[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SATELLITE TELEVISION LAWS IN TITLE 17
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 10, 2013
__________
Serial No. 113-48
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
U.S. GOVERNMENT PRINTING OFFICE
82-690 WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania KAREN BASS, California
TREY GOWDY, South Carolina CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Courts, Intellectual Property, and the Internet
HOWARD COBLE, North Carolina, Chairman
TOM MARINO, Pennsylvania, Vice-Chairman
F. JAMES SENSENBRENNER, Jr., MELVIN L. WATT, North Carolina
Wisconsin JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE CHABOT, Ohio Georgia
DARRELL E. ISSA, California JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah KAREN BASS, California
MARK AMODEI, Nevada CEDRIC RICHMOND, Louisiana
BLAKE FARENTHOLD, Texas SUZAN DelBENE, Washington
GEORGE HOLDING, North Carolina HAKEEM JEFFRIES, New York
DOUG COLLINS, Georgia JERROLD NADLER, New York
RON DeSANTIS, Florida ZOE LOFGREN, California
JASON T. SMITH, Missouri SHEILA JACKSON LEE, Texas
Joe Keeley, Chief Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
----------
SEPTEMBER 10, 2013
Page
OPENING STATEMENTS
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Chairman, Subcommittee on Courts,
Intellectual Property, and the Internet........................ 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Courts, Intellectual Property, and the Internet............. 2
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 3
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Ranking Member, Committee on the
Judiciary, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 4
WITNESSES
Paul Donato, Executive Vice President and Chief Research Officer,
The Nielsen Company
Oral Testimony................................................. 6
Prepared Statement............................................. 8
R. Stanton Dodge, Executive Vice President, General Counsel and
Secretary, DISH Network, L.L.C.
Oral Testimony................................................. 10
Prepared Statement............................................. 12
Gerard J. Waldron, Partner, Covington and Burling LLP, on behalf
of the National Association of Broadcasters
Oral Testimony................................................. 25
Prepared Statement............................................. 27
Earle A. MacKenzie, Executive Vice President and Chief Operating
Officer, Shentel Cable, on behalf of the American Cable
Association
Oral Testimony................................................. 43
Prepared Statement............................................. 45
James Campbell, Regional Vice President, Public Policy,
CenturyLink, Inc.
Oral Testimony................................................. 56
Prepared Statement............................................. 58
Robert Alan Garrett, Partner, Arnold & Porter LLP, on behalf of
Major League Baseball
Oral Testimony................................................. 67
Prepared Statement............................................. 68
Preston Padden, former President, ABC Television Network, former
Executive Vice President, The Walt Disney Company, testifying
on his own behalf
Oral Testimony................................................. 70
Prepared Statement............................................. 72
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Melvin L. Watt, a
Representative in Congress from the State of North Carolina,
and Ranking Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 109
SATELLITE TELEVISION LAWS IN TITLE 17
----------
TUESDAY, SEPTEMBER 10, 2013
House of Representatives
Subcommittee on Courts, Intellectual Property,
and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 10:04 a.m., in
room 2141, Rayburn Office Building, the Honorable Howard Coble
(Chairman of the Subcommittee) presiding.
Present: Representatives Coble, Goodlatte, Marino,
Sensenbrenner, Smith (Texas), Chabot, Farenthold, Holding,
Collins, DeSantis, Smith (Missouri), Watt, Conyers, Chu,
Deutch, Bass, Richmond, DelBene, Jeffries, and Jackson Lee.
Staff present: (Majority) Joe Keeley, Chief Counsel; Olivia
Lee, Clerk; and (Minority) Stephanie Moore, Minority Counsel.
Mr. Coble. Good morning, ladies and gentlemen. I appreciate
the witnesses' presence today. We welcome you to the
Subcommittee hearing on satellite television laws contained in
Title 17 of the U.S. Code.
Not unlike other copyright issues before Congress, the
circumstances surrounding disputes over our satellite
television laws are exceedingly complicated and important to
every congressional district.
When it comes to video, I believe there are some points on
which we can all agree. Americans love to watch television and
want to have as many choices available at the lowest possible
price.
This Committee has created three compulsory licenses to
make content more available. While in some instances these
licenses have served consumers and stakeholders efficiently and
effectively, I believe it is safe to say that compulsory
licenses are not without their shortcomings. The classic
example is when a local sports competition or a popular show is
suddenly unavailable. You go home looking forward to seeing
that particular show involved and you are unable to get it. You
are likely to turn off the television and call someone to
complain. I think that is a natural result.
Regardless of what perspective a Member of Congress has on
licensing issues, we can all learn one truth. Our constituents
are not shy about telling us to do something about problems in
the marketplace that deprive them of their favorite shows.
As we begin this review of the satellite licenses, one of
our goals will be to find solutions to situations where the
laws tend to benefit one party over the other. Throughout this
discussion, our top priority will be to protect the interests
of consumers. When there is a dispute and a resultant blackout,
consumers are left with no recourse.
Again, this is an extremely complex area of copyright law,
and I am pleased by our highly talented and highly qualified
panel of witnesses who are participating in today's hearing.
I am now pleased to recognize the distinguished gentleman
from North Carolina, the Ranking Member, Congressman Mel Watt,
for his opening statement.
Mr. Watt. Thank you, Mr. Chairman.
Today is the first of what I suspect will be a series of
hearings to consider the reauthorization of the Satellite
Television Extension and Localism Act, or what we call STELA,
which, among other things, extended the 119 license through
December 31, 2014.
Enacted in 1988, the Satellite Home Viewer Act created a
copyright compulsory license for the benefit of the satellite
industry to retransmit distant television signals to its
subscribers. The license, codified in section 119 of the
Copyright Act, was originally intended to ensure the
availability of broadcast programming to satellite providers
and to foster competition with the cable industry, which has
enjoyed a permanent compulsory license to retransmit
copyrighted content contained in both local and distant
broadcast television signals since passage of the Copyright Act
of 1976.
The intent of providing compulsory copyright licenses was
to facilitate investment in new, creative works by the
satellite and cable industries by eliminating direct
negotiation with the copyright owners for the use of distant
signal programming.
Although the 119 compulsory license is temporary and
therefore the focus of the reauthorization we will be
considering, it is part of a complex statutory and regulatory
framework governing cable and satellite retransmission of
broadcast signals, making it virtually impossible to consider
whether to reauthorize the provision in a vacuum.
For that reason, the Committee on Energy and Commerce,
which has jurisdiction over key regulations and statutory
provisions that govern the broadcast market, has held multiple
hearings in this Congress on whether to repeal, revise, or
reauthorize STELA.
Four years ago, under the leadership of Chairman Conyers,
the Judiciary Committee also grappled with a number of issues
that had emerged in the marketplace in an effort to simplify
and modernize what was largely perceived as an anachronistic
regime for the provision of broadcast programming. Most
immediately we addressed the impending transition from analog
to digital television. Other issues the Committee considered at
that time remain unresolved while new technologies have further
disrupted the market with innovations that we could not foresee
less than a decade ago.
I believe we have a unique opportunity to tackle some of
the big issues that will define the future of video. Compulsory
licenses I think everyone will admit represent a departure from
free market negotiations and are usually the last resort in the
event of market failure. When the compulsory licenses were
first enacted, the cable and satellite industries were in their
embryonic stages. Today, however, it is estimated that over 90
percent of American households subscribe to a pay TV service.
So there are a myriad of issues that may be relevant for
consideration.
For example, are these licenses still necessary to foster
competition or should they be phased out as the Copyright
Office and others have recommended? How many consumers truly
benefit from these licenses?
On the other hand, is the current overlapping web of
communications and copyright policy functioning in a way that
meets the goals of national media policy? It cannot be denied
or disregarded that marketplace incumbents, including
broadcasters, cable, and satellite providers and content
creators, have entrenched interests and investments in a
complex framework created by law. Would an abrupt dismantling
of this structure be unfair to those industries and harmful to
consumers? Can current law keep pace with new technologies that
seek to exploit ambiguities in the legal framework, for
example, what constitutes a public performance for
retransmission consent purposes?
Recently the CBS/Time Warner Cable retransmission consent
dispute resulted in a temporary blackout for some consumers. Is
that dispute evidence of a broken system or does it reflect a
robust free market?
Also, how should we address or should we address the
nascent online video distribution models that in the future may
very well displace the traditional distribution methods
altogether? Are these Internet-based video distribution models
the new kids on the block entitled to comparable statutory
imposed rights, obligations, and prohibitions? Or is the time
for Government intervention over?
These are only a few of the broad policy questions that I
think are relevant in this space. I believe that we must
determine whether the current regime is working to ensure that
content providers and distributors, old and new, are
appropriately compensated and incentivized in a way that
provides a competitive environment for American consumers.
We have an impressive and diverse group of expert witnesses
today with very different views on how the marketplace works
and how it has developed since STELA and most probably what the
rules of the road should be moving forward. I look forward to
the testimony today and to continuing this dialogue in the
future.
And, Mr. Chairman, I yield back and thank you for the time.
Mr. Coble. I thank the gentleman for his opening statement.
The Chair now recognizes the distinguished gentleman from
Virginia, Mr. Bob Goodlatte, the Chairman of the Committee on
the Judiciary, for his opening statement.
Mr. Goodlatte. Well, thank you, Mr. Chairman. I appreciate
your holding this hearing. I look forward to the testimony of
the witnesses.
For decades, the vast majority of Americans have relied
upon satellite and cable services for access to a wide variety
of video content ranging from nighttime entertainment for their
families, educational shows for their children, local and
national news with information that informs them, and public
access channels that empower Americans to see their local,
State, and Federal representatives in action.
As the number of channels and sources of video content
continue to increase, a growing number of Americans now
subscribe to additional services such as Redbox, Amazon, and
Hulu, some of which create their own content. Americans are
embracing these additional services to such a degree that
society has coined two new terms, ``cord shavers'' and ``cord
cutters,'' for those who are reducing or eliminating
traditional video subscriptions. According to the FCC's latest
competition report, in addition to free over-the-air broadcast
content, 100 percent of Americans have access to two satellite
services. 98 percent have access to these two satellite
services and one local alternative, and 35 percent have access
to two satellite services and two local alternatives.
Marketplace competition has grown significantly since the
last major Committee activity in this area in 2010 when
Congress enacted the Satellite Television Extension and
Localism Act. There are three compulsory licenses in Title 17
impacting this industry, one of which expires at the end of
2014. This Committee will consider, over the next year, whether
a reauthorization of this compulsory license is warranted.
However, as the written testimony submitted for this
hearing demonstrates, some interested parties are advocating
for Congress to undertake more than a simple reauthorization
and look at other matters surrounding the video marketplace and
competition policies that appear to have become more prominent
recently.
One core factor that this Committee will weigh, as we
consider these important issues, is ensuring that copyright
owners maintain the right to distribute their intellectual
property as they choose. This Committee has traditionally
disfavored compulsory licenses, although there are three in
effect today in this marketplace.
Another core factor we will weigh is ensuring competition
in the marketplace. Consumers and intermediaries benefit where
there is robust competition. As the Committee of jurisdiction
for competition policy, efforts that involve competition issues
deserve this Committee's oversight and ongoing attention.
The written testimony of the witnesses here this morning
highlights the importance of both issues to the video
marketplace. As this Committee continues its oversight and
legislative activities in this area, I look forward to hearing
from all interested parties about their perspectives and
concerns.
And I thank the Chairman and yield back.
Mr. Coble. I thank you, Chairman Goodlatte.
The Chair now recognizes the distinguished gentleman from
Michigan, Mr. John Conyers, the Ranking Member of the Committee
on the Judiciary, for his opening statement.
Mr. Conyers. Thank you, Chairman.
The Satellite Television Extension and Localism Act is full
of options that we have witnesses to distinguish.
I want to thank the Chairman for keeping the witness list
down to seven. I understand we ran out of tables and we were
not able to put on any more people than are here.
I want to consider these options, and I look forward to the
witnesses' testimony.
Two considerations, one about copyright owners and the
other about consumers. We must protect copyright owners because
it is their property that forms the basis of the entire scheme.
Compulsory licenses are generally not favored because they
distort the marketplace and result in below-market rates being
paid to content owners.
Second, we must enact policies that protect consumers and
safeguard competition. Consumers benefit from increased
competition because more competition usually produces lower
prices. And copyright owners do not benefit financially from
retransmission consent agreements, which is at the heart of
these disputes, despite the fact that the signal only has worth
because of the programming contained on the signal.
And so I think we must focus on principles of localism.
People who subscribe to cable or satellite television have so
many options. There is never a shortage of something to watch.
But even with all these choices, people still highly value
their local news, their local sports, and need local channels
to deliver community service and emergency information.
Localism and the traditional network affiliate relationship
also benefits copyright owners by allowing their programming to
be publicly performed in every market across the country.
Now, I conclude by observing that there will be
circumstances in which these principles will conflict. I look
forward to working to ensure that the public interest can best
be served through satellite carriage of broadcast television
signals.
And I thank the Chairman for allowing me to make these few
brief remarks.
Mr. Coble. Thank you, Mr. Conyers. I appreciate that.
As indicated before, we have a very distinguished panel
before us today, and I will begin by swearing in the witnesses.
Gentlemen, if you would please rise.
[Witnesses sworn.]
Mr. Coble. Let the record show that all witnesses concur
with that.
And I will now introduce our panel. We appreciate
everyone's attendance at this very important hearing.
Our first witness today is Mr. Paul Donato, Executive Vice
President and Chief Research Officer of the Nielsen Company.
Mr. Donato is responsible for overseeing the development and
evaluation of research while also serving as Nielsen's liaison
to his clients and industry associations. He received his B.A.
in psychology and sociology from the State University of New
York at Stony Brook.
Our second witness is Mr. Stanton Dodge, Executive Vice
President, General Counsel, and Secretary for DISH Network. Mr.
Dodge is responsible for all legal and government affairs for
DISH-added subsidiaries. He received his B.S. in accounting
from the University of Vermont.
Our third witness is Mr. Gerard Waldron, partner at
Covington and Burling, testifying today on behalf of the
National Association of Broadcasters. With more than 25 years
experience in law and public policy, his practice focuses on
communication and technology. Mr. Waldron received his B.A.
degree from the University of Virginia.
Chairman Goodlatte has now asked permission to introduce
our next witness.
Mr. Goodlatte. Thank you, Mr. Chairman. It is my pleasure
to welcome our fourth witness and my constituent, Mr. Earle
MacKenzie, the Executive Vice President and Chief Operating
Officer of Shentel Cable, testifying on behalf of the American
Cable Association. With 35 years of telecom experience, Mr.
MacKenzie is responsible for Shentel's daily operations of its
many subsidiaries. He received his B.A. in accounting from the
College of William and Mary. Earle, welcome. We are delighted
to have your testimony today as well.
Mr. Coble. I thank the Chairman.
Our next witness is our fifth witness today, Mr. James
Campbell, Vice President for Public Policy at CenturyLink. Mr.
Campbell is responsible for the company's regulatory and
legislative affairs and received his bachelor's degree from
Santa Clara University.
Our sixth witness is Mr. Robert Garrett, partner at Arnold
& Porter, who is testifying today on behalf of Major League
Baseball. Mr. Garrett joined Arnold & Porter in 1977 and has
served as outside counsel to Major League Baseball on copyright
and telecom issues for more than 35 years. Mr. Garrett attended
the Northwestern University.
Our seventh and final witness is Mr. Preston Padden, who is
testifying on his own behalf today. With an extensive career in
the media business, he served as former President of the ABC
Television Network and former Executive Vice President of the
Walt Disney Company. He received his B.A. from the University
of Maryland.
We welcome you all and we will start, Mr. Donato, with you.
You will be the lead-off hitter today.
Gentlemen, as is obvious to all, we have seven witnesses.
This could take a long time. We try to apply the 5-minute rule.
There is a timer before you. When that green light turns to
amber, that is your signal that the time is running. The clock
is running out. You have a minute to go. So at that point, we
would appreciate if you would sort of wrap it up.
We are trying to apply the 5-minute rule to us as well. So
if you will respond tersely to our questions, that would be
helpful as well.
So, Mr. Donato, why don't you start us off?
TESTIMONY OF PAUL DONATO, EXECUTIVE VICE PRESIDENT AND CHIEF
RESEARCH OFFICER, THE NIELSEN COMPANY
Mr. Donato. Good morning, Chairman Coble, Ranking Member
Watt, and Members of the Subcommittee. My name is Paul Donato
and I am the Executive Vice President and Chief Research
Officer for Nielsen. I thank you for the opportunity to join
today's panel to discuss Nielsen's designated market area,
commonly known as DMAs, and their role in satellite
transmission statutes such as STELA.
Nielsen is a global media and marketing research company
that measures what people watch and buy in 100 countries
worldwide. In the United States, we are widely known for our
television audience measurement service, the Nielsen television
ratings, which provide estimates of audiences for broadcast,
cable, and satellite programs.
Over the years, Nielsen has developed innovative
technologies, allowing us to expand our measurement services to
include computers, tablets, and smart phones. Through these
technologies and our volunteer opt-in panelists, Nielsen has
the capability to measure consumer Internet purchase habits,
listening trends on terrestrial, Internet, and satellite radio,
and how consumers utilize social media. Our audience
measurement reports are relied on by a range of public and
private sector stakeholders to facilitate business transactions
and gauge consumer trends. Nielsen's DMAs are also used by the
Federal Government to define markets in satellite television
retransmission statutes.
Most discussions of STELA and its predecessors begin with a
conversation about Nielsen's DMAs, and that will be the focus
of my testimony today.
The designated market area is a collection of counties
which share a predominance of viewing to broadcast stations
licensed to operate within a given standard metropolitan
statistical area as defined by the OMB. Predominance or
dominance of viewing is defined here to indicate that ``for a
particular county, homes may view broadcast stations licensed
to operate from different but generally nearby metro areas. The
DMA with the predominant viewing is that metro area whose
broadcast stations have the highest share of audience for that
county.''
So we start with a metro area, such as New York or Los
Angeles, and continue on through the 210 DMA markets in the
United States.
Each March, using tuning data collected from Nielsen homes
over the last year, existing DMA regions are tested in order to
verify that the dominant share of viewing from each DMA county
continues to be from broadcast stations licensed to operate
from within that same home metro. All assignments are based on
share of household tuning between 6 a.m. and 2 a.m. Sunday
through Saturday. While this is the basic premise behind the
DMA, there are rules which Nielsen exercises when it appears
that the predominance of viewing may be shifting. These rules
try to balance the need for stability in television markets,
but at the same time, they need to ensure that counties are
assigned to the DMAs from where the highest share of broadcast
viewing occurs.
For example, if a larger share of viewing from a county
shifts from its current DMA assignment to broadcast stations
from another DMA, that shift must be statistically significant
and occur for 2 consecutive years.
Nielsen instituted the DMA system in the mid-1960's to
measure the number of viewers in a particular area and, more
specifically, to connect sellers and buyers of advertising.
The DMA allowed for the creation of a market where buyers
and sellers of local television advertising could do business
with each other based on impartial information provided by a
third party. Advertisers need to know that their ads are
directed at audiences they want to serve. The TV Advertising
Bureau estimates that in Q1 of this year, ad spending in the
U.S. was almost $18 billion, with an estimate of $72 billion
for the entire year. That is a market that fuels the great
entertainment and news programs that this country produces and
watches.
With the emergence of cable and satellite television in the
late 1980's and early 1990's, the landscape of the industry
changed. The new technology allowed companies that carried
television programming to expand their boundaries.
Specifically, television stations were previously limited to
being viewed within a local DMA and could not be seen outside
of those boundaries. And while new technologies open up new
horizons, they also create new problems for the television
industry.
The industry needed rules to determine which local stations
could be carried in which local markets, and it turned to the
Federal Government for help. In 1992, Congress and the FCC
established rules governing which local television stations
could be carried in which local markets. As part of that
process, Nielsen's designated market areas were adopted as the
guideline for determining which local stations could be
carried. It should be noted that Nielsen did not recommend the
use of the DMAs for this purpose nor were we asked for
technical assistance on the use of the DMAs. It was a decision
that was made entirely by Congress.
Finally, as you work to learn more about the future trends
in video use, we would be happy to assist you in any way we
can. Thank you again for the opportunity to appear before you,
and I look forward to your questions.
[The prepared statement of Mr. Donato follows:]
Prepared Statement of Paul Donato, Executive Vice President and
Chief Research Officer, Nielsen
Good morning Chairman Coble, Ranking Member Watt and members of the
Subcommittee. My name is Paul Donato, and I am the Executive Vice
President and Chief Research Officer for Nielsen. I thank you for the
opportunity to join today's panel to discuss Nielsen's Designated
Market Areas, commonly referred to as ``DMAs,'' and their role in
satellite transmission statues such as the Satellite Television
Extension and Localism Act (STELA).
Nielsen is a global media and marketing research company that
measures what people watch and buy in 100 countries worldwide. In the
United States, we are widely known for our Television Audience
Measurement Service, the Nielsen Television Ratings, which provide
estimates of the audiences for broadcast cable and satellite programs.
Over the years Nielsen has developed innovative technologies allowing
us to expand our measurement services to include computers, tablets,
and smartphones. Through these technologies and our volunteer
panelists, Nielsen has the capability to measure consumers' Internet
purchasing habits, listening trends on terrestrial, Internet and
satellite radio, and also how consumers utilize social media. Our
audience measurement reports are relied upon by a range of public and
private sector stakeholders to facilitate business transactions and
gauge consumer trends. Nielsen's DMAs are also used by the federal
government to define markets in satellite television retransmission
statutes.
nielsen dmas & satellite retransmission statutes
Most discussions of STELA and its predecessors begin with a
conversation about Nielsen's DMAs, and that will be the focus of my
testimony today.
The Designated Market Area
The Designated Market Area is a collection of counties each of
which shares a predominance of viewing to broadcast stations licensed
to operate in a given Standard Metropolitan Statistical Area (SMSA) as
defined by the Office of Management and Budget (OMB). Predominance or
dominance of viewing is defined here to indicate that:
for a particular county, homes may view broadcast stations
licensed to operate from different but generally nearby Metro
areas. The DMA with the predominant viewing is that Metro area
whose broadcast stations have the highest share of audience for
that county.
So we start with a Metro area such as the New York or Los Angeles SMSA
and continue throughout the 210 DMA markets in the US.
Each March, using tuning data collected from Nielsen homes over the
last year, existing DMA regions are tested in order to verify that the
dominant share of viewing from each DMA county continues to be from
broadcast stations licensed to operate from within that same home Metro
(SMSA). All assignments are based on share of household tuning between
6 AM and 2 AM Sunday through Saturday. While this is the basic premise
behind the DMA, there are rules which Nielsen exercises when it appears
that the predominance of viewing may be shifting. These rules try to
balance the need for stability in television market definitions and the
need to ensure that counties are assigned to the DMAs from where the
highest share of broadcast viewing occurs.
For example, if the larger share of viewing from a county shifts
from its current DMA assignment to broadcast stations from another DMA,
that shift must be ``statistically significant'' and occur for two
consecutive years.
Nielsen instituted the DMA system in the mid-1960s to measure the
number of viewers in a particular area and, more specifically, to
connect the sellers and buyers of advertising.
The DMA system allowed for the creation of a market where the
buyers and sellers of local television advertising could do business
with each other based on impartial information provided by a third
party. Advertisers need to know that their ads are directed at the
audience they want to serve. The Television Advertising Bureau
estimates that Q1 2013 ad spending in the US was almost $18 billion,
for an annual spending estimate of almost $72 billion for all TV, a
market that fuels the great entertainment and news programs that this
country produces and America watches.
With the emergence of cable and satellite television in the late
1980s and early 1990s, the landscape of the industry changed. The new
technology allowed companies that carried television programming to
expand their boundaries. Specifically, television stations that were
previously limited to being viewed within a local DMA could be seen
outside of those boundaries. And, while the new technologies open new
horizons, they also created new problems for the television industry.
The DMA and Satellite Statutes
The industry needed rules to determine which local stations could
be carried in which local markets and it turned to the federal
government for help. In 1992, the Congress and the Federal
Communications Commission established rules governing which local
television station could be carried in which local markets. As part of
that process, Nielsen's Designated Market Areas were adopted as the
guideline for determining which local stations could be carried in
which local markets. It should be noted that Nielsen did not recommend
the use of DMAs for this purpose, nor were we asked for technical
assistance on the use of DMAs. This was a decision that was made by the
Congress.
conclusion
As you work to learn more about the future trends in video use, we
would be happy to assist you in any way we can. Thank you again for the
opportunity to appear before you and I look forward to your questions.
__________
Mr. Coble. Thank you, Mr. Donato. Congratulations. You beat
the illumination of the red light. Pressure on you, Mr. Dodge.
Needless to say, gentlemen, your entire statements will be
made part of the record.
Mr. Dodge?
TESTIMONY OF R. STANTON DODGE, EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY, DISH NETWORK, L.L.C.
Mr. Dodge. Thank you. Chairman Goodlatte, Chairman Coble,
Ranking Member Conyers, Ranking Member Watt, and Members of the
Subcommittee, I appreciate the opportunity to testify today. My
name is Stanton Dodge, and I am the General Counsel of DISH
Network. DISH is the Nation's third largest pay TV provider
with more than 14 million subscribers and over 25,000
employees. We are the only provider for local television
service in all 210 local DMAs.
DISH's award-winning innovations include the Hopper DVR and
TV Everywhere features that consumers can use to have greater
choice and control over their viewing experience. DISH pays
billions of dollars a year for the right to distribute
programming to our subscribers and fully supports fair
compensation to copyright holders.
As the Subcommittee examines the video marketplace, we
believe that outdated laws need to be updated comprehensively
to reflect changes in the market and changes in how consumers
view their content. Public policy should support the
preservation and expansion of consumer video choices.
Unfortunately, as distributors like DISH offer advances in
technology, some programmers are again crying wolf, saying that
this time the threat is real and they will not be able to
survive the onslaught of innovation. The challenges to our
Hopper DVR are a perfect example.
We believe in consumer choice and to preserve and expand
it, I want to make three points.
First, we believe Congress should protect consumers against
the growing problem of blackouts caused by retransmission
consent disputes. The proof is in the numbers. In 2010, there
were 12 blackouts. In 2011, there were 51. In 2012, the number
soared to almost 100, and the pace has yet to level off. So far
in 2013, we have had 84 blackouts which puts us on track for a
record-setting year of 120.
Making matters worse, the length of the blackouts and the
number of consumers impacted are increasing. The consumers are
the real victims of these one-sided negotiations. Their
programming gets pulled by the broadcasters and their monthly
bills go up. Of increasing concern, some broadcasters are
coordinating their negotiations with each other and colluding
rates that they demand from video distributors like DISH.
The American Television Alliance, a coalition whose
membership encompasses cable, satellite, and telco providers,
independent programmers and public interest groups, and of
which DISH is a member, is unified in calling for changes to
the outdated retransmission consent rules as part of the STELA
reauthorization. We and many others in the industry propose,
among other things, that when a local network station is pulled
from a consumer due to a retransmission consent dispute, the
video distributor should be able to provide another market's
network signal. The broadcaster whose signal is imported would
be compensated under the established distant signal royalty
rate. And this reform will at least allow consumers to keep
their network programming while negotiations continue. If the
broadcaster's local content is as valuable as they assert, then
the imported distant network signal is a poor substitute, and
both parties will continue to have every incentive to reach an
agreement. Importing a distant signal during a blackout simply
fills the void for network programming.
Second, Americans living in remote, underserved areas have
especially benefited from STELA and its predecessors. Among
other things, STELA allows Americans residing in predominantly
rural areas to receive distant network signals for any missing
Big 4 stations in their market. The distant signal license
sunsets at the end of 2014, and without reauthorization, 1.5
million American households will be disenfranchised.
Third, in the 3 years since the last reauthorization, the
video industry has not been sitting still. Consumers can and
increasingly want to watch news, sports, and entertainment on
the go using increasingly high resolution screens available on
their smart phones and tablets. Over the years, DISH has done
much to respond to changing consumer preferences, and today
DISH stands ready to make a significant investment in the
wireless market to satiate consumers' growing demand for
increased mobility and flexibility in consuming video.
In summary, we believe the Government should work to ensure
its laws mirror today's competitive realities, consumer
expectations, and advances in technology.
Thank you, and I look forward to answering any questions
you may have.
[The prepared statement of Mr. Dodge follows:]
__________
Mr. Coble. Thank you, Mr. Dodge.
Mr. Waldron?
I commend you as well for beating the illuminating light,
Mr. Dodge. Thank you. Pressure on you, Mr. Waldron.
TESTIMONY OF GERARD J. WALDRON, PARTNER, COVINGTON AND BURLING
LLP, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS
Mr. Waldron. Good morning, Chairman Coble, Ranking Member
Watt, Chairman Goodlatte, and Ranking Member Conyers, and
Members of the Subcommittee. My name is Gerry Waldron. I am a
partner with the law firm of Covington and Burling, and I am
testifying here today on behalf of the more than 1,000 free,
local, over-the-air television members of the National
Association of Broadcasters.
As the Committee begins its review of STELA, your broadcast
constituents urge you to keep in mind two principles. First,
free, locally focused broadcast television should remain
available to American households. Second, your review of STELA
should not be used to create new exceptions to copyright law
that undermine those contractual relationships between
broadcasters and satellite or cable companies that enable
broadcasting's local focus.
Why is localism so important? For broadcasters, localism is
coverage of local news, severe weather and emergency alerts,
school closings, high school sports, local elections, and
public affairs. Localism is support for charities, civic
organizations, and events that help create a sense of
community. Our broadcast stations are also the way that local
businesses educate and inform the public about the goods and
services and, in turn, create jobs and support your economies.
There is no doubt that viewers, your constituents, continue
to rely on our service. Broadcast television remains unique
because it is free, it is local, and it is always on even when
other forms of communications may fail.
As a threshold matter, the Subcommittee should ask whether
the expiring section 119 distant signal license continues to
promote localism and whether it is in the public interest. It
could be argued that the distant signal license served its
purpose in 1988 when the backyard satellite industry was just
getting started and that it served its purpose again when DISH
and DirecTV first launched their small receiver services in the
mid-1990's. But in 2013, when DISH and DirecTV are two of the
largest three pay TV providers in the country, the distant
signal license is a vestige of a bygone era.
Today over 98 percent of all U.S. television households can
view their local network affiliates by satellite, and that
number is growing all the time. No public policy justifies
treating satellite subscribers in local markets as unserved,
which would deprive viewers of the benefits of locally focused
service. As DISH has demonstrated, there are no technical
reasons for failing to serve all markets.
Accordingly, the Subcommittee should continue to encourage
localism and consider whether the section 119 license should
expire.
In reexamining STELA, you are likely to hear from those
seeking enactment of new exceptions to the copyright laws that
would undermine broadcasters' retransmission consent rights.
Let me be clear. Arguments that broadcasters have too much
leverage in the retransmission consent process or that
retransmission fees are directly responsible for rising cable
bills are wrong. Local broadcasters and pay TV providers both
have an incentive to complete retransmission consent
negotiations. And for that simple reason, they always do before
any disruption to viewers occurs. There are exceptions but they
are rare, and in fact, carriage disruptions from retransmission
consent impasses represent 1 one-hundredth of 1 percent of all
annual U.S. television viewing hours. Put that another way,
consumers are 20 times more likely to lose television
programming service because of a power outage than because of a
retransmission consent impasse.
Furthermore, in the small number of instances where these
negotiations have resulted in disruptions to consumers, there
is one distinct pattern: the involvement of Time Warner Cable,
DirecTV, and DISH. Since 2012, these three companies alone have
been party to 89 percent of all the disruptions nationwide.
In contrast to what some suggest, NAB has demonstrated
across numerous economic studies that retransmission consent
payments are not responsible for high and rising pay TV prices.
Just 2 cents of every cable bill dollar goes to broadcast
retransmission fees, and that is true in spite of the fact that
during the 2011 season, 96 of the top 100 most watched prime
time programs were on broadcast television.
Lastly, the Committee should understand that retransmission
consent negotiations are about more than just fees.
Increasingly, these negotiations include hard discussions about
how we can distribute our content across a variety of new
platforms such as Hulu that promote competition.
In conclusion, your local broadcast constituents urge you
to rebuff calls from the pay TV industry to expand the narrow
examination of STELA solely to give them an unfair leverage in
market-based negotiations.
Thank you for your time. I look forward to your questions.
[The prepared statement of Mr. Waldron follows:]
__________
Mr. Coble. Thank you, Mr. Waldron.
Mr. MacKenzie?
TESTIMONY OF EARLE A. MacKENZIE, EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER, SHENTEL CABLE, ON BEHALF OF THE
AMERICAN CABLE ASSOCIATION
Mr. MacKenzie. Good morning.
Shentel offers wireline and wireless services to
residential and business customers in smaller markets in rural
areas in the mid-Atlantic region. As a smaller, rural provider,
our costs per subscriber are greater. However, despite the
higher costs, firms like Shentel still provide our customers
with the same service enjoyed by urban customers.
It is a challenge that is not made any easier by certain
laws and rules that govern our business. For example, one of
the simplest issues I would raise for the Committee today is
the competitive disparity that stems from the fact that certain
laws governing the satellite TV industry are reauthorized every
5 years. The cable industry does not benefit from such a
periodic review. In fact, Congress has not made a broad
legislative change to the cable rules since the 1990's.
If Congress wants to conduct such a review, one set of
rules that has worked and should not be changed is the cable
copyright license. It continues to serve its goal in
compensating copyright holders for the retransmission of their
work. Many stakeholders agree no significant change to the
license is necessary.
If Congress were to repeal the license, it would be very
burdensome for the cable firms to anticipate all the
copyrighted works that would need to be cleared before they are
aired on broadcast stations. Moreover, the repeal would create
uncertainty in the marketplace for us and our customers.
Should Congress reach a different conclusion, any change to
the existing license must coincide with reform to the broadcast
carriage rules such as retransmission consent because they are
legally intertwined.
There are a number of specific problems related to the
outdated rules and regulations governing the cable industry,
particularly retransmission consent, that are covered in my
written testimony. But with limited time, I will focus on just
two that are of direct relevance to the Judiciary Committee.
This Committee should be aware that there are dozens of
instances where separately owned Big 4 broadcasters in the same
market are colluding against the cable operator in their
negotiation of retransmission consent. Typically this means
that two broadcast stations with exclusive market rights that
are protected by the Government use the same negotiator to
conduct the negotiations. Available evidence shows this
anticompetitive conduct by broadcasters raises fees between 22
and 160 percent. In the end, these costs are passed on to the
consumer.
The practice of coordinating retransmission consent
negotiations is widespread, occurring in at least 20 percent of
the TV station markets, and it is increasing. This year, there
has been a number of broadcast station mergers and acquisitions
that could result in even more coordination of retransmission
consent negotiations.
If you share my concerns, please inform the Department of
Justice.
Another area we would like the Committee to consider are
skyrocketing sport programming fees. It is amazing in the past
few years sports leagues have extracted more than $110 billion
from broadcast and cable TV networks, and there is no end in
sight. These networks bid extraordinary amounts because they
can pass those costs on to the pay TV providers and our
customers. Not surprisingly, ESPN, regional sports networks,
and the Big 4 broadcasters are aggressively hiking their fees.
In the end, the consumer shoulders these costs.
One part of the sports programming problem is rooted in a
50-year-old Federal law giving an antitrust exemption to
professional sports leagues when they are negotiating their TV
programming deals. However, like retransmission consent, the
sports programming market has changed significantly since JFK
was President, but the rules have not. It may have made sense
to give professional sports leagues a pass from the antitrust
rules in 1961. Their dominant market power no longer justifies
this exemption.
Mr. Chairman, it is clear that there is a host of issues
that need attention. Given the significant changes in the
marketplace, I hope the issues I have raised here will be taken
into consideration as part of the Committee's reauthorization
of the satellite TV license.
Thank you for the opportunity to testify.
[The prepared statement of Mr. MacKenzie follows:]
__________
Mr. Coble. Thank you, Mr. MacKenzie.
Mr. Campbell?
TESTIMONY OF JAMES CAMPBELL, REGIONAL
VICE PRESIDENT, PUBLIC POLICY, CENTURYLINK, INC.
Mr. Campbell. Thank you, Mr. Chairman, Ranking Member Watt,
Chairman Goodlatte, and Ranking Member Conyers. I appreciate
you giving CenturyLink the opportunity to testify before this
Subcommittee as a relatively new entrant into the video
marketplace.
And I would echo Mr. Dodge's testimony that CenturyLink is
certainly not seeking to avoid paying reasonable costs for
acquisition of broadcast content. Rather, we seek a fair set of
rules by which it cannot be unfairly leveraged against both
consumers and new entrants like us.
To give you a little background, CenturyLink is the third
largest telecommunications company in the United States
offering voice, video, and data at over 14 million homes in 37
States and businesses in all 50 States and select international
markets. We offer cybersecurity solutions to the Federal
Government and multiple State and local governments, and as a
result of our recent acquisition of Savvis, we are actually one
of the largest cloud computing and hosting companies in the
world.
Only recently over the past 5 years have we gotten involved
in the competitive video market, launching a fully digital IPTV
product in multiple markets, including Orlando, Las Vegas,
Phoenix, and central North Carolina. And I will tell you
consumers benefit from robust competition in the form of better
service quality, in the form of more innovation, more
investment, and ultimately lower rates. But, unfortunately, the
cost of obtaining broadcast content has threatened consumers'
ability to get any of these benefits.
The current regulatory regime was created in an environment
where the Federal lawmakers were concerned about market abuse
from monopoly incumbent cable operators. As a result, over the
years lawmakers have kind of skewed the regulatory advantages
toward broadcasters vis-a-vis their relationship with pay TV
providers in multiple ways.
For example, one, a local broadcaster, because of tie-down
arrangements, can force feed unwanted content to providers
regardless of consumer demand.
Two, a provider has no other alternative to obtain this
content in most of these markets.
And third, the FCC's application and interpretation of the
good faith standard has rendered really meaningless, giving de
facto power to the broadcasters in retransmission consent
negotiations.
In addition, the regulatory regime, as has been stated, did
not contemplate the explosion of video competition from a
myriad of industries. Incumbent cable operators no longer have
a monopoly in the market.
While the current rules create problems for the larger
companies, they impose additional burdens on new entrants like
CenturyLink. Every customer we get had a relationship with
another provider before they come to us. We have to win every
single customer we sign up. That is capital intensive. It is
tough sledding. And for that reason, we cannot simply just take
whatever the broadcasters' demands are. In the case of a
blackout--and I know that broadcasters have used this more
frequently--there is little harm to the broadcasters if the
signal is lost, but a tremendous amount of harm to a company
like CenturyLink as we try and provide competitive service.
And unfortunately, the retransmission consent fees are
providing a windfall not to the local stations but to national
networks. The original intent of these rules was to provide a
safety net for true local stations. It is not the case anymore.
SNL Kagan projects that retransmission fees will increase to
$6.1 billion in 2018, up from $2.4 billion in 2012. That is a
250 percent increase, and that is all at the expense of
consumers.
Congress has an opportunity as part of the STELA
reauthorization to reform and rebalance the negotiation process
regarding the retransmission consent marketplace. The reasons
Congress conferred significant regulatory advantage to the
broadcasters no longer exist. CenturyLink favors a deregulatory
approach where our consumers could receive national content
from adjacent or alternate markets during the pendency of
negotiations, should they break down. This is good for two
reasons. One, it rebalances the negotiation process where both
parties have a little bit more leverage at the table, and two
and most importantly, it does not punish consumers for two
providers' failure to reach an agreement.
At the end of the day, it is not about winners and losers.
It is about protecting consumers who bear the biggest brunt of
this regulatory problem and ensuring the future of a
competitive marketplace in the video marketplace.
Again, I thank you again for the opportunity testify. We
look forward to working with the Committee and try and enact
and enable consumer-oriented legislative reform. Thank you.
[The prepared statement of Mr. Campbell follows:]
__________
Mr. Coble. Thank you, Mr. Campbell.
Mr. Garrett?
TESTIMONY OF ROBERT ALAN GARRETT, PARTNER, ARNOLD & PORTER LLP,
ON BEHALF OF MAJOR LEAGUE BASEBALL
Mr. Garrett. Thank you, Chairman Coble, Ranking Member
Watt. Thanks for the opportunity to testify on behalf of Major
League Baseball this morning.
Let me summarize that testimony with three brief points.
First, baseball has a major stake in any revision of the
copyright laws that affect television programming, including
cable and satellite compulsory licenses. Baseball and its
member clubs are copyright owners of a substantial amount of
very entertaining, very valuable television programming. They
now offer their fans access to approximately 5,000 copyrighted
telecasts of Major League Baseball games each year. They do not
believe that there is any single copyright owner that provides
the American public with more television programming than Major
League Baseball.
Second, the vast, overwhelming majority of baseball's
telecasts are provided to cable and satellite subscribers
pursuant to licenses negotiated in a free marketplace and not
pursuant to compulsory licensing. There is simply no reason
that satellite carriers or cable systems or anyone else require
a compulsory license to provide Major League Baseball telecasts
or any other broadcast television programming. Satellite
carriers and cable systems negotiate every day in the free
marketplace to offer hundreds of channels, tens of thousands of
hours of non-broadcast television programming. We believe that
they can do the same to offer broadcast programming, including
telecasts of baseball games.
Third and finally, if Congress, nevertheless, chooses to
reauthorize the section 119 compulsory license, baseball has
one simple request, and that is adopt a mechanism to ensure
that satellite carriers and cable systems at the very least pay
fair market value for their compulsory licenses. According to
the FCC, cable systems derive more than $67 billion in revenues
by selling access to video programming. Compulsory licensing
royalties amount to less than one-half of 1 percent of those
revenues, one-half of 1 percent for what is undoubtedly the
most valuable, the most watched of all the programming cable
systems offer. Satellite carriers also pay less than one-half
of 1 percent of their revenues for their compulsory license.
Their video revenues amount to approximately $36 billion. Their
compulsory licensing royalties in 2012 amounted to
approximately $87 million or about $10 million less than when
Congress last renewed the section 119 license. The current
satellite royalty rate is, in fact, the same as the rate that
an independent panel of arbitrators determined to be fair
market value in 1997, 16 years ago.
There is simply no justification for requiring copyright
owners to subsidize with below-market royalty rates the major
corporate entities that dominate the cable and satellite
industries. Baseball believes that Congress should authorize
the Copyright Board to set rates for the carriage of all
broadcast programming under the cable and satellite compulsory
licenses and that the Copyright Royalty Board also should be
authorized to adjust those rates periodically so that they
continue to provide fair market compensation to copyright
owners.
Thank you, Mr. Chairman, and baseball also looks forward to
working with you and your Subcommittee on this important
matter.
[The prepared statement of Mr. Garrett follows:]
Prepared Statement of Robert Alan Garrett, Arnold & Porter LLP,
Washington, DC, on Behalf of Major League Baseball
Mr. Chairman and members of the Subcommittee, thank you for the
opportunity to testify, on behalf of Major League Baseball, concerning
the Section 119 satellite compulsory license that is scheduled to
expire at the end of next year. I have been Major League Baseball's
outside counsel on copyright and telecommunications matters for more
than thirty-five years. During that same period, I also have served as
lead counsel in satellite and cable compulsory licensing proceedings
for the Joint Sports Claimants, which consists of Baseball, the
National Football League, National Basketball Association, National
Hockey League and National Collegiate Athletic Association. While I am
presenting this testimony solely on behalf of Baseball, all JSC members
share a common interest in ensuring strong and effective copyright
protection, and fair market compensation, for the telecasts of their
games.
baseball's copyrighted telecasts
When Congress comprehensively revised the copyright laws in 1976,
and adopted the Section 111 cable compulsory license, the average
sports fan had access to approximately 100 telecasts of Major League
Baseball games each season. Much the same was true in 1988 when
Congress enacted the satellite compulsory license by adding a new
Section 119 to the Copyright Act. Today, however, the situation is very
different.
Baseball and its member clubs now offer their fans the ability to
view virtually every one of the approximately 5,000 MLB game telecasts
each year. Telecasts of MLB games are available on the FOX national
broadcast television network; three national cable networks (ESPN, TBS,
MLB Network); over-the-air broadcast stations throughout the country
(e.g., WUSA-TV in Washington DC and ``superstation'' WGN-TV in
Chicago); and more than two dozen regional sports networks (e.g., MASN,
FOX Sports Net). In addition, Baseball's ``out-of-market'' satellite
and cable package, MLB Extra Innings, provides each subscriber with
virtually all Major League Baseball games not otherwise available from
other licensed telecasters. Fans in Washington DC, for example, can
view game telecasts of the Yankees, Red Sox, Cardinals, Pirates, Giants
and a score of other teams. More than 67 million cable and satellite
subscribers in the United States currently have access to MLB Extra
Innings.
The comparable out-of-market package for Internet-connected
devices, MLB.TV, is available to subscribers through more than 350 such
devices--including personal computers, smartphones (Apple, Blackberry
and Android), tablets (iPad, Kindle Fire and Android) and a variety of
consoles (Xbox360, Sony Playstation 3, Apple TV, Roku). In addition to
receiving access to out-of-market games, MLB.TV subscribers can choose
whether to listen to the radio or TV broadcast of the home or visiting
club. MLB.TV also offers access to HD quality broadcasts of the games
and provides DVR capabilities that allow fans to pause or rewind live
telecasts. And those who utilize the MLB.com At Bat app to view games
can take advantage of several additional features, including real-time
statistical updates and analyses, video archive and a ``pitch-by-pitch
widget'' that tracks the location, type, and speed of every pitch
(including whether a pitch is a curve ball, slider, or knuckle-curve).
The At Bat app has been downloaded more than 22 million times since its
debut five years ago.
All of the MLB game telecasts, whether they are accessible over-
the-air or via cable, satellite or Internet-connected devices, are
copyrighted works. In the 1976 Copyright Act, Congress--at the urging
of Baseball and other sports interests--clarified that telecasts of
live sports events receive copyright protection, like any other
audiovisual work, as long as they are recorded (``fixed'')
simultaneously with their transmission. When entering into licensing
agreements with its various rightsholders, Major League Baseball and
its member clubs contractually ensure that the resulting telecasts are
recorded and that either Baseball or one of its clubs will own the
copyright in those telecasts. With approximately 5,000 MLB game
telecasts each year, Major League Baseball is a major copyright owner
and source of television programming. Baseball relies heavily upon the
copyright laws to protect its substantial investment in (and incentive
to create) that highly entertaining and valuable programming.
compulsory licensing
The satellite compulsory license in Section 119 of the Copyright
Act permits satellite carriers to retransmit to their paying
subscribers, without the consent of copyright owners, out-of-market
broadcast television programming. The retransmitted programming
includes the telecasts of games that Major League Baseball and its
clubs license to broadcast stations and the FOX broadcast network. A
similar compulsory license, which applies to cable systems, exists in
Section 111 of the Copyright Act. The effect of these licenses is to
divest Baseball (as well as other copyright owners) of any ability to
negotiate with satellite carriers and cable systems over the terms on
which those services commercially exploit broadcasts of MLB games.
These licenses are impediments to the operation of the free
marketplace. They unfairly deprive all copyright owners, including
Baseball, of the ability to control the distribution of their
copyrighted works--as well as the right to receive fair market
compensation and other license terms typically included in marketplace
agreements. They also impose significant administrative costs upon
Baseball and other copyright owners and substantially delay the receipt
of compensation for the use of their programming. Baseball routinely
negotiates in the marketplace with the cable and satellite industry
concerning the carriage of Baseball telecasts; the vast majority of
programming that cable systems and satellite carriers offer are the
product of marketplace negotiations. There is no reason that similar
negotiations should not be allowed to occur over the broadcast
programming now covered by the compulsory licenses.
fair market compensation
Some parties have taken the position that elimination of the
compulsory licenses could be disruptive to the marketplace, because the
licenses reflect the settled expectations of the licensees and at least
some licensors. Baseball respectfully disagrees with that view. An
inequitable and unjustifiable regulatory regime that supplants
marketplace negotiations should not be perpetuated simply because some
parties have become accustomed to it. However, Baseball understands the
practical difficulties associated with elimination of the cable and
satellite compulsory licenses.
If the compulsory licenses are retained, Baseball urges Congress to
ensure that both cable operators and satellite carriers pay fair market
value for all programming they choose to carry pursuant to the
compulsory licenses. Baseball believes the relevant evidence
demonstrates that neither cable operators nor satellite carriers are
paying fair market value under their compulsory licenses. Indeed,
satellite carriers are currently paying a Section 119 royalty that is
less than the royalty that three independent arbitrators considered to
be fair market value in 1997--sixteen years ago. Moreover, the total
Section 119 royalties have declined by approximately $10 million per
year since Congress last reauthorized the Section 119 license. The
Section 111 royalty paid by cable operators is comparably below fair
market value. Indeed, when Congress adopted the Section 111 royalty
rates nearly forty years ago, it explicitly noted that those rates
would produce only a ``minimal'' royalty that had no economic basis.
Cable operators pay less than one-half of one percent of their $66
billion in video revenues (according to the FCC) for the Section 111
compulsory license that allows them to offer some of their most
valuable television programming.
There is no justification for requiring copyright owners to
subsidize, with below-market royalty rates, the major corporate
entities that dominate the cable and satellite industries. Baseball
believes Congress should, at the very least, authorize the Copyright
Royalty Board to set market rates for the carriage of all programming
under the cable and satellite compulsory licenses. The CRB also should
be authorized periodically to adjust those rates so that they continue
to provide fair market compensation to copyright owners.
While Section 119(c) of the Copyright Act directs the Copyright
Royalty Board to adopt fair market value rates for the satellite
carrier license, that provision sets a series of procedural dates that
focus upon 2010, when Congress last renewed the Section 119 license.
Section 119(c) must be amended to permit the adjustment of royalty
rates for whatever period, if any, Congress decides to continue the
Section 119 compulsory license. Congress also should adopt a similar
rate adjustment mechanism for the compulsory license of cable systems,
which compete with satellite carriers in the delivery of broadcast
television programming. Currently, the law allows adjustments in the
cable royalty rates to account for inflation only.
* * * * *
Thank you, Mr. Chairman and members of the Subcommittee, for the
opportunity to express Baseball's views on the satellite compulsory
license in Section 119 of the Copyright Act and the related cable
compulsory license in Section 111 of the Act. Baseball looks forward to
working with you and your Subcommittee to help ensure strong and
effective copyright protection, including fair market compensation, for
all copyrighted works.
__________
Mr. Coble. Thank you, Mr. Garrett.
Mr. Padden?
TESTIMONY OF PRESTON PADDEN, FORMER PRESIDENT, ABC TELEVISION
NETWORK, FORMER EXECUTIVE VICE PRESIDENT, THE WALT DISNEY
COMPANY, TESTIFYING ON HIS OWN BEHALF
Mr. Padden. Chairman Coble, Ranking Member Watt, Chairman
Goodlatte, and Ranking Member Conyers, my name is Preston
Padden. I appear today on my own behalf and sadly no one is
paying me to be here. [Laughter.]
I am so old that I am one of the few living souls who has
been around for the entire history of this issue, and I am here
today to implore you not to just kick the can down the road
again. It is long past time to repeal the satellite and cable
compulsory licenses and the Rube Goldberg-like statutory and
regulatory system that surrounds them.
As the former President of the ABC Television Network, I
know how TV program rights are negotiated. I promise you that
the earth will continue to spin, consumers will continue to
have access to TV, and all TV industry sectors will continue to
thrive without the compulsory licenses, without the associated
FCC rules, and without retransmission consent.
In 1976 when the cable TV industry was in its infancy,
Congress granted cable an extraordinary exception to normal
copyright principles: a compulsory copyright license to
distribute the programs on broadcast TV channels. The FCC
adopted rules, including network non-duplication and syndicated
exclusivity, to limit the market disruption caused by the new
compulsory license.
In 1988, the compulsory license was extended to satellite.
Then in 1992, Congress enacted retransmission consent
requiring a marketplace negotiation between broadcast TV
stations and cable and satellite distributors, a negotiation
that is the functional equivalent of a negotiation that would
have been required if the compulsory licenses had never been
enacted in the first place.
When others argue that the compulsory licenses are
essential, please consider this. Every day hundreds of non-
broadcast TV channels, channels like Discovery, History
Channel, USA Network, Bravo, and HBO, get distributed to nearly
every man, woman, and child in America without any compulsory
license and without retransmission consent. They get
distributed because the channel owner and the cable and
satellite systems have an old-fashioned, simple copyright
negotiation. There is absolutely no reason why the broadcast
channels cannot be distributed in exactly the same way.
When the satellite license was adopted in 1988, you
provided a sunset and expressed the expectation that the
license would temporary and would be replaced by market
negotiations. Instead, the license has been renewed four times.
When you renewed it in 2004, you directed the Register of
Copyrights to study the continued need for compulsory
licensing. In 2008, the Register released that study, calling
the cable and satellite compulsory licenses--and I quote--
arcane, antiquated, complicated, and dysfunctional. Not exactly
a ringing endorsement.
When you renewed the satellite license again in 2010, you
directed the Register of Copyrights to prepare a more specific
report to Congress, proposing mechanisms and methods for the
phase-out and eventual repeal of the cable and satellite
compulsory licenses. And you asked the Register to propose
marketplace alternatives. The Register issued that report in
2011, concluding that the compulsory licenses are--and I quote
again--an artificial construct created in an earlier era. The
Register further recommended that Congress set a date-specific
trigger to phase out and ultimately repeal the licenses.
I want to close with what I think are three simple truths.
First, compulsory licensing is just not necessary in these
markets. Second, broadcast channels like non-broadcast channels
absolutely deserve to be paid by the cable and satellite
distributors who want to sell their programming to consumers.
And lastly, local broadcast channels are no more a monopoly
than are the non-broadcast channels like AMC, Time Warner Cable
SportsNet, Bravo, and Discovery.
Thank you very much.
[The prepared statement of Mr. Padden follows:]
__________
Mr. Coble. Thank you, Mr. Padden.
I want to thank the witnesses for your timely testimony,
staying within the 5-minute rule. We try to apply the 5-minute
rule to ourselves as well. So if you can be terse in your
answers, we would be appreciative of that.
Mr. Garrett, how is Major League Baseball working to make
its content available to Americans in new ways with advanced
technology?
Mr. Garrett. Mr. Chairman, as I indicated in my testimony,
Major League Baseball currently offers approximately 5,000
telecasts of its games to consumers each season. That is
virtually every single game that is played during the course of
a season is made available to Major League Baseball's fans.
They do it in a variety of ways. They have done it over
national broadcast television networks such as Fox. They do it
over a myriad of local broadcast stations and regional sports
networks throughout the country. They do it over several cable
networks, including ESPN, TBS, the Major League Baseball
network. They make some of these programs available via their
out-of-market packages that are carried by cable systems and
satellite carriers to almost 67 million households across the
United States. And finally, they also make it available via
their very successful, award-winning MLB.TV app which makes all
of these telecasts available to anyone with an Internet-
connected device, over 350 different devices.
Mr. Coble. Thank you, sir.
Mr. Dodge, for our constituents what issues should they be
asking the Congress to place its focus upon?
Mr. Dodge. If there is one issue that is top of mine for
DISH is that the retransmission consent system today is broken.
It is not a free market. In every local market around the
country, in the old days when cable was in its infancy, you had
one broadcaster who would negotiate with one cable company and
there was somewhat a symbiotic relationship or mutual assured
destruction, depending on how you looked at it, and today that
one broadcaster plays three or four distributors off against
each other and ultimately it is consumers who are caught in the
crosshairs and are hurt by losing their signals and have their
prices go up year after year.
Mr. Coble. Thank you, sir.
Mr. Padden, I think you have touched on this. In your
opinion, what would be the result if the section 119 license
simply expires, which I think is December of next year.
Mr. Padden. My recommendation is that Congress provide a
short transition period to allow the broadcast industry to get
its rights in order and then repeal all of these licenses. And
all that would happen is the broadcast programming would get
distributed exactly the same way the non-broadcast programming
is distributed today, through a simple negotiation between the
cable and satellite companies on the one hand and the local
station on the other hand, with the station acting as a rights
aggregator just as the non-broadcast channels do today.
Mr. Coble. I still have time. Anybody else want to weigh in
on that?
Mr. Dodge. Sure. I think what Mr. Padden suggests is very
similar to a bill that has been proposed by Representative
Scalise over at the Energy and Commerce Committee, and it is
certainly one potential option very worthy of debate. We are
just thrilled at DISH that there does appear to be a
recognition that there is a problem and that there should be
such a debate.
Mr. Waldron. If I may add. I think the section 119 license
expiring--this Committee could advance the debate by actually
getting a number as to how many people would be affected. So I
would suggest that the Committee ask the satellite carriers to
submit a certified number as to how many people today are
getting distant signal. In the past, we have heard 1 million.
But we do not know what the number is. And I think if the
Committee would get that information, then we could have a
serious debate about is this distant signal license worthwhile
to extend for this small number of people. There may be some
hardship cases. There may be special circumstances which
justify it. But right now we are all in a blind alley.
Mr. Coble. Time for one more comment.
Mr. Dodge. Well, in response to that, I would say that it
is true that there are less and less folks who are actually
availing themselves of the distant signal license today, but it
is a very important group of rural and underserved Americans,
for example, in short markets like Glendive, Montana that does
not have an ABC or Fox affiliate, and what the distant signal
license allows us to do is import those stations, the network
programming, to those folks who otherwise would have no access
to that.
Mr. Waldron. And we would be happy to have a conversation
about short markets and areas where there is a spot beam
problem. But we just do not know what the nature of it is. And
that would actually be a helpful step in promoting legislation.
Mr. Coble. How many people use it, Mr. Dodge?
Mr. Dodge. The estimates I have heard are 1 million to 1.5
million consumers.
Mr. Coble. I see my amber light appears. So I now recognize
the distinguished gentleman from North Carolina, Mr. Watt, for
his questioning.
Mr. Watt. Thank you, Mr. Chairman. As has become my policy,
I have decided to defer until the end of the process. So I will
defer to Mr. Conyers and go last in the chain.
Mr. Conyers. Thank you very much.
Could I begin our discussion that I thank you for the
variety of views presented? But do you believe, Mr. Dodge and
Mr. Padden, that Congress should do more than simply
reauthorize the distant signal license? Either one can start
off.
Mr. Padden. I am happy to go first.
As I have said, I think this is one Government program that
you can retire. These licenses were enacted before there were
any non-broadcast channels. They only apply to the programming
on the broadcast channels, and you now have hundreds of other
channels distributed nationwide with no muss, no fuss through
normal copyright negotiations, and I think that proves that you
do not need these licenses anymore for the broadcast
programming.
Mr. Dodge. To address that specific point, I believe there
is a difference between cable channels and the local
broadcasters, the chief difference being the local broadcasters
received at least initially billions of dollars of spectrum for
free under the promise that they would be stewards of that
spectrum and use it for the public good. And they are further
propped up by rules such as must-carry, syndicated exclusivity,
and network non-duplication that the cables do not have the
benefit of.
And to your specific question, Ranking Member Conyers, we
think that the satellite act should be reauthorized so that the
current beneficiaries are not disenfranchised.
And further, we think there are two reasonable zones of
expansion that should be considered, one of which is fixing the
broken retransmission consent system as it stands today, and
the other is fixing the orphan county that, at least in my
case, every time around this year, the folks in two southwest
counties in Colorado start asking the question of why they
cannot watch the Broncos. And the reason is because they are in
the Albuquerque DMA.
Mr. Conyers. Well, Mr. Dodge and Mr. Padden, do I sense
that there is a little space between both your responses?
[Laughter.]
Mr. Dodge. Yes, although we are good friends.
Mr. Conyers. We are all friends here.
Mr. Padden. Ranking Member Conyers, this Committee asked
the expert agency, the Register of Copyrights, to study these
licenses, and their report said--and again I will quote--that
they are arcane, antiquated, complicated, and dysfunctional. I
cannot imagine why you would want to continue such a program.
Mr. Conyers. Now, I am going to give you another chance,
Mr. Dodge. What are the targeted fixes that the American
Television Alliance, ATVA, is calling for to the retransmission
consent rules as part of the STELA reauthorization?
Mr. Dodge. Principally there are two, the first of which is
one that we favor, which is allowing video providers to import
a distant signal on an interim basis during the pendency of
retransmission disputes when the broadcaster takes down the
programming. The other would be some form of standstill where
the programming stays up and then the parties would enter
binding baseball-style arbitration to reach a fair rate. But in
each of those cases, the consumers would still have access to
the programming and theoretically the broadcasters in the first
instance would still have an incentive to negotiate, as would
the TV provider because the distant signal is an imperfect
solution.
Mr. Conyers. Would you add to that, Mr. Waldron?
Mr. Waldron. Absolutely. Thank you, sir.
In terms of it, I think it is clear that there are
thousands of cable systems in America. There are thousands of
broadcasters in America. And the vast majority of time, the
system works. There is a marketplace settlement. There are
marketplace negotiations.
The fact is, as I mentioned in my testimony, there has been
an increase in disruptions, and they all involve three
companies, DirecTV, DISH, and Time Warner. We see this,
frankly, as a manufactured crisis. They are deliberately going
and playing the game and, frankly, in order to get this
Committee to pay attention to these issues.
So we actually think in the vast majority of cases the
system is working.
And with respect to the suggestion of a standstill, well,
there is another way of putting that. They get to take my
copyright without my permission. That is what a standstill is.
I do not want to give them my retransmission consent, but yet
they get to take it because they were taking it before. And I
do not want to give it to them anymore. That seems rather
contrary to our copyright law tradition. So we think that
actually would be not something that the Congress should
endorse.
Mr. Padden. Could I add one thing?
Mr. Conyers. Yes.
Mr. Padden. In evaluating the request being made by the
cable and satellite industry for a standstill provision, I
think you should consider the fact that the cable industry just
went to court and successfully defeated a standstill agreement
in program access disputes. So they went to court and got rid
of the standstill when they did not want to continue to carry
something, and now they are back here asking you to enact a
standstill against the broadcasters.
Mr. Conyers. Mr. Campbell, the last comment.
Mr. Campbell. Thank you, Ranking Member Conyers.
The companies that Mr. Waldron mentioned are very large.
And we are a new entrant into the market. I would suggest that
often these larger companies play the negotiations against
smaller companies like CenturyLink trying to compete and win
customers over. And without any leverage at all, we are the
ones that are getting kind of swallowed up in this thing, and
that is going to stifle competition, investment, and
innovation.
The other thing I would point out is while the broadcasters
often threaten to black out, it is unlawful for any provider to
not carry the signals during ``sweeps week,'' which is the week
that broadcasters get their ratings and make their advertising
money. That is the 1 week we cannot put it off.
Mr. Conyers. Mr. Chairman, could I get 30 seconds more?
Mr. Coble. 30 seconds will be granted.
Mr. Dodge. Thank you. I just wanted to address one point
made by Mr. Waldron, which is that 90 percent of the blackouts
are caused by three entities, my company included. And I guess
that is a bit in the eye of the beholder because we would, of
course, take the view that 100 percent the blackouts are caused
by four companies, ABC, NBC, CBS, and Fox and their affiliates.
[Laughter.]
But putting that aside for the moment, if you look at the
facts, it is not surprising the DISH, DirecTV, and Time Warner
Cable represent, as they assert, 90 percent of the blackouts
because, one, we represent 50 percent of the marketplace for
pay TV today. The other 25 percent is Comcast, which owns NBC,
arguably is conflicted. And the remaining 25 percent is folks
like Mr. Campbell. So in many ways, DISH, DirecTV, and Time
Warner are the only folks who are actually able to negotiate
effectively with the broadcasters, and thank goodness we are
out there fighting for consumers to lower prices.
Mr. Conyers. Thank you, Chairman Coble.
Mr. Coble. You are welcome, Mr. Conyers.
The distinguished from Virginia, Mr. Goodlatte, is
recognized for 5 minutes.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Donato, I want to ask you a question on behalf of my
constituents. I have a number of them that I hear from who live
usually in a rural area, a good distance from the market that
they are in and a lot closer to another market that they would
prefer to receive the broadcast signal from or the
retransmission of that. And I wonder if you might just
elaborate on that. These are lots of people but living in rural
areas who are 75 miles from the D.C. market but 25 miles from
the small Harrisonburg market and would rather have the
Harrisonburg market.
Mr. Donato. Generally each year there are a few markets in
which that kind of a situation happens. The DMA is what it is.
It was created to reflect the viewing of people in that county.
So the particular counties that you are talking about, as I
said in my testimony, the predominance of viewing is actually
to the home market that it is currently in.
Again, it was developed as a mechanism to define the
geography in which television signals are viewed and therefore
local advertisers would be able to use local television and
support local television.
Mr. Goodlatte. Should those lines be adjusted?
Mr. Donato. We have an analysis process. Every year we go
through and we evaluate the viewing for each county within the
DMA. It is perhaps a little bit conservative in that you have
got to have a statistically significant change 2 years in a row
before we move the county over. But the reason for that is the
need for stability in the marketplace overall in the
advertisers' behalf.
There are always better ways of doing things. We generally
treat these situations on a case-by-case basis. We often meet
with Congressmen when in their district there is an issue and
we describe what the numbers are. So it is a system upon which
almost $40 billion worth of advertising has been very
successful for the last 50 years.
Mr. Goodlatte. Let me interrupt you, and I want to ask a
couple other questions that are of a broader nature.
But before I do that, I want to ask Mr. Garrett if he wants
to respond to Mr. MacKenzie's suggestion that the sports
broadcast antitrust exemption should be eliminated.
Mr. Garrett. Mr. Chairman, actually I do not have a
response. There is nobody who comes to me and asks for advice
on antitrust laws. My focus is on copyright law and what is
good copyright policy.
Mr. Goodlatte. Well, in light of that, I will cut you short
then and ask if you work with and represent people who might
have an opinion on that subject.
Mr. Garrett. Absolutely.
Mr. Goodlatte. And if they would submit that to the
Chairman of the Committee in writing, I would be pleased if the
Chairman would share that answer with me when it arrives.
Mr. Garrett. Absolutely.
Mr. Goodlatte. Let me ask all of the members of the panel
what is the proper role for Congress in responding to
marketplace disputes. In order to resolve disputes, should
Congress set general guidelines for the marketplace to follow,
or should it set detailed requirements that all participants
must follow? And then as an adjunct to that, are there ways for
business disputes to occur and be resolved without disrupting
the consumers who rely upon satellite and cable services for
access to video content?
Mr. Donato I gave you a shot. I will start with Mr. Dodge
and we will work our way down. If we have time, we will get
back to you.
Mr. Dodge. I will take your second question first, and I
would say the ways to avoid consumers being disrupted are the
two ways I said earlier, which is, one, allow us to import a
distant signal during the pendency of these disputes or some
mechanism for a standstill. I have to say I am not all that
familiar with the niceties of what standstills have and have
not been struck down over the time, but the fact of the matter
is if the broadcasters are going to sit here and wrap
themselves in localism as a justification for about 99 percent
of what they are saying, why do they want to take the signal
down and disenfranchise consumers at these times? Leave the
signal up. We are not saying we are not going to pay during
those periods. We gladly will. But do not disenfranchise the
consumer.
Mr. Goodlatte. We have just got to keep moving because of
limited time.
Mr. Waldron. Two points. One is that Congress actually, I
think, wisely decided in 1992 to essentially have the
marketplace settle these issues.
And secondly, where there are problems, frankly, consumers
should have more choice. So it is sometimes difficult to change
your provider. There were news reports that people wanted to
change from Time Warner, but nobody was answering the phone.
And there are cancellation penalties and the like. So that
actually would enhance the marketplace competition.
Mr. Goodlatte. Mr. MacKenzie?
Mr. MacKenzie. I think our position is general guidelines
would be better than specific guidelines. Mr. Dodge has come up
with two ideas, the distant signal and also kind of preventing
the blackouts. A distant signal really does not work for the
cable industry because we do not already have that content. The
satellite industry already has that content and can quickly
move it. For us, it would be building fiber and trying to get
it off air, which would be impossible. So from our standpoint,
preventing the blackout by leaving the signal on while we
negotiate would be preferable.
Mr. Goodlatte. Mr. Campbell?
Mr. Campbell. Not to repeat what has been said, I agree
with Mr. Dodge and Mr. MacKenzie.
But to return the negotiations to actual free market
negotiations, we hear a lot about the thumb on the scale in
favor of one party over the other. We do not seek to have the
thumb put on the scale in our favor. We would just rather have
it removed from the other side so that the negotiations do
become, once again, free market negotiations because the world
has changed a lot since 1992.
Mr. Goodlatte. Thank you.
Mr. Garrett?
Mr. Garrett. From Major League Baseball's standpoint, they
license a great deal of programming that they want their
consumers--they want their fans to see. And they are as
frustrated as anyone either here in Congress or the fans
themselves when that programming is not made available.
Having said that, we also recognize that broadcasters have
property rights in those signals, and we believe the best way
to determine the value of those property rights is through free
marketplace negotiations. And that is the objective that we in
baseball have, is to have free marketplace negotiations or, at
the very least, fair market value compensation for the
programming that is being utilized.
Mr. Goodlatte. Thank you.
Mr. Padden?
Mr. Coble. The gentleman's time has expired.
Mr. Padden, you may respond.
Mr. Padden. If I could, I would like to respond briefly to
your question to Nielsen about the DMA. This is an example of
the dysfunction that is built into the compulsory license and
the associated FCC rules. In the free market, if you have
constituents who want to see station A and station A would like
constituents to see it and there is a distributor between them
that would like to make money distributing it, they can figure
it out. All the non-broadcast channels get distributed anywhere
someone wants to see them.
The problem is the compulsory license and the associated
FCC rules actually enshrine Nielsen's rating data from 1972 as
the basis for what signals can go where. They are still sitting
in the FCC rules, 1972 ratings data. And if you would just get
a big broom and sweep all of this stuff away, the free market
could better serve your constituents.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Coble. Thank you. The gentlelady from California, Ms.
Chu, is recognized for 5 minutes.
Ms. Chu. Thank you, Mr. Chair.
Mr. Dodge, I understand that--well, in fact, you said
earlier that 1 million to 1.5 million households in the United
States currently get their access to broadcast stations through
the distant signal service. But it is clear that the number of
households that are dependent on the distant signal decreases
every time Congress looks into reauthorizing section 119.
Can you tell us who these remaining 1 million to 1.5
million households are and where they are located? Are they
mostly located in rural areas, or are they concentrated in
certain parts of the country?
Mr. Dodge. Generally located in rural and underserved
areas. And there is really four categories, if you will, of
consumers: folks in short markets such as Glendive, Montana
that is missing a Fox and an ABC where we are allowed those
network affiliates into those markets; outside the spot beam of
our satellites. So if you think of Utah, for example, which is
a rectangle--our spot beams are generally round. The law allows
us to provide distant signals to the folks that are not covered
by our spot beams. Commercial trucks and RVs are covered by the
distant signal license, and then DirecTV.
We are an alternate in 10 markets so we do not actually
make use of the, quote, traditional unserved household
exception allowing a distant signal, but DirecTV does because I
believe there are still 15 markets where they do not provide
local service. And then they have some grandfathered
subscribers as well I believe.
Ms. Chu. And do we have that technology now to close the
gap to them?
Mr. Dodge. For example, the short market issue is just
purely the fact that there are no affiliates of a particular
network in those markets. And with respect to outside of the
spot beam, it depends on whether or not the satellite beam is
large enough to actually cover an entire DMA, which it is not
in all cases, but it is very, very limited when it is not.
Ms. Chu. Mr. Waldron, I am aware that today consumers have
several options for how they will view video content. They can
access the content through pay TV carriers or other options now
through the Internet. There is no doubt that the online model
will continue to grow in the coming years. To what extent
should we consider these newer platforms as we are
reauthorizing satellite TV laws? Should we consider them at
all?
Mr. Waldron. Well, I think they can inform the debate
because they show how the TV market is evolving.
And let me also say that, you know, we have talked earlier
about the conflict between CBS and Time Warner Cable. A
significant part of that dispute was about the ability for CBS
to offer its programming to a competitor to Time Warner Cable.
Now, I understand why Time Warner Cable does not want CBS to
make its programming available to a Hulu or a Netflix or an
Amazon Instant Video. But CBS actually is interested in doing
that to give consumers choice. So you should be aware that that
is actually increasingly a matter of the negotiations. It is
not necessarily the fee which news reports said was a deal that
was cut relatively early in the process, but in fact, enabling
broadcasters to actually have--giving consumers choice across
these different platforms.
Ms. Chu. Well, in fact, the digital rights of content are
playing a more important role in these retransmission
negotiations. How do you think the issue of digital rights will
impact future negotiations, and does Congress have a role in
protecting consumers in this regard?
Mr. Waldron. Well, I think Congress should actually say, as
it has, that the copyright holders should be able to negotiate
an agreement across all of their content. As I said, I think
the CBS example is telling in that CBS wants to actually
promote competition. So that is why they actually went about
those negotiations. And we think that actually is a way that
consumers can give choices.
I do want to come back to a statement that Mr. Dodge said.
We do not dispute that there are some hard cases out there such
as the short market situation or the corners of spot beams. But
what we do not know is how many there are. And Mr. Dodge is one
of two. So he said earlier he has heard the 1.5 million. Well,
he has half of the information that is needed and DirecTV has
the other half. So it is not like you have to survey a thousand
companies in order to get this data. And what we would like to
do is to get what is the number and what is the context. How
many are RVs, how many are in short markets, how many are spot
beams problems. And as DISH has proven, there is now technology
so that there should not be an unserved household. So DISH is
in 100 percent of all the markets.
Ms. Chu. And can you address the issue of localism, the
principle that is embedded in our Nation's communications laws?
Can you tell us how the law developed to focus on localism and
some of the benefits of holding onto that principle?
Mr. Waldron. So just quickly. So localism goes back to the
original broadcast licenses. It is embedded in the
Communications Act of 1934, and it is the notion that
broadcasters should meet the needs of their local community.
That makes American broadcasting unique around the world. There
are national broadcast systems in Europe and in Asia. We have a
locally focused broadcast system.
The reason why we have concerns with the distant signal--it
undermines that localism. That local broadcaster who is
bringing the local car dealership, who is talking about the
local high school sports or the tornado--if you are getting a
signal in from New York or LA, you are not going to be aware in
Moore, Oklahoma about the tornado that is coming. So localism
is the heart of the broadcast and it also is at the heart of
the satellite laws. And we think that that actually is a strong
argument why the Committee should be skeptical that a distant
signal license is still needed.
Ms. Chu. Thank you. I yield back.
Mr. Coble. I thank the gentlelady.
The gentleman from Texas.
Mr. Farenthold. Thank you very much.
Having grown up as a broadcaster working in radio since I
was 15 years old, I kind of grew up with the public interest,
convenience, and necessity standard. And I certainly have a
great deal of sympathy for the local broadcasters.
I want to ask Mr. Dodge and maybe Mr. MacKenzie. If we take
away or limit the local TV station's leverage with respect to
negotiating a programming license by allowing distant signals,
what leverage are they going to have in the negotiations?
Mr. Dodge. Well, if you believe what they say and localism
is as important as it is, then the distant signal is an
imperfect solution. All it will do is ensure that folks
continue to be able to watch American Idol, but they will not
be getting their local news.
Mr. Farenthold. I do think that that is important. And, Mr.
Waldron, maybe you can tell me some of the benefits that we are
getting. I cannot believe Jim Cantore is going to give me
better hurricane information than the weathercaster we call
``Dead Wrong Dale'' affectionately in Corpus Christi.
Mr. Waldron. Actually that is exactly right. And look, we
understand the market. We understand that people actually are
tuning in on a daily basis for their American Idol or for their
CBS or NBC hit show. But when the tornado comes, suddenly there
will be an outcry. And I do not think you want to say where is
that local station the day after the tornado hits. So that is
the point, that localism is about being there and serving the
community all the time. And yes, much of the viewing is tuning
in for----
Mr. Farenthold. Okay. I have got limited time.
So, Mr. MacKenzie, can you tell me--go ahead. Did you want
to answer this?
Mr. MacKenzie. I would. The American Cable Association are
primarily very small cable providers. Oftentimes we are at the
edge of a DMA. So I will use my system as an example. We are in
Shenandoah County, which is in the Washington, D.C. DMA. You
cannot get off air in our area. We have to have that brought in
by fiber to do so. So I can tell you there are no local sports.
There are no local--but I can get that from a distant station
which is only 30 miles away.
Mr. Farenthold. All right. So let us talk about section
119. And if we do away with the requirements--or the incentives
for local stations to get on or the requirements, do we end up
with network affiliate super stations where it is the station
in New York or Chicago or LA that everyone gets? And then how
does the local car dealer advertise or whatever business there
is in the local community or a candidate for Congress?
Mr. Waldron. Our view is that is absolutely what would
happen, that the easiest thing for the carriers to do would be
to make an arrangement with New York and Chicago and LA. So
then we would have a national broadcast system, which is how
some other countries are doing it. That is not the American
system and it is not the case that actually would give a
platform for the car dealers or the movie theaters----
Mr. Farenthold. I am sorry. I have got limited time.
Mr. Dodge----
Mr. Dodge. Can I just say----
Mr. Farenthold. Sure.
Mr. Dodge. Why should consumers not be able to choose in
that case? It sounds like Mr. Waldron is proving the point that
perhaps localism is not that important. If a consumer is going
to be satisfied with New York, shouldn't they make that----
Mr. Farenthold. But isn't it much cheaper for you and uses
less bandwidth and less resources for you on your satellite
just to have one national? You do away with all the spot beams
and all of that and you just have one station. And it is
actually cheaper for you to broadcast one affiliate rather than
several hundred?
Mr. Dodge. It certainly would be, but the fact of the
matter is today we broadcast locals in all 210 markets. We have
made the decision that we want to be in there, and all we are
saying is to protect consumers from takedowns, allow us to
temporarily import a distant signal. That is not the end game.
Mr. Farenthold. Would another option to the ones you
suggested might be, all right, you stay up and you go under
whatever agreement is eventually reached?
Mr. Dodge. Of course.
Mr. Farenthold. All right.
Mr. Donato, we talk about these million or so----
Mr. Donato. Designated market areas.
Mr. Farenthold. Yes. Well, we talk about the million or so
people who are not served by anybody. Is there a way we set it
up where--and even with the DMAs, we set it up to the one that
is most rationally close to them? Isn't there just a way to
start over and do away with the 1972 stuff? If I had my choice
of local affiliates in Washington, D.C. on DirecTV, I would
pick the Corpus Christi local affiliate.
Mr. Donato. So the 1972 stuff is--that is what existed at
the time the law was written, and that is why it is in the
appendix and no one has gone back to update it. We would be
delighted to supply the Committee with updated information on
it.
Just so you understand what the implications are, pay
penetration in 1972 was obviously less than 5 percent or the
amount of viewing that went to pay was less than 5 percent. And
right now the amount of viewing that goes to cable stations is
about 60-65 percent. So there has been a shift.
Typically the counties in which it feels like it is
irrational because you cannot get the Broncos game are really
large rural counties, and most of those people in those
counties do, in fact, watch to the home market station. We do
have split counties. We had split counties in the past.
Mr. Farenthold. My time is up. I have now got to go
research whether or not watching my Corpus Christi stations on
my Slingbox is illegal. I am really concerned now.
I yield back.
Mr. Coble. I thank the gentleman.
The distinguished gentleman from Florida, Mr. Deutch, is
recognized for 5 minutes.
Mr. Deutch. Thank you, Mr. Chairman.
Mr. Padden, you have made an argument, a very compelling
argument, that the current retransmission system that is in
place is incredibly complex, comically complex I am sure you
would say. But your solution is to walk away--for us to walk
away from that process altogether, which would bring all of the
broadcast stations into the free market, if I understand your
proposal. And I appreciate your desire to take Congress out of
this. And the full Committee's Chairman I think touched on this
before. If you take Congress out of these business-to-business
dealings, Congress is still going to be tipping the scales in
favor of one party or the other either by keeping compulsory
licenses or by striking them. Why is walking away altogether a
fair solution?
Mr. Padden. I think the best way to explain it is like
this. First you gave cable--I will say cable and satellite a
compulsory license for the programs on broadcast stations. Then
as part of that deal, the FCC adopted rules that restrict cable
and satellite's use of that compulsory license. And then in
1992, Congress enacted retransmission consent which requires a
marketplace negotiation between the station and the cable and
satellite people. So you ended up at the same place you would
be, namely in marketplace negotiation, if you had done nothing
except you have got a bunch of regulatory warts that you
developed along the way like the fact that the 1972 rules are
still in the FCC's rules.
All I am saying is it is a Rube Goldberg system. It is a
complex way to do something simple, and it really is a chance
for once to say here is a Government program that each little
step made sense when we did it but the end result is
nonsensical, so we are going to back out of it.
Mr. Deutch. Mr. Dodge, let's talk about regulatory warts
for a second. I assume that you would be in some disagreement
with that proposal. But I am hoping you could walk us through
the process that DISH undertakes to negotiate with local
broadcasters. What makes that more difficult from your
company's perspective than negotiating with the non-broadcast
stations that Mr. Padden holds up as the model as to exactly
how this should now work? As he points out, those negotiations
all take place without any congressional interference at all.
Why is there a difference? Is it more difficult and, if so,
why?
Mr. Dodge. It is more difficult because you have 210 small
monopoly territories, if you will, where this one local
broadcaster who, as Mr. Waldron asserts, has this valuable
local content that is irreplaceable that no one else can
recreate, and that one broadcaster gets to play three if not
four distributors off each other. And oftentimes you get to a
point in a negotiation where they are asking for 300-400
percent increase, and they say, okay, I guess we are not going
to get there. I am just going to take the signal down. I am
going to call up your competitors and tell my consumers to go
switch to them. And the problem is while the broadcaster might
lose an eyeball for 30 days, DISH has lost a customer for
eternity after the consumer goes through the headache of
switching.
Mr. Deutch. Mr. Dodge, can you just go through that in a
little more detail, though? When you say they are playing
several off of one another, can you give me some examples? How
does that actually work? What is it that you would see happen?
Mr. Dodge. So in some cases, the broadcasters literally
start running advertisements in the paper saying--you know,
putting into their signal that you are about to lose your
signal from DISH network. Please call DirecTV or Comcast,
whomever. They run advertisements in the local papers. And, you
know, as Mr. Waldron says, maybe it is a smaller amount of
these things that actually go to a takedown. What he does not
account for is there are numbers of these where you do actually
get to an 11th hour negotiation, but the consumers have been
bombarded for weeks if not a month with all these
advertisements and messages across the bottom of the screen
saying the sky is falling, you better switch now. So there is a
huge disenfranchisement of consumers even in cases where it
does not actually go to a takedown.
Mr. Deutch. Mr. Waldron?
Mr. Waldron. Let's take Mr. Dodge's statement, read it
back, and swap out the word HBO for broadcaster. HBO does not
want to reach a deal with the local cable company. HBO is going
to pull back its programming. HBO is going to run an
advertising to say that, ``Oh, you want to watch HBO, you want
to watch your favorite show? Go to DirecTV because DISH does
not have HBO.'' What is so remarkable about this? These are
marketplace negotiations. To your point, Congressman, what you
started out with, what is different about this, as Mr. Padden
said, with every other sort of broadcaster? And the answer is
Congress depends on HBO and DISH and DirecTV to have serious
negotiations and to deal with the marketplace. That is the same
exact thing that is going on here.
Mr. Dodge. And if I may.
Mr. Deutch. Can I have 15 seconds just to hear the
difference? Mr. Dodge?
Mr. Dodge. So with respect to HBO, are there other movie
channels out there? Yes, there are. Is there potential
substitute programming? Yes, there is.
Now let's substitute in what Mr. Waldron said. I guess
localism is not that important. We should be able to import New
York because it is just not that important what is actually
going on in Denver. He cannot talk about of both sides of his
mouth.
Mr. Coble. The gentleman's time has expired.
The distinguished gentleman from Florida?
Mr. DeSantis. Mr. MacKenzie, if you wanted to chime in, go
ahead.
Mr. MacKenzie. I would. I think the big difference between
DirecTV and DISH and members of the American Cable Association
are relative size. We are very small providers, normally with,
on average, less than 5,000 subscribers. When we start our
retransmission discussions with the broadcasters, it is after
they have already negotiated with the big company that is in
the DMA. When we try to make a negotiation--and on numerous
occasions I have asked, ``Could we have a most favored nations
clause in our contract to make sure that we are being treated
fairly compared to the others in the marketplace?'' And I have
never been able to get that in. So I think there is a huge
difference between the negotiations between a DirecTV and DISH
and the broadcasters and the small cable operators and the
broadcasters.
Mr. DeSantis. Great. I just wanted to give you a chance.
This is my first time going around with this. I am a
freshman, but it is really interesting to see. I was listening
to the Major League Baseball testimony, and I am one of the
youngest Members of Congress, but yet I remember watching 100
games about. We had TBS in Florida, TBS for the Braves, WGN for
the Cubs, a little bit of White Sox. Then we did get WOR, so
there were Mets games. So those were the people that I
followed. When ESPN started covering cable, you started to get
more, and then with the Internet--I remember when MLB.TV came
out. You could actually watch games at work. And now you can do
it on your devices. I mean, it is just unbelievable. And I
think the technology is great. I wonder about the lost
productivity in the American workforce, but I guess that is
just a discussion for another time.
So as someone who is new to this, I would just like you all
to say--you know, we are here. A lot of people say, you know,
Congress--they got to solve the problems of the American
public, all that. And that is nice to say but it obscures the
fact that we actually create a lot of problems here through the
years. And I have seen it in other areas.
And so as somebody who is new looking at this, what would
you say as kind of something that Congress has created a
problem with this that we should look to rectify? I probably
know where Mr. Padden is going but can you start and then just
give me a quick----
Mr. Padden. Sure. One perfect example is the compulsory
license that you enacted gives cable systems the right to carry
stations that are deemed significantly viewed in their county
based on a list of ratings from 1972 that is enshrined in the
FCC rules. And if a station wants to get carried somewhere else
and the constituents there want to see it, the station has to
petition the FCC to amend the list of significantly viewed
stations so they can be carried there. It is crazy. I mean, if
you simply rely on the free market and there are people who
want to see the station and the station wants to be seen, they
will figure out how to get it done.
Mr. DeSantis. Mr. Garrett?
Mr. Garrett. Well, Congressman DeSantis, there are probably
several answers I could give. The one I would focus on for
Major League Baseball here is the fact that entities like Major
League Baseball and other content owners are forced to
subsidize essentially a $100 billion industry by providing them
with below-market programming pursuant to the compulsory
license.
You mentioned the great variety, the wealth of programming,
baseball programming that you can see now. The vast bulk of
that programming is made available through negotiated licenses,
through marketplace negotiations. And we think that the same
can be true of the program that is now available during
compulsory licensing, but if compulsory licenses continue, at
the very least, we should have fair market value paid for that
programming.
Mr. DeSantis. You mentioned the industry. But what is the
dollar loss to Major League Baseball? Have you looked----
Mr. Garrett. I do not know the answer to that. It is not a
question of harm here. It is a question of talking about what
is fair and reasonable and that marketplace compensations,
marketplace value is what we all live with in this industry.
Mr. DeSantis. Thank you.
Mr. Campbell?
Mr. Campbell. Congressman DeSantis, thank you.
Conceptually I think that the biggest problem is that the
rules that are currently in place do not recognize what the
marketplace looks like today and it is ever-changing and ever-
evolving. I think the biggest thing that Congress could do
would make sure that rules are in place that encourage
innovation and investment and competition because we are
dealing with companies that have been there forever, and I
think consumers benefit the most by having companies like
CenturyLink go into a major market, invest the capital, and
compete. And I think the rules in place would tend to stifle
that. So I think conceptually that is what Congress should take
a look at.
Mr. DeSantis. Good.
Mr. MacKenzie?
Mr. MacKenzie. Small rural carriers are the ones who are
bringing broadband to America which is, I know, a priority for
everyone. But oftentimes the rules and regulations are one size
fits all. And so I think one of the things we should look at is
some changes in the rules or when the rules are being looked
at, how it impacts the small providers.
Mr. DeSantis. I am out of time, but if the rest of you
gentlemen would like to submit something, I would certainly
love to hear your views as well.
So thank you for coming.
Mr. Coble. I thank the gentleman from Florida.
The distinguished lady from California.
Ms. Bass. Thank you very much, Mr. Chairman.
And our witnesses today--I appreciate your time. It has
been helpful to me coming from Los Angeles and having just
experienced the blackout which, again, I thought was specific
to our area and did not really realize how widespread this was
or why this happens.
So I just had a couple of questions for you, one of which
is do you worry that pulling consumers into these escalating
negotiations between cable or satellite and broadcasters means
that more people are going to opt out of pay TV and whether or
not you think this would have a harmful effect on content
creators whose shows are distributed on cable and satellite?
And that is for anybody.
Mr. Waldron. Can I make one point?
Ms. Bass. Sure.
Mr. Waldron. I want to emphasize that a broadcaster is a
free over-the-air service. So during the so-called blackout,
the service was available 100 percent of the time. I realize
that some people might not have antennas or some people might
have reception problems. But I do want to emphasize----
Ms. Bass. I could have seen CBS?
Mr. Waldron. I am sorry?
Ms. Bass. I could have seen CBS if I had rabbit ears?
Mr. Waldron. Yes, absolutely. It was available over the air
during the entire time, and indeed, there were reports at least
in the New York market that there was a run on antennas at
Radio Shack. So I do want to emphasize that the signal is
always on and always up. It may not be available on the cable
system, and we realize that, but it was available during this
whole time.
Mr. Dodge. Well, I would take a bit of an issue with that
as I do not think the broadcasters actually build out
terrestrial signal to their entire DMA, certainly not in every
DMA. So I think it depends where you lived in Los Angeles as to
whether you could get an off-air signal.
Ms. Bass. I see. I do not think people knew that, and I
doubt whether there was a run on rabbit ears in LA.
Mr. Dodge. Shame on broadcasters for not building out their
entire DMAs.
Ms. Bass. Okay.
Mr. Campbell. And from a pay provider perspective, it is
not free.
Ms. Bass. Okay.
The second question is many local broadcast stations play
an important role in providing local news, weather and
emergency information particular to the communities they serve.
And I know that we all agree that viewers should not be
deprived of local information, especially during emergencies.
So specifically I wanted to ask what steps can Congress take to
ensure that our constituents do not get caught in the middle of
these commercial disputes, particularly when weather or other
emergency information is at stake.
Mr. Waldron. Well, one approach that we would have is that
if there is a dispute, the consumers should be able to change
providers. So there should not be a cancellation fee, and
frankly there should be a rebate if they are denied service.
Ms. Bass. That is not that easy to do.
Mr. Waldron. I am sorry. Excuse me?
Ms. Bass. That is not that easy to do. I mean, if you just
want to cancel right in the middle of the dispute?
Mr. Waldron. I understand it is not easy to do, but that is
a choice that consumers can have in addition to getting the
signal over the air. And by the way, it is free to anyone who
has antennas. You can also pay for pay TV, but it is free to
anyone who has an antenna.
Ms. Bass. Okay, representing the antenna companies.
Mr. Dodge. Could I address just the point about refunds and
cancellation fees? I think, as is clear, our view of the world
is today it is an unfair fight as it stands. You have got one
broadcaster who plays all the distributors off against each
other. With all due respect, Mr. Waldron is trying to actually
make it even worse by saying now let's give another hammer to
the broadcaster by saying you have to do refunds and waive
termination fees in all these cases when, quite frankly, the
fact that there are blackouts are the exact reason why our
disclosures to our consumers in our contracts are crystal clear
that programming is subject to change because we cannot ever
guarantee that we are going to be able to provide any local
broadcaster's signal because there is this constant threat of
takedowns.
Ms. Bass. Thank you.
Would anybody else like to respond?
Mr. MacKenzie. Yes. I think the proposal that we put
forward that during these disputes the signal remains up while
the negotiations are going on, therefore the consumer is not
going to be harmed, and once the negotiations are completed,
then the fees are paid retroactive. So no one really is
disturbed or harmed by that, and it allows the consumer to
continue to have service during that period of time.
Ms. Bass. Anyone else? All right. Thank you. Oh, I am
sorry.
Mr. Padden. I would just repeat that Mr. MacKenzie's
industry just went to court to defeat a standstill agreement in
the context of the program access rules, and for them to now
come in and say they would like it in this instance I think is
unusually duplicitous even by Washington standards.
Ms. Bass. Would you like to respond to that, Mr. MacKenzie?
Mr. MacKenzie. My company and the companies of the ACA were
not involved in that suit. The large cable operators maybe, but
not the small cable operators.
Ms. Bass. Okay, thank you.
Mr. Coble. I thank the gentlelady.
The distinguished gentleman from Louisiana.
Mr. Richmond. Thank you, Mr. Chairman. I want to thank you
for having the Committee meeting today.
Let me just start with--I guess I will show a little
favoritism and start with Mr. Campbell from CenturyLink. I
guess my question to you would be looking at most of your new
subscribers and the fact that they are probably new to the
Internet and looking at the area where you all are located
which, if you go right down the street toward Monroe Lake
Providence, you are talking about one of the poorest places in
the country. That has consistently been that way. The fact that
your new customers and coming in and taking video along with
Internet access, what kind of effect is that having in the
area?
Mr. Campbell. Congressman, thank you for the question. It
has had a great effect not only for our subscribers that take
the video product but for those who choose not to. As we
upgrade the networks in these markets that we enter, we are
offering broadband speeds that range from 25 to 40 megabits. So
even those folks we cannot sign up to the video product that
may not want it, everyone else is getting enhanced broadband
speed. So really the benefit from the video perspective is
great because it allows us to compete with the incumbent cable
operator and offer a video product. But even from a broadband
perspective, the effect is even greater.
Mr. Richmond. From a price point, how are you all with the
traditional video providers and cable providers?
Mr. Campbell. Traditionally in the markets where we have
entered, we obviously enter lower than they do. What we have
seen is some slowdown in price increases from the incumbent
cable operator although that has not--they slow down the
increases. They still increase their prices and the content
acquisition is still a problem, but generally our price point
is lower.
Mr. Richmond. Let me just say that many local broadcast
stations play an important role in providing local news,
weather, and emergency information to the communities they
serve. However, nearly 90 percent of households today watch
their local broadcaster through a pay TV subscription and
therefore are dependent on cable, satellite, or other video
provider to offer this program. And as we mark the anniversary
of 9/11, I believe that we all agree that the U.S. should not
be deprived of local information during emergencies regardless
of how retransmission consent negotiation is proceeding. And I
mentioned 9/11 but, of course, in Louisiana and in our area, we
have to worry about hurricanes and tornados and other things.
So I would be interested whether the panelists would
comment on their views as to whether it is a fair negotiating
tactic to threaten blackouts given viewers are then at the risk
of missing emergency information. What steps can we take to
ensure that our constituents do not get caught in the middle of
that fight, particularly when weather and other disasters may
play a part? And anyone can start.
Mr. Dodge. Of course, we do not think it is fair for
consumers to be put in that position, especially given that the
broadcasters received at least initially billions of dollars of
spectrum for free under the premise that they would be stewards
of that spectrum for the public good.
And with all due respect to Mr. Waldron, I do not think
saying to folks, ``Hey, just go use an off-air antenna'' is a
100 percent satisfactory solution because the broadcasters do
not cover their entire DMAs with the free broadcast signal.
Mr. Waldron. The vast majority--I do want to emphasize the
vast majority of the thousands of broadcasters and the
thousands of cable companies reach deals. So for your
constituents and the vast majority of constituents, as I said
in my opening statement, 1 one-hundredth of 1 percent of all
viewing hours were lost to disruptions last year. You are 20
times more likely to lose your service because of a power
outage than you are because of retransmission consent impasse.
So broadcasters have every commitment to reach the deals in the
marketplace, and in the vast majority of times, those deals are
reached and constituents continue to get their service.
Mr. Campbell. Congressman, as you know, our company is
steeped in a rich history of being a local rural communications
provider, and we absolutely embrace localism. The issue from a
video perspective is--I think Mr. Dodge mentioned this--
negotiations are not quite as local as they used to be. If we
were dealing with a local station in the Colorado Springs
market, then it might be a better negotiation process. We are
dealing with syndicates that own 30, 40, 50 markets who play
them against each other, who push these negotiations up to the
national level and tie in all of this non-local content into
the agreement and say take it or else. And so that is kind of
the issue from the video perspective.
In utopia, if they were local and it worked the way that
Mr. Waldron said, I do not disagree, but it does not work that
way.
Mr. Richmond. I see that my time has expired, and Mr.
Chairman, I yield back.
Mr. Coble. The gentleman's time has expired. I thank the
gentleman.
The distinguished gentleman from Georgia.
Mr. Collins. Thank you, Mr. Chairman. I appreciate the
opportunity to be here.
This is one of those issues that my staff and others have
said this is just a terribly complicated issue. And I began
reading about this last week, and I felt like I was back in law
school and, as I call, seminary ``cemetery'' and reading a
paragraph and having to reread it four or five times and saying
what exactly is being said here. Mr. Padden, you made a great
point about that. This is just chaotic.
And then I have been listening today, and what I come back
to is--having the great joy of serving Georgia's 9th
congressional district, which is northeast Georgia, the
mountains, the start of the Appalachian Trail, very rural but
also very urban in certain areas. Is what I hear lost here? The
people who are not in this room paid to be here and that is my
constituents back home who could really frankly care less about
the complexity of it. They are wanting to be able to get their
news, to watch new ideas and to watch new TV and to watch new
programming. And sometimes the complacency of what I have seen
here today is more fighting for our battles and our market
share than ending up--the bottom line is the person that we
actually serve. And this is some of the questions that I want
to take up first.
Mr. Donato, you answered a few minutes ago, and I am going
to assume that it was sort of off the cuff. But you said, well,
the DMA is what it is, almost implying like Nielsen--where we
are because we are in a statute doing what we do. But you do
not always have to be there. We can change that. I mean, there
can be other ways to look at DMAs and going very conservatively
and this kind of thing.
So I would like for you to explain the process in which
Nielsen decides current DMA boundaries and tell me whether or
not northeast Georgia is under current consideration.
Mr. Donato. Currently the process is annually. We go in and
we evaluate the share of tuning to stations from the home
market, and the market for a particular county which has the
majority of the viewing or the larger share--it is to that home
market that a county is assigned. In some cases very large or
rural or counties which are on the sort of outskirts of the
DMA, we will actually split counties and put one part of the
county in one market and one part of the county in the other
market.
Mr. Collins. Does safety ever become an issue? I mean, you
seem to talk about viewership, but I mean, we are talking about
safety here. We talked about hurricanes, tornados. Does safety
ever enter into what you are thinking about? Because by
splitting a county--Elbert County is one of mine that is split.
I was watching just a few months ago when we had an issue with
ice. I did not even see four of my counties on the Atlanta
area--which I am in Gainesville--even listed there. I mean, is
there safety that ever comes into account of what you are
talking about?
Mr. Donato. The DMA is entirely based on viewing.
Mr. Collins. Okay, and I appreciate that because we have
something I want to cover here.
So these gentlemen have talked about safety and localism
and these kind of things, but yet, when we do the DMA, safety
is not a consideration being taken into account. So the
argument is really interesting here. We get them talking about
localism and safety. We get you saying, well, we do not even
take it into account for DMAs.
Mr. Donato. I guess I would respond in this way. So the DMA
is basically set up as a commercial entity so that buyers and
sellers of advertising understand the geography associated with
viewing audiences. It is the basis for literally hundreds of
billions of dollars of commercial activity, and it really is
the thing that has supported local television all along. It is
objective. It is based on viewer preferences. It is not based
on any rules. We frequently talk to Congressmen and women when
there are issues that arise in terms of someone not seeing a
signal and they go to their Congressman or woman.
Mr. Collins. We are going to talk about that in just a
second.
Mr. Donato. Yes. We basically handle them one at a time and
try to demonstrate why they are where they are. And we listen
to them and sometimes this is the reason why we begin to split
a county if it does appear as if a county really goes--part of
a county goes to one market, part of a county goes to another
market in terms of the viewer preferences.
Mr. Collins. In one of my counties in particular, I think
that is just a false distinction.
But really I think what is happening here is we are talking
on two different levels when we deal with this DMA issue. In
one part, we are dealing with localism and the safety aspects
and why we need local broadcasting and why the satellite and
cable providers get in this market. And on your angle, you are
not even discussing really what some of the arguments that are
being made here. So that is a concern. I may submit more
questions for the record for you at a later time.
Mr. Waldron, how specifically are broadcasters willing to
facilitate the availability? As I said before, I have four
counties that are orphan counties. I would like a commitment
from you to work with my office, and I know that they have
already been working there to make sure that we get this
question addressed because it came up in my town hall meetings.
They understand this. They get it because we are really in a
different dynamic in those four counties and really split
between two smaller markets in the predominant Atlanta market
in which most of them are participating. Can I get a commitment
out of you continuing to work with me on those orphan counties
that I have?
Mr. Waldron. Absolutely.
Mr. Collins. The other question here and this is sort of an
overall question. I will leave this one open. It is not one
that I had prepared but it came to me as I was listening to
you. I am out of time, I believe, Mr. Chairman? So I guess I
will have to submit it for the record. Can I have 30 seconds,
Mr. Chairman?
Mr. Coble. 30 seconds will be granted.
Mr. Collins. Thank you, Mr. Chairman.
I read the New York Times. I read the Washington Post. I
read the Wall Street Journal. I read the Atlanta Journal. I
read the Gainesville Times. I even read the Fannin News
Observer. I get information from all over. Why couldn't I have
my local broadcasting and the Los Angeles affiliate if I wanted
to? And I am not setting myself up. So anybody in the audience
says, ``Oh, he is for one side or the other.'' No. I am just
asking an honest question with the way things are developed.
Shouldn't the question be ``either/or''--not be ``either/or''
and be ``and?''
Mr. Waldron. If I may answer.
Mr. Coble. Your time has expired.
You may answer.
Mr. Waldron. I mean, I think the argument is that exclusive
territories are very common in business, let's say a beer
distributorship or a car dealership. Well, that is what a local
broadcaster is. They are the CBS outlet, if you will, for a CBS
affiliate in Gainesville or Atlanta. They are that outlet. If
you are bringing in another CBS station, then you actually have
defeated the exclusivity that the broadcaster negotiated for.
Mr. Collins. We will talk about it.
Mr. Coble. The gentleman's time has expired. I thank the
gentleman.
The gentlelady from Washington.
Ms. DelBene. Thank you, Mr. Chair, and I just want to thank
all of you for being here today and continuing as we have more
questions.
I wanted to start with Mr. Padden. You have not talked
about localism at all and with your proposal how that would
impact access to local information.
Mr. Padden. Again, I am just suggesting to you that
marketplace forces would be a better servant of consumers'
interests. If there is programming they are interested in,
whether it is local programming or something from somewhere
else, and you leave it to the market and there is money to be
made providing that program to them, they will get it. The
overwhelming majority of the viewing is to local broadcast
stations because of the overwhelming interest in the local news
and weather and sports, and in a free market system, that would
continue. There would be absolutely no diminution in that at
all.
Why you would want to continue a system that is based on
the Nielsen ratings from 1972 to decide who gets to watch what
I do not understand.
Ms. DelBene. You know, with the new technology today, the
Internet, people are getting a lot of local information even
when they are not at home. Many of us when we are here are
still staying connected at home and getting local information
in other ways because we have people traveling around a lot and
they are not always in their local area but they still want
news that is happening from home.
So given the development of new technologies and the
different consumer behavior in terms of access to content and
making sure that we--given that we have legislation from 1988
and Nielsen ratings from earlier, how do we make sure that we
put together a policy that does not inhibit innovation or
change going forward as we look at what we should do here in
the next step? And so that is kind of a broad question for
everyone, but we want to make sure that whatever we do
addresses issues that consumers have today but also does not
block innovative new entrants that may also want to compete in
this space.
Mr. Donato?
Mr. Donato. Yes, I would like to answer that actually.
So we measure viewing of television online. We have made an
announcement. It is a very complicated technical problem of
measuring it through tablets. We have made an announcement that
we have solved the technology, and starting the end of next
year, viewership on tablets will also be included in the
ratings.
I suppose my point is we have got measurement solutions.
The business relationships are very, very complicated, and I
would not comment on them. I would leave it to my fellow
panelists to comment on them. But we do have the measurement
solutions worked out.
Mr. Dodge. If I could comment on the 1972 Nielsen data
point, I think one thing that is missing from the record is
that although theoretically DMAs can change based on viewership
and viewership is what is measured, if there is only one signal
that is available in a DMA, when you check the viewership, you
are going to get the same local affiliate over and over and
over again. And in southwest Colorado, for example, which I
mentioned is in the Albuquerque DMA, we have proposed to
provide both Albuquerque and Denver to the folks in those two
counties and let the consumers decide. So when Mr. Donato's
firm calls them up, they can say I am watching Albuquerque and,
lo and behold, maybe the broadcasters are right. People down
there prefer to buy their Chevrolets from Albuquerque, but some
people might say I am watching Denver. And ultimately it is a
vote of the people to decide where those two counties should
be.
Mr. Donato. I said it before, but I do not understand the
1972 comment. Every year we evaluate viewership and that is the
basis on which DMAs are constructed.
Ms. DelBene. So I was not just focused on 1972. I am kind
of focused on the speed of legislation and the way people are
viewing, the way the industry work changes more quickly
sometimes than legislation does. So how do we make sure we put
together legislation that does not inhibit that innovation?
Mr. Waldron. If I could come back to your original question
about technology, technology is very exciting for broadcasters
because, as you are probably well aware, with Slingbox and
other technologies, watchabc.com, you can actually use the
Internet technologies to keep up with your local broadcaster
even when you are in Washington, D.C. And with the CBS issue
with Time Warner, an important part of that was the online
digital rights so that CBS can make that programming available
to Hulu or Netflix or Amazon Instant Video. So the technology
is actually expanding opportunities to access your local
broadcaster.
Ms. DelBene. Yes, Mr. Padden.
Mr. Padden. If I could respond just briefly. You are right.
New technology is creating all kinds of wonderful
opportunities. Unfortunately, the compulsory license that you
have given to the cable industry and the satellite industry you
have not given to the online industry. So, for example, you
give the rights to broadcast programming, to Comcast and to
DirecTV, but you do not give it to Netflix. I do not understand
why. I am not advocating that you give it to Netflix. What I am
advocating is you undo the license you have given to cable and
satellite that currently puts online distributors at a
disadvantage. The United States is a party to a number of
international treaties that prohibit compulsory licensing of
television programming to online providers. So the only way you
can level the playing field is by repealing the license for
cable and satellite.
Ms. DelBene. My time has expired. So thank you, Mr. Chair.
I yield back.
Mr. Coble. I thank the gentlelady.
The distinguished gentleman from Texas, Mr. Lamar Smith.
Mr. Smith of Texas. Thank you, Mr. Chairman.
First of all, let me apologize for being tardy as well as
for having to leave early. This is one of those days where all
of the three Committees on which I serve are meeting
concurrently. So I am having to shift around.
Also, I may be covering some subjects that have already
been covered, and I apologize for that. But I would like to
address a couple of questions to our panelists today.
My first question I think would go to Mr. Dodge, Mr.
Waldron, and Mr. MacKenzie, and it is this. The compulsory
license has been extended innumerable times by Congress, and my
question is how well is it working for television viewers? And
do you feel that it ought to be reauthorized for another 5
years? Mr. Dodge?
Mr. Dodge. I would say it is working wonderfully. As a
result of the last reauthorization, DISH is now providing local
channels in all 210 DMAs.
Mr. Smith of Texas. Okay. Thank you.
Mr. Waldron?
Mr. Waldron. With respect to the local channels, I might
surprise you. I agree completely with Mr. Dodge. We think the
local compulsory licenses actually do work. I disagree with my
friend, Preston Padden, on that one. Broadcasters think the
system is working.
Mr. Smith of Texas. And Mr. MacKenzie?
Mr. MacKenzie. We are going to go three in a row. I would
agree.
Mr. Smith of Texas. Okay. Thank you.
The next question is for Mr. Garrett and Mr. Padden and Mr.
Dodge, and it is this. What alternatives exist to the
compulsory license? And would those alternatives adequately
protect the rights of copyright holders? Mr. Garrett?
Mr. Garrett. The Copyright Office addressed that very
question in a report that they prepared for Congress here, and
they talked about the different types of licensing, direct
licensing, sub-licensing, and collective licensing. And the
report lays it out in excellent detail here.
The one thing I would mention is just the actual history
here of what has happened with WTBS, for example. I have had
the privilege of being present, I think, at every one of the
hearings this Subcommittee has held on this issue since the
late 1970's. And when I go back, I think about the years when
people would debate about making WTBS available and it could
only be done via compulsory licensing. And in fact, what
happened in 1990 is WTBS converted to a cable network, and
today it is available to virtually every cable subscriber, not
pursuant to compulsory licensing, but pursuant to free
marketplace negotiated agreements, including agreements that
Major League Baseball has and has kept a package of programming
on TBS for several years and will through the year 2021.
Mr. Smith of Texas. Mr. Padden?
Mr. Padden. There are plenty of marketplace alternatives
that would be far more appropriate and fair to copyright owners
than a Government system where Government boards set the rates.
Mr. Smith of Texas. Thank you.
And finally, Mr. Dodge.
Mr. Dodge. We believe that the compulsory licenses do still
continue to have utility, and part of the reason is what Mr.
Padden noted in his written testimony, which is to this day the
broadcasters still have not cleared copyrights through to the
viewer in all instances. And that is the magic of a compulsory
license actually.
Mr. Smith of Texas. Thank you all for your testimony.
Thank you, Mr. Chairman. I yield back.
Mr. Coble. I thank the gentleman from Texas.
The distinguished gentleman from New York.
Mr. Jeffries. Thank you, Mr. Chairman, and I thank the
distinguished Ranking Member as well.
It seems to me that many of the disputes over the last
several years that have, in some instances unfortunately,
resulted in a temporary blackout and ability for consumers,
some of whom I represent back home in Brooklyn and parts of
Queens, to get content all seem to occur in and around
significant sporting events. So most recently in the run-up to
the start of the football season, there was a conflict that was
resolved on the eve of the football season starting,
thankfully. In the past back at home, there was a conflict that
prevented some consumers from seeing part of the early Yankees
run through a particular playoff season that wound up resolving
itself. And there was a conflict at home that centered around
the ability for some people to see MSG which broadcast cast the
Knicks. The Knicks were off to a terrible start, so nobody
cared. [Laughter.]
And then Jeremy Lin came on the scene and it became a big
problem. And it ultimately resolved itself.
But there is a lot of conflicts, not all exclusively, but a
lot that just seem to have interesting timing as it relates to
major sporting events.
And so I was very interested in Mr. MacKenzie's
observations as it relates to sports licensing fees. I believe
you testified that sort of these transmission fees have been
skyrocketing in recent times. Is that correct?
Mr. MacKenzie. True.
Mr. Jeffries. And I think you also indicated that as a
result, consumers are hurt as a result of the increase in the
sports transmission fees. Is that right?
Mr. MacKenzie. That is our opinion, yes.
Mr. Jeffries. Now, could you elaborate on that opinion in
terms of how exactly you think the consumers are hurt by an
increase in licensing fees connected to ESPN or some of the
other sports content?
Mr. MacKenzie. Well, for instance, ESPN, as reported by SNL
Kagan--the cost of that channel alone is $5.50, and that is a
channel that is required to be carried at the basic tier. So
whether you are a sports fan or not, you are having to pay for
ESPN. So when you look at the sports programming that is on the
cable channels and on the broadcast channels, the amount of the
programming costs that can be attributed to sports--and I do
not have an exact number, but the estimate is a third of the
expense----
Mr. Jeffries. Now, who requires ESPN to be carried at the
basic tier?
Mr. MacKenzie. That is part of the negotiations that you
have with Disney. When you are negotiating with them, they will
only allow you to carry ESPN if you put it on the lowest tier.
Mr. Jeffries. Okay.
You also mentioned in your testimony that you thought that
the antitrust exemption that exists perhaps should be revisited
because of the dominant market share that exists with the major
sports leagues. Is that correct?
Mr. MacKenzie. Yes.
Mr. Jeffries. Now, in 1922, I believe there was an
antitrust exemption granted blanket to Major League Baseball,
and then you referenced legislation that this Congress passed
in 1961. But if we were to revisit the antitrust exemption and
adjustments were to be made, recognizing that there is a
difference between baseball and the other major sports leagues,
how do you think that that could impact the landscape in a
manner that was favorable to our consumers?
Mr. MacKenzie. Well, I think that what you have, rather
than one entity negotiating on behalf of the entire league, you
would have individual teams negotiating in their local market.
I think that that would allow for more competition and probably
lower costs.
Mr. Jeffries. Could you comment on that, Mr. Garrett?
Mr. Garrett. Congressman, as I indicated earlier, very few
people want to hear what I have to say about antitrust policies
and antitrust laws. My focus is on the copyright side.
But what I will say is that with the Sports Broadcasting
Act, it is, among other things, responsible for why you and the
American public will be able to see the World Series on Fox
this year. It is that law which gives the Commissioner of
Baseball, gives the NFL and other leagues the ability to pull
together rights and make available to the American public the
kind of programming that is now made available. I think the law
has worked well. It has not been abused, and it is one of the
reasons why today I can come here and say to you that every one
of the approximately 5,000 games played in Major League
Baseball--I am sorry--5,000 telecasts of games in Major League
Baseball is available in one fashion or another to your
constituents and to all consumers.
Mr. Jeffries. Thank you.
Mr. Coble. Thank you. I thank the gentleman.
The distinguished lady from Texas is recognized.
Ms. Jackson Lee. Mr. Chairman, thank you. I think all of us
are expressing our appreciation to our Chairman and to the
Ranking Member and indicating that our calendars caused us to
be delayed. In one instance, the Homeland Security Committee
was discussing Syria, and I might add that the combination of
gentlemen that are before us, content and the various
providers, have helped to contribute to America's education and
discourse on this very important issue. So we are here for more
than just a separation of powers as to who has what, who is to
be regulated, but to be able to thank you for how you
contribute to the public discourse on some very vital issues.
We are engaged in this regulatory discussion because
Congress, in its wisdom, saw fit to regulate both the content
and the providers in order to create more robust competition,
which I think is vital, and particularly the responsibilities
of the Judiciary Committee are on the issue of competition. And
I might add that there is merit in everyone's position, as I
have been able to glean, as I have sat here.
And certainly to the National Association of Broadcasters,
I want to just be historic in my reflection on the old days of
the black and white television with that antenna where you did
provide content of joy to those communities that could get a
television. And all they had to do was to plug it into the
socket. So we have come to a new posture that for many was a
very difficult change because they had to now pay for something
that they had been able to plug in and receive some form of
content. But in the wisdom of the Congress and the
innovativeness of technology, we have all come to live together
with the new access that consumers have.
In the course of that, I want to raise a number of
questions. All of us I think or many Members have expressed
certainly the concern of the issue of blackout and how it
impacts not so much the two entities that are having a
disagreement. I heard someone say that that is only a minute
percentage that occurred, but if it occurs at all, it is a
difficult challenge for many of us who deal with our
constituents.
With all due respect and reflection, the customer will be
calling the satellite company or they will be calling the cable
company, and they will not be calling the entity that has the
content. And we have to find a balance with that because there
are concerns that this would be a growing problem.
So I am going to be posing a generic question to start out
with, and I would appreciate those who would answer it could do
so. And I might have missed. So this is just a plain, simple
question. Do we expect to have these content conflicts coming
up over and over again? And is there a way that the industry
will look to solve those kinds of concerns? We know what the
issues are. The issues I have, content. You are a provider. You
want to get my content. You have to pay. But are there ways to
handle that in a preferable way than to skew what Congress
tried to regulate and balance to protect the content, rightly
so, and also to give competition. That is one question.
The other question is should the upcoming reauthorization
include a discussion of other issues related to satellite,
cable, and the Big 4 broadcasters? And what do you think they
should be or do you think--and again, to those who would want
to answer that--it should be simply a clean reauthorization?
The Judiciary Committee has its jurisdiction and others have
theirs.
Specifically to Mr. Dodge on the DISH Network, are the cord
cutters or cord shavers, those who do not subscribe to multi-
channel video programming distributor, reduce the scope of the
MVP's ability--are they of concern to the DISH Network? And if
Congress did not reauthorize section 119 compulsory license,
how expensive or burdensome would that be for you? Now, that is
specifically to you.
Can you answer the other questions about getting a
resolution on how you debate this question going forward and
then the reauthorization question?
Mr. Dodge. Sure.
Ms. Jackson Lee. And this is for everyone, Mr. Dodge. Why
don't you wait on the question I specifically asked you?
Others on the comment please.
Mr. Campbell. Yes, I think something can be done to resolve
this. What we need to do is look at the rules that are
currently in place that are slanted in favor of the
broadcasters that were created at a time when the broadcasters
were facing issues with the incumbent operators, and now the
shield has turned into a sword. And so if some of those issues
were removed, such as network non-duplication and syndicated
exclusivity, then I think you would see a much more balanced
negotiation process. We have incentive to get local channels,
the local news channels to our consumers, and I think the
broadcasters have the incentive as well. But the problem is
that so much of a national content is tied to it. If we were
able to carry that content, I think the negotiations would be
more balanced.
Ms. Jackson Lee. Mr. Dodge, on your question.
Mr. Dodge. Oh, sure. I would say to answer your first
question, is this problem going away, for lack of a better
term, the proof is in the numbers. In 2010, there were 10 local
blackouts. In 2011, there were roughly 50. Last year, there
were roughly 100, and now we are on track to set a record with
120, which is not a record I think any of us will be happy to
hit.
With respect to your question on whether cord cutters were
a concern for DISH, the answer is no. We welcome the
competition, and we need to find a way ourselves to actually
evolve and participate in that.
Ms. Jackson Lee. Thank you.
Anyone else?
Mr. Waldron. If I may,
Mr. Coble. The gentlelady's time has expired. I will give
you 1 more minute.
Mr. Waldron. I was just going to say broadcasters support a
clean reauthorization of STELA, and the vast majority of deals
do get done.
And with your opening comment, still today you can get a TV
and an antenna and plug it in and you get TV for free.
Ms. Jackson Lee. Thank you, Mr. Chairman, for your
indulgence. And thank you. I look forward to talking with you
all individually. Thank you very much.
Mr. Coble. I thank the gentlelady.
The distinguished gentleman from North Carolina, Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman. And I want to thank the
Chair for convening this hearing and all of the witnesses for
participating. It has been a delightful, free-flowing
discussion. It has been great to see Mr. Dodge and Mr. Waldron
seated next to each other going toe to toe.
I will always benefit, since I have started going last in
the series of questioning on our side, from what has taken
place because there is always one comment that kind of pops up
in the whole discussion that hits my mind. And that comment
today came from Mr. Dodge when he looked at Mr. Waldron and
said you cannot talk out of both sides of your mouth. My
thought was that most of us--in all of the industries is my
experience--have talked out of both sides of their mouths
depending on what is beneficial to their particular industry.
But I did note that it was particularly applicable to the
broadcasters because I have been a strong advocate for people
being paid for their intellectual property, and for that
reason, I have been a strong advocate of your ability to
negotiate for payment for your products. I think that is very
important.
What I have not been able to reconcile, however, is how you
apply a different standard to the people who provide
copyrighted material on radio, the performers. And I just do
not understand that dichotomy. And so I am hopeful that you all
will maybe come around on the radio side to the same position
that you hold on the--when you own the protected material,
understand that there are performers out there that own the
protected material that they produce, and they deserve to be
paid also.
So I am not going to belabor that, although I would note
that it seems to me to be unfair for you all to take the
position that there is some kind of performance tax when the
Government gets no part of the performance rights revenue. Yet,
there is no performance tax when you get paid for what you have
the copyright to. So I hope you all will help me reconcile
that. I will not do it here in public. But it is a concern that
I have.
I think these are inordinately difficult issues. I kind of
come down closer probably to where Mr. Padden does than most
people. We would probably be better off to get the Government
out of the way not only in this context but in the performance
rights context too.
So it will not be a surprise to anybody because I announced
it at a hearing right before the break that I was introducing a
bill to do away with the compulsory license of music, but to
make sure that if you play a performer's music that you
compensate them and go and work out a deal with them if that is
what you want to do. I am kind of free market on a lot of this
stuff, Mr. Padden, and I was particularly appreciative that
your testimony was the last testimony.
So I thank all of you for being here. I will not
necessarily ask a question unless Mr. Waldron wants to respond
to what I did not intend to be a personal attack on NAB because
I started out by saying we all are self-serving and talk out of
both sides of our mouths. I think that is characteristic of all
of us at one time or another. I just used your industry as an
example, as Mr. Dodge did. I thought his comment was
appropriate.
Mr. Waldron. I was just going to say we look forward to
further conversations with you. It probably is best in private.
We do not accept all that you said, but we can continue those
conversations.
Mr. Watt. Well, we have continued those conversations on a
local and national level, and they have always been cordial and
congenial. So as you all said, you and Mr. Dodge and Mr.
Waldron are good friends, and Mr. Dodge and Mr. Padden are good
friends. All of us are good friends. We do not always agree on
every issue.
Mr. Chairman, before you close the record, the Motion
Picture Association of America has requested that we submit
this info-graphic illustrating the continued rapid growth of
online viewing options for audiences for the record. So I would
ask unanimous consent that we make this a part of the record. I
am not even sure what it is. [Laughter.]
But I am in complete agreement that anything that will help
us make good decisions ought to be part of the record. I ask
unanimous consent to submit it.
Mr. Coble. Without objection. Now, if it ignites in my
hands, Mr. Watt, I will not hold you harmless for that. But we
will accept that without objection.
[The information referred to follows:]
__________
Mr. Coble. I thank the gentleman.
I want to thank those of you who have been in attendance
for the entire hearing. Obviously, your interest is more than
just casual. And I particularly want to thank the witnesses.
You have contributed significantly to a very complex and a very
important issue. And we may meet again. But it has been a
pleasure having you all with us.
The hearing is now concluded.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing stands adjourned.
[Whereupon, at 12:25 p.m., the Subcommittee was adjourned.]