[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
COMPULSORY VIDEO LICENSES OF 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
SECOND SESSION
__________
MAY 8, 2014
__________
Serial No. 113-89
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
_____
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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 ZOE LOFGREN, California
SPENCER BACHUS, Alabama SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
TRENT FRANKS, Arizona PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas JUDY CHU, California
JIM JORDAN, Ohio TED DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]
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., JERROLD NADLER, New York
Wisconsin JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas JUDY CHU, California
STEVE CHABOT, Ohio TED DEUTCH, Florida
DARRELL E. ISSA, California KAREN BASS, California
TED POE, Texas CEDRIC RICHMOND, Louisiana
JASON CHAFFETZ, Utah SUZAN DelBENE, Washington
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia ZOE LOFGREN, California
RON DeSANTIS, Florida SHEILA JACKSON LEE, Texas
JASON T. SMITH, Missouri STEVE COHEN, Tennessee
[Vacant]
Joe Keeley, Chief Counsel
Heather Sawyer, Minority Counsel
C O N T E N T S
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MAY 8, 2014
Page
OPENING STATEMENTS
The Honorable Tom Marino, a Representative in Congress from the
State of Pennsylvania, and Vice-Chairman, Subcommittee on
Courts, Intellectual Property, and the Internet................ 1
The Honorable Jerrold Nadler, a Representative in Congress from
the State of New York, 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 11
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..................................... 12
WITNESSES
William J. Roberts, Jr., Acting Associate Register of Copyrights
and Director of Public Information & Education
Oral Testimony................................................. 15
Prepared Statement............................................. 17
R. Stanton Dodge, Executive Vice President and General Counsel,
DISH Network L.L.C.
Oral Testimony................................................. 23
Prepared Statement............................................. 24
Marci Burdick, Senior Vice President of Broadcasting, Schurz
Communications, Inc., on behalf of the National Association of
Broadcasters
Oral Testimony................................................. 50
Prepared Statement............................................. 52
Matthew M. Polka, President and Chief Executive Officer, American
Cable Association
Oral Testimony................................................. 62
Prepared Statement............................................. 64
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Jerrold Nadler, a
Representative in Congress from the State of New York, and
Ranking Member, Subcommittee on Courts, Intellectual Property,
and the Internet............................................... 5
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of Sandra M. Aistars, Chief Executive Officer,
the Copyright Alliance......................................... 96
Prepared Statement of the Independent Film & Television Alliance
(IFTA)......................................................... 104
Prepared Statement of the Motion Picture Association of America,
Inc............................................................ 110
Letter from Brad Ramsey, President, Virginia Association of
Broadcasters, and President & General Manager, WVEC-TV......... 114
COMPULSORY VIDEO LICENSES OF TITLE 17
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THURSDAY, MAY 8, 2014
House of Representatives
Subcommittee on Courts, Intellectual Property,
and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 2:04 p.m., in
room 2141, Rayburn Office Building, the Honorable Tom Marino
(Vice-Chairman of the Subcommittee) presiding.
Present: Representatives Marino, Goodlatte, Smith of Texas,
Chabot, Chaffetz, Farenthold, Holding, Collins, Smith of
Missouri, Nadler, Conyers, Chu, Richmond, DelBene, Jeffries,
Cicilline, and Lofgren.
Staff present: (Majority) Joe Keeley, Chief Counsel; Olivia
Lee, Clerk; (Minority) Heather Sawyer, Counsel; Jason Everett,
Counsel; and Rosalind Jackson, Professional Staff Member.
Mr. Marino. The Subcommittee on Courts, Intellectual
Property, and the Internet will come to order. Without
objection, the Chair is authorized to declare recesses of the
Subcommittee at any time.
We welcome all of our witnesses here today. And just to
give you a little heads up, we are going to be voting somewhere
around the 2:30 mark. I apologize. It will be better than, I
think, 30 minutes on the voting, maybe a little longer. I beg
your indulgence. And we will get right back here as soon as
votes are over.
And I will now read my opening statement. Good afternoon,
and welcome to today's Subcommittee hearing on the compulsory
video licenses contained in Title 17 of the United States Code.
Unfortunately, Mr. Coble has a conflicting schedule for today
and is unable to join the hearing, and has graciously asked me
to sit in his place. Big shoes to follow.
Some of the more complex portions of Title 17 concern
compulsory video licenses used by cable and satellite
companies. Although these are very complex issues, make no
mistake about it, all my constituents understand when a video
licensing agreement has gone awry. This is, of course, the
moment when one of their favorite stations suddenly goes dark
and they are unable to watch the regularly scheduled content,
such as football games, to which they have grown accustomed.
I think I can speak for all Members of Congress when I say
our constituents are very quick to call and demand answers when
this happens. And although I empathize with them, their
frustration, there is little I can do in those moments. And
fact of the matter is that we Americans love our television
just as much as baseball games and ice cream sundaes.
Just as with any other product, consumers in this country
want to have as many choices available at the lowest price.
Fortunately, the number of choices available to consumers for
content has exploded over the years. Some might say that this
is due to the compulsory licenses we have today, while others
might say this is the case in spite of these same licenses.
Determining which view is correct may be an interesting
academic exercise, but it overlooks an important issue: whether
or not these licenses are still required today.
Although one of the licenses expires in 8 months, the
others are permanent. This Subcommittee would like to better
understand whether these licenses still serve either their
original purpose or some other important purposes today, and,
therefore, whether Congress should reauthorize the Satellite
Television Extension and Localism Act, otherwise known as
STELA. With such a complex area of copyright law, I am pleased
by our talented and qualified panel of witnesses who are
participating in today's hearing, and I look forward to their
testimony.
With that, I recognize the distinguished gentleman from New
York, Ranking Member Congressman Nadler.
Mr. Nadler. Thank you, Mr. Chairman. Today we continue our
examination of the cable and satellite compulsory licenses
contained in the Copyright Act. Broadly speaking, these
licenses permit cable and satellite providers to retransmit
copyrighted broadcast content without having to negotiate with
creators and content owners to do so.
Of the three statutory licenses in Title 17, the satellite
distant-into-local license contained in Section 119 is set to
sunset on December 31 of this year unless reauthorized by
Congress. Among other things, that license allows satellite
carriers to provide an out-of-market station to customers who
are not served by local television broadcasts. The other two
licenses, Section 111 for cable providers and Section 122 for
satellite retransmission of local broadcast programming in
local markets, are permanent.
Enacted in 1988--I am sorry--enacted in 1988 when the
satellite industry was in its infancy, the Section 119 license
was intended to foster competition with the cable industry and
also to increase service to unserved households, those
subscribers who had not received an over-the-air signal from a
local network. In 2010, and as was the case on three prior
occasions, Congress extended the Section 119 license for
another 5 years as part of the Satellite Television Extension
and Localism Act of 2010, STELA.
STELA includes provisions of the Copyright Act, which fall
within this Committee's jurisdiction, and broadcast signal
retransmission consent provisions that fall under the
Communications Act are within the jurisdiction of the Energy
and Commerce Committee. Just today, Energy and Commerce marked
up a bill reauthorizing the retransmission consent provisions
of the Communications Act with some adjustments. I am
interested in the views of our witnesses on how, if it all, the
Energy and Commerce bill should impact our potential
reauthorization of the Section 119 license.
In granting cable and satellite providers their statutory
right to retransmit copyrighted content at a government
regulated rate, Congress created an exception to the general
rule that creators have exclusive rights to their works,
including the right to determine when and how to distribute
them. This licensing signal replaces the free market, something
we are generally reluctant to do. And when we did so for cable
and satellite providers, these industries were just starting
up, and the licenses were intended to encourage growth, foster
competition, and enhance customer access.
On these fronts, the system has been a tremendous success.
It is estimated that nearly 90 percent of American households
now subscribe to a pay TV service provided by multi-channel
video programming distributors, in most cases cable or
satellite operators, and nearly all households have a choice of
at least three different providers. At the same time, broadcast
TV continues to lead the way on programming content with 97 of
the top 100 most watched shows in the recent television season
aired on broadcast stations.
The dramatic change in marketplace dynamics as well as
technological advances that continue to revolutionize ways of
distributing video programming content raise legitimate
questions about whether the statutory licensing scheme in the
Copyright Act is still needed. This is not a new question. 10
years ago, we tasked the Copyright Office with reporting on
whether the compulsory licensing scheme was still justified.
The Office recommended that Congress move toward abolishing the
licenses. As part of the 2010 reauthorization, we then asked
for recommendations on how to phase out the statutory licensing
scheme.
In an August 2011 report, the Copyright Office suggested a
range of licensing alternatives, including a sublicensing
system to which broadcast stations would act as marketplace
intermediaries between rights holders and cable and satellite
providers. And in last September's Subcommittee hearings on
satellite television laws in Title 17, Preston Padden, the
former President of ABC Television Network and former Executive
Vice President of Walt Disney Company, made an impassioned plea
for repeal of the existing statutory licenses.
One common refrain in the calls for repeal is the desire to
allow the creators of program content, who may not receive
compensation under the existing and limited royalty system, to
develop marketplace licensing options and negotiate in the open
market for the rights to their works. Whether we address the
overarching licensing systems at this time, however, we must
still decide whether to reauthorize the Section 119 distant-
into-local satellite license by the end of the year.
The satellite industry estimates that approximately one and
a half million customers, mostly in rural areas, would lose one
or more of the four major network channels if Section 119 were
not renewed. And both the cable and satellite industries seek
additional changes as part of this reauthorization process to
address blackouts of local channels during retransmission
content consent disputes.
On the other side of this equation, the broadcast industry
and others, including the Writers Guild of America, the
International Brotherhood of Electrical Workers, and the
Teamsters Union, whose letters will be submitted for the
record, have questioned the need to renew this particular
license, and object to additional changes that are intended to
impact retransmission consent negotiations.
[The information referred to follows:]
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Mr. Nadler. Under the Communications Act, retransmission
consent rules require cable and satellite providers to
negotiate with broadcasters in order to carry their broadcast
signals. These are only a few of the broad policy questions
that will arise as we continue to consider whether to
reauthorize Section 119. As always, as we do so, our goal must
be to try to ensure a framework within 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 who have very different views on how this marketplace
works, how it has developed since our passage of STELA in 2010,
and what should be done going forward. I look forward to their
testimony and continuing this discussion in the future. I yield
back the balance of my time.
Mr. Marino. Thank you, Congressman Nadler. I now recognize
the full Committee Chairman, the gentleman from Virginia, the
distinguished Mr. Goodlatte, for his opening statement.
Mr. Goodlatte. Thank you, Mr. Chairman. Since television
was first invented, Americans have been large consumers of
video content. While some Americans still rely on over-the-air
antennas for watching video content from network channels, the
majority of Americans today subscribe to satellite and cable
services where they have access to the same network channels in
addition to several hundred more channels of their choosing.
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. Combined with the large
number of channels carried by satellite and cable systems,
these statistics reflect how the video marketplace has grown
from the original three over-the-air channels from decades ago.
In recent years, a growing number of Americans have also
subscribed to services such as Amazon, Hulu, and RedBox to
either supplement or replace their satellite and cable
subscriptions. It also has resulted in the creation of two new
terms--``cord shavers'' and ``cord cutters''--that are used to
describe those who reduce or eliminate traditional
subscriptions. There are three compulsory video licenses in
Title 17, one of which expires at the end of this year.
Although these licenses are important by themselves, we cannot
overlook the fact that a television with no signal is simply a
collection of components with minimal interest to consumers.
It is the content displayed on a television that is of
interest to subscribers. This content is created by copyright
owners who depend upon licensing revenue to fund the creation
of programs that are of interest to Americans. This Committee
is always concerned about ensuring competition in the
marketplace both for the content and the networks that deliver
it. Consumers and intermediaries benefit where there is robust
competition.
This Committee held a hearing just this morning on a major
merger in the video marketplace. And I might note that Mr.
Polka has a rare distinction of testifying in two hearings in 1
day in this Committee with two different Subcommittees.
Congratulations. [Laughter.]
Finally, I would note that several Members have market-
specific issues in which their constituents are unable to watch
local channels due to what could best be described as line
drawing exercises over designated market areas gone astray. In
my own congressional district, my Page County constituents, who
are satellite subscribers, watch Washington, D.C. channels when
there are local channels in nearby Harrisonburg readily
available and which provide local news and emergency
information better tailored to that region.
In fact, the over-the-air antenna used to broadcast the
Harrisonburg channels is actually located in Page County. Under
the current law, if satellite companies provide these local
channels, royalties would be due to both the Washington, D.C.
and Harrisonburg channels, even if my constituents only want to
subscribe to Harrisonburg channels. I look forward to resolving
these market-specific issues going forward as we determine
whether the current video compulsory license system is working
for the digital era. Thank you, Mr. Chairman. I yield back.
Mr. Marino. Thank you, Mr. Chairman. I now recognize the
full Committee Ranking Member, the distinguished gentleman from
Michigan, Congressman Conyers, for his opening statement.
Mr. Conyers. Thank you, Mr. Chairman, and welcome to our
distinguished witnesses. The purpose of this hearing is to
continue to examine the issues as we consider the reauthorizing
and updating of the Satellite Television Extension and Localism
Act. Should we repeal it, should we extend it, or should we let
it expire? And I look to you for your candid comments based
upon your knowledge and experience.
The provisions that fall under the Copyright Act include
Section 119, the Distant Signal Compulsory License that is set
to expire at the end of this year. And it allows satellite
carriers to provide an out-of-market station to consumers that
are unserved by their local broadcaster. And so, we must ask
whether Section 119 has outlived its purpose, whether we should
extend it again, or how long it should be extended as well.
And as we analyze these questions, we must ensure
incentives remain in place to protect copyright. Copyright
owners must be protected because it is their property that
forms the basis for this entire system. Compulsory licenses are
generally not favored by copyright owners because they distort
the marketplace and result in big old market rates being paid
to the content owners. Copyright owners assert that they would
fare better in private marketplace negotiations, and that the
licenses are no longer needed now that there is healthy
competition in the cable and satellite industries. And I would
like the witnesses to feel free to give me their best thoughts
on that subject as well.
Now, assuming we decide to extend Section 119 licenses, we
should consider whether any other issues should be addressed.
Among them is the impact that blackouts of local channels
during disputed retransmission consent negotiations have on
consumers, as well as the overall effectiveness and efficiency
of the current statutory and regulatory system established in
the Copyright and Communications Act. We have seen that
blackouts of major television networks are affecting consumers,
and they seem to be occurring with greater frequency. I would
like to hear how they believe that this issue might be
addressed with an eye toward ensuring adequate compensation for
creativity and providing healthy competition.
I would like to hear witnesses discuss the possible change
to the law that would allow interim carriage authority which
would temporarily permit a distant signal to be imported during
a retransmission consent dispute. I believe that anything that
we do must protect consumers and safeguard competition.
Consumers generally benefit from increased competition because
more competition produces lower prices and more variety and
options. Consumers want to watch programming on their choice of
television sets, phones, and tablets, no matter where they are.
We should ask what, if anything, we should be doing with
regard to the compulsory licenses that do not expire--Section
111, cable license, and Section 122, satellite local into local
license. Section 302 of STELA required the Copyright Office to
deliver a report that considered alternatives to the statutory
licensing provisions in Section 119, 111, and 122 of the
Copyright Act. These sections govern the retransmission of
distant and local television broadcast signals by cable
operators as well as satellite carriers.
The Copyright Office issued the 302-page report in August
2011, and the report recommended replacement of the existing
statutory regime with sublicensing, collective licensing, and/
or direct licensing as feasible alternatives to securing public
performance rights necessary to retransmit copyrighted content.
And I am sure our witness from the Copyright Office will speak
about these market-based alternatives to statutory licensing,
and I would be interested in hearing what other witnesses have
to say about this issue as well.
And as we consider these issues, we want to continue to
support innovation and ensure that we increase consumer choice.
We must focus on the principles of localism. There is still a
high value placed on local news and sports, and the need for
local channels to deliver community service and emergency
information still exists. I also recognize that people who
subscribe to cable or satellite television have so many
programming options. There is never a shortage of something to
watch on television, and we want these options to continue to
grow.
I know that there will be circumstances in which these
principles, some of them, will conflict, and I look forward to
working to ensure that the public interest can best be served
through satellite carriage of broadcast television signals. And
I will consider each of these options that will be discussed
today by witnesses, and want to take a broad and expansive look
at the different possibilities.
I look forward to hearing from the witnesses today and
continuing to work with all of you on this complex issue. I
thank the Chairman.
Mr. Marino. Thank you, Ranking Member Conyers. And without
objection, other Members' opening statements will be made part
of the record.
We have a very high-recognized panel today, and we will
begin by swearing in our witnesses before introducing them. And
if you would please all rise and raise your right hands.
[Witnesses sworn.]
Mr. Marino. Let the record reflect that the witnesses
answered in the affirmative. And you may be seated.
Each of the witnesses' written statements will be entered
into the record in its entirety. I ask that each witness
summarize his or her testimony in 5 minutes or less. We are on
a very tight schedule today, and to help you stay within that
time, there is a timing light on the table, several timing
lights. When the light switches from green to yellow--and I
have no idea what that is because I am color blind--you will
have 1 minute to conclude your testimony. When the light turns
red, it signals that the witness' time has expired. And since I
cannot tell colors, I just know on your right when that light
lights up, your time is up, and I will politely tap the hammer
to see if you can conclude your testimony. And I thank you for
that.
Our first witness this morning is Mr. William Roberts,
Acting Associate Register of Copyrights. He returned to the
Office last year having served as Judge on the Copyright
Royalty Board. Mr. Roberts has worked in the area of statutory
licensing for 25 years and has actively participated in many of
the reauthorizations of the statutory license for satellite
television. He received his J.D. from the University of
Virginia School of Law and his undergraduate degree from the
College of the Holy Cross. Good afternoon.
Our second witness is Mr. Stanton Dodge, Executive Vice
President and General Counsel of DISH Network. In his position,
Mr. Dodge is responsible for all legal and government affairs
for DISH and its subsidiaries. He received his J.D. from
Suffolk University Law School and his bachelor of science
degree in accounting from the University of Vermont. It is a
pleasure to have you here, sir.
Our third witness is Ms. Marci Burdick--did I pronounce
that right?
Ms. Burdick. You did.
Mr. Marino. Thank you. Senior Vice President of
Broadcasting at Shurz Communications, testifying on behalf of
the National Association of Broadcasters. In her position at
Shurz Communications, Ms. Burdick is responsible for 13 radio
stations, two cable companies, and eight television stations.
Ms. Burdick received her degree from South Dakota School of
Mines and Technology. It is good to see you.
Our fourth and final witness today is Mr. Matthew Polka,
President and Chief Executive Officer of the American Cable
Association, an association of 850 independent and medium-sized
cable businesses. Prior to joining ACA, Mr. Polka served as
Vice President and General Counsel of Star Cable Associates. He
received his J.D. from Duquesne University School of Law and
his undergraduate degree in journalism from West Virginia
University.
Welcome to all, and we will start with you, Mr. Roberts,
for your opening statement. And I have been notified that we
are going to be called shortly, and we may be out over an hour
for voting. So once again, I apologize for making you wait, but
we will get right back. Mr. Roberts, please.
TESTIMONY OF WILLIAM J. ROBERTS, JR., ACTING ASSOCIATE REGISTER
OF COPYRIGHTS AND DIRECTOR OF PUBLIC INFORMATION & EDUCATION
Mr. Roberts. Thank you, and I will try to go as fast as I
can. Vice Chairman Marino, Ranking Member Nadler, and Members
of the Subcommittee, I appreciate the opportunity to appear
before you today and share some observations and
recommendations of the United States Copyright Office regarding
the future of the cable and satellite statutory licenses.
As you may recall, in enacting the Satellite Television
Extension and Localism Act of 2010, or as it commonly referred
to as STELA, Congress directed the Copyright Office to prepare
a report addressing possible mechanisms, methods, and
recommendations for phasing out the statutory licenses set
forth in Sections 111, 119, and 122 of the Copyright Office
which are applicable to the retransmission of over-the-air
broadcast stations by cable and satellite television providers.
The Office delivered the report to this Subcommittee on
August 29, 2011, after extensive input from and conversation
with the stakeholders affected by the licenses, including the
Federal Communications Commission. The purpose of the report
was to inform your discussions and deliberations as you
consider the expiration of STELA at the end of this year. In my
brief statement today, I would like to highlight the key
aspects of that report.
First, although statutory licensing has ensured the
efficient and cost effective delivery of television programming
in the United States, starting over 38 years ago, it was
created in an earlier era where evidence of marketplace failure
was present. In the present time, copyright owners working with
broadcasters, cable operators, satellite carriers, and other
licensees should be permitted to develop marketplace licensing
options to replace the provisions of Section 111, 119, and 122.
Second, the Copyright Office recommends that Congress
provide a date specific trigger for the phase-out and eventual
repeal of the distant signal licenses contained in Sections 111
and 119, but leave the repeal of the local signal licenses in
Section 111 and 122 for a later time. This approach will
provide stakeholders with an opportunity to test new business
models with the least likelihood of disruption to consumers,
and give Congress the advantage of drawing on that experience
when considering how and when to address the licensing of local
stations.
Third, in determining a date specific trigger and
transition period for the phase-out of the distant signal
licenses, the Office recommends that Congress consider the
circumstances and concerns of stakeholders who operate with
limited resources in the broadcast programming distribution
chain, such as small producers and small cable operators, and
determine whether special accommodations are warranted.
Finally, it is important to note that while the statutory
licenses are codified in the copyright law, they do interact
with equally complex provisions in the communications law and
regulations, and attention must be paid. The Office, therefore,
recommends that Congress consider and, as appropriate, address
these provisions in tandem with the recommendations specified
in our report to assure a harmonious regulatory scheme in the
delivery of broadcast programming to consumers.
Thank you for inviting me to testify today. We at the
Copyright Office look forward to assisting the Committee as it
continues this process of review. Thank you.
[The prepared statement of Mr. Roberts follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Marino. Thank you, sir.
Mr. Dodge, please?
TESTIMONY OF R. STANTON DODGE, EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL, DISH NETWORK L.L.C.
Mr. Dodge. Chairman Goodlatte, Vice Chairman Marino,
Ranking Member Conyers and Nadler, and Members of the
Committee, I appreciate the opportunity to testify today. My
name is Stanton Dodge, and I am the Executive Vice President
and General Counsel of DISH Network, the Nation's third largest
pay TV provider, and the only provider of local television
service in all 210 markets.
Should STELA be authorized? Of course. If not, over 1.5
million customers, mostly in rural areas, will lose one or more
of the big four network channels. But just extending the act
for another 5 years is not enough. A so-called clean
reauthorization would ignore the number one problem facing
consumers today: the increasing threat of blackouts. There were
12 blackouts in 2010 and more than 10 times as many in 2013, a
record breaking 127.
We believe that there are at least two possible solutions
to end blackouts and ensure that consumers have continuous
access to network program from the pay TV provider of their
choice. First, during the retransmission consent impasse, a
mandatory standstill should be in place to ensure that
broadcast signals stay up. If the parties are unable to agree
upon carriage terms, they should proceed to so-called baseball
arbitration where a neutral arbitrator chosen by the parties
will evaluate each party's best offer and select the one that
most accurately reflects a fair market price. In all cases, we
suggest that the final rate would apply retroactively, ensuring
that the broadcaster is fairly compensated. But most
importantly, the consumer would remain unharmed.
Second, a more limited solution would allow pay TV
providers to import a distant network signal when the local
network affiliate withholds its signal during a retransmission
consent dispute. This solution would still leave consumers
without access to certain local programming, including local
news, sports, and weather, but at least it would provide
network programming content during the dispute.
As this Committee knows, the television landscape has
changed dramatically from when the Cable Act of 1992 first
established the current system of retransmission consent. In
those early days, the broadcaster negotiated with a single
cable company that was likely the only pay TV provider in the
same market. Today, cable operators no longer enjoy local
monopolies, and broadcasters pit multiple pay TV providers
against one another, all to the customer's detriment. This is
not free market.
Meanwhile, mom and pop local broadcasters continue to
disappear as broadcaster conglomeration accelerates. In 2013
alone, there were three large broadcaster mergers. Not
surprisingly, these market developments have led to a dramatic
increase in local channel blackouts, but fortunately Congress
can do something about it.
On behalf of DISH's 22,000 employees and more than 14
million subscribers across the Nation, I strongly encourage the
Committee to seize this opportunity and update the law to
reflect marketplace realities and better protect consumers.
Thank you, and I look forward to answering any questions you
may have.
[The prepared statement of Mr. Dodge follows:]
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APPENDIX A
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__________
Mr. Marino. Thank you, Mr. Dodge.
Ms. Burdick?
TESTIMONY OF MARCI BURDICK, SENIOR VICE PRESIDENT OF
BROADCASTING, SCHURZ COMMUNICATIONS, INC., ON BEHALF OF THE
NATIONAL ASSOCIATION OF BROADCASTERS
Ms. Burdick. Thank you. Good afternoon, Chairman Marino and
Goodlatte, Ranking Members Nadler and Conyers, and Members of
the Subcommittee. I am Marci Burdick, Senior Vice President for
Shurz Communications. A bit updated from the bio you have. We
actually own 11 television stations, and we have operating
partnerships with two others. I am a mom and pop broadcaster.
I am testifying today on behalf of the National Association
of Broadcasters and our more than 1,300 free local over-the-air
television station members from across the country. While I am
happy to answer questions on the video compulsory licenses in
Title 17, my focus today is on the expiring distant signal
satellite license, commonly referred to as STELA.
NAB's position on the STELA reauthorization is simple.
First, given the technological advancements and licensing
alternatives, we ask that this Committee take a hard look at
whether the distant signal license continues to benefit
consumers and whether it should be allowed to sunset as
originally intended. Second, should this Committee conclude
that this satellite compulsory license is still warranted, NAB
supports a narrow temporary reauthorization that does nothing
to expand the scope of the license or undermine broadcasters'
ability to be compensated for our programming or to serve our
local communications.
26 years ago at a time when Rain Man topped the box office
and CDs outsold vinyl records for the first time ever, Congress
created the distant signal satellite television compulsory
license in the Satellite Home Viewer Act as a means to spur
competition against the big incumbent cable monopolies. SHVA
and successive extensions also aim to enhance localism by
promoting the broad availability of locally focused broadcast
television without undermining the viability of its unique free
business model.
It is clear this Committee's work was a success. The
satellite companies have evolved into the country's second and
third largest pay TV providers, and broadcast television is as
popular as ever. 97 of the top 100 most watched primetime shows
in the last TV season aired on our channels.
Today, there are no technological reasons preventing any
market from receiving local into local broadcast service, as
DISH has demonstrated. More than 98 percent of all United
States TV households can view their local network affiliates by
satellite. This legal framework allows local TV stations to
deliver high quality local news, weather, sports, and emergency
services to communities across the country. In 2013, for
example, our station, WDBJ in Roanoke, Virginia, added jobs and
resources by investing in a new local news bureau in Forest,
Virginia, just as it had done previously in Danville and will
again this year in Martinsville. But Shurz is not alone. The
local TV stations serving the Commonwealth of Virginia produced
over 57,000 hours of original live local newscasts in 2013.
That marked an increase for the fourth consecutive year.
To encourage localism, this Committee should identify the
precise number and nature of households that the distant
satellite license continues to serve, and whether those
households could be more effectively served by the local
license. NAB is also attentive to the needs of viewers who
reside in communities located in out-of-state designated market
areas, or DMAs, but desire to receive in-State broadcast
programming. NAB is committed to making in-State broadcast
programming available through existing statutory remedies and
to finding marketplace solutions for carriage of non-
duplicative in-State broadcast programming.
We caution the Subcommittee against legislating new
exceptions to copyright law when in many instances cable, and
particularly satellite providers, are not taking full advantage
of existing and available statutory or marketplace options. We
also urge you to reject calls from pay TV seeking additional
exceptions that would permit a satellite carrier to import a
distant signal during a contractual impasse, not based on need,
but based on a need to gain unfair market leverage in a
retransmission consent negotiation. That would be contrary to
decades of congressional policy aimed to promote localism.
In conclusion, if this Committee decides to once again
reauthorize the distant signal satellite license, that is an
effort NAB supports. But with that support, we ask you to take
a hard look at whether Section 119 continues to serve consumers
and to reject calls from satellite providers to expand the
scope of the compulsory 119 license to give them a leg up in
market-based negotiations.
Thank you for inviting me to testify today.
[The prepared statement of Ms. Burdick follows:]
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__________
Mr. Marino. Thank you, Ms. Burdick.
Mr. Polka?
TESTIMONY OF MATTHEW M. POLKA, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN CABLE ASSOCIATION
Mr. Polka. Thank you, Mr. Chairman. It is indeed an honor
to be here again with you today, and thank you for having me. I
am here today on behalf of the small- and medium-sized cable
operators of the American Cable Association, who provide video,
broadband, and voice services in local markets in 50 States to
nearly 7 million video subscribers. ACA members serve several
important functions in our communications markets and
societies, such as providing broadband in rural areas,
competition and choice in urban areas, services to communicate
institutions and businesses in underserved areas.
It has been too long since Congress conducted a
comprehensive review of the laws governing the cable industry.
If Congress were to conduct such a review, we would expect many
laws to be preserved or slightly updated and others to be
significantly updated or even eliminated. One set of rules and
many that others believe should remain unchanged is the cable
compulsory license. It continues to serve its goal in
compensating copyright holders for the retransmission of their
work. If Congress were to repeal this license, it would be
extremely burdensome for operators to anticipate all of the
copyrighted works that would need to be cleared before they
aired on a broadcast station. Moreover, the repeal would create
greater uncertainty in the marketplace for our members and our
customers. Should Congress reach a different conclusion,
changes to the existing license must coincide with reform to
broadcast carriage rules, such as retransmission consent,
because they are legally intertwined.
Within the category of rules that need to be updated or
eliminated, ACA would include retransmission consent rules.
Modernization is needed to address three key areas. First,
existing rules fail to protect consumers from broadcasters
pulling their signals during negotiating impasses. Second,
current rules do not prevent a broadcaster and its affiliated
network from blocking access to their online content that is
otherwise freely available to a pay TV provider's broadband
subscribers while that pay TV provider and station are in a
negotiation dispute. CBS did this to Time Warner Cable last
year. Third, current rules require cable subscribers to
purchase broadcast stations that elect retransmission consent,
even if they do not want to receive those stations via their
subscription service. Each issue can be addressed through
narrowly-tailored amendments to existing rules, and we
encourage Congress to act on these matters this year.
Looking toward the future, with consumers increasingly
watching video content online, and a growing number of
consumers choosing online video over pay TV service, Congress
needs to begin having a separate discussion about the future of
online video. It is an important complex subject, and one that
cannot be ignored.
Currently, the online video marketplace is one in which
online content and edge providers sell access to their content
directly to consumers. Nearly all content and edge providers
employ this business model. This model provides consumers with
significant choice in the online video content they pay to
receive. However, it is not pre-ordained that all content and
edge providers will continue to sell their content in this way.
The online video marketplace might develop into one
resembling the current cable model where the content or edge
provider receives fees directly from internet service
providers, who impose the charge on all of their broadband
customers, whether or not the customer wants to receive the
content. This is not a hypothetical. ESPN 3 currently uses this
model. Increasingly, other power online video content providers
are testing the market by charging broadband providers rather
than establishing a direct relationship with the consumers.
For example, Viacom is currently blocking access to its
websites by broadband internet subscribers who are served by
dozens of smaller broadband internet service providers. Viacom
is unwilling to allow these smaller providers and their
customers to access its content unless the provider meets
Viacom's financial demands. If the cableization of the internet
sounds even a bit troublesome, and it does to us, ACA believes
that Congress should review issues like whether content and
edge providers should be able to block access to their freely
available content on the internet to certain users.
In conclusion, it is clear that there are a host of issues
that need attention. Given the significant changes in the
marketplace, I hope that the reforms to the retransmission
consent rules that I discussed will be considered this year as
part of Congress's reauthorization of the satellite TV license.
Thank you again for this opportunity to testify.
[The prepared statement of Mr. Polka follows:]
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__________
Mr. Marino. Thank you, Mr. Polka. We will now proceed under
the 5-minute rule with questions as is the practice. I will
defer my questions and recognize the Chairman of the full
Committee, Congressman Goodlatte. And I have just been advised
that we are going to be in recess on the Floor until 3:30, and
then we have four votes. The House--excuse me--will be in
recess until 3:30, and so we will proceed, and we could finish
before we vote. So, Chairman?
Mr. Goodlatte. Thank you, Mr. Chairman. I would like to
thank all of you for your testimony and welcome you here today.
Ms. Burdick, I appreciated--I am sure it was totally random--
the shout out for WDBJ in Roanoke, Virginia, my hometown. They
are a great television station and a very prominent one in our
community, and we thank you for that.
Ms. Burdick. Thank you.
Mr. Goodlatte. I want to ask all of you about new video
entrants that are bringing greater competition to the
marketplace. What legislation, if any, should Congress consider
to encourage the growth of such competition? We will start with
you, Mr. Roberts.
Mr. Roberts. Thank you. With respect to new services, it is
certainly important to understand a little bit of the history
of statutory licensing and the way that Congress has treated
the cable industry and the satellite industry. Different
services experience different regulatory regimes, and
principally that is through the communications law so that the
cable industry is regulated in a very different fashion than
the satellite industry. And the statutory licenses for cable
and satellite reflect those differences.
With respect to new entrants, it is the position of the
Copyright Office that great care should be given and
examination to the special circumstances of those new services.
Mr. Goodlatte. Let me interrupt you for a second. I am
going to have two questions I am going to ask each of four
people, so that is eight questions in 5 minutes. So you have
got to sum it up.
Mr. Roberts. Fair enough. And so, in other words, there
should be careful examination of the differences between the
different types of services before statutory licenses are
extended to them.
Mr. Goodlatte. Great, thank you. Mr. Dodge?
Mr. Dodge. So we welcome competition. We view online video,
for example, as an area we need to evolve and adapt. And our
simplistic view of this is as we testified when we were helping
the Copyright Office with their report, we favor a unitary type
license where all competitors are treated roughly equally,
recognizing that there are some differences that need to be
recognized.
Mr. Goodlatte. Thank you. Ms. Burdick?
Ms. Burdick. Local broadcasters are working with our
networks to explore new models to get content to as many
consumers as possible. We also as a local broadcaster are
developing mobile online resources for the rights to the
content that we create ourselves, and that has been an emerging
fast-growing line of business for us.
Mr. Goodlatte. And does that rights issue contemplate any
legislation on the part of the Congress?
Ms. Burdick. I do not think we see any significant barriers
in the marketplace today to the development of those new
business models and trying to determine how they are monetized
into the future.
Mr. Goodlatte. Great. Mr. Polka
Mr. Polka. Our members report that broadband usage is
doubling every 2 years. Online video usage is exploding through
Netflix, Hulu, Amazon, and others. And so, as a result, it is
extremely important for this Committee to look ahead in
addition to looking at current copyright licenses. As I
mentioned in my testimony, we have to be mindful of how content
is delivered and to ensure that consumers can receive the
content that they want over the internet.
Mr. Goodlatte. Thank you. As I mentioned in my opening
statement, several Members have issues related to significantly
reviewed stations in their districts. Mine is in Page County,
Virginia, toward the northern end of my district. My
constituents in Page County are better served with both local
news and emergency information by the more local Harrisonburg
station than the Washington, D.C. stations. Yet the satellite
companies do not yet provide these more local Harrisonburg
channels in Page County.
So let me ask you each, what do you think is inhibiting the
satellite companies and local station from making arrangements
to provide these significantly viewed stations to consumers,
and what solutions can you offer today, including possible
changes to the law, to provide more incentives for these
stations to be provided via satellite to consumers that happen
to be just outside of the DMA for these stations? In Page
County, cable and other alternatives are not often available,
so satellite is a prime interest to them. Mr. Roberts?
Mr. Roberts. Thank you. This was an issue that was
presented when Congress considered and adopted STELA, and
specific provisions were adopted to address that. The Office
does not have a position as to whether further provisions are
required, and I would defer to my colleagues on the panel for
their opinions on that.
Mr. Goodlatte. Thank you. Mr. Dodge?
Mr. Dodge. So I would say they are significantly viewed as
two significant flaws, if you will. One, it would require
providers such as us to pay double retran. So you have to pay
retrans to the market into which the signal is being imported
and for the imported signal. A simple fix there----
Mr. Goodlatte. That is the way it works under current law,
right?
Mr. Dodge. Yes, correct.
Mr. Goodlatte. Okay.
Mr. Dodge. And a simple fix for that might be that we pay a
distant signal royalty for the station being imported. The
second is the market into which the signal is being imported in
many cases, our retransmission consent agreements do not allow
us to import or require us to waive our right to import a
significantly viewed station. And one suggestion we have for
that is to abolish those types of provisions in retransmission
consent agreements, or at least factor that into whether or not
they have met their good faith standard under FCC rules.
Mr. Goodlatte. So that would pass it right over to Ms.
Burdick.
Ms. Burdick. Well, I would commend, I think, in Page County
specifically local broadcasters who are significantly viewed,
have extended those rights and negotiated agreements with cable
operators, who are also to be commended in Page County.
Notoriously absent from any of those carriage solutions which
exist today are DISH Network and largely, I think with the
exception of one case, DirecTV, there is a fix today. They
choose not to participate in that as a business or other
reason. Cable has decided to do it to serve its customers
better. So I would again defer back to Mr. Dodge as to why it
is not a good business practice.
Mr. Goodlatte. Does cable face the same issue they do about
the double royalty issue?
Ms. Burdick. The negotiation is the same. It is a
negotiation, and as an example, I live in Michigan. My backyard
is in Indiana. So I vote in Michigan, but I view South Bend
television. We as a CBS affiliate have an agreement with the
MSO in Michigan to allow the CBS affiliate in Michigan to carry
unduplicated programming. And I imagine that is at either no
fee or significantly less fee, although I am not privy to their
business negotiations. The fact is, it is possible today.
Mr. Goodlatte. Thank you. So you live in the Chairman of
the other Committee's district who has an interest in this
issue, Mr. Upton.
Ms. Burdick. I do.
Mr. Goodlatte. Mr. Polka?
Mr. Polka. Thank you, sir. I would agree with Mr. Dodge as
it relates to sometimes the difficulty of negotiating
retransmission consent for either significantly viewed stations
or even out-of-market stations, and this gets into some of the
orphan DMA issues. We also encounter as cable operators, and
your question was focused on satellite, but as cable operators,
we also encounter the problems where in many cases our members
are legally permitted under the law to carry an out-of-market
station because they are far enough away from the local
station. But provisions and network affiliation agreements
prohibit the out-of-market station, which is actually the local
in-State station from being carried. So there are lots of
issues like that that prevent what the stations that viewers
want to watch from being actually watched.
Ms. Burdick. If I could correct, I do not think that is
quite right. It prohibits the network content, not the local
content.
Mr. Polka. And that is true. And when you have 8 or 10
hours of blank content, that is not what consumers want.
Mr. Goodlatte. Okay. Thank you.
Mr. Polka. Particularly when the law allows you to carry
that signal.
Mr. Goodlatte. My time has expired. Thank you, Mr.
Chairman.
Mr. Marino. Thank you, Chairman. The Chair now recognizes
the gentleman from New York, Congressman Nadler.
Mr. Nadler. Thank you, Mr. Chairman. I have a couple of
questions for Mr. Dodge first. We obviously have to consider
the necessity or a lack of necessity of renewing Section 119.
And I want to put that into context and have you help define
the scope of the problem. So first, you estimated that about a
million and a half households could lose access to network
broadcasting if the Section 119 license is not reauthorized,
correct?
Mr. Dodge. Yes, sir.
Mr. Nadler. Okay. If that license were to expire, how many
households could be brought in? How many of those one and a
half million could be brought in through local retransmission
because of advances in satellite capacities?
Mr. Dodge. I must admit as I sit here today, I do not know
the answer to that. That 1.5 million number is an aggregated
number between us and DirecTV that we provided the data to our
industry.
Mr. Nadler. All right. Could you find that out and let us
know after the hearing?
Mr. Dodge. I can certainly look into it.
But there are certain folks I would say who there is no fix
for. There are folks in short market where there is no----
Mr. Nadler. Yes. What we are trying to figure is how many
of the one and a half million, how many would have no fix and
how many could be handled some other way. If 98 percent could
be handled in some other way, it is not a big problem. If 98
percent could not, it is obviously a big problem.
Can you give us a sense of how many households are
grandfather subscribers, meaning customers who come under the
Section 119 license for reasons other than being in unserved
households that at least at the time the license was enacted,
did not get local broadcasts?
Mr. Dodge. DISH does not have any grandfathered
subscribers, so I do not know the answer to that.
Mr. Nadler. Okay. Does anybody else know the answer to
that? [No response.]
All right. I am doing pretty well so far. [Laughter.]
With regard to grandfathered as opposed to unserved
households, would those households also lose access to network
broadcasting if Section 119 is not renewed?
Mr. Dodge. That is something that I am going to have to
look into in response to the first question. I do not know the
answer.
Mr. Nadler. Okay. And is there an opportunity, in your
opinion, in the absence of a statutory license to simply cure
the problem by negotiating with rights holders or possibly
broadcasters as intermediaries to obtain the needed copyrighted
content?
Mr. Dodge. I don't think so. For example, the best example
would be short markets where no one has stepped up to
actually----
Mr. Nadler. What do you mean by a ``short market?"
Mr. Dodge. A short market is a market where there are one
or more missing local affiliates. In those markets, no one has
stepped up to actually take a broadcast license to broadcast
the programming. So in order for someone in those markets, for
example, to get the latest version of 24 and see Jack Bauer, we
have to import a distant Fox for those people to watch the
programming.
Mr. Nadler. Does anybody disagree with that?
Ms. Burdick. I would say, Congressman, it is a problem that
decreases every year. With digital technology we now have
digital sub-channels. Many of those short market problems are
being taken care of with digital sub-channels.
Mr. Nadler. What is a ``digital sub-channel?"
Ms. Burdick. So you have your big network signal, and then
you can transmit in the stream as many as two others
technologically.
Mr. Nadler. Oh, okay.
Ms. Burdick. And so, where there is not an over-the-air
station, you are seeing more cases of a network affiliate start
to carry a second where it does not exist in that market.
Mr. Dodge. And we do carry those digital subcarriers, but
the fact remains that there are 18 of these markets across----
Mr. Nadler. Eighteen what?
Mr. Dodge. Eighteen of these short markets across the
country today, and they are in the most rural areas. Without
access to a distant signal----
Mr. Nadler. There are only 18 short markets in the whole
country?
Mr. Dodge. Yes.
Mr. Nadler. And how many people would you say? How many
households are there?
Mr. Dodge. That I do not know, but they are the most rural
areas of the country where without this, they would have no
access to that network programming without distant signals.
Mr. Nadler. Okay. Mr. Roberts, you testified that the
majority of stakeholders consulted by the Copyright Office for
its 2011 report took the position that the existing statutory
regime should remain in place.
Mr. Roberts. Yes.
Mr. Nadler. How has the landscape changed since then? And
to the extent that key stakeholders are against the plan, how
might we address their key concerns?
Mr. Roberts. It would seem that the stakeholders are still
of the same opinion that generally the licenses should stay in
place. With respect to our 302 report, we were directed to
consider to how to phase them out, and that is why we came up
with the particular recommendations that we did. Specifically,
our particular recommendation was sublicensing by the broadcast
stations, but that that would have to be phased in over a
period of time.
Mr. Nadler. Okay. And lastly, because my time is about to
run out, if we do not address the overall statutory licensing
scheme or do not get to it by the end of the year, should we
reauthorize, in your opinion, the Section 119 license or allow
it to expire? And if we reauthorize it, should we do so for
another 5 years, or would you recommend that we consider a
different term?
Mr. Roberts. Well, the Office does not have a position as
to how many years it should be renewed. I would point out----
Mr. Nadler. Do you think 5 is a good number or is too long,
too short?
Mr. Roberts. I would say that if phase-out is the intention
of the Congress of the licenses, then perhaps something that is
less than 5 years. And the reason in saying that is that this
is the fifth time that the license has been up for
reauthorization.
Mr. Nadler. All right. The other half of the question is,
if we do not get to the entire scheme this year, should we
reauthorize Section 119 or allow it to expire?
Mr. Roberts. We recommend that it be reauthorized, but
phased out over a shorter term so that we would phase out the
distant signal license, but retain the local license.
Mr. Nadler. Even if we do not get to the entire question.
Mr. Roberts. Even if you do not, yes, it would be to phase
it out.
Mr. Nadler. Thank you. My time has expired.
Mr. Marino. Thank you, Congressman Nadler. The Chair
recognizes the congressman from Ohio, Mr. Chabot.
Mr. Chabot. Thank you, Mr. Chairman. And I appreciate the
opportunity to discuss legislation that literally affects
millions of Americans. TV enjoyment is very important to them.
Just in my district, which is the 1st District of Ohio,
Cincinnati and the Greater Cincinnati area, and north almost up
to Dayton, there are over 64,000 satellite TV subscribers. The
STELA legislation that is currently on the books has
effectively facilitated the satellite television industry for a
number of years. But as we look toward reauthorization, we
should be realistic in understanding that the current law is
old. It is outdated, and it needs to be changed in some manner
certainly.
The industry and the technology have experienced great
change since the original law was passed. And while we need to
do our job and pass STELA, we should use these discussions to
move toward a more modern and free market approach to how
Americans receive their television. We need to use these
hearings and discussions to find a solution that protects the
consumers, intellectual property, of course, as well as our
local broadcasters and small market providers as the market
becomes increasingly consolidated.
And just a couple of questions. I will begin with you, if I
could, Mr. Polka. There have been an increasing number of
signal blackouts over the years--I believe 127 in 2013 compared
to only 12 back in 2010. What has changed in the market that
has caused a dramatic increase, and what should we do about it?
Mr. Polka. It is the question as we consider STELA
reauthorization and perhaps what the Committee can do. Let me
say, too, just to start that none of us at the American Cable
Association dispute that broadcast content is valuable. Where
we have a problem is in the negotiation of retransmission
consent, which was passed in 1992 at a much different time when
only smaller broadcasters and a growing industry existed
compared to the industry that we live in today with satellite
companies, with Netflix, with Hulu, with AT&T, FiOS, U-verse,
and the like.
The marketplace has changed, but the rules have not, such
as rules that grant broadcasters exclusivity in a market, but
do not allow competition. And because of that inability to seek
more competition for consumers, as well as the demand by
networks who back in 1992 said they would never get involved in
the retransmission consent process, we now have a reverse
scheme of retransmission content where networks are demanding
money from their affiliates in what is called reverse
compensation, which in turn drives up the price demanded by the
local broadcaster for retransmission consent.
So what we have here is a fundamental shift in the
marketplace where large corporate interests are looking for
revenue for sports programming, for other programming, and the
like. And consequently, what happens at the end of that is the
price for that local broadcast station rises to the consumers.
And with prices escalating like they are, cable operators and
satellite providers across the country are saying, no, we are
not going to raise our prices for our consumers to that extent.
Mr. Chabot. Thank you. Ms. Burdick, let me turn to you
next. Local broadcasters play a very important role, in
Cincinnati, for example. Companies like yours make investments
and are very active in the local community and provide a
critical public service. How are local broadcasters adjusting
to stay competitive with the increased competition in the
marketplace? And do you think any dramatic changes to STELA
could impact the investments that are made in the various
communities around the country?
Ms. Burdick. Thank you, Congressman, for your kind words
about local broadcasters. Of all of the program providers that
are out there today receiving compensation for their works,
local broadcasters are the only ones reinvesting it back in
local communities through local news, weather, sports, and
public service. If this distant signal was expanded or is used
more liberally, our concern is that that underpins all of the
conversations about retransmission consent, and 85 to 90
percent of our revenue still comes from advertising. And
anything that divides our local market and creates a situation
where I can generate less money means the only place I have to
take it is out of local news, weather, or sports.
If I could take a minute, I did want to address your
comment about the blackouts unless you want to move on.
Mr. Chabot. I will tell you what. Yes, I have one last
question, and I would run out of time.
Ms. Burdick. We can come back.
Mr. Chabot. All right. Thank you very much. Smaller cable
companies are at a decided disadvantage when it comes to
programming negotiations, particularly when competing with one
of the national companies due to size and scale. What
accommodations could be made to recognize this competitive
disadvantage? Mr. Polka, you might be in the best position, but
if anybody else wanted to respond quickly, but I have only
got----
Mr. Polka. Sure. From a standpoint of broadcast carriage, I
think we have to look at the consumer first. What consumers do
not like, what no one likes, are blackouts, and we are seeing
them at an increasing historical pace. So consequently,
regardless of sometimes the business issue that occurs, the
consumer has to be put first. So consequently, whether we are
talking about considering an interim carriage rule, whether we
are considering allowing consumers to choose, or whether they
want to actually receive a broadcast signal rather than having
it mandated in the local basic tier, giving consumers some more
choice or even allowing in a dispute the signal to be carried
while the parties continue to negotiate. What we have to focus
on is not so much the business issue, but the consumer to
ensure that we are eliminating blackouts.
Mr. Chabot. Thank you. Mr. Chairman, I see my time has
expired. Thank you.
Mr. Marino. Thank you. The Chair recognizes the Ranking
Member, Mr. Conyers.
Mr. Conyers. Thank you, Mr. Chairman. Let me, first of all,
welcome Mr. Polka back. He has been in many Judiciary hearings
as I have today. [Laughter.]
And in both settings, we appreciated your comments very
much, sir. Mr. Roberts, with regard to the replacement of the
existing statutory system, which you say there is some
controversy. The sublicensing model that has been recommended,
what is the debate around that? Can you summarize it?
Mr. Roberts. Certainly. Unfortunately, there is no perfect
solution to this. The Office looked at sublicensing which is
when the broadcaster would do the negotiations with the multi-
channel video provider. Also collective licensing and then
direct licensing.
With sublicensing, we recognize that there are certain
concerns, particularly amongst non-commercial broadcast
stations and some smaller broadcasters who do not have the
resources to conduct effective negotiations. And some sort of
consideration and accommodation for them is appropriate, and
that is why we have recommended a phased-in period retaining
the local statutory license component of both 111 and 122 to
accommodate those concerns.
Mr. Conyers. Has that received any support or approval from
organizations?
Mr. Roberts. It has. I believe the broadcasters, and I do
not mean to presumptively speak for them, but I believe that
the broadcasters are certainly in favor of eliminating the
distant signal license, but retaining the local license on a
going forward basis for the time being to address----
Mr. Conyers. Did you want to comment on that, Ms. Burdick?
Ms. Burdick. I absolutely agree with what he said.
Mr. Conyers. All right. Thank you. Let us go to DISH. Mr.
Dodge, why do you believe that Congress should fix local
channel blackouts during retransmission disputes? There was a
record-setting 127 last year, so how should we approach that
from our point of view?
Mr. Dodge. Well, it is an escalating problem, there is no
question, from only 10 blackouts in 2010 to 140 last year. When
I was preparing for this hearing, I did a little research, and
as it turns out, 22 out of the 26 Members of the Subcommittee
have had blackouts in their districts. 73 percent of those have
had multiple blackouts in their districts. And only one Member
of the Subcommittee has not had a blackout in their district or
State--Congressman Chaffetz. So I think that speaks volumes to
the fact that this is touching a lot of people, and it is
getting worse every day.
Mr. Conyers. So what is an approach that you would
recommend for those who legislate?
Mr. Dodge. So we have suggested two approaches, the first
of which is the focus here should be on the consumers. The
consumers have access to key network programming and are not
used as pawns in negotiations. So the simple solution is keep
the signals up during retransmission consent negotiations, and
if the parties are not able to agree, they can appoint a party
agreed and approved arbitrator to decide what a fair rate is
based on baseball arbitration, which, as people know, each
party has to come forth with their best number. Gives everyone
an incentive to actually be reasonable.
Mr. Conyers. Right.
Mr. Dodge. The arbitrator has to pick between one of the
two.
Mr. Conyers. Let me ask Ms. Burdick. Would you have a
comment on that?
Ms. Burdick. Thank you. I absolutely would. Let us face
reality for a second. I operate in seven television markets and
have to compete against major MVPDs, like DISH Network. The top
four MVPDs control 60 percent of the country. The top 10
control 91 percent. The only leverage I have to get a deal done
is to pull the signal. Now, at the end of the day, do I want to
do that? Absolutely not. We have done it in one small case for
a short period of time only as a last ditch effort.
Of the outages that have occurred, 90 percent have happened
with DISH, Direct, and Time Warner. 50 percent have happened
with DISH alone. So I would suggest to you that perhaps there
is a business strategy afoot here. At the end of the day, we
share that customer and that consumer, and we do not want a
disruption.
And I would remind the Committee we are never off the air.
We are always on the air. We may have a contractual dispute
with DISH, and the only thing that prevents their customer from
moving is their contracts that require significant early
termination fees.
So what could Congress do? Well, we should all do a better
job about educating people about free over-the-air television,
number one. Number two, we could do a better job of warning
customers about the potential of a dispute. Third, early
termination fees should go away if a customer wants to move, or
they should get rebates if they are not getting all the
channels they paid for.
Mr. Conyers. Thanks so much. I yield back any time
remaining, Mr. Chairman.
Mr. Marino. Thank you, Congressman. The Chair recognizes
the former U.S. attorney, Mr. Holding from North Carolina.
Mr. Holding. Thank you, Mr. Chairman. You know, I am
concerned about the blackouts. I have kindly been provided the
precise number of DISH subscribers in my district, which is
about 84,000, and there are about 1.3 million in North
Carolina. And those folks, you know, they see a blackout, and
they wonder why they are involved in it. You know, why have I
gotten caught up in this? Mr. Dodge, you went through a number
of proposed, I guess, negotiation arrangements, whether it is
the baseball arbitration rubric.
As far as the broadcasters are concerned, do any of those
methods of negotiating provide an avenue where you are not
giving up your ultimate leverage, where you maintain leverage
in the negotiations, because I certainly understand what you
are saying, that, you know, the signal is what you have got to
negotiate with. Are there any of those rubrics that allow you
to keep your leverage, allow fair negotiation without putting
the consumer in the middle of it?
Ms. Burdick. I think the context is important. I appreciate
the question. 90 percent of the deals get done, and of those
outages that have occurred, some are just a few hours, some are
a couple of days. There have been one or two high profile that
have been a longer period of time.
I think the system is not broken. Disruptive on occasion,
but not broken. The arbitration solution, if the goal, if the
end game is to shorten the amount of time consumers are
disrupted, that certainly will not accomplish that and, in
fact, will lengthen it perhaps into months in every case.
So I think the fact that 90 percent of the deals get done,
and of those disruptions, they are rare and short. We are both
motivated to get the deals done now because our collective
consumer is disrupted.
Mr. Holding. Mr. Dodge, do you want to respond to that
briefly?
Mr. Dodge. Sure. I would say one interruption is too many,
and even an hour interruption is too long if it occurs during
the course of the Super Bowl or some event that you truly care
about. And the fact of the matter is that the concept that, you
know, 90 percent of these are a result of DISH, DirecTV, and
Time Warner, that may very well be true. But the reasons for
that is folks, like Mr. Polka's members, Century Link, and
others, have no negotiating leverage at all, and they are
forced to take the broadcasters' offer whole cloth.
Mr. Holding. Well, one of the reasons why the local
broadcast is important, and, you know, all of my constituents
rely on the local broadcast, whether it is in times of
emergency. We have great ice storms down in North Carolina. We
have got hurricanes in North Carolina, and last week we had
tornados in North Carolina. Of course, what are you tuning
into? But, you know, your local broadcast for me is WRAL or
WTVD. And so, Ms. Burdick, if you could expound upon the
concept of broadcast localism and why it is important in this
STELA debate, and in your opinion what is the best policy to
continue to engender localized content.
Ms. Burdick. As NAB, we have been supportive of keeping the
local cable and the local television compulsory licenses as a
way to advance localism, and to look only narrowly at the
distant signal importation as a piece of the compulsory license
that could either sunset, as Congress intended, based on the
fact that there is no need today, or do a narrow
reauthorization of it.
Mr. Holding. All right. Mr. Chairman, I am going to yield
back the balance of my time.
Mr. Marino. Thank you. The Chair recognizes the
distinguished gentlewoman from California, Dr. Chu.
Ms. Chu. Thank you, Mr. Chair. Consumers today have several
options for how they view content, whether it be through pay TV
carriers, their bunny ears, or through the internet. The way
that a consumer can view content is constantly evolving. In
fact, Mr. Polka, you said in your testimony that 52.8 million
households view television shows or movies using the internet
or over-the-air delivery. And take, for example, the Aereo
model.
The Supreme Court is trying to determine whether online
streaming of live TV broadcasts constitutes an infringement of
a copyright holder's exclusive right of public performance.
Since the decision is looming, I would like for all the
panelists to weigh in if they can, and what should members of
this panel be thinking about while we wait for the Court's
decision and we review existing statutory licenses for cable
and satellite providers?
Mr. Polka. Would you like me to start?
Ms. Chu. Sure.
Mr. Polka. I would be happy to. I think the key thing here
for the Committee is that innovation is occurring whether we
like it or not. It is happening. Whether it is Aereo or whether
it is the next new disruptive technology--by the way, I love
that term, ``disruptive technology'' because it is disrupting
existing business models. And we had better get it, and we had
better get with the consumer or else the consumers are going to
pass us by. And frankly, that is one of the reasons why at the
American Cable Association we supported Aereo because we
believed that innovation in this marketplace is good.
And so, as I mentioned even in my testimony, greater usage
of broadband for online viewing is important, and frankly, it
is where consumers are going. So that is why I think the
Committee needs to be focused on it.
Ms. Burdick. As broadcasters, we want as many people to get
our signals on as many platforms as they can get them. I think
Aereo is only innovative in that it is innovative in how it
attempts to, in a group Goldberg way, avoid the law.
The underpinning of what we believe is that in order to
support local content and local news, weather, and sports, we
have to have an economic model to do it. And we do not believe
anyone should be able to take our content, package it, and
resell it without that money being returned to us to help
reinvest in local communities.
Mr. Dodge. We, too, similar to Mr. Polka, respect Aereo's
disruptive impacts on the market, and we, too, submitted a
brief in support of them with the Supreme Court. And to answer
your question, what I think Members of Congress should be
thinking about is to be careful in drawing lines so as not to
impact, unnecessarily, innovation.
Mr. Roberts. And, Congresswoman, I would note that Aereo in
their presentation before the Court specifically acknowledged
that they were not a cable system, and, therefore, not
qualified for the cable statutory license, therefore,
suggesting that any license that they might wish to have in the
future would have to be considered by the Congress.
Ms. Chu. Mr. Roberts, I would like to ask you about your
Section 302 report from the Copyright Office where you make
recommendations on how we can phase out this statutory
licensing in Title 17. The Office gathered comments on three
possible marketplace alternatives to statutory licensing, and
you stated that sublicensing holds the most promise.
Under that structure, do you think there are enough
incentives for the relevant parties to negotiate in good faith?
In other words, is it a mechanism to help avoid negotiation
impasses and blackouts that are harmful to consumers?
Mr. Roberts. Well, we feel that in order to bring something
like that about, there needs to be a trigger date, a date
certain by where the statutory license, at least with respect
to distant signals, would, in fact, come to an end so that
market-based solutions could take a process and be put into
place.
Sublicensing does seem to be the best possible result of
those marketplace negotiations. But in order for that to
happen, it is going to have to be phased in over a period of
time, and the communications law aspects really need to be
considered because the statutory licenses have always marched
according to how communications law regulates the various
industries, so they cannot be separated. They need to move
together.
Ms. Chu. Does anybody else want to weigh in on that?
Mr. Dodge. One thing I would just add is if there is an
idea of a ramp down, I think there should be some required
showing on behalf of the broadcasters that actually have the
necessary right to engage in such sublicensing negotiations.
Ms. Burdick. Well, I would agree with what Mr. Roberts
said. But as a small broadcaster and a small cable operator who
does not employ a phalanx of copyright attorneys and
negotiators, I question how we are going to do that with the
hundreds, maybe thousands, of pieces of copyrighted material.
And then secondly, if you think about the ability of one to
withhold carriage creates a blackout. So I have a lot of
questions about the actual implementation.
Mr. Polka. Thank you, Congresswoman. I actually agree with
Ms. Burdick. We are very concerned about the application of the
copyright license and allowing that to be used by smaller
providers. It is efficient. It works very, very well to clear
copyrights, and we are very concerned even in the nature of the
suggestion to eliminate the distant license, that it would be
heaping onto smaller providers dozens, if not hundreds, of
separate negotiations with copyright holders, while at the same
time small cable operators are also negotiating for
retransmission consent, which is what we tried to indicate, is
not really a functioning marketplace.
Ms. Chu. Thank you. I yield back.
Mr. Marino. Thank you, Dr. Chu. We are going to get through
one more. The Chair recognizes the gentleman from Missouri,
Congressman Smith.
Mr. Smith of Missouri. Thank you, Mr. Chairman. Mr. Dodge,
how many households need Section 119 because they truly cannot
receive a local signal? And how many of the households are
grandfathered in as a result of past satellite
reauthorizations?
Mr. Dodge. I answered that question earlier. I do not have
that information off the top of my head, but we will look into
providing that to you.
Mr. Smith of Missouri. Okay. That would be good. Also
speaking more broadly about the trends in the satellite
marketplace, blackouts have clearly changed. We have seen
significant increases in the last couple of years. In fact,
DISH customers in my district last August faced blackouts. And
as you know--well, you may not know, but in my district, August
is an important time for Major League Baseball and the
Cardinals. It was a pretty big deal. What changes to Section
119 would you suggest to address this?
Mr. Dodge. Quite simply, we think that programming should
stay up during impasses, and that the parties, if they cannot
reach a negotiated agreement on rates, should submit to binding
baseball arbitration, which theoretically would produce a fair
rate because each party has to put forth their best rate and be
as fair as possible or risk losing.
So in many cases, maybe it would not even get to the end of
your arbitration because both parties, as they figured out what
a fair rate was, would actually end up agreeing upon something.
But worst case, you have one number from each party, and the
arbitrator has to pick that number.
Mr. Smith of Missouri. So would you not make any changes to
Section 119 or what? I mean----
Mr. Dodge. So we would. We would change the retransmission
consent process, which actually is part of the Communications
Act, to make it so that blackouts do not occur any longer, that
the signal would stay up. And another proposal would be you
could change 119 to allow the import of a distant network
station if the broadcaster insists on taking their signal down.
But we at DISH are always willing to keep the signal up while
we negotiate, and then have any resulting rate apply
retroactively.
Mr. Smith of Missouri. It looks you might want to respond
to that, Ms. Burdick.
Ms. Burdick. Maybe. I said earlier that if the end game is
to shorten the dispute, arbitration does not do it. It
lengthens it perhaps by months in every circumstance because it
creates a process and a burden. But as a small broadcaster,
when I negotiate against someone like DISH, it is a last resort
and often the only leverage that I have to get a deal done to
be fairly compensated.
And let us not forget the context. Broadcasters were
allowed to negotiate starting in 1992 for payment for the most
watched content on satellite and cable. It was not until 2006
that broadcasters began to be paid, so we have only had a few
cycles to negotiate those payments.
And today, broadcasters are still the most watched. I have
one market where my channel alone is watched by 40 percent of
the customers on one cable system, yet I receive less than an
estimated 2 percent of the revenue. So we have had a high hill
against operators that have stated publicly we will never pay
you. So these have been tough negotiations.
Mr. Smith of Missouri. Mr. Polka?
Mr. Polka. Thank you, sir. Let us be clear. Most
broadcasters may not be like Ms. Burdick at Shurz
Communications. In fact, they are not. They are major media
conglomerates, like Sinclair Broadcasting, Nexstar
Broadcasting, and others. And the nature of who our members are
certainly are not the huge cable monopolies, but rather
companies of 1,500 or below, such as Cablevision, which I
mentioned this morning. So that kind of negotiation and the
power of the cable operator, particularly in the smaller rural
market, does not exist.
And to really focus on a real life situation that is
happening today, you need look no farther than Toledo, Ohio,
where Sinclair Broadcasting, one of the major broadcasting
groups in this country, has blacked out Buckeye Cablevision for
5 months on NBC WNBO, which Sinclair acquired in late November
and came in with a first demand of nearly a thousand percent
increase in retransmission consent. That is why there are
blackouts today. And frankly, I applaud the Buckeye people for
not paying that kind of ransom.
Mr. Smith of Missouri. Thank you, Mr. Chairman.
Mr. Marino. Thank you. The Chair recognizes the
distinguished woman from California, Ms. Lofgren.
Ms. Lofgren. Thank you, Mr. Chairman. I will be brief
because we do have votes pending on the House floor. But I
remember when I was a freshman Member of this Committee and we
had a markup on this bill, and we said at the time this was the
last time we would do it, and here we are again. And I predict
that we will proceed again because we're not really willing, I
think, to face millions of consumers that are going to end up
with no access, because that is what the result is going to be.
So I just have two questions, one on the blackout bills. I
am sure you are aware, Mr. Dodge, my colleague, Congresswoman
Anna Eshoo, has introduced a bill on blackouts that I have co-
sponsored. I am interested in your take on that bill.
Mr. Dodge. Yes, and we thank you for your co-sponsorship of
that bill. We think it goes a long way to fixing, you know, a
couple of the biggest problems, which are on joint negotiating
agreements amongst unaffiliated broadcasters in a single market
that further exacerbates the leverage that the broadcasters
have in programming or retransmission consent negotiations. And
two, also giving the FCC some ability to curb those abuses.
Ms. Lofgren. I am going to ask not Ms. Burdick, because I
know the broadcasters are opposed to it, and I am almost out of
time. Mr. Polka, your take on the bill?
Mr. Polka. Fully supportive. I totally agree with Mr.
Dodge. The one point that I would also thank you for is the
fact that your bill focuses on availability of content online.
To focus on behavior where a broadcaster in a retransmission
consent dispute unilaterally identifies IP addresses of
consumers and denies access to content that is otherwise freely
available online. Thank you for focusing on that.
Ms. Lofgren. Yes. That is a net neutrality as well. Let me
just ask one final question. Other than areas that cannot
receive an over-the-air broadcast, from a legal or technical
standpoint, or maybe a business standpoint, what would prevent
either a satellite or cable provider from simply integrating an
over-the-air antenna into their cable box to avoid some of
these problems?
Mr. Dodge. That is a great question, and it is in some
instances possible. But one of the points that Ms. Burdick made
earlier that I take complete issue with is this concept that
local programming is always available free over the air.
DirecTV did a recent study where they did 1,800 signal tests in
three different markets. And it actually showed that in the Los
Angeles DMA, only 67 percent of the folks who were predicted to
receive an adequate signal actually received an adequate
signal.
Ms. Lofgren. Right.
Mr. Dodge. Meaning 33 percent of the folks do not get over-
the-air broadcasts, and that is only within the area that the
FCC predicts you would.
Ms. Lofgren. I see. Mr. Polka?
Mr. Polka. Completely agree with Mr. Dodge.
Ms. Lofgren. I am going to yield back the rest of my time
because I know that the Committee needs to go vote and not miss
it. So thank you very much. This has been very helpful.
Mr. Marino. Thank you, Ms. Lofgren. Mr. Collins needs to
get to his questions. He is going to do it. I am going to stick
around, and then when he is done, I am going to call a recess
and go vote. I hope the Ranking Member does not oppose. All
right. So the Chair recognizes Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman. It is amazing what
you hear when you are thinking you are going in one area, and
then all of a sudden you get a curve ball thrown in. And, Mr.
Polka, thank you for doing that. Frankly, from my opinion,
anybody that has sat in this Committee long enough, they know
that property rights are pretty important to me, and that
includes intellectual property rights.
And to describe Aereo as anything but a disruptive
technology or a new and innovative technology is being very
generous at best and dishonest at worst. That is not the way I
say that, and I have issues with other things. And like I said,
you see a lot of things in these hearings. That was just not
one.
But I want to thank the Chairman for doing this. I believe
it is vitally important and appropriate for the Judiciary
Committee to exercise its jurisdiction over the compulsory
licenses in Title 17. And I hope the Committee moves forward to
develop our own proposal regarding the expiring 119 license.
Ms. Burdick, I have a question for you. It is pretty
straightforward. You know, you are defending intellectual
property, your own, and that you have your television broadcast
programming. And you want protection of Federal copyright law
to collect fees for your intellectual property. However, NAB in
particular, when it comes to music licensing, your industry
says that songwriters and composers do not have the right to
receive the fair market value for their intellectual property.
And under current law, cable operators are prohibited from
taking down broadcast signal during the Nielsen sweeps period.
However, there is no such prohibition for a TV broadcaster that
pulls their signal during a retransmission consent dispute. Are
these positions not inconsistent and really not being able to
hold mutually in the same hand?
Ms. Burdick. So let me start with the radio piece.
Broadcasters pay $500 million a year to songwriters through the
U.S. copyright rules. In terms of streaming, we pay an
estimated $60 million more a year to performers and to the
labels. We pay consideration in other ways in terms of free
promotional value, averaging about $2 billion a year to the
artists.
Mr. Collins. Again, hold on right there, and we will leave
you to more of this. You are getting into performance rights. I
am not dealing with performance rights, and I am not dealing
with artists. I am dealing with songwriters in the question. My
simple question, and if you want to stick to the TV component
as well, you can do that. They just seem to be inconsistent
where you want your protection, which I do not blame you. I
would want the protection, too. Cable wants theirs as well. I
mean, it is just, I think, just an honest discussion as we are
having this issue of reauthorization in the Committee.
Ms. Burdick. Well, I guess the point I was trying to make
in too long-winded of a way is the fact that we on the radio
side do not take someone else's work, re-package it, and get
real American dollars from someone that we put in our pocket.
Mr. Collins. No, that is Aereo. [Laughter.]
Ms. Burdick. I would agree with that. On the television
side, that is what was happening to our signal. And in terms of
the difficulty in negotiation of these signals, it is tough,
whether you are a small broadcaster or a tough--and I think
that was the second part of your question, the negotiation----
Mr. Collins. Where you can pull out when you need to. They
cannot pull out during sweeps. So I think it is just, and that
is where I was getting. I appreciate your answer.
Ms. Burdick. Could I just answer that real quickly?
Mr. Collins. Yes, finish up.
Ms. Burdick. The only reason that that was done is because
there was a history and pattern and practice that Congress
observed of some MVPDs, I am sure not represented at this
table, but proactively pulling broadcaster signals to disrupt
only 4 times a year when their economics are set to disrupt
their economic model. And that is why that was created.
Mr. Collins. And here is a big one for me. I have four
orphan counties in my district, and many of these constituents
in these counties only have access to satellite service, and
these providers are not able to offer in-State local news and
weather to residents in these counties. This is very important
to me.
To Mr. Dodge, I know there are larger reforms on both the
copyright side and telecom side that this Committee should and
will discuss in the weeks and months ahead. I have heard from
too many Members whose constituents are facing similar
situations. Localism is important, and the current DMA setup
leaves my constituents feeling isolated and removed from their
home State. We need to change that, and I need your help right
now to assist my constituents to pursue larger reforms.
Following up on sort of Mr. Goodlatte's position, if the
broadcasters are willing to clear rights to local in-State news
and weather, can you commit to me as you have done to other
Members in the past to make the programming available to your
subscribers in my orphan counties? And will you encourage other
satellite providers to do the same?
Mr. Dodge. Well, one, I am not sure that they actually have
the necessary rights to----
Mr. Collins. And I apologize. Let me restate my question.
If broadcasters are willing to clear the rights to local in-
State news and weather, will you then transmit to my orphan
counties?
Mr. Dodge. It depends to an extent. We actually do not
think just passing through the local content actually is what
consumers want, nor does it scratch the bigger itch of when
catastrophes happen, that people are typically watching
national content and get the local----
Mr. Collins. Mr. Dodge, I am going to stop you right there.
My folks in Elberton, Stephens, Hart, and Franklin counties do
not look to the national news service to determine. They look
to the ones that they want to. And when you look at a disaster
going on and I have four of my counties blanked out, frankly,
that is a very disturbing answer.
Ms. Burdick, I will give you the same question. I need your
help to connect my constituents who are satellite subscribers
with local in-State programming. Will you commit to clearing
the rights working with the local stations for local news and
weather in my orphan counties, so in addition DirecTV can
provide the programming to my constituents?
Ms. Burdick. Yes. And as we have in many cases across the
country, and I believe in your specific case, cable and
broadcasters have worked together to provide Atlanta broadcast
into those counties. For some reason, satellite chooses not to
do it.
Mr. Collins. Right. You have brought up an issue, and, yes,
it is. And I am a satellite user because of multiple reasons.
This one is concerning me, and frankly, Mr. Dodge, that answer
was very disturbing to me. In the light of other things where
we could agree on, that answer is very disturbing because it
highlights to me that there may not be a willingness on a
financial reason, not a safety or a customer service need,
because if you take the calls from district when I go in there,
they are concerned about this. And so, it is disturbing. And
with that, Mr. Chairman, I yield back.
Mr. Marino. Thank you, Mr. Collins. It is past time for us
to get to the Floor to vote. We have four votes. There is a
good chance that we may be back here by 4. We will try. This
hearing is now in recess.
[Recess.]
Mr. Marino. We will resume this hearing on intellectual
property, and the gentleman from Texas, Congressman Farenthold,
is up next.
Mr. Farenthold. Thank you very much. Mr. Dodge, you
testified earlier you had the number of days every
congressional district had been blacked out. Just for
curiosity, do I win that? It sure seems like it with the most
days blacked out.
Mr. Dodge. And I am sorry, I could not hear. Were you
asking do I know the exact number?
Mr. Farenthold. I mean, who won? You testified you looked
at the numbers, and all but one had been blacked out. Do I win
with the most days because it sure seems like it.
Mr. Dodge. That I do not know, but it was Congressman
Chaffetz who is the only Member of the Subcommittee whose State
and district have not had a blackout.
Mr. Farenthold. I feel like the district I represent has
been at the forefront of it, and we have actually ended up
having to try to broker deals between the TV and the cable
companies out of my office.
Let us go to Mrs. Burdick. What happened to the business
model of broadcast TV as advertiser supported? Back in the
early days of cable, you guys were begging to be on the cable
systems for free. What happened to change?
Ms. Burdick. Yes. Well, the largest thing that has happened
is that it used to be just the three television stations, in
essence, selling advertising, maybe only against newspaper and
radio in that market. Now, we sell against cable or multiple
cable systems, the internet, and that pool of advertising
dollars has shrunk and shrunk and shrunk. So our ability to
grow our business on advertising alone has diminished.
Mr. Holding. And so, as far as local stations, I mean, a
lot of what you get you can get on the internet. You can
download even some of the network stuff now the day after it
was aired. Where is the value in the future for local
television stations? You know, I do not mean to be cruel about
this. What are you offering that the internet cannot now?
Ms. Burdick. You ask a really good question. We ask
ourselves it every day. I do not know how the world is going to
change in terms of the network affiliate model. What I do know
that I can provide that is irreplaceable and to date not
replicated by anyone is local news, weather, and sports. And in
order to grow those businesses, and we have in our company been
growing and investing in digital sub-channels that cater to
local or new internet products that, as an example, cover only
and every Kansas sports team. That takes people. It takes
resources. And so, I have to think about what my future is
going to be and how I monetize that.
Mr. Holding. Okay. I am going to play devil's advocate here
for Mr. Dodge. His proposal was an arbitration, and your
response to that is it would lengthen the time to make a deal.
Well, his proposal that during the term of arbitration, the
satellite or cable carrier still has the network affiliate on
the air and saves my constituents from losing access to, say,
the Super Bowl or 24 or whatever they are watching. I mean, you
kind of conveniently leave that out of your response there.
Ms. Burdick. Yes. I guess I would say two things. First of
all, and I always stress this because people seem to forget it.
We never go off. We are always on the air----
Mr. Holding. But in today's market, I mean, do rabbit ears
really work during the blackouts? I tried rabbit ears. I had to
climb up on my roof, mount an antenna, and string cable down to
my house. Fortunately, I pre-wired for a lot of that, but it
did take an afternoon.
Ms. Burdick. I do not say it is easy or the disruptions,
and I do not take lightly disruptions. It is a last resort for
a broadcaster in a negotiation because those are our mutual
customers, and we do want to disrupt them. But when I as a
small broadcaster have to face someone with 14 million
customers and $14 billion in revenue, it is often the only tool
that I have to get a fair price.
Mr. Holding. All right. And then, Mr. Dodge, does DISH have
local affiliates for everywhere in the country, or are there
still some smaller areas that you are not carrying the
affiliates?
Mr. Dodge. No, we carry local channels in all 210 DMAS.
Mr. Holding. All right. So we had the Chairman doing some
questions about how some of the areas that are orphan areas or
short areas, how do we deal with those. It seems to me the
solution to that is to allow the customer to pick which one
they want. We had a ranch about halfway between San Antonio and
Laredo as a child growing up, you know. Why could we not say,
well, we kind of want the San Antonio stations or we want the
Laredo stations? Why do we not leave that to the consumer?
Mr. Dodge. In our proposal with respect to that, I believe
we do exactly that.
Mr. Holding. And would that be technically possible? I
mean, your spot beams are not so tight that you do not have a
little bleed there.
Mr. Dodge. It depends on the particular markets because our
satellites have been designed with the current DMAs. But for
many of them, you know, let us use Southern Colorado, for
example, which is in the Albuquerque DMA, we actually could
provide Denver channels to those folks, and that is what we had
suggested, that they would continue to receive Albuquerque,
provide Denver on top of that, and ultimately let the
consumer----
Mr. Farenthold. Now, as an affiliate I might have a problem
with multiple affiliates in there. But for the ones outside the
DMA, it seems like you ought to be able to pick, and you can
divide out whatever you pay the station, you know, based on a
per subscriber base, and click it up a few bucks here, a few
bucks there based on the subscribers. Would that work for the
broadcasters, Ms. Burdick?
Ms. Burdick. I think the first part of your question was
really important. How many are there? There are, I think you
said 18 markets. Those could be negotiated directly. What we
are talking about today is the expansion of the distant signal
license. If that license expired today, those 18 markets could
be negotiated with the rights holders, whether it is a network
or the local broadcaster.
Mr. Farenthold. But it would be probably easier for the
satellite companies to pick one station, you know, New York or
LA, and do it for everybody. But if they have got the
technological capability, I think you want to keep it as local
as possible.
Ms. Burdick. You absolutely do.
Mr. Farenthold. Mr. Dodge, I am out of time, but if you
want to comment, I will let you comment before I yield back.
Mr. Dodge. For short markets we typically import an
adjacent signal, so we do try to keep it as local as possible.
Mr. Farenthold. All right. Thank you very much. I see I am
out of time.
Mr. Marino. If you have another question, go ahead. We are
still possibly waiting for someone.
Mr. Farenthold. I just have a general question. Why is it
my bills keep going up when the technology keeps getting
cheaper? Why does my cable bill always seem like it is going
up? We will go to Mr. Polka.
Mr. Polka. I will start. I will be happy to start. And we
talked about it a little bit this morning at the Comcast
hearing. As a result of companies that own content, the four or
five major content companies control some 80 to 90 percent of
all of the channels that we see on television today, and how
that content is sold in bundles as opposed to in any way,
shape, or form where a consumer has choice to either buy a
channel separately or as part of a special package.
Sports is a big driver of this. It is ironic nowadays, even
though, you know, I am a sports fan and would be willing to pay
for it that most of our subscribers, about 7 out of 10, would
tell us I would not pay for it if I had the choice not to, but
they do not have that choice.
This is about the only marketplace I can think of where now
you have more competitors, whether it is ESPN or whether it is
FS One, Fox Sports One, or NBC Sports Network, where you
actually have more sports competitors and the price goes up,
not down, because the leagues are able to charge more in rights
fees for TV rights.
Mr. Farenthold. Well, I will tell you. If I could probably
just get the news channels in my local affiliates in internet,
that is probably about all I would buy. Anyway, I see my time
has expired, and I think you are ready to move on, Mr.
Chairman.
Mr. Marino. Thank you. There are no other Members here. All
the questions that I was going to ask have been asked. I want
to thank the panel, and this concludes today's hearing. Thanks
to all of our witnesses for attending. I apologize for the
delay.
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 is adjourned.
[Whereupon, at 4:32 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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