the best features of SHVIA is the ``carry one, carry
all'' provision. Vermont Public Television is on EchoStar's
main satellite, along with the four commercial affiliates as
part of the local channel package. Unfortunately, the good news
in 2002 about local-into-local did not apply statewide. Because
local service is determined by Nielsen DMAs, Vermont's two
southern counties are excluded, as they lie outside the
Burlington DMA.
Windham County, in the southeast corner, is assigned to the
Boston DMA, and Bennington County, in the southwest corner, to
the Albany, New York, DMA. Would-be viewers in those counties
were surprised to find they couldn't get Vermont channels, only
Boston and Albany stations. As good as those stations are and
as interesting as the news from New York and Massachusetts may
be, Vermonters wanted news, weather, emergency information and
local public affairs programming from Vermont.
Last month, EchoStar took a positive step toward bringing
southern Vermonters into the community of Vermont viewers.
Thanks to an agreement between EchoStar and Vermont Public
Television, EchoStar began offering Vermont Public Television
as an a la carte channel. This is a good first step, but we
think viewers would prefer access to Vermont Public Television
as part of a local channel package.
Vermont Public Television and the commercial TV stations
are a unifying force in our rural State, giving Vermonters
information to help them to be more knowledgeable, active
citizens of their State and community. We look forward to the
day when all Vermont satellite viewers can see our programs
about State government. The Speaker of the House in Vermont and
the Chair of the Vermont Senate Judiciary Committee are both
from southern Vermont, and we think their constituents should
have been able to see their recent appearances on our air.
We would like all Vermonters to be able to participate in
the regular call-in shows we do with the Governor or the
members of our Congressional delegation. In an election year,
statewide TV is essential. I would like Vermont Public
Television's candidate debates and public affairs programs and
the commercial stations' news and information to reach all
Vermonters. I urge this Committee to work with the satellite
companies on giving all Vermonters access to all of their
State's television stations.
Thank you, Mr. Chairman.
[The prepared statement of Mr. King appears as a submission
for the record.]
Chairman Hatch. Well, thank you, Mr. King.
Let me turn to you, Mr. Reese. Can you discuss the long-
term effect on advertising revenues in small markets if we were
to allow the continual retransmission of distant signals by
satellite in areas already served by local-to-local
retransmission?
Mr. Reese. I find it interesting that the SHVIA Act and
SHVIA reauthorization are characterized here as a way to
balance the playing field between satellite and cable, and that
the sort of fundamental communication mechanism, the policy
decision that was made in this country 80 years ago about the
need for local, over-the-air, free broadcasting, is sort of a
footnote in this conversation.
What we as broadcasters have to support in our obligations
to serve the community is the ability to reach our audiences.
There is an absolute need that we have access to those people.
We are grateful to have competition to cable via satellite. We
are pleased with the results from local-to-local. We look
forward to the day when satellite and cable will be delivering
our digital signals within the markets that we serve.
But it is extremely important that broadcasters have access
with their signals to all of the viewers within our area, and
the retention of these so-called grandfathered homes is simply
not justifiable either in terms of retaining the viability of
commercial television, but more importantly in terms of the
public policy, the public safety, the localism situations, the
localism policies that underlie the Telecommunications Act.
Chairman Hatch. Would you please comment further on Mr.
Ergen's digital white area proposal? Tell me how that would
work in my home State of Utah. And, of course, I would be happy
to hear from the rest of you witnesses on that as well.
Mr. Reese. Well, in the State of Utah, as you very well
know, despite being the seventh largest State geographically,
we are also the seventh most urban State in America because so
much of the population is concentrated in and around the Salt
Lake City area, with about 90 percent of the land mass of Utah
owned by the Federal Government and fairly sparsely populated.
Beginning 40 years ago, through the combined efforts of the
State and two legendary broadcasters in Utah, Arch Madison and
George Hatch, broadcasters there began building translators
throughout the State of Utah, not because there was a
commercial benefit to it, because local Salt Lake advertisers
receive no benefit from viewership in Monticello, Utah, but
because there was a feeling that it was important that those
people be part of the State, that they have access to the news
and public safety information that comes out of the State
capital.
Those translators--and there are now 622 of them in Utah
that we know about. They are not licensed generally to the
stations, but are licensed to county governments, city
governments, the Lion's Club, the Rotary Club, in a community
that wanted to see television.
Until we solve the bureaucratic issues related to the
transition of those translators, which is an issue that is
before the FCC and that they are moving on, but until we solve
all of the technical issues related to the main channel
transitions, we really don't get to the translator issues.
What happens if we do a digital white area is that large
portions of your State might well be watching Los Angeles
television stations. It provides no incentive, then, to try and
solve this translator problem to be able to deliver local Salt
Lake City television stations into the State of Utah.
We have local-into-local satellite. There is no need for
those people to be able to--they can see Salt Lake City
stations now under SHVIA. We hope someday to be able to have
digital local-into-local, in which case those rural viewers
would be able to watch digital Salt Lake City stations. There
is no policy that is benefitted by getting those people
watching Los Angeles digital signals.
Mr. Ergen. I think it is a little bit different. Our white
area proposal is for high-definition television. Through
satellite today, every square inch of the United States and
every consumer in America could get HD signals. They could get
the football games, the Master's golf tournament, the Tonight
Show, all the things that are being broadcast on HDTV public
broadcasting.
Should you be denied that because you live in rural
America? Should you be denied that because your local
broadcaster hasn't put up the signal, even though they were
supposed to 2 years ago?
In fact, in Salt Lake City a majority of broadcasters now
are leasing their digital spectrum to a service--I think it is
called U.S. Digital--which is broadcasting, in competition with
satellite and cable systems, channels like ESPN and CNN news.
So they are not using the signal for HDTV and we don't have the
right to bring HDTV in, and the only people we can get it from,
broadcasters in Salt Lake City, aren't using it for HDTV. So I
think the translator issue that Mr. Reese mentioned is a valid
issue, but it is a smokescreen in terms of Salt Lake City
because they are not doing high-definition television.
Having said that, I think that there should be some common
ground here. You now, we are problem-solvers. We don't have all
the solutions and we certainly are willing to enter into
dialogue. It seems to me that we should have some kind of
transition period to bring HDTV to the State of Utah until the
translator issue can be resolved.
At some point, we need to get spectrum from the FCC, and so
forth, so that we can do local-to-local HD, and it seems to me
that we shouldn't deprive people today. We should speed the
digital revolution for HD. We should get the analog spectrum
back so it can be used by other people to increase productivity
in the United States.
It seems to me that we want to open the dialogue. We don't
have all the answers and I think there are good points on every
side. But we do know that consumers aren't calling us about two
dishes. Consumers are calling us about why can't they get HDTV.
Consumers are calling us about why they can't get a network
signal when it is snowy with an off-air antenna. They are
calling about a waiver process they don't understand. Those are
things we hope this legislation will address.
Chairman Hatch. Thank you.
Does anybody else care to comment?
Mr. Reese. If I could just add, Senator, some stations in
Salt Lake are cooperating with U.S. DTV. Those stations can,
however, still broadcast a digital signal. There is the
flexibility in the spectrum to do that and to be able to
provide this further competition to cable and to satellite with
Steve Lindsley and U.S. DTV.
Mr. Ergen. We are talking about two different things. I am
talking about high-definition television and Mr. Reese is
talking about a digital signal. The digital signal is very
similar to the analog signal. It doesn't go on a wide screen.
It doesn't go on the 16-by-9 with all the 1080(i) lines. So
that takes the full spectrum.
I believe, based on everything I have seen, that what we
have proposed is high-definition television using the full
spectrum through the 1080(i) that was mandated by Congress.
Mr. Reese. Which, as I understand it, is what we are still
able to do while working with Steve Lindsley and U.S. DTV.
Chairman Hatch. Thank you. My time is up.
Senator Leahy.
Senator Leahy. Thank you, Mr. Chairman. You know, as I was
listening to some of the openings on this, we are expecting a
grandchild in July. We don't know whether it is going to be a
boy or a girl, but whatever it is, I think I will name it
Farnsworth. It is the only way I am going to get into this
plan, with apologies to the child when the child hears that.
Chairman Hatch. Well, I want the name ``Philo,'' as well,
you know.
[Laughter.]
Senator Leahy. Don't push it. That will be the next one;
that will be the next grandchild.
Chairman Hatch. Can you imagine, Philo Leahy? That sounds
pretty good. It has a ring to it.
Senator Leahy. I am not sure it will in Vermont, but that
is okay.
Chairman Hatch. I think I am going to start calling you
Philo.
Senator Leahy. The President has nicknames for all of us,
and we were out to dinner and somebody asked my wife what his
nickname was for me and she said, well, we don't use that in
polite company.
[Laughter.]
Senator Leahy. No. Actually, it was very nice.
Getting back to the subject, Mr. Carson, first off, I just
want to thank you and the Copyright Office. You come over here
so often, all of you, and you are so helpful. The hearings are
the tip of the iceberg. I know the staffs on both sides of the
aisle are calling all the time, and I have never known a time
when the Copyright Office wasn't ready and able to come right
back with answers for us.
I think in the satellite TV industry, you don't have to be
a genius to know that one of the reasons for the growth of it
is partly due to the availability of local-into-local
television, and a lot of that came from the work done in this
Committee and the House Judiciary Committee. You might have two
satellite companies and a cable company in an area, and it is
great because you get some competition and go from there.
If we do this reauthorization, assuming like most
reauthorizations it is not just simply a one-line ``it is
hereby reauthorized for `x' amount of time'' and we start
adding some things, what can we do to increase competition in
the areas where it now exists?
Mr. Carson. Well, Senator Leahy, there are a number of
things you can think about doing. Actually, in 1997 we made
quite a few suggestions, including, for example, trying to
harmonize the rate structures which are very different in the
two industries.
But if your question is, as I understand it, what can you
do this year in the context of a reauthorization, I think you
have to set your sights considerably lower. First of all, while
we recommend that you take a look at the cable regime--and when
we are talking about harmonization and convergence, we are
talking about looking at both licenses, not just changing one
to look more like the other--I don't think anyone is talking
about changing the cable regime this year.
What can you do this year? Well, one thing that I mentioned
in my testimony that you could do would be to deal with the
issue of the significantly viewed signal. As I mentioned, cable
has the ability right now to transmit a signal from an adjacent
area when it is significantly viewed over the air in a
particular locality.
Most people, I think, who have been discussing
reauthorization of the satellite license this year have agreed
that that is not a bad idea with respect to satellite. It helps
in terms of convergence. It helps in terms of giving satellite
the ability to deliver something that many customers will want
and that they can get from cable. That may be all you can do
this year, really, in that respect, given the very limited
nature and limited time of the process this year.
Senator Leahy. Mr. King, thank you for coming down from
Vermont this morning to be here. I will probably see you on the
streets or in the grocery store in Vermont this weekend when I
am back up there.
The House Judiciary Committee passed out a bill that
addresses a problem regarding two northern counties in New
Hampshire which seem to have very similar situations to the two
southernmost counties that you talked about, Windham and
Bennington counties. The counties in northern New Hampshire are
Grafton and Sullivan and they are actually in the Burlington
designated market area, even though our whole State is between
there. They receive Vermont stations through local-into-local
satellite service.
Under the House bill, a major network station in
Manchester, New Hampshire, would be able to have its signals
offered through local-into-local service to those northern New
Hampshire counties even though they are in the Burlington,
Vermont, market. That means some New Hampshire residents would
be offered both WMUR, the Manchester station, and a competing
Vermont network station. We have to assume that probably they
are watching the New Hampshire one more.
Do the same reasons you gave in your testimony about
providing Vermont station signals to our southern counties
apply with equal force to permitting a New Hampshire station to
serve two northern counties in New Hampshire with local-into-
local? That is a long way around to ask a simple question.
Mr. King. I don't know whether to call you Senator
Farnsworth or not, but in response to your question, absolutely
the logic applies equally in my mind to WMUR in New Hampshire
in the northern counties of Vermont as it does to the southern
counties of Vermont in terms of Vermont stations.
People who live in New Hampshire may receive Vermont
stations, but clearly our indication from our viewer responses
and letters and phone calls and e-mails would indicate that
nothing is more important to them than local news. And if WMUR
serves a statewide population, which in most cases I believe it
does, then the logic would apply and they should be on the dish
as well.
Senator Leahy. Speaking of calling me Senator Farnsworth, I
actually ran into somebody once who called me Senator Tuttle.
That is a local joke, for those of you who don't know Vermont.
I also had somebody come up to me in the Capitol here
recently who said I looked familiar. I told him I was Pat
Leahy, a Senator from Vermont, and he looked at me carefully
and said, no, no, you are not. And I said, well, I will accept
that, but why aren't I? He said, well, I have seen him on
television; he is about five-two and you are about six-four. I
said, what if I was a foot shorter? He said, oh, you could pass
for him easy.
Mr. Attaway, sometimes we look different wherever we are.
Mr. Ergen, there has been some question here, and I know
you have heard this criticism about two satellite dishes to
offer the full complement of stations. Am I correct that this
allowed local-into-local faster than it would have been
otherwise?
Mr. Ergen. First of all, as you recall, in 1999 all of us
were involved, as were you, in legislation for SHVIA. The
``must carry'' passed, which is ``carry one, carry all,'' and
as part of that legislation the compromise was that a two-dish
solution was allowed. The broadcasters' lawyers and teams of
lobbyists were certainly well aware of that; it has been black
and white in the law. So we have followed the law.
Every Congressman and every Senator that I have seen since
1999 has begged us to bring local-to-local to their
communities, and we have done that. We have done almost twice
as many as our competitor, DirecTV. In other words, we are the
good guys here.
The only channels that we put predominantly on the wing
satellites are channels that do not have local content. In
other words, they don't have local news, weather, sports. If it
is a religious station, it is exactly the same as a national
religious channel. We carry Trinity Broadcasting and we carry
them on a national basis. If there is not capacity available,
they have gone on a wing satellite. Only 11 percent of our
channels are on wing satellites. Only 30 percent of our markets
require two dishes. So that allows us in your case to do
Vermont some three or 4 years before maybe DirecTV is going to
do that.
So the balance for us had to be do we bring more
competition with local channels and more local markets? And we
are now in 49 States, Senator, 88 percent of the population. Or
do we go to a single-dish solution and do half that number?
Because it was the law, because it was agreed to by all
parties in 1999, and because we were encouraged by Congress, we
did that. It seems to me very punitive to now pass a law that
says, EchoStar, you did a great job, but now we are going to
penalize you and you have to retroactively go out and take
those customers who are on one dish and put them on two-dish
markets, or in some cases take down local markets.
I think the solution is to give us a period of time, going
forward, to be able to implement that. That may require
spectrum. It may require a new satellite. As you know, it takes
probably 3 years to build and launch a new satellite and some
$250 million.
We don't want to be in a two-dish solution. We don't want
any broadcaster to be on a second dish, even in local content,
but we need time to do that. DirecTV, of course, is now against
two dishes because they are not really a satellite company,
solely. They are obviously a broadcaster owned by news
corporations. So we are the only independent company left. And
they don't have spectrum for two dishes. Everything they have
ever done has been on a single dish because that is the only
spectrum they have.
So we are kind of fighting this. While you may see
agreement to the left-hand side of me on two-dish, it is rare
that Congress would pass legislation that is solely directed
anti-competitively at one company, particularly a company that
has done more for local-to-local than any other company.
Senator Leahy. My time is up. I will have some questions
for the record. The question was raised on HDTV. Are any of you
suggesting that you would not be planning to carry HDTV on
every channel that might have it? I don't think anybody is
suggested that, are they?
The reason I ask this is I know I hear some talk about,
gee, this is great if we give the broadcasters more spectrum so
that we can have HDTV. And they say, well, if we just send a
regular signal, of course, we can use that extra bandwidth to
use any number of commercial things on it.
Let me ask this question. Is anybody suggesting in their
business, assuming they are in the business, that they are not
going to carry HDTV everywhere it is available?
Mr. Reese. Mr. Leahy, we are certainly not suggesting that,
but we need help from the Congress and from the regulatory
perspective to make sure that a group not here today, the cable
industry, and the satellite people carry our digital signals,
our HD signals when we as broadcasters put them on the air.
Senator Leahy. You know, this is a whole new consumer area
once it becomes available. Senator Hatch and I are old enough
to remember when the first TV sets started showing up in our
homes, and then the wonder of color, even though I think RCA
carried about--it could only be seen by a handful of people,
but they started broadcasting more and more programs in color,
and then everybody did. And today the rare set is the black-
and-white set.
Thank you, Mr. Chairman. I have some thing I will submit,
but I just want to compliment you again for holding this
hearing.
Chairman Hatch. Well, thank you, Senator Leahy. We are
going to keep the record open for questions, and I have a
number of questions I am going to submit in writing.
We are appreciative of all of you being here and for the
respective points of view. Mr. Carson, we will particularly pay
attention to what you suggest to us. You have been terrific
through the years, and so has the Office. So we just want to
compliment you on that.
In closing, I would like to thank all of you witnesses for
your testimony today. I think we have had a good, small hearing
here, and I will look forward to working with interested
parties to go ahead with legislation this year. I want to
mention that I would anticipate fairly quick action on this in
our Committee. We have put S. 2013 on the agenda for the markup
tomorrow, and I hope that we will be able to move that through
Committee within the next couple of weeks. So we need all your
suggestions.
We certainly don't want to hurt anybody. We want to get
this so that it works in the best way for everybody. As you
know, I take particular interest in the Satellite Home Viewer
Act. I remember when we had to fight that through and it was a
very, very difficult thing to do. Hopefully, we will have a
little easier time this time and hopefully we can resolve some
of these conflicts that we have. If not, we will do the best we
can.
So with that, we will adjourn until further notice.
[Whereupon, at 3:43 p.m., the Committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
[Additional material is being retained in the Committee
files.]
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