[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
STELAR REVIEW: PROTECTING CONSUMERS IN
AN EVOLVING MEDIA MARKETPLACE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JUNE 4, 2019
__________
Serial No. 116-41
Printed for the use of the Committee on Energy and Commerce
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
41-117 PDF WASHINGTON : 2022
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COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois GREG WALDEN, Oregon
ANNA G. ESHOO, California Ranking Member
ELIOT L. ENGEL, New York FRED UPTON, Michigan
DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland PETE OLSON, Texas
JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice BILL JOHNSON, Ohio
Chair BILLY LONG, Missouri
DAVID LOEBSACK, Iowa LARRY BUCSHON, Indiana
KURT SCHRADER, Oregon BILL FLORES, Texas
JOSEPH P. KENNEDY III, SUSAN W. BROOKS, Indiana
Massachusetts MARKWAYNE MULLIN, Oklahoma
TONY CARDENAS, California RICHARD HUDSON, North Carolina
RAUL RUIZ, California TIM WALBERG, Michigan
SCOTT H. PETERS, California EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
------
Professional Staff
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
MIKE BLOOMQUIST, Minority Staff Director
Subcommittee on Communications and Technology
MIKE DOYLE, Pennsylvania
Chairman
JERRY McNERNEY, California ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York Ranking Member
DAVID LOEBSACK, Iowa JOHN SHIMKUS, Illinois
MARC A. VEASEY, Texas STEVE SCALISE, Louisiana
A. DONALD McEACHIN, Virginia PETE OLSON, Texas
DARREN SOTO, Florida ADAM KINZINGER, Illinois
TOM O'HALLERAN, Arizona GUS M. BILIRAKIS, Florida
ANNA G. ESHOO, California BILL JOHNSON, Ohio
DIANA DeGETTE, Colorado BILLY LONG, Missouri
G. K. BUTTERFIELD, North Carolina BILL FLORES, Texas
DORIS O. MATSUI, California, Vice SUSAN W. BROOKS, Indiana
Chair TIM WALBERG, Michigan
PETER WELCH, Vermont GREG GIANFORTE, Montana
BEN RAY LUJAN, New Mexico GREG WALDEN, Oregon (ex officio)
KURT SCHRADER, Oregon
TONY CARDENAS, California
DEBBIE DINGELL, Michigan
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
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Page
Hon. Mike Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, prepared statement.................................... 4
Prepared statement........................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 6
Prepared statement........................................... 7
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 9
Prepared statement........................................... 10
Hon. Billy Long, a Representative in Congress from the State of
Missouri, prepared statement................................... 81
Witnesses
Patricia Jo Boyers, President and Vice Chairman of the Board,
Boycom Vision, and Vice Chairman of ACA Connects-America's
Communications Association..................................... 12
Prepared statement........................................... 14
Answers to submitted questions............................... 128
Robert D. Thun, Senior Vice President, Content and Programming,
AT&T........................................................... 26
Prepared statement........................................... 28
Answers to submitted questions............................... 132
Gordon H. Smith, President and CEO, National Association of
Broadcasters................................................... 33
Prepared statement........................................... 35
Answers to submitted questions............................... 144
John Bergmayer, Senior Counsel, Public Knowledge................. 42
Prepared statement........................................... 44
Answers to submitted questions............................... 152
Submitted Material
Letter of June 3, 2019, from Karyn A. Temple, Register of
Copyrights and Director, United States Copyright Office
Enclosure, to Mr. Jerrold Nadler and Mr. Doug Collins,
submitted by Mr. Doyle......................................... 82
Letter of May 30, 2019, from Dave Loebsack, Member of Congress,
to Mr. Pallone, et al., submitted by Mr. Doyle................. 92
Letter of May 2, 2019, from Michael Cloud, Member of Congress, to
Mr. Jerrold Nadler and Mr. Doug Collins, submitted by Mr. Doyle 94
Letter of June 3, 2019, from Mike Chappell, Chairman, American
Television Alliance, to Mr. Pallone, et al., submitted by Mr.
Doyle.......................................................... 95
Letter of June 4, 2014, from Jonathan Schwantes, Senior Policy
Counsel, Consumer Reports, to Mr. Doyle and Mr. Latta,
submitted by Mr. Doyle......................................... 100
Letter of May 31, 2019, from James L. Winston, President,
National Association of Black Owned Broadcasters, to Mr.
Pallone, et al., submitted by Mr. Doyle........................ 103
Letter of May 10, 2019, from Jared Golden, Member of Congress, to
Mr. Pallone, et al., submitted by Mr. Doyle.................... 105
Letter of June 3, 2019, from Craig Morris, Co-Founder and
President, Ride Television Network, Inc., to Mr. Pallone, et
al., submitted by Mr. Doyle.................................... 107
Letter of June 3, 2019, from American Agri-Women, et al., to Mr.
Pallone, et al., submitted by Mr. Doyle........................ 111
Statement of June 4, 2019, by Neil Fried, Senior Vice President
and Senior Counsel, Motion Picture Association of America,
Inc., submitted by Mr. Doyle................................... 113
Article of Sports fans need Distant Network Signals, submitted by
Mr. Doyle...................................................... 123
Letter of June 4, 2019, from Tom Struble, Technology and
Innovation Policy Manager and Jeff Westling, Technology and
Innovation Policy Fellow, R Street Institute, to Mr. Doyle and
Mr. Latta, submitted by Mr. Doyle.............................. 125
STELAR REVIEW: PROTECTING CONSUMERS IN AN EVOLVING MEDIA MARKETPLACE
----------
TUESDAY, JUNE 4, 2019
House of Representatives,
Subcommittee on Communications and Technology,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:28 a.m., in
room 2322, Rayburn House Office Building, Hon. Mike Doyle
(chairman of the subcommittee) presiding.
Present: Representatives Doyle, McNerney, Clarke, Loebsack,
Veasey, McEachin, Soto, O'Halleran, Eshoo, DeGette,
Butterfield, Matsui, Welch, Cardenas, Dingell, Pallone (ex
officio), Latta (subcommittee ranking member), Shimkus,
Scalise, Olson, Kinzinger, Bilirakis, Johnson, Long, Flores,
Brooks, Walberg, Gianforte, and Walden (ex officio).
Staff Present: Jeffrey C. Carroll, Staff Director; Jennifer
Epperson, FCC Detailee; Evan Gilbert, Deputy Press Secretary;
Waverly Gordon, Deputy Chief Counsel; Alex Hoehn-Saric, Chief
Counsel, Communications and Consumer Protection; Zach Kahan,
Outreach and Member Service Coordinator; Jerry Leverich, Senior
Counsel; Dan Miller, Policy Analyst; Phil Murphy, Policy
Coordinator; Alivia Roberts, Press Assistant; Mike Bloomquist,
Minority Staff Director; S. K. Bowen, Minority Press Assistant;
Robin Colwell, Minority Chief Counsel, Communications and
Technology; Brannon Rains, Minority Legislative Clerk; and
Michael Engel, Minority Detailee, Communications and
Technology.
Mr. Doyle. The Subcommittee on Communications and
Technology will now come to order. The Chair now recognizes
himself for 5 minutes.
OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Good morning. I would like to welcome everyone to the
subcommittee's first hearing of the new Congress on STELAR and
the involving media marketplace. I would also like to thank our
witnesses for appearing before us today to discuss these
important issues.
Five years ago, this committee passed the STELA
Reauthorization Act. This bill extended the authorization for
satellite television companies to provide broadcast content to
unserved households. According to the satellite TV industry,
this provision enables roughly 870,000 customers in mostly
rural communities to receive over-the-air broadcast television
signals.
These customers fall into a few categories. The first is
households that cannot receive broadcast content using an
antenna. The second is markets where a satellite provider does
not offer local-to-local service, and the third is short
markets, where there are no local affiliated stations with one
of the networks. And finally, satellite TV subscribers that
receive service to a commercial truck or an RV.
In effect, this provision enables rural customers of DISH
and DIRECTV to receive content from NBC, ABC, CBS, FOX, and
other broadcast stations where it isn't otherwise available.
STELAR also required broadcast stations and MVPDs, cable,
telco, and satellite companies like Charter, Verizon, DISH, and
others that offer television service, to negotiate the carriage
of broadcast television content on their systems which is known
as retransmission consent, or retrans, under a good faith
standard to be decided by the FCC.
This regulatory backstop was and is important because there
have been allegations that these negotiations have, at times,
not been carried out in good faith. When negotiations stall or
break down, broadcasters may pull their signal from an MVPD
system channel lineup, resulting in a blackout of that content.
In these circumstances, consumers suffer as a result of the two
parties' inability to come to an agreement.
And while it is true that some customers have the ability
to set up an antenna to get this content over the air when it
gets pulled off their cable or satellite service, for many,
this option is too complicated, or they go without this
broadcast content during the disputes.
Requiring the parties engage in good faith negotiations was
intended to reduce the number of blackouts and the resulting
consumer harm. These were the major provisions of the bill that
are now set to expire at the end of this year. Some in the
broadcast industry have argued that this legislation should
sunset, and that the provisions are no longer necessary.
While I agree that this law isn't a perfect solution,
allowing this legislation to sunset would create a crisis that
could result in nearly a million consumers losing access to
important broadcast content. Allowing a lapse of the good faith
standard in retransmission consent negotiation only invites bad
behavior and consumer harm.
More broadly, the media landscape has changed a lot in the
last five years, with major consolidation occurring among
broadcasters and MVPDs. Ms. Boyers, in her testimony, argues
that this arms race between the two sides has resulted in
increased rates for smaller rural cable providers who don't
have the scale to get preferential rates, and who, oftentimes,
pay higher rates for the content than their larger rivals,
However, across the board, we hear from MVPDs that the
rates for retransmission consent are increasing. In recent
years, we have also seen the rise of over-the-top providers
like Sling, HULU, and YouTube, offering live television service
over the internet directly to consumers. This is a complex
marketplace that consumers rely on for information and
entertainment, and Americans pay a lot every year to get access
to this content.
[The prepared statement of Mr. Doyle follows:]
Prepared Statement of Hon. Mike Doyle
Good morning, I'd like to welcome everyone to this
subcommittee's first hearing of the new Congress on STELAR and
the evolving media marketplace. I'd also like to thank our
witnesses for appearing before us today to discuss these
important issues.
Five years ago, this Committee passed the STELA
Reauthorization Act. This bill extended the authorization for
satellite television companies to provide broadcast content to
unserved households. According to the satellite TV industry,
this provision enables roughly 870,000 customers, in mostly
rural communities, to receive over-the-air broadcast television
signals.
These customers fall into a few categories. The first is
households that cannot receive broadcast content using an
antenna. The second is markets where a satellite provider does
not offer local into local service. The third is short markets,
where there are no local affiliated stations with one of the
networks. And finally, satellite TV subscribers that receive
service to a commercial truck or RV.
In effect, this provision enables rural customers of Dish
and Direct TV to receive content from NBC, ABC, CBS, Fox, and
other broadcast stations, where it isn't otherwise available.
STELAR also required broadcast stations and MVPDs, cable,
telco, and satellite companies like Charter, Verizon, Dish, and
others that offer television service, to negotiate the carriage
of broadcast television content on their systems, what is known
as retransmission consent or retrans, under a good faith
standard, to be decided by the FCC. This regulatory backstop
was and is important, because there have been allegations that
these negotiations have at times not been carried out in good
faith. When negotiations stall or break down, broadcasters may
pull their signal from an MVPDs system's channel lineup,
resulting in a blackout of that content. In these
circumstances, consumers suffer as a result of the 2 parties'
inability to come to an agreement. And while it is true that
some consumers have the ability to setup an antenna to get this
content over the air, when it gets pulled off their cable or
satellite service, for many this option is too complicated, and
they go without this broadcast content during these disputes.
Requiring that parties engage in good faith negotiations was
intended to reduce the number of blackouts and the resulting
consumer harm. These were the major provisions of the bill that
are now set to expire at the end of this year.
Some in the broadcast industry have argued that this
legislation should sunset, and that the provisions are no
longer necessary. While I agree that this law isn't a perfect
solution, allowing this legislation to sunset would create a
crisis that could result in nearly a million consumers losing
access to important broadcast content. Allowing a lapse of the
good faith standard in retransmission consent negotiations only
invites bad behavior and consumer harm. More broadly, the media
landscape has changed a lot of the last five years, with major
consolidation occurring among broadcasters and MVPDs. Ms.
Boyers, in her testimony, argues that this arms race between
the two sides has resulted in increased rates for smaller rural
cable providers, who don't have the scale to get preferential
rates, and who often times pay higher rates for content than
their larger rivals. However, across the board, we hear from
MVPDs that the rates for retransmission consent are increasing.
In recent years we have also seen the rise of over-the-top
providers like Sling, Hulu, and YouTube offering live
television services over the internet directly to consumers.
This is a complex marketplace that consumers rely on for
information and entertainment, and American's pay a lot every
year to get access to this content.
I look forward to the testimony of our witnesses.
Mr. Doyle. I look forward to the testimony of our
witnesses, and with that, I yield one minute to my friend from
California, Ms. Eshoo.
Ms. Eshoo. I thank the chairman for yielding to me.
I think today's hearing is not so much about choosing sides
between broadcasters and cable. I think it is really about
consumers who I think are losing out in the media market in two
ways: blackouts and unexpected fees. Too often, consumers are
held hostage during disputes between broadcasters and cable. In
2017, there were 213 blackouts, which is more than double the
number from five years prior. I am pleased to report that Mr.
Scalise and I have agreed to a champion legislation to end
blackouts by overhauling outdated regulations.
Next, I think we should also deal with the hundreds of
millions of dollars of misleading, below-the-line fees that
consumers get stuck with every year. My bill, H.R. 1220, The
True Fees Act, simply requires that cable, phone, and internet
providers include all fees in the prices they advertise to
consumers. Kind of a commonsense idea. I think that it would
ensure that the consumers would then know exactly what they are
paying when they sign up for a service.
So thank you, Mr. Chairman. I look forward to a productive
hearing, and thank you for yielding to me.
Mr. Doyle. I thank the gentlelady, and now the Chair
recognizes Mr. Latta, the ranking member of the subcommittee,
for five minutes for his opening statement.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Latta. Well, thank you, Mr. Chairman, and thank you
very much for holding today's hearing, and thank you very much
to our panel of witnesses for being with us today.
Today's hearing, once again, considers the interplay
between local broadcasters and direct broadcast satellite
services known as STELAR. Key provisions of STELAR expire at
the end of 2019, and I am pleased that the subcommittee is
continuing this process on a question of reauthorization that
we started last year with a broader hearing examining the
current state of the video marketplace.
In the subcommittee's hearing last September, we learned
about changes in consumers' viewing habits, such as the
continuing rise of the over-the-top video services, and notable
shifts of advertising expenditures across the various mediums.
Nevertheless, while online video services flourish and deliver
exciting and innovating viewing alternatives, the bedrock of
our video marketplace remains local broadcast programming.
All of us rely on our local broadcasters for news,
emergency updates, weather, traffic, community engagement, and
local interest programming. Accordingly, this subcommittee has
a duty to ensure that local broadcasters retain the ability to
invest in infrastructure and programming that keeps all
Americans connected to their communities.
For 30 years, Congress has also played a key role in
ensuring that rural Americans who are unable to receive an
over-the-air broadcast network signal are able to receive local
news and content via direct broadcast satellite services.
Congress accomplished this in 1988 by creating a statutory
copyright license for fee, license fee, that helped the direct
broadcast satellite industry take root.
But the video marketplace continues to evolve, and
accordingly, every five years we carefully examine whether this
model should be reauthorized, repealed, or revised. Through
each iteration of what we now call STELAR, we ask the expert
subject matter agencies to report on the effectiveness of
statutory license fee model, and we hold hearings calling upon
a broad collection of the stakeholders representing both
consumers and the industrial participants.
I am pleased that we have again seated a qualified panel of
experts who can assist this committee to paint an accurate
picture of this market. It is important that we foster a
competitive video marketplace and ensure that all Americans
continue to receive access to unbiased local news reports, up-
to-the-minute weather updates, and critical information during
emergencies.
For example, unfortunately, last week in Ohio, we had a
series of tornadoes, and folks back home in my district,
particularly, had to rely on the local broadcast as to what was
occurring.
I look forward to working with the chairman and members of
the subcommittee as we carefully examine reauthorization, and I
thank our witnesses again.
And I appreciate the time, Mr. Chairman, and I yield back.
[The prepared statement of Mr. Latta follow:]
Prepared Statement of Hon. Robert E. Latta
Thank you, Mr. Chairman. I appreciate the subcommittee
holding this hearing today and I thank our panel of witnesses
for testifying.
Today's hearing once again considers the interplay between
local broadcasters and direct broadcast satellite services--
namely the``Satellite Television Extension and Localism Act
Reauthorization," known as ``STELAR." Key provisions of STELAR
expire at the end of 2019, and I'm pleased this subcommittee is
continuing this process on the question of reauthorization that
we started last year with a broader hearing examining the
current state of the video marketplace.
In this subcommittee's hearing last September, we learned
about changes in consumers' viewing habits, such as the
continuing rise of over-the-top video services, and notable
shifts of advertising expenditures across the various mediums.
Nevertheless, while online video services flourish and deliver
exciting and innovative viewing alternatives, the bedrock of
our video marketplace remains local broadcast programming. All
of us rely on our local broadcasters for news, emergency
updates, weather, traffic, community engagement, and local
interest programming. Accordingly, this subcommittee has a duty
to ensure that local broadcasters retain the ability to invest
in infrastructure and programming that keeps all Americans
connected to their communities.
For 30 years, Congress has also played a key role in
ensuring that rural Americans who are unable to receive an
over-the-air broadcast network signal, are able to receive
local news and content via direct broadcast satellite services.
Congress accomplished this in 1988 by creating a statutory
Copyright license fee that helped the direct broadcast
satellite industry take root. But the video marketplace
continues to evolve and, accordingly, every five years, we
carefully reexamine whether this model should be reauthorized,
repealed, or revised. Through each iteration of what we now
call STELAR, we ask the expert subject matter agencies to
report on the effectiveness of statutory license fee model, and
we hold hearings calling upon a broad collection of
stakeholders representing both consumers and industry
participants. I'm pleased that we have again seated a qualified
panel of experts who can assist this committee to paint an
accurate picture of this market. It's important that we foster
a competitive video marketplace AND ensure that all Americans
continue to receive access to unbiased local news reports, up-
to-the-minute weather updates, and critical information during
emergencies.
I look forward to working with the chairman and the members
of the subcommittee as we carefully consider reauthorization.
Thank you again to our witnesses and I yield back.
Mr. Latta. And at this time, I am going to yield to Mr.
Long.
Mr. Long. Thank you. I thank my friend for yielding, and I
would like to thank the witnesses for being here, and I am
especially happy to see a fellow Missourian, Ms. Boyers, here
today even though she did make the unfortunate decision to live
in Jason Smith's district and not mine. But as a real estate
broker for 30 years, I still have a lot of friends. If you want
to move into the best of the 435 Congressional districts, we
can set you up.
I think we can all agree that the media and entertainment
marketplace has, and is, rapidly evolving. There is more
competition than ever, and government intervention is not
always the answer. It is important for us to examine the state
of the video marketplace, but as we approach a potential sixth
reauthorization of STELAR, we need to take a hard look at the
underlying policy and its relevance today rather than assuming
its passage is a necessity.
They say there is only 3 things in life that are certain:
death, taxes, and the reauthorization of STELAR. We should
ignore the inclination to rubber-stamp this legislation only
because this committee has historically done so in the past,
and I yield back.
Mr. Latta. Mr. Chairman, at this time--are there any other
members wishing to claim the remainder of my time? Mr. Scalise?
Mr. Scalise. Thank you, Mr. Ranking Member and Mr.
Chairman. I appreciate all of you coming to talk about STELAR,
and really, not just STELAR in the context of reauthorization
in that silo, but it is a time that forces us, I think, to look
at the entire marketplace, the entire video marketplace, and
all the laws governing it, because I actually share the
expressions of some of the panelists who talk about why they
think STELAR should expire.
It is not because they think it should just go away because
they want more reforms, and some people might think that STELAR
going away gets us reform, but it really doesn't. STELAR going
away just brings us back to the fundamental 1992 Cable Act
laws, the foundation which is incredibly outdated.
We have got a marketplace that has changed dramatically
since 1992. I think everybody knows that. I mean, I literally
can pull up content on this device right here, and it is not
governed by--primarily most of what I would pull up is not
governed by the 1992 Cable Act. Some actually is governed by
the 1992 Cable Act.
But if I go on the internet and pull something up, or if I
am over the top, why do we have such a diverse set of rules and
laws that apply to a basic industry in our country? We need to
reform the entire 1992 Cable Act. It is long past time for this
Congress to do it.
I applaud Congresswoman Eshoo, and I know she spoke a few
minutes ago. We have been working very closely, and hopefully,
we can get to that point where we are reforming the entire
marketplace that regards video.
Mr. Doyle. The gentleman yields back. The Chair now
recognizes Mr. Pallone, chairman of the full committee, for 5
minutes for his opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Doyle.
For nearly 70 years, television has been a unifying thread
in American society. It brings people together, friends gather
around to watch the big game, and coworkers share their
theories about the twists and turns of the moments most-watched
series. TV is also the place where we get our local and
national news, and where we turn for emergency information
during a storm or natural disaster.
The hearing today may appear to be focused on a few
discrete, arcane provisions of communications and copyright
law, but it is fundamentally about consumers getting access to
broadcast programming, whether they are in urban or rural
areas. And we should continue to focus on the timeless values
that inform our media policy, and those are localism,
diversity, and competition.
The STELA Reauthorization Act of 2014, or STELAR, and its
predecessors, established the framework that allows satellite
television providers to deliver broadcast stations inside, and
sometimes outside of a subscriber's market to their customers.
Some so-called unserved subscribers can't receive their local
stations from an antenna, because they are too far away, or
they are in a media market that doesn't have a station
affiliated with one or more of the big four networks, and these
consumers must be protected.
At the same time, satellite television providers are not
required to carry local broadcast networks. As a result, some
subscribers receive out-of-market network programming from
their satellite provider instead of local stations.
Congress also created the good faith negotiation rules that
underlie the agreements that allow consumers to watch over-the-
air broadcast stations as part of their cable and satellite TV
packages. As media consolidation has grown, so too have the
fights over these programming agreements, and unfortunately,
consumers have been caught in the middle. The number of station
blackouts has been increasing as have the rates consumers pay.
Smaller telecommunication companies are facing a choice of
whether to continue as cable operators, or simply become
broadband providers.
So as we begin our examination of STELAR, it is important
that we ask the ultimate question of how best to put consumers
first. I expect that my colleagues on both sides of the aisle
will offer a number of different solutions, large and small,
tackling different issues cropping up within the media
landscape.
In my opinion, we should focus our analysis on the
consumers, and questions like what are the implications if
STELAR is not reauthorized, and how are the over 800,000
consumers currently receiving distant signals be impacted? What
is the path that gives consumers the ability to access at
prices they can afford the television content they want? How do
we ensure that consumers are not rendered pawns in high-stakes
negotiations between video distribution companies and big
broadcaster station groups?
And how can we ensure that broadcast stations remain
vibrant outlets of expression and trusted sources of
information for the local communities, while also promoting
competition to the benefit of consumers? Also, how can we
encourage the carrying of local programming at reasonable
rates, and that local programming reflects a diversity of
views? So this committee will closely examine these issues and
work together to find a consensus approach of moving forward.
I want to thank the witnesses for being here today.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
For nearly 70 years, television has been a unifying thread
in American society. It brings people together--friends gather
around to watch the big game and co-workers share their
theories about the twists and turns of the moment's must-watch
series. Television is also the place where we get our local and
national news, and where we turn for emergency information
during a storm or natural disaster.
The hearing today may appear to be focused on a few
discreet, arcane provisions of communications and copyright
law, but it is fundamentally about consumers getting access to
broadcast programming, whether they are in urban or rural
areas. We should continue to focus on the timeless values that
inform our media policy-localism, diversity and competition.
The STELA Reauthorization Act of 2014, or STELAR, and its
predecessors, established the framework that allows satellite
television providers to deliver broadcast stations inside, and
sometimes outside, of a subscriber's market to their customers.
Some so-called ``unserved" subscribers can't receive their
local stations from an antenna because they are too far away,
or they are in a media market that doesn't have a station
affiliated with one or more of the ``big four" networks. These
consumers must be protected. At the same time, satellite
television providers are not required to carry local broadcast
networks. As a result, some subscribers receive out of market
network programming from their satellite provider instead of
local stations.
Congress also created the good faith negotiation rules that
underlie the agreements that allow consumers to watch over-the-
air broadcast stations as part of their cable and satellite TV
packages. As media consolidation has grown, so too have the
fights over these programming agreements and unfortunately
consumers have been caught in the middle.
The number of station blackouts has been increasing as have
the rates consumers pay. Smaller telecommunications companies
are facing a choice of whether to continue as cable operators
or simply become broadband providers.
As we begin our examination of STELAR, it's important that
we ask the ultimate question of how best to put consumers
first.
I expect that my colleagues on both sides of the aisle will
offer a number of different solutions, large and small,
tackling different issues cropping up within the media
landscape. In my opinion, we should focus our analysis on the
consumers:
What are the implications if STELAR is not reauthorized and
how will the over 800,000 consumers currently receiving distant
signals be impacted?
What is the path that gives consumers the ability to
access--at prices they can afford--the television content they
want?
How do we ensure that consumers are not rendered pawns in
high-stakes negotiations between video distribution companies
and big broadcaster station groups?
How can we ensure that broadcast stations remain vibrant
outlets of expression and trusted sources of information for
their local communities, while also promoting competition to
the benefit of consumers?
How can we encourage the carrying of local programming at
reasonable rates and that local programming reflects a
diversity of views?
This Committee will closely examine these issues and work
together to find a consensus approach of moving forward. I
thank the witnesses for being here today, and with that, I
yield back.
Mr. Pallone.I still have--I don't know if anybody wants my
time. If not, I will yield back. Thank you. Oh, yes. I will
yield to the vice chair.
Ms. Clarke. Thank you very much, Mr. Chairman, and I thank
Chairman Doyle and our ranking member.
Good morning, and I want to thank you for holding this very
important hearing. Providing equal television broadcast access
for consumers is crucial to informing the public, and having
more competition available will assist our constituents.
We are not seated here today to discuss satellite and cable
operators or broadcasters for that matter. We are here today to
focus on the consumers. Our constituents deserve rules that
protect them. They deserve rules that protect the diversity of
voices in media and access to the spectrum. It is my hope that
your input, as experts in the field today, media marketplace,
will give us that room and that space to do just that.
With that, Mr. Chairman, I yield back.
Mr. Pallone. And I yield back as well, Mr. Chairman.
Mr. Doyle. The gentleman yields back. The Chair now
recognizes Mr. Walden, the ranking member of the full
committee, for five minutes for his opening statement.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Good morning, Mr. Chairman, and good morning to
our witnesses. We are delighted to have you here today. I want
to thank you. I know your expertise is going to help us as we
work on this legislation and review the media marketplace; and
whether or not the Satellite Home Viewer Act, first passed when
Ronald Reagan was President, works for television viewers
today.
I would especially like to extend a warm welcome to my
friend and fellow Oregonian, Senator Gordon Smith, who
effectively served Oregon in the United States Senate for a
dozen years. It is good to see you over here in the people's
House, Senator.
Mr. Smith. Thank you.
Mr. Walden. Thirty years ago, Congress sought to ensure
that rural Americans, unable to receive an over-the-air
broadcast signal, would still be able to view content via
satellite services. For a large rural district like mine in
Oregon, which would stretch from the Atlantic Ocean to Ohio if
you laid it over the east coast, this was critical.
Congress would go on to bless the budding satellite
industry with a discounted Copyright license as an alternative
to individually negotiating with each Copyright holder. While
the license to provide local-into-local is now a permanent
fixture, the ``distant network signal'' license is still
reviewed every five years, along with other elements that
accompany the extension.
As I emphasize when we did this five years ago during my
time as subcommittee chair, this must be a transparent process
and driven by data. I am encouraged the FCC last year commenced
its quadrennial review of the media landscape. I am also
appreciative of the work by the Government Accountability
Office in drafting its report to Congress, directing--
describing the stakeholders' views on phasing out the statutory
license. Our goal should certainly be that everyone in the
country has access to local content and at a reasonable price.
You all have heard me discuss my background in radio
broadcasting, and, hopefully, understand that my priority that
local content is preserved. We must have a model that revolves
around this concept, because although we might like watching
the latest shows on Netflix or some other service, it is
essential that we have access to our local news, sports,
weather, and emergency information. Whether it is the wildfires
and smoke warnings in the summer in Oregon, or tornadoes,
traffic accidents, emergency situations elsewhere in the
country, local content provides vitally important, trustworthy,
and timely information to communities across America.
It is also certainly understandable in our fast-moving
world to take stock of what has changed. Technological
developments, paired with changes in how Americans consume
video driven, in significant part, by online video services,
have led video distributors to see steep declines in
subscribers as consumers cut the cord, and broadcasters have
seen advertising revenues move to digital platforms.
This fact certainly impacts the distributors, but also
impacts the broadcasters and their ability to serve their local
communities with in-depth news programming. Local broadcasters
expend tremendous resources serving their communities, and they
deserve a level playing field. Through their FCC licenses, they
are also trustees of the public's airways, and must serve the
public's interest. That means they serve the needs and interest
of their communities. We must be careful not to hamstring with
them with negotiating restrictions not justified by market
conditions.
Most importantly, consumers won't tolerate gaps in
coverage, blackouts, and arbitrage opportunities that drive up
prices, and reduce the quality of content. The bottom line is
that Congress must consider whether a distant network signal
license extension is a bridge or a blockade to delivering local
coverage.
So I am committed to ensuring that all rural communities,
both in Oregon and across the country, continue to receive
robust, effective, and affordable local coverage. I am looking
forward to the hearing today and hearing from our witnesses, a
cross-section of industry and public interest stakeholders, as
we move forward in this process and examine the role of
statutory licensing in today's video marketplace.
With that, Mr. Chairman, I yield back. Thank you.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Mr. Chairman, thank you for scheduling this hearing today.
And thank you to our witnesses for being with us today, I
know expertise will be invaluable as we move forward in our
review of the media marketplace and whether or not the
Satellite Home Viewer Act--first passed when Ronald Reagan was
president--works for television viewers today.
I'd especially like to extend a warm welcome to my friend
and fellow Oregonian, Senator Gordon Smith, who effectively
served Oregon in the United States Senate for a dozen years.
It's good to see you over here in ``the people's House."
Thirty years ago, Congress sought to ensure that rural
Americans, unable to receive an over-the-air broadcast signal,
would still be able to view content via satellite services. For
a large rural district like mine in Oregon--which would stretch
from the Atlantic Ocean to Ohio if you laid it over the East
Coast--this was critical.
Congress would go on to bless the budding satellite
industry with a discounted Copyright license as an alternative
to individually negotiating with each Copyright holder. While
the license to provide local-into-local signal is now a
permanent fixture, the ``distant network signal" license is
still reviewed every five years, along with other elements that
accompany the extension.
As I emphasized when we did this five years ago during my
time as subcommittee chairman, this must be a transparent
process driven by reliable data. I am encouraged that the FCC
last year commenced its Quadrennial Review of the media
landscape. I'm also appreciative of the work by the Government
Accountability Office in drafting its report that Congress
directed describing stakeholders' views on phasing out the
statutory license.
Our goal should certainly be that everyone in this country
has access to local content at a reasonable price.
You all have heard me discuss my background in
broadcasting, and hopefully understand my priority that local
content is preserved. We must have a model that revolves around
this concept because although we might like watching the latest
show on Netflix, it's essential that we have access to our
local news, sports, weather and emergency information. Whether
it is the wildfires and smoke warnings in the summer months in
Oregon, or tornados, traffic accidents, and emergency
situations, local content provides vitally important,
trustworthy, and timely information to communities across the
country.
It is also certainly understandable in our fast-moving
world to take stock of what has changed. Technological
developments paired with changes in how Americans consume
video--driven in significant part by online video services--
have led video distributors to see steep declines in
subscribers as consumers cut the cord, and broadcasters have
seen advertising revenues move to digital platforms. This fact
certainly impacts the distributors, but also it impacts
broadcasters in their ability to serve their local communities
with in-depth news coverage.
Local broadcasters expend tremendous resources serving
their communities, and they deserve a level playing field.
Through their FCC licenses, broadcasters serve as trustees of
the public's airwaves, and must serve the public interest. That
means they serve the needs and interests of their local
communities. We must be careful not to hamstring them with
negotiating restrictions not justified by market conditions.
Most importantly, consumers won't tolerate gaps in
coverage, blackouts, and arbitrage opportunities that drive up
prices and reduce the quality of local content. The bottom line
is that Congress must consider whether a distant network signal
license extension is a bridge--or a blockade--to delivering
local coverage. I am committed to ensuring that all rural
communities both in Oregon, and across the United States,
continue to receive robust, effective, and affordable local
broadcast coverage. Period.
So, I'm looking forward to hearing from our witnesses
today--a cross-section of industry and public interest
stakeholders--as we move forward in this process and examine
the role of the statutory license in today's video marketplace.
Thank you.
Mr. Doyle. The gentleman yields back.
The Chair would like to remind Members that pursuant to
committee rules, all Members' written opening statements will
be made part of the record.
Now I would like to introduce witnesses for today's
hearing. Ms. Patricia Jo Boyers, President and Vice-Chairman of
the board of BOYCOM VISION. Welcome.
Mr. Robert Thun, Senior Vice President of Content
Programming, AT&T Mobility and Entertainment. Welcome, sir.
Senator Gordon Smith, President and CEO of the National
Association of Broadcasters. Senator, welcome.
And Mr. John Bergmayer, Senior Counsel, Public Knowledge.
Welcome, sir.
We want to thank our witnesses for joining us today. We
look forward to your testimony. At this time, the Chair will
now recognize each witness for 5 minutes to provide their
opening statement.
Before we begin, I would like to explain the lighting
system. In front of you is a series of lights. The light will
initially be green at the start of your opening statement. It
will turn yellow when you have 1-minute left, so please start
to wrap up your testimony at that point, and the light will
turn red when your time expires.
Ms. Boyers, you are now recognized for 5 minutes, and
please make sure your microphone is on.
STATEMENTS OF PATRICIA JO BOYERS, PRESIDENT AND VICE CHAIRMAN
OF THE BOARD, BOYCOM VISION; ROBERT D. THUN, SENIOR VICE
PRESIDENT OF CONTENT AND PROGRAMMING, AT&T MOBILITY AND
ENTERTAINMENT; GORDON H. SMITH, PRESIDENT AND CEO, NATIONAL
ASSOCIATION OF BROADCASTERS; AND JOHN BERGMAYER, SENIOR
COUNSEL, PUBLIC KNOWLEDGE
STATEMENT OF PATRICIA JO BOYERS
Ms. Boyers. Thank you. Good morning. I bring you greetings
from the foothills of the great Ozark Mountains in southeast
Missouri.
My husband and I started our mom and pop, BOYCOM, in 1992.
This meant we had to take out a second mortgage on our home,
and we used our farm as collateral. It has never been easy. Our
systems are very rural. In most areas, you need a tomcat if you
want kittens.
So our systems are 147 miles from our local NBC affiliate,
and more than 75 miles away from our local NBC and CBS
stations. Most of my subscribers can't get these signals free
over the air, and none of these stations offer our local news,
sports, or weather, no matter what others might tell you today.
We have a very price-sensitive population. Four of our five
counties are perpetually impoverished. This simply means that
the median annual household income of these counties has been
below the national poverty level since the 1960 Census. Yet we
survive.
All of y'all already know that the retransmission consent
problems from your constituents, double-digit price hikes,
blackouts before marquee events, and requirements to carry
channels that no one has ever heard of. So the reality for us
and other rural operators is, things have gotten worse since
the last satellite television reauthorization.
First, broadcasters increasingly control multiple network
affiliates within local markets. For instance, in my market,
the same folks from Atlanta, Georgia, own both the local CBS
and the ABC affiliates. This naturally leads to higher prices.
There is no other game in town for us. And these two stations
air the exact same local broadcast; same weather guy, same news
guy, same words, same news. So that is one station for the
price of two, and it is not even my local news, unless we beat
Cape Girardeau playing football.
Secondly, broadcasters now control many more stations
nationally. Years ago, I knew the owners of every broadcast
station that I dealt with, all three of them. Now I deal with
huge conglomerates. This means higher rates in the form of
take-it-or-leave-it prices from the broadcasters who do not
know where I am at, or anything about my customers.
And thirdly, broadcasters are acquiring these regional
sports networks to increase their overall average in these
bundling of contract renewals. This is especially egregious for
us when Sinclair finally finishes their purchase of the Fox
Sports Midwest, home of the Cardinals. Hell, we could drive all
the way to St. Louis, buy tickets, hot dogs, popcorn, and beer
for the price of what we are going to be paying Sinclair for
our subscriber.
So it is no wonder why the broadcasters want this law to
sunset. But what is needed is sunshine on their behavior, and
the practices towards consumers and competition. Their prices
are especially bad for small operators like me. The FCC reports
that small cable operators now pay, on average, at least 30
percent more than large systems pay for retransmission consent.
For my small system, that percentage is 47 percent. Today, the
four affiliated broadcast stations make up 20 percent of my
programming fees, and the rest is for the other 300 channels,
and that percentage is growing at a rate of more than 200
percent every renewal cycle.
So I know that y'all care as much about your constituents
as I do about my customers, who are elderly, on fixed incomes
that depend on us for that video service, and who are greatly
impacted by higher subscription fees. In fact, a lot of these
folks can't get even satellite for DISH, not because it is not
available to them, but because they can't afford it. They don't
have a checking account. They don't have credit cards. They
don't have credit. Well, they do have credit, but it is bad.
All they can do is work with a local cable TV provider who will
work with them. We can work with them. We can even barter out
sometimes.
But by turning a deaf ear to my plight today simply ensures
that those who live in the hills, and the hollows of southeast
Missouri, and the rest of rural America will be uneconomical to
reach, and those who do have our service are paying through the
nose for it. So the mandated regulatory advantages given to
broadcasters make a free marketplace solution impossible.
Now, I hate the idea of Congress getting involved in my
business, but they are already involved in my business, with
everything from basic tier buyouts through to channel placement
rules, so I do need your help. One solution of many to help
mitigate these soaring fees would be to apply the good faith
rules to negotiations between larger station groups and the
NCTC, which is a buying group that the small cable TV
operators, like myself, use. We are affiliated with the
American Communications Association. We connect. So we have an
affiliation with the NCTC.
Regulations and reauthorization reform are desperately
needed. Together, we can put our shoulder to the plow and
figure this out now. Thank you.
[The prepared statement of Ms. Boyers follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Doyle. Thank you very much. The Chair now recognizes
Mr. Thun for 5 minutes.
STATEMENT OF ROBERT D. THUN
Mr. Thun. Thank you, Chairman Pallone, Ranking Member
Walden, subcommittee Chairman Doyle, subcommittee Ranking
Member Latta, and members of the committee. My name is Rob
Thun, Senior Vice President of Content Programming at AT&T. In
my current role, I am responsible for securing content rights
for both the major networks and local broadcast station groups
for the company.
AT&T has a 143-year history of innovation that includes
eight Nobel prizes. We employ more than 200,000 Americans
across all of the 50 States. We are deeply invested in our
country, our communities, our employees, and our customers.
This hearing is aptly focused on protecting consumers in a
marketplace that is undergoing revolutionary change. It is
consumers, our customers, and your constituents, who are
driving these changes. They are demanding high quality video
content and the ability to watch it where and how they want to.
It is important for policymakers to ensure that the laws
reflect a vibrant video marketplace and that all consumers
benefit from it. At present, they do not, because the legal and
regulatory framework for licensing broadcast television content
distorts the market in favor of broadcasters. This framework is
sorely in need of recalibration.
The retransmission consent regime that governs the video
marketplace dates back to the 1992 Cable Act, well before
today's multitude of competitive platforms and consumer
options. It was first put in place to help broadcasters obtain
carriage on cable platforms that, at the time, were the only
pay TV offering in most areas.
Despite the competition in the video marketplace,
broadcaster fees for carrying these stations have roughly
doubled over the last five years. Since 2008 through 2018, the
retrans fees have grown from $500 million to $10 billion. That
is a 2,000 percent increase, which is clearly unsustainable.
Why is this happening? Because under the current law, MVPDs
cannot offer their subscribers alternate network programming,
even temporarily, during an impasse. These laws unfairly
protect local broadcasters from the changes in the video
marketplace, harming innovation and consumer choice.
When MVPDs attempt to limit the increases in these fees,
local broadcasters, shielded with their statutory protections,
respond with blackouts. Local broadcasters have shattered
records for blackouts, and as I testify in front of you today,
we face blackouts across 33 stations covering 25 markets.
The cycle of increased local broadcast fees and blackouts
unfairly penalizes the nearly 90 million pay TV customers that
have chosen to keep their traditional TV service, which
includes over 20 million of our premium customers.
Retransmission consent has become a weapon for broadcasters
to use to the detriment of these consumers. It is time to
modernize the law to reflect the current marketplace, and to
provide distributors a more level playing field with local
broadcasters.
The marketplace has seen tremendous change since Congress
last renewed STELAR in 2014. There are now over 170 million
over-the-top subscriptions with Netflix having more subscribers
than AT&T and Comcast combined. As is done in every past
renewal, Congress should view the STELAR renewal as an
opportunity to fix the big problem in the video marketplace,
the broken retransmission consent regime.
To be clear, AT&T strongly supports the renewal of STELAR.
STELAR contains provisions that benefit consumers, including
the good-faith negotiations requirements and the statutory
copyright license permitting satellite carriers to provide
network programming to more than 870,000 satellite subscribers.
Among these are hundreds of thousands of rural homes that
broadcast stations fail to reach. In addition, it provides
long-haul truckers, RV enthusiasts, tailgating sports fans, and
the satellite delivery network TV.
Congress should take this opportunity to make permanent the
satellite distant signal license that brings network service to
hundreds of thousands of rural customers. STELAR's requirement
that broadcasters and MVPDs negotiate in good-faith serves an
important backstop that places guideposts on these
negotiations. We still have issues with stations refusing to
negotiate fairly, or even respond to offers in certain cases.
Despite this, the good-faith provisions are important to
helping these negotiations along. The notion that broadcasters
oppose this provision is emblematic of the challenges that we
face under the current law.
AT&T is grateful to the committee for holding this
important hearing. We would also like to acknowledge and give
thanks to the bipartisan efforts of Representatives Eshoo and
Scalise to reform the broken retrans regime. We look forward to
working with them and all of you to find a solution. I look
forward to answering any questions you might have.
[The prepared statement of Mr. Thun follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Doyle. I thank the gentleman.
Now, Senator Smith, you are recognized for 5 minutes.
STATEMENT OF GORDON H. SMITH
Mr. Smith. Thank you. And good morning, Chairmen Pallone
and Doyle, Ranking Members Latta and Walden, and members of
this distinguished subcommittee. My name is Gordon Smith. I am
the president and CEO of the National Association of
Broadcasters.
On behalf of the free and local broadcast television
stations serving your hometowns, I appreciate the opportunity
to testify on how Congress can ensure that viewers are better
able to access their local news, sports, weather, emergency
information by allowing the expiring provisions of STELAR to
sunset this year.
Today, STELAR is not only unnecessary due to considerable
advances in the media marketplace, but any reauthorization will
further harm the satellite viewers that are currently denied
access to their local television stations as a result of this
law. For these reasons, broadcasters oppose STELAR's
reauthorization. Similarly, the copyright office, the expert
agency charged with administering STELAR's license, released a
report yesterday calling for its expiration.
In today's competitive media landscape, local broadcast
television remains the most watched source of news, emergency
updates, entertainment, programming, sports, and investigative
journalism, something that is in trouble in this country. And
in communities across America, we are their lifeline. Our
viewers turn to local stations to get weather reports, learn
how to help neighbors in need, and watch trusted local news
anchors give an unbiased view of what is happening in their
communities. Local broadcasting is a critical electronic thread
that keeps every community together, informed, and safe.
The exceptions to the benefits afforded by this local
broadcast system are those communities that continue to be
served by out-of-market stations as a result of STELAR. In
1988, when the original satellite law was enacted, viewers had
two predominant choices for video programming, over-the-air
broadcasting, television, or subscription cable package offered
by a single local provider.
That satellite legislation, a predecessor of STELAR, was
hugely successful in enabling the Nation's satellite television
companies to better compete with cable's monopoly, but it was
never meant to be permanent, and it gave satellite operators a
crutch, the ability to serve local viewers with out-of-market
network programming at below-market rates, and without having
to negotiate for it.
Thirty years later, today's media market is virtually
unrecognizable and dramatically different, even compared to
just five years ago at the last STELAR renewal. Those nascent
satellite companies that Congress subsidized are now multi-
billion dollar behemoths, and today's competition for viewers
comes not from those giant pay TV providers and their cable
brethren, but also by unregulated behemoth tech companies, such
as Facebook, Google, and online video providers, like Netflix
and Amazon.
Most importantly, no technological impediment exists today
to prevent AT&T and DIRECTV and DISH from providing local
broadcast channels to their subscribers across the country.
Yet, STELAR's distant signal provisions incentivize those
companies to serve a shrinking universe of eligible viewers
with out-of-market stations because of this subsidy.
To put this in practical terms, DIRECTV subscribers in
Ottumwa, Iowa, saw a news story about a garbage truck catching
fire in Los Angeles. The local news they should have seen is
that of crop insurance prices rising, and its impact on farmers
in their State, in the Hawkeye State.
Well, during times of emergency, the difference between
what STELAR viewers see versus the local broadcast news is
stark. This is a business decision that a $200 billion AT&T
DIRECTV is making in 12 rural markets across America, a choice
that puts their profits ahead of service to consumers and ahead
of the safety of communities.
Broadcast and viewers salute Congressman Loebsack and other
Members of Congress who have highlighted the STELAR harm. To
end this consumer harm, and to modernize the video marketplace
laws, Congress should allow STELAR to expire as it was
originally intended. There is no policy justification or
technological reason for this outdated law to be reauthorized.
The time has come to stop subsidizing $1 billion satellite
companies, and to instead provide viewers with the most
accurate, the most watched, the most timely source of community
news, their weather, their emergency information which is their
local broadcast stations.
Thank you for this opportunity.
[The prepared statement of Mr. Smith follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Doyle. Thank you. We now recognize Mr. Bergmayer for 5
minutes.
STATEMENT OF JOHN BERGMAYER
Mr. Bergmayer. Thank you, Chairman Pallone, Chairman Doyle,
Ranking Member Latta, and Ranking Member Walden and all the
members of the subcommittee.
Congress must reauthorize STELAR, or even better, make it
permanent. Eight hundred and seventy thousand satellite
subscribers should not be a bargaining chip in the decades-long
disputes between broadcasters and MVPDs. Whether it is called
SHVA, SHAVIA, SHAVIRA, STELA, or STELAR, it has ensured that
satellite television companies can continue to retransmit local
broadcast stations to all of their customers. STELAR is an
important building block of video competition, allowing viewers
who live in unserved areas to continue receiving a full range
of national programming.
Satellite television has been a success story. Action by
Congress and the Federal Communications Commission has ensured
that satellite television, once a new distribution technology,
could access content and reach viewers. Public policies that
ensure that new distributors can access content on fair terms
benefit the public interest, and the success of satellite
should be a lesson for policymakers about the importance of
fostering new modes of video competition.
Congress should make STELAR permanent. There is no reason
for Congress to create artificial crises every few years,
jeopardizing the ability of satellite to remain a competitor.
The reason why Congress enacted STELAR in the first place
remain unchanged. It remains a necessary part of the current
overall regulatory system, which otherwise has no clear way to
deal with the problem of short markets.
However, if Congress does choose to reauthorize STELAR for
only a few years, it could consider timing its expiration to
the expiration of other video marketplace provisions, such as
distant signal importation rules, or basic tier buy-through.
This approach would better incentivize all industry players to
come to the table.
But fundamentally, if we are to consider reforms in the
video marketplace rules, they should benefit consumers, not one
industry sector at the expense of another. For years, public
knowledge has believed that this is an instance where a
predominantly deregulatory approach is needed and has a chance
of bipartisan support.
In particular, we would like to recognize Representatives
Anna Eshoo and Steve Scalise for their leadership on video
marketplace reforms. A promising approach would be to replace
the cumbersome and duplicative compulsory copyright license
retransmission consent system with a regime based purely on
copyright. This would better align the interests of programming
creators, and distributors, and eliminate duplicative
negotiations. It would ensure that local broadcasters have the
incentive to produce original, relevant local programming they
would own the rights to, that they could then license to MVPDs
and online distributors. And it would make it much easier for
non-MVPD video distributors to access programming by
eliminating the current two-track system where online video
rights are negotiated one way, and VPD rights another way, and
where incumbent MVPDs have a structural advantage.
To eliminate viewer blackouts, such an approach would keep
good faith requirements in place, as well as institute dispute
resolution mechanisms, and a gradual phase-in would avoid
industry and consumer disruption.
Additionally, it is time to eliminate network non-
duplication and syndicated exclusivity protections as the
elimination of the sports blackout rule has proven that such
measures are unnecessary and that the video industry can manage
its affairs via private contracting alone.
Ambitious reforms of this kind are the best way to
streamline the video marketplace and curb bill inflation. While
public knowledge supports bold changes to the video marketplace
rules, incremental reform should not be off the table if they
are more feasible in the short term. The retransmission consent
regime could be improved through the adoption of clear
standards of good faith and through the prohibition of certain
actions that should be considered bad faith, per se.
Congress should also consider protecting and promoting
competitiveness by directing the FCC to end the basic tier buy-
through rule, and unjustified policy intervention that makes a
la carte offerings unlawful. It could also extend the
successful policies that protect MVPDs from anticompetitive
conduct to certain online providers.
Congress should also promote internet openness and prevent
discriminatory billing practices that can hold back online
video. In addition to supporting strong open internet rules
under Title II of the Communications Act, Congress should
examine whether discriminatory data caps can hold back online
video competition.
It is time for Congress and the FCC to revamp the rules of
the video industry to promote the public interest. A video
marketplace that serves the public interest would give viewers
more choice of providers and the ability to watch any
programming wherever they want, and on the device of their
choice.
At the same time, it would ensure that creators and
distributors are paid a fair price. Congress can begin its
video reform efforts by making STELAR permanent, or at least
tying its sunset to the expiration of various other marketplace
rules. Thank you.
[The statement of Mr. Bergmayer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Doyle. We thank all the witnesses for their testimony.
That concludes opening statements. We are now going to move to
member questions. Each Member will have 5 minutes to ask
questions of our witnesses, and I will start by recognizing
myself for five minutes.
Mr. Thun, in your testimony, you say that roughly 870,000
satellite TV subscribers, mostly in rural areas, depend on the
provisions of STELAR to receive broadcast content. What would
happen if those provisions expire, and do you think any
customers would lose programming that they currently receive?
Mr. Thun. If STELAR were to expire, those customers simply
would not receive broadcast stations, those signals, and they
would lose access to that programming.
Mr. Doyle. Senator Smith, what do you think about that?
Mr. Smith. Well, right now, there are 12 markets that AT&T
does not provide local news to that it could. It chooses not
to. There is no technological reason that they couldn't. The
market has fundamentally changed, and renewing STELAR just
simply perpetuates that harm to many communities, specifically
Mr. Loebsack's. That will continue.
Mr. Doyle. Ms. Boyers, let me ask you. What would be the
consequences if Congress allows STELAR to expire, specifically
the good faith provisions related to retransmission consent
negotiations?
Ms. Boyers. Well, thank you, Congressman. It is important
because the reauthorization gives Congress that ability every
five years to reexamine the marketplace to make necessary
changes that protect customers, consumers, your constituents,
and competition. And less oversight by Congress in its critical
role means harm to consumers and to competition because the
broadcast industry, which has already shown a willingness every
year to raise their prices to consumers, and increase their
broadband TV, or their broadcast TV blackouts will have no
check and no balance whatsoever. That is not good for your
constituents, my consumers, my folks that we provide service
to.
It is kind of that David and Goliath thing for us. I have
got 3,000 subscribers, you know. I am just 3,000 subscribers. I
am really just a gnat, you know. I said that this morning. I am
a gnat on the butt of life because whenever you think in terms
of retransmission consent, they don't care. They don't care
about me. They don't care that it costs me $12.16 a month for
my four channels. They don't care. I mean, that is more than I
pay for ESPN or anything else. It is like David and Goliath,
you know. David needed God to help him fight Goliath, and we
need you to help us with retransmission consent. Pretty close
line drawn there.
Mr. Doyle. How about you, Mr. Thun? Whether a do you think
about the good faith provisions related to retransmission
consent negotiations?
Mr. Thun. Will, I think they are critical, and as they sit
today, they are extremely loose. They are a guidepost for
negotiations, but they don't work perfectly. We are currently
in a situation where we have blackouts because we put a
proposal on the table 60 days ago across seven broadcasters.
They refused to respond. They didn't want to do a deal
independently of each other. They wanted to do them all
together. Therefore, they gave us no ability to keep the
signals up. They took them away. So I welcome divine
intervention as well on this, because we are having an
unsustainable path of pricing increases that goes straight to
the consumer, and that is a bad place to be.
Mr. Doyle. Senator Smith, what do you think?
Mr. Smith. I think I have heard from those seven
broadcasters, all of whom have said that they offered to keep
the signal up, and AT&T has said no. If we are talking about
the same ones, I don't know. But I know that if you want to go
through the lamentable catalog of bad faith, what you will find
is that there have been very few uses of this good faith
provision, and never have the broadcasters been found guilty of
operating and negotiating in bad faith. Never in all the
history of it. And we are committed to good faith.
Mr. Doyle. Ms. Boyers and Mr. Thun, I understand that there
is a large number of TV markets in this country that are
duopolies, triopolies, and in 2 cases, a single entity owns all
four of the big four broadcast networks in a single market.
Tell me. What impact does this consolidation have on you and
your customers?
Ms. Boyers. We have one company out of Atlanta, Georgia,
that owns two of my four, and it creates a much larger price,
because they can come in and say, you know, little BOYCOM, we
really don't want to mess with you. Here is a take it or leave
it. But those good faith regulations help us to still have a
seat at that table irregardless of how egregious that price is.
Mr. Doyle. Mr. Boyd, you have 17 seconds left. Mr. Thun.
Mr. Thun. It absolutely leads to price increases.
Ironically, one of those markets that has--I believe there are
two markets that have quadropolies. One of those currently do
not have signals because the broadcaster has been given too
much power through the consolidation of those stations in that
market. I don't think that is the way the law was intended, but
there are loopholes in it that allow these broadcasters to put
other signals on low powered station, as well as multi-cast
signals that create undue market power.
Mr. Doyle. I see my time has expired, so thank you very
much to all the witnesses. The Chair now recognizes Mr. Latta,
the subcommittee ranking member, for 5 minutes to ask
questions.
Mr. Latta. Thank you, Mr. Chairman.
And to Senator Smith, I believe that local broadcasting is
important to my constituents. It provides vital information and
services to our communities. As I mentioned a little earlier,
we all know that weather and traffic reports are the crowd
favorites, but I appreciate the focus on local news programming
and interest in building up the local area.
I also notice in my hometown of Bowling Green and the
communities nearby, that broadcasters are engaged in community
activities and put on local fundraisers, toy drives, and other
charity events. I also held two large public forums in my
district on the tragic opioid crisis that were moderated by
local news anchors on their own time. It is evident that local
broadcasters want to help build and maintain strong communities
outside the newsroom.
With that, Senator, I am curious if people want to receive
out-of-state rather than local broadcast programming and does
STELAR encourage programming--sorry. Does STELAR encourage
providers to offer local broadcast signals?
Mr. Smith. What STELAR enables if it were Bowling Green,
Kentucky--I don't know if there's a Bowling Green, Ohio.
Mr. Latta. That is where I am from, the Ohio part.
Mr. Smith. Well, Bowling Green, Kentucky, for example, is
not served with a local signal by AT&T DIRECTV, and they are
complaining about it, and it wouldn't cost AT&T, a $200-billion
company, a whole lot to negotiate with the local broadcasters.
To me, the whole point of the distant signal was just to
give them some breathing space to get big enough to compete
with cable, so that over time, when technology made it
possible, and it does, they would then, as they promised to do
long ago, provide local into local in every one of the 110
market--212 markets in the country. That has not happened, and
it should have. There is no reason for it not to.
Mr. Latta. Let me follow up to you, Mr. Thun. From a
satellite perspective, what barriers do satellite MVPDs face in
providing local programming?
Mr. Thun. Well, in the 12 markets, we do serve those
constituents with local broadcasting, we happen to have an
over-the-air solution that is integrated in our set top box
that provides a seamless experience to our customers. So we do,
in fact, in those markets, do provide local programming.
The impediments to providing it are also cost. If we have
to turn around--and, by the way, of the 12 markets that we
don't service, they are either, in all cases, except for one,
all duopolies, double duopolies, or triopolies. And the one
market that isn't is a short market.
So when you face that, going into those markets with,
again, stations somehow circumventing; what I think the laws
were intended to have, multiple stations, that makes it even
harder to enter into those markets.
Mr. Latta. Thank you.
Ms. Boyers, STELAR was intended to help rural Americans
receive local news, but your testimony makes it clear that you
don't believe STELAR is properly serving rural America. How can
we ensure that constituents like mine in rural areas are not
disproportionately impacted by either reforming or repealing
STELAR?
Ms. Boyers. Well, obviously a rewrite as Mr. Scalise--a
rewrite of the Communications Act would be awesome. We also
know that maybe granular level, small changes are what is
needed in a situation where the signal does get everywhere
through satellite dishes, and through us, the ever-increasing
prices. They have the same problem we have in getting that
signal to our customers because of the price.
Now, if you are down in the hill in a holler at Clearwater
Lake in Piedmont, Missouri, you are not getting anything. If
you don't have BOYCOM, you are not getting anything. If you are
on a fixed income and your credit's bad, you can't get DISH.
You can't get, you know, DIRECTV. If you don't have BOYCOM, you
are not getting anything. So those are the customers that we
are concerned about. That makes up the bulk of my customers are
those folks that are economically impaired and don't have the
ability.
So STELAR is very important for us with the good faith
rules that are on the board. That is what makes a broadcaster
like Raycom or Sinclair come to the table with little 'ole me
and say, You know, we don't want to talk to you, we don't care
about you, but the good faith rules say we have got to honor
good faith.
When those go away, if they sunset in December, they could
care less probably whether or not, or they could give an
exclusivity to DISH or to, you know, the other satellite
companies that prohibit us from having their local channels at
all. So therein lies some protection for us, simply because we
are small and because we are the ruralist of rurals.
Mr. Latta. Thank you very much. My time has expired.
Mr. Doyle. The gentleman yields back. The Chair now
recognizes Mr. McNerney for 5 minutes.
Mr. McNerney. I thank the chairman. I thank the witnesses.
I appreciate you coming out here and talking to us.
Senator Gordon--or Senator Smith. Excuse me.
Mr. Smith. It works either way.
Mr. McNerney. What percentage of the retransmission fees
does the local broadcast affiliate typically receive after
reverse transmission fees have been accounted for?
Ms. Smith. What is so interesting, Congressman, when you
add up these claims of broadcaster gouging for the most
watched, most important news and entertainment, we represent,
depending on the company, probably $0.12 on a cable bill. I
don't think we are the cause of cable inflation or satellite
inflation.
And what we do appreciate is the opportunity to negotiate
in a free market for the value of our content, and that is what
we do, and that is what supports localism so the news is about
you, sir, and not somebody at the national level and thank you
for local journalism.
Mr. McNerney. Thank you for not filibustering here, Mr.
Smith.
Mr. Thun, I am hearing that the retransmission fees have
been going up over time. What has happened to the share that
local broadcast affiliates have been getting?
Mr. Thun. Well, the ratings are down. So to directly answer
your question, the share is diminishing, but we face an ever-
increasing sea of pricing, and so, I am not sure where the
$0.12 comes from, but that certainty isn't the bill that we pay
to any individual station. It is much higher than that. So it
is a burden that we have to take on, and ultimately our
consumers take on, and it is a bad policy. It is a bad place
for our customers to be if their bills are continuously going
to go up certainly, at the clip that broadcasting fees are
going up.
Mr. McNerney. Well, between local broadcast affiliates
receiving a smaller portion of the retransmission fees and the
relaxation of media ownership rules over the past two years, I
am concerned that the principle of localism, one of the core
principles behind broadcast licenses being undermined, and
consumers have less access to local.
Mr. Bergmayer, how does the relaxation of media ownership
rules over the last two years affect retransmission
negotiations?
Mr. Bergmayer. Yes. I mean, I certainly share the goal of
localism. I think local content is very important to viewers. I
question whether the current Rube Goldberg-like regulatory
scheme that we have in place is the best way to promote
localism. And one of the things that undermines localism the
most is broadcaster consolidation. When you have broadcasters,
they are not really local broadcasters. They are owned by a
national chain that spans the country. Companies like Sinclair,
Nexstar which are just as big and powerful as any of the other
media companies that are more, you know, known brand names to
consumers.
And I think that structure where different stations are
linked together as part of single retransmission consent
negotiations where the carriage of cable content is part of
local signal retransmission negotiations crowds out small,
independent programmers which harms the diversity of
programming generally, and it is really hard to see how this
system benefits localism in any significant way.
Mr. McNerney. Well, you're using the word consolidation is
music to my ears, Mr. Bergmayer. Thank you for saying that.
Mr. Thun, in your written testimony, you note that while in
2014, Congress prohibited local stations from jointly
negotiating for retransmission consent. Broadcasters have found
ways around these prohibitions. What are the ways that they are
using to get around the prohibitions?
Mr. Thun. Sure. Like I said previously, they are using the
multi-cast fees as a vehicle to put another big four station
upon their one broadcast stream as well as they are buying low
power stations and placing these big four networks upon them.
So we face seemingly more and more markets that have more than
one station owned by the same company. And that, ultimately, as
the numbers always prove out, leads to higher prices which is a
bad thing for our consumers.
Mr. McNerney. Ms. Boyers, please describe what effect
blackouts have on your viewers and their relationship to your
business?
Ms. Boyers. Well, in my particular neck of the woods, we
don't have blackouts. We just simply don't. There is no place
where anything that we have to say or do is controversial
enough for the broadcaster to cut their signal off to me. In my
statement, obviously we are 75 to 147 miles away from our local
affiliates.
Mr. McNerney. All right.
Thank you, Mr. Chairman. I will give you nine seconds.
Mr. Doyle. I thank the gentleman. The Chair now recognizes
the ranking member of the full committee, Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman. I want to thank you
all for being here, and as I sit here and listen to this, I
don't think there is an industry that isn't consolidating
represented here. Everybody is. And so--and Ms. Boyers, you
aside there for a second, there are a lot of big players
represented in this room.
Ms. Boyers. I am honored.
Mr. Walden. And so, you, too, could be a big player some
day if you just keep going out in the hollows and the hills and
all that. Yes, it is tough serving rural areas. My district's
enormous, and so, I care a lot about how we get affordable
programming to consumers, but I also know that programming has
great value, or you all wouldn't be having this discussion, so
it is how you set the value.
In my opening statement, I talked about some of that and
then, the copyright office just wrote to the Judiciary
Committee yesterday, and they recommended that the license be
allowed to sunset, due to its limited current usage, the
distance signal license. I would like to ask the letter to be
entered into the record, Mr. Chairman. I think you have a copy
of that. If not, we will----
Mr. Chairman. Without objection so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Walden. So according to the copyright office data,
royalties paid under the license have plummeted since we last
reauthorized this act in 2014. They are down somewhere around
85 to 87 percent nationwide. And they say this is, and I quote,
``due to a dramatic decline in total subscribers which, in
turn, is affected: by, one, a drop in the overall number of
distant network stations carried and, two, the disappearance of
non-network super stations such as WGN,'' close quote.
Senator Smith, NAB has estimated that about 500,000
households get at least one distant signal and Mr. Thun, I
believe, according to your testimony, that number is somewhere
around 870,000 individuals, or households. Can each of you
explain what those numbers are based on, and what you think
explains the discrepancy there between 500,000 households and
870,000 households. Mr. Smith?
Mr. Smith. Congressman, I think the only way they could get
to an 800,000 number is to include the CW Network, which is not
about localism.
Mr. Walden. OK. Mr. Thun, is that what happens?
Mr. Thun. I am not sure of the detail behind all the
subscribers that go into those numbers. All I know is that the
numbers are the direct relationships that we have to customers
related to distant signals and that those numbers are combined
with dishes, and I assume they use the same measurement and
have the same number of--or they apply the same standard in
gathering their numbers, but those are the relationships
combined between the companies that we have and those
customers.
Mr. Walden. And could you look into that more and provide
it for us, maybe, for the record, after this?
Mr. Thun. We will have our team work with you guys.
Mr. Walden. Perfect.
Now, Ms. Boyers, I want to get back to you because, our
friend at the end, talked about the importance of net
neutrality somehow in this hearing, and Title 2, and I am
curious as a small provider, what net neutrality Title 2
regulations on you might have meant, and might mean going
forward if they were restored?
Ms. Boyers. Well, obviously, we do not favor reinstating
Title 2.
Mr. Walden. Why is that?
Ms. Boyers. That classification of broadband for us and
hundreds of ACA Connect members do not support YOU enacting
opening internet legislation that would apply in all
jurisdictions across the country, and all firms operate in an
internet ecosystem. No one should be able to block, or
otherwise impair broadband internet access service subscribers
from accessing lawful content, subject to reasonable network
practices. And no one should be able to engage in unreasonable
discrimination and paid prioritization.
We follow good faith practices as well in our businesses,
and so all providers should be required to disclose to
customers key information about their service. We do all those
things.
Mr. Walden. Right.
Ms. Boyers. We are a good player in that realm, and in
protecting neutrality on the net is so important. I don't think
it is productive to consider this issue as parts still are.
Mr. Walden. All right. All right. So Senator Smith said
that broadcasters, I think you said, represent about 12 cents
of the overall cable bill. Is that right? Where do you get that
number and----
Mr. Smith. It is a number that is not difficult to
calculate. We follow it fairly regularly as an association.
Mr. Walden. Yes. And Mr. Thun, what do you say about that?
Mr. Thun. I am not sure. I wish they were that low.
Mr. Walden. Now, this is the overall cable bill, right?
Mr. Thun. Yes. Our numbers are significantly higher than
that. I don't have the exact number in front of me. I could
tell you--the number of 12 cents is dwarfed by what we pay
overall for retransmission.
Mr. Walden. For retrans. All right. Ms. Boyers?
Ms. Boyers. $12.16 a subscriber as of March 31, 2019, right
off of my P&L.
Mr. Walden. And that is for retrans?
Ms. Boyers. Four stations.
Mr. Walden. Now, what do you pay for other programming
services?
Ms. Boyers. $62.12.
Mr. Walden. OK.
Ms. Boyers. Seventy nine percent of my retail cable
programming, 79 percent is programming, and 20 percent of that
79 percent is four channels.
Mr. Walden. You know what I really like, Mr. Chairman,
about a small operator, she knows her numbers.
Ms. Boyers. Hell, yes.
Mr. Walden. Hell, yes. You heard it right there.
Ms. Boyers. It is my pocket.
Mr. Walden. That is right. I was a small market radio
station owner. I knew my numbers too. I have gone way over. I
appreciate all your testimonies as we work on this issue. Thank
you.
Mr. Doyle. The Chair now recognizes Mr. Loebsack for 5
minutes.
Mr. Loebsack. Thank you, Mr. Chair and ranking member, for
having this hearing today and all the witnesses here. I really
appreciate it. It is always enlightening to hear from different
points of view, because this is a pretty complicated topic and
we have got a lot of different points of views represented.
And, unfortunately, the consumer is the one who is in the
middle of all this, and those are the folks, the consumers I
think, that we need to be focusing on, my constituents, the
constituents of all of us here. I did write a letter recently,
which I think was mentioned by Mr. Smith and I appreciate that,
to this committee, to the Judiciary Committee, last week
raising an issue that is facing many of my constituents who
have DIRECTV, and I do ask unanimous consent if I could submit
that into the record, I would like to do that.
Mr. Doyle. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Loebsack. Thank you. And what I am talking about is
folks who live in Ottumwa, Iowa. They subscribe to DirecTV,
those folks do. They are not able to receive local broadcast
unless they have an antenna. In fact, I was interviewed by one
of those stations over the weekend and they asked me what I
thought about all of this, I said, Well, we are having this
hearing, and we will let you know more about what comes of it,
but they knew about my letter, obviously.
And in many places, even an antenna, won't pick up the
local broadcast and this, again, is Ottumwa, Iowa, southeast
Iowa. Some of you may be aware of that.
Mr. Thun, one of the things I talked a lot about on this
committee is rural broadband. In many rural areas, the business
case to build out broadband is very difficult, if not
impossible, because there isn't enough infrastructure there, it
costs a lot of money obviously, but with satellites, it seems
the business case for local and the locals shouldn't be all
that hard. Again, that DIRECTV is already beaming signals into
Ottumwa. So does AT&T/DIRECTV have any intention of bringing
local service to my constituents in the near future?
Mr. Thun. Well, we think we do. We provide it through a
local antenna. We have an integrated solutions in our set top
box that takes the signals over the air, pumps it through our
set top box, and subscribers can enjoy a DVR functionality,
closed captioning, parental controls. So we do have that in
place, and we also, for those customers, we take $3 off their
bill regardless of the package that they are in.
Mr. Loebsack. What solution is there for your customers who
can't access a signal via antenna?
Mr. Thun. I think it is partially incumbent on the
broadcasters as well. They could invest it in their broadcast
stations and put more into putting out a broader signal. They
don't do that. They are not incented to do that because they
want to rely on us to pay them hefty retransmission consent
fees. So, I don't know if all of the blame should be shouldered
upon us in this regard.
Mr. Loebsack. Right. Ms. Boyers, I do want to ask you and
Mr. Bergmayer a question if I could. I love your perspective.
Thank you so much for being here today. You clearly, I think,
have unique insight when it comes to serving rural areas, and
my district and I was very rural, so thank you.
And Mr. Bergmayer, I think this committee is familiar with
Public Knowledge and their advocacy on behalf of consumers, so
I would like to address my next question to both of you. Do you
believe there is a harm for customers who don't have access to
local broadcasts through available MVPDs in their area? What
kind of harm are we talking about?
Ms. Boyers. Well, do you mind if I go first? Ladies first.
Mr. Doyle. Excuse me. Could the witnesses pull the
microphones a little closer to you. We are having trouble
hearing you on the streaming.
Ms. Boyers. I am sorry.
Mr. Doyle. Yes. Thank you.
Ms. Boyers. On the outside, I will tell you that BOYCOM is
not coming to Iowa, just to let you know. Don't wait for us.
Yes, I do believe that as a general global statement, yes, I
believe every customer has--should have the opportunity to
receive local broadcast, and we do every daggone thing we can
to make sure that happens.
Mr. Loebsack. And what about you, Mr. Bergmayer?
Mr. Bergmayer. I would agree, all things being equal, it is
better to have access to local programming. I think the only
question is, how best to get there, whether it is STELAR
expiring or being renewed may not even make or break the
system. I think, basically, the current regulatory system as we
see at the debates today is really not serving the interests of
viewers of local programming. It is really not serving the
interest of people who pay bills.
So that is why in our written testimony, we have a lot of
specific detailed policy proposals, and we have supported some
pretty radical approaches that I think would, in fact, promote
localism better than these incremental kinds of----
Mr. Loebsack. Well, my interest is asking you what counts
as first priority for guaranteeing improving locals and for
rural consumers should be--can you specify a little bit?
Mr. Bergmayer. I think that the first thing is to make
STELAR permanent, just so that this crisis goes away, and we
can address the underlying fundamental issues with the video
marketplace. I think one way is to--we started the compulsory
copyright licenses for television signals back in the 1970s. We
then layered retransmission consent on top of that already
existing system. Every little step made sense over the years,
but I think we really need to radically rethink the ways that
MVPDs and broadcasters and video distributors interact, and I
think in doing that we will better align the interests of local
broadcasters to produce local programming----
Mr. Loebsack. Thank you. And Mr. Chair, I am sorry. I do
have questions I would like to submit for the record for Mr.
Smith and Mr. Thun.
Mr. Doyle. Yes.
Mr. Loebsack. Thank you.
Mr. Doyle. OK. The Chair now recognizes Mr. Shimkus for 5
minutes.
Mr. Shimkus. Thank you, Mr. Chairman. Just some historical
remembering of a committee. I think we went to the digital
transition, and away from analog, and I think we lost some
distance because there is a digital cliff, just kind of
information for some of my colleagues who weren't here during
those battles.
So some of the rural areas, you know, had trouble getting
their signal where they used to be able to. Clearly, we have a
difference of opinion on reauthorization of STELAR and the
question is, is this just a binary choice?
So let me ask this question: Senator Smith, good to see
you. We had a chance to serve together when you were a Senator
and happy to have you here. Can you briefly describe in more
detail how you envision a negotiation process between
broadcasters and satellite operators for local programming if
STELAR expires?
Mr. Smith. Probably not unlike what occurs now through
over-the-top offerings. There are market solutions to fix this,
but as long as the incentive is given to not bring local into
local, they have no incentive to come and talk to us.
Mr. Shimkus. Mr. Thun, same question.
Mr. Thun. I think it would be of tremendous harm to us in
our negotiations at the good faith provision with Sunset from
our perspective and when we are negotiating, we feel like the
minimum is being set here and it is, in certain cases, not
being met.
So that would be harmful. Ultimately, if that went away, I
am not sure how broadcasters would behave, presumably more
aggressively than they are now, and in a regime where we have
those policies in place, we have seen the increases that I
talked about, 2,000 percent over 10 years.
Mr. Shimkus. I want to go back to Senator Smith to respond
to that.
Mr. Smith. Well, when you start from nothing, getting to
2,000 percent isn't all that hard, particularly when what we
are offering is the most important, most valued, most watched
programming. We appreciate the opportunity to negotiate for its
value in a free market. That isn't reflected. In other words,
what they pay for our content is way below what they pay for
much less watched other content that they pay for.
But I would like to speak, and I don't mean to filibuster,
there has to be a way, in this expanding telecommunications
market, to pay for localism and investigative journalism. We
are one of the last ones standing. We have two revenue streams,
the advertising model, which is being cannibalized by the big
digital companies, the tech companies, every transmission
consent. We don't want to be like the newspapers, but that is
where we are heading if we can't negotiate for the value of our
content.
Mr. Shimkus. My district's changed quite a bit over the
years because of just redistricting and the like, and when I
first came here, I had much of the upper Mississippi or St.
Louis north, and there was a local TV station there in Quincy
that was on the levy when the levy broke, so I am torn. I
believe in the need of local broadcasters and local
programming. I fear consolidation in purchasing power where we
lose the stories of local high school teams and emergency
activity and stuff.
So we want to, as much as we can, keep that localism, and
sometimes consolidation helps, because it does provide more
dollars to coverage. There is some consolidation in that part
of the State and you get better weather coverage because of the
competition. But let me turn to Ms. Boyers. The current system
is challenging for you in negotiations currently, right?
Ms. Boyers. Yes, sir.
Mr. Shimkus. So you are caught between a rock and a hard
place.
Ms. Boyers. Yes, sir.
Mr. Shimkus. And I would ask you to, if it is a keep it or
not keep it, maybe there is a middle ground of where you think
the small providers are adequately listened to versus--again,
if it is just a binary choice between one or the others, I
don't see how you are served by either.
Ms. Boyers. Well, for one second, if I could defer a little
bit to----
Mr. Shimkus. Well, you got 10 seconds to defer.
Ms. Boyers. We did a survey in 2018 on my broadcast
channels. All of my customers, 47 percent returned on a survey
on a daggone postcard, 61 percent watch our CBS affiliate, 21
percent watch our NBC affiliate. I am sorry, reverse that ABC 6
percent watch the affiliate that is 147 miles away, so I beg to
differ that it is the most important programming.
However, in my neck of the woods, if your horse dies, you
wait till it is dead before you take your saddle off. All of
the things that have been happening in every revision of STELAR
has incrementally helped through some retransmission consent,
just little idiosyncrasies that have helped the process along
for me, and to sense that this without anything to provide for
that, I have no place to move my saddle.
Mr. Doyle. The gentleman's time is expired. The Chair now
recognizes Mr. McEachin for 5 minutes.
Mr. McEachin. Thank you, Mr. Chairman, and thank you for
holding this hearing. Local broadcast television remains a
vital resource for consumers to receive information about their
communities, including times of severe weather and natural
disasters. This role will only grow more important in time as
climate change worsens, and severe weather becomes more
frequent and dangerous. Local broadcasters must be able to
continue to get timely information to their communities in
order to help keep them safe.
Despite the important role played by local broadcast
television, especially in times of danger, retransmission
blackouts remain a problem. In 2017 and 2018, there were
approximately 213 and 165 disruptions of service to consumers
nationwide respectively.
In the six months of 2019, we have already had 62 blackouts
across the Nation. While blackouts have fluctuated annually,
these numbers in comparison to 2010 with only eight blackouts
are unacceptable.
Senator Smith, first of all, thank you for being here. I am
going to ask the same question of Mr. Thun in just a moment,
but I would like to start with you. Why do you believe
blackouts are occurring despite existing good faith provisions,
and what would be the effect on markets and consumers were the
STELAR provisions to expire?
Mr. Smith. First of all, Congressman, I would make the
observation that 99 percent of them are negotiated successfully
without any interruption. We also point out that if people just
want to keep the digital antenna that comes with their TV set,
all they got to do is plug that in to the other output, hit
input, and they got all the local television that you can get
over the air.
I don't know where retrans is in terms of it finding its
market. I leave that to business people that I represent, that
he represents. At the end of the day, we don't like them but we
are always on, we are always available if people want to use
their antenna, and we think it is really important that we have
the ability to negotiate for the value of our content.
Mr. McEachin. Mr. Thun?
Mr. Thun. We fully support localism. Our service is
available to 99.58 percent of satellite reaches broadcast
stations across the country that capture that. I am the
business person on the other end of the stick in these
negotiations, and I can tell you that absent good faith rules,
I can only predict that rates are going to go up. There is no
other way to think that--if we think that you take those away
and the rates are going to somehow stabilize and blackouts are
going to go down, we are fooling ourselves.
Mr. McEachin. Thank you. Mr. Bergmayer, is beefing up the
good faith requirements the solution to blackouts? Is there
more Congress should consider?
Mr. Bergmayer. I think that beefing up the good faith
requirements would be an important component as well as interim
carriage. We just need to make it so that blackouts aren't used
as a tactic in negotiations to kind of harm the other side and
bring them to the table to pay more than they otherwise would,
but for, you know, the local emergency that you have.
Mr. McEachin. Would you define interim carriage for me,
please?
Mr. Bergmayer. So interim carriage would just mean that
while negotiations are ongoing between 2 parties, and they just
haven't decided to part ways, then the signal just continues
being carried under the terms of the previous agreement.
Mr. McEachin. Thank you. And I thank all the witnesses. And
Mr. Chairman, I yield back.
Mr. Doyle. The gentleman yields back.
The Chair now recognizes Mr. Olson for 5 minutes.
Mr. Olson. I thank the chair. Senator Smith, it is good to
see you again.
Mr. Smith. Thank you.
Mr. Olson. Welcome Mr. Thun and Mr. Bergmayer, and from the
Shelby City of Texas 22, Missouri City, how the heck you doing,
Ms. Boyers?
Ms. Boyers. I am doing wonderful, sir.
Mr. Olson. I hope my questions knowing firsthand how
important local broadcast is during a disaster. Y'all recall
that almost two years ago to the very day, April of 2017,
almost my entire State, certainly my district, was hit hard by
Hurricane Harvey. Parts of the district had five feet of water
in less than two days dramatic flooding.
People turned to local news to get their weather
information, road closures, where they should go, where those
recovery operations. They, too, did the KPLC 2, NBC 2, CBS 11.
One of them actually had the main studio flood, but the back-up
studios they kept on air during the storm, which was just
amazing. ABC-13, Fox 26, Independent TV 39, and also don't
forget, be it the most diverse county in America, two big
Spanish language stations stayed online. Univision 45 and
Telemundo 47.
And this question is for you, Mr. Smith, and you Mr. Thun,
Senator Smith, your testimony you detailed the legislative
history of STELAR and how Congress always meant for it to
expire at some point in the future. I know that Mr. Walden, a
member of the head of our committee on our side of the aisle
has said it is an open question as to whether we should
reauthorize it as well.
And Senator Smith, we all know my former boss, your
colleague, Phil Gramm, very well, and in this issue, he would
say, it is easy to kill a vampire than a bad government
program. So my question is, if we decide that STELAR is a bad
Government program that should be killed or allowed to expire,
how that impacts local TV during a time of crisis?
Mr. Smith. I would just remind the committee and thank you
for the question, Congressman, broadcasters have every
incentive to be viewed on as many platforms as possible. We
don't want disruptions. We are there in good faith. We have
never been found to be otherwise, and your question perfectly
points out how vital a lifeline my members are in times when my
wonderful AT&T Apple phone crashes, and the only thing you can
get is your local television or radio. And so, as you tinker
with the economics around here, I would just remind you of the
importance of our lifeline, and the revenues that we have to
support journalism and localism come from 2 sources.
Advertising is being cannibalized, retransmission is where we
go and it is very important that that not be upset if having
the news about you Members of Congress and for your
constituents remains important.
Mr. Olson. And one comment that as well, my family tune to
8613 Doppler radar, we could see it real time what was out
there as opposed to going to the weather channel, or some other
channel that would drift in and drift out. It was very
important to have those local TV stations.
Mr. Thun, how about you? Once you deal with disasters, how
important is local TV during a disaster if we let STELAR
expire?
Mr. Thun. Well, as I testified earlier, I certainly do not
think that STELAR should expire. I think it will be bad for
consumers and it will increase pricing. As it relates to
getting programming during disasters, as it pertains to
weather, I think in a lot of cases people are used to
watching--looking at their weather on these, actually.
I don't know many people who sit around waiting for weather
on the 8s. It does happen. But more and more you are looking at
your Weather Channel app, or your weather app, to see what is
happening and when it is going to happen. That is not the
solution necessarily. We do have other national programs that
is available, but in these cases, we certainly would rather be
up than down with your broadcast partners, but unfortunately
that is not always the case. We have contentious relationships
with them because of the prices that they seek, and the
services go down during bad weather, but they also go down
during times when broadcasters are being unreasonable.
Mr. Olson. One further question, Mr. Smith. I am sorry,
ma'am. I am sorry about that, but I got to ask this question.
Victoria, Texas, is a--colleague there named Representative
Michael Cloud. He sent a letter to judiciary leadership asking
about making sure STELAR was allowed to expire. He talked about
how bad it is for his town Victoria. I submit this for the
record, please, Mr. Chairman, if that is all right.
Mr. Doyle. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Olson. Victoria is not a small town. Population of
62,592 with a Census of 2010. San Angelo, Texas, out that west
is no small town either. Population 100,450, the Census
modified in 2014. Both these towns have issues with TV
reception because of STELAR. So Senator Smith, can you explain
how STELAR is responsible for 170,000 Texans in Victoria and
San Angelo for not having access to local news----
Mr. Doyle. If you can do that in five seconds, I will let
him answer, but we are 45 seconds over your time.
Mr. Smith. Well, if I understand your question,
Congressman, obviously we want your constituents to have our
product, is to negotiate it with the satellites and cable
providers and then hopefully they can put up an antenna, if all
else fails, and get it for free. I am the only one up here
offering everything for free if you don't want to pay a
subscription paid TV thing.
Mr. Doyle. The gentleman's time is expired.
The Chair now recognizes Mr. Soto.
Mr. Soto. Thank you, Mr. Chairman.
I bring greetings from Orlando, the 18th largest media
market in the Nation and growing. In our area, we are really
worried about diversity in programming, and increasing local
content, and I worry about the modernization of programming
across the Nation. There are so many great local towns across
this Nation that really need to have a voice. I also worry
about Spanish language in Creole stations. Every couple of
years, we seem to have a crisis about certain programs being
blocked, either in Florida, Puerto Rico. I wanted to start with
you, Mr. Thun, regarding basic diversity requirements, if we
were to put some in place as a condition of reauthorization of
STELAR, would that be something that you all would be
supportive of?
Mr. Thun. I think we would have to see everything to know
what we are considering here. We are certainly big proponents
of diversity. I think our record in providing television
content that is diverse is unassailable. I think, by our
measure, we think we distribute more diverse programming than
any other distributor. So if there is a poster child for
somebody as a good actor in that space, we believe DIRECTV,
AT&T would be that.
Mr. Soto. Thank you for that, and Senator Smith, if STELAR
were to sunset, how would that affect diversity in programming?
Mr. Smith. I think what is really important about what we
do is, if you look at the percentages of people wholly reliant
upon over-the-air broadcasting that tends to be minority
communities, we are very anxious to keep our content appealing
to all and that is why we also have networks that are
specifically targeted to some in the Hispanic community.
Mr. Soto. And how would it affect original, local content
if STELAR were to sunset?
Mr. Smith. What I have noticed, Congressman, is that if one
of my members is going to succeed, they succeed when they focus
on local. When they do otherwise, they are less successful and
they can't sell ads unless they focus on local.
Mr. Soto. Sure. Thank you.
Mr. Bergmayer, you mentioned changing the compulsory
copyright license with the reform to pure copyright, can you
explain in more detail, I guess, the increased profits, or
payments to artists and local providers, how that would work,
and what would the incentive be?
Mr. Bergmayer. So the idea is that the people who are
creating content should just sell content directly to the
distributors instead of through various layers of middlemen
like we have, and then, again, the thought is; if you are a
local broadcaster and one of your primary revenue streams comes
from creating local programming that is relevant to your
community, that is relevant to the people who live there, then
you have every incentive to make that programming the best you
can and to make as much of it as you can, rather than the
current system where, you know, the local content is there, but
also, you know, a lot of the primary leverage that happens from
retransmission consent is from reselling national programming.
Mr. Soto. So would this help out local broadcasters and
local artists and producers?
Mr. Bergmayer. I believe the overall approach would end up
certainly helping the production of local content, local
artists by basically streamlining the system.
Mr. Soto. What about local sports or more diversity
content?
Mr. Bergmayer. I think that there is this notion that if
you got the government out of the way somehow that
automatically localism would be fixed, you know. I am looking
at how online video works today. I am noticing that CBS has CBS
All Access that they are distributing without any local
broadcasters at all. You have virtual MVPDs, like YouTube TV,
DIRECTV now. A lot of them are missing the local broadcast
content. I think that, you know, if we want to promote
localism, it is going to require a lot. I think an important
step would be streamlining the regulatory system, but I don't
think it really can end there, because I think that we have
seen that a lot of the online providers simply aren't providing
the local programming without being caused to.
Mr. Soto. Thank you, and Ms. Boyers, other than Ozark on
Netflix, which I have watched multiple episodes on, has STELAR
assisted in local content for the Ozark Mountains in your
region?
Ms. Boyers. Diversity--absolutely. We offer everything that
is available to us through the NCTC.
Mr. Soto. What is some local programming that you all
provide?
Ms. Boyers. We have Telemundo and B.E.T., which both come
from the NCTC. We do not receive those from an off-air station.
Mr. Soto. But, like, from the Ozark Mountain areas, is
there any local programming you develop for your region?
Ms. Boyers. No, sir. There is no local programming even
being developed. Our closest local programmer is 75 miles away.
Mr. Soto. What would help with that?
Ms. Boyers. Funding, obviously. Money is always the bottom
line. But for me, the tree transmission consent fees are--
prohibit me from--I only have so much of a budget.
Mr. Soto. Sure.
Ms. Boyers. And where I am at, I can't raise my rates and
so those folks--I just have a certain amount of dollars I can
pay for programming.
Mr. Soto. I understand.
And I yield back.
Mr. Doyle. Thank the gentleman. The Chair now yields 5
minutes to Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman, and I appreciate the
panel being here. This is a really important hearing. I
represent a very rural district in Appalachia. It is the
longest district east of the Mississippi, and we have many
technological challenges. This is one of the biggest ones. We
are here today to discuss the STELAR Act, which expires at the
end of this year, and I have heard many different perspectives
as to whether it should be considered must pass, or whether it
should be allowed to sunset.
As we all know with the increase in new technologies, the
media marketplace has changed substantially, since STELAR was
first passed by Congress in the late '80s. I appreciate all the
perspectives that I have heard today. Let me go to some very
basic questions.
Mr. Thun, in your testimony, you explain that there are a
number of people that still receive broadcast channels because
of STELAR. I know many of my colleagues in both the House and
the Senate have asked you for the specific breakdown of the
markets for those subscribers that receive out-of-market
channels because of STELAR.
While this committee considers whether or not this
legislation needs to be reauthorized, it would be extremely
helpful to understand what benefit the expiring provisions of
STELAR are providing, how they are being used, and what the
consequences would be should Congress allow STELAR to sunset.
Would you be willing to work with my staff and the
committee staff to supply us with the specifics of what
subscribers receive--which subscribers receive what channels
and from where on DIRECTV?
Mr. Thun. Yes, we would be willing to help provide you some
more information related to your question.
Mr. Johnson. OK. All right. We will call on you for that.
Senator Smith, my district partially encompasses the
Zanesville market, which I know only has one local broadcast
affiliate, the NBC station.
Can you explain to me where satellite TV subscribers in
Zanesville will receive their other broadcast channels from? If
Congress does not reauthorize STELAR, will they still receive
those stations?
Mr. Smith. I know my local broadcasters will be anxious to
talk with them and make them a fair price to make sure that
rural constituents can get their signal. We have an incentive
to make sure that people see what we produce and what we put
over the air, and I know it is hard for you to manage the food
fight up here with my friends, but the truth is, we all need
each other and, ultimately, everybody has to make a buck.
And we are not trying to put anybody out of business, but
we are trying to preserve localism, which is under threat.
Mr. Johnson. That is a really good point. You kind of threw
me off my questions because you said everybody needs everybody
up here. You are exactly right. We do. It would seem to me that
common sense should prevail at some point, and rather than
Congress having to mediate and solve this problem, it seems to
me the industry ought to be able to come together and come up
with some commonsense solutions where everybody walks away a
winner.
Senator Smith, moving on. In his testimony, Mr. Thun spoke
about how the number of impasses between local broadcast
stations and cable and satellite television seemed to peak a
couple of years ago and how that resulted in some stations
going off the air. What is your response to that testimony?
Mr. Smith. I think it is a marketplace finding its level,
and at the end of the day, I just remind you, we have an
incentive to make sure more people see our stuff. We sell
advertising off of that, and, obviously, retransmission is a
piece of it, a vital piece, to keeping local television
available to all these communities and to these wonderful
platforms that are represented here.
Mr. Johnson. OK. Mr. Thun, do you have anything to add to
that?
Mr. Thun. I agree. We both need each other. They are an
important part of our business, but finding the level ground is
what we are fighting over, I think.
Mr. Johnson. Yes.
Mr. Thun. And in any rational case, even though we did
start a low place, I should remind everybody that we were
amongst the first, if not the first to start paying for
retransmission, so we didn't start at the baseline that a lot
of others did.
Mr. Smith. You are a great American.
Mr. Thun. But we can't sustain these kinds of prices and
hold that back from hitting consumers, and that is bad for all
of us in here.
Ms. Boyers. Congressman, can I comment to that?
Mr. Johnson. I am coming to you, Ms. Boyers. You stated
that retransmission consent fees deter broadband deployment.
So, in addition to commenting on what I just said, or just
asked, what do you mean when you say that video revenue support
broadband deployment?
Ms. Boyers. Video revenues, however small they may be,
y'all care about closing that digital divide, and every
precious dollar that we could put towards deployment by them
back even further into the woods is being sucked up by these
ever-increasing retransmission consent fees.
Now, rural and small cable operators, independent guys like
me, we are the ones that are out there already on that digital
divide. We operate leaner, we operate meaner, and we are
already on those front lines for the deployment of this
broadband, so every stinkin' dollar that goes to retransmission
consent, I could be deploying--costs about $25,000 a mile to
build aerial, $32,500 to build underground, if you can do it in
the Ozark Mountains; however, they would rather string it on a
pole between the trees or a fence post to get it back there
because where we are at, we only have a certain amount.
Now, I would like to speak to Mr. Smith on that 12 cents. I
want that deal.
Mr. Doyle. The gentlelady's time is expired.
Mr. Johnson. I am going to have to yield back.
Mr. Doyle. As much as I love spending time with all of you
here, we are going to be here for a long time if we keep going
minutes over peoples' time.
Mr. Johnson. I will let you, arm wrestle Ms. Boyers.
Mr. Doyle. Yes, yes. I know.
The Chair now recognizes Ms. Eshoo for 5 minutes.
Ms. Eshoo. I thank the gentleman. Thank you to the
witnesses, and I am sorry I have to bounce back and forth
between Health Subcommittee hearing downstairs, and this very
important one.
Senator Smith, it is wonderful to see you, a longtime
friend, and someone that has served people in our country
really so--so well.
Mr. Smith. Thank you.
Ms. Eshoo. Thank you, and each one of the witnesses. What
were you going to say, Ms. Boyers, when our distinguished
chairman said we are going to be here all day? I will give you
a little bit of my time so that you can share your thought.
Ms. Boyers. I appreciate it. I appreciate it so much. Mr.
Smith spoke to everybody needs to make a buck. Let it be known
right now on your record, we don't make a buck on
retransmission consent. What the big guys charge me gets passed
to my consumer. That $12.16 BOYCOM does not make a buck on.
Simple pass-through, 100 percent to my consumer and they know
what they are paying for their broadcast channels. That being
said, I don't know where the $0.12 is coming from but I want
that deal, and we shall talk after the committee meeting
convenes because--I mean, dismisses because I want that $0.12
deal.
Ms. Eshoo. I think you are one hell of a witness, I tell
you.
Ms. Boyers. Thank you, ma'am.
Ms. Eshoo. I would love to be there with you, and Senator
Smith, but I think I am going to have to go back downstairs.
Ms. Boyers. I got your back.
Ms. Eshoo. Yes. OK. To Mr. Thun, you have argued for
regulatory overhaul, and I agree with you, and specifically,
you state that retransmission consent is in dire need of
reform. I have thought this for a long time. It is not any
secret. Now, I understand why AT&T doesn't like the current
regime. Tell us, through your experience, how it affects your
customers? Is it the same whether it is a small cable operator
and, you are a giant and everyone in between? This is all
passed to the consumer?
Mr. Thun. I think it affects us similarly in that we are
offering a video product to our consumers, and it is predicated
upon what we are charged to program that, and if those prices
go up, our prices correspondingly go up, and that happens for
years.
What we have hit is a wall. Consumers aren't willing to pay
anymore, and so the plight that we face is, this is not a win-
win where money--where our revenue is going up and their
revenues are going up. This is simply margin shrinking to the
point where certain businesses, especially rural cable
operators, are going out of business because they can't afford
the programming costs.
So this goes straight to the consumer and that is what we
are here to protect.
Ms. Eshoo. And it is where we need them because the larger
guys don't go out to where Ms. Boyers is.
Ms. Boyers. Yes, ma'am.
Ms. Eshoo. Senator Smith, let me ask a really obvious
question, maybe it has already been asked. Every five years,
you know, this comes up, and now we are reauthorizing, and it
seems to me that there is a pattern here and that is the year
or the year before reauthorization comes up, the numbers dip a
little on retrans and then afterwards, it is just jacked up all
over again.
I can't imagine that this is comfortable for you, you in
the broader sense of broadcasters. Have the broadcasters
thought of some other kind of model? I mean, this is not
sustainable, and, most frankly, and you are a very reasonable
and intelligent man, it is not defensible. It is not
defensible. You know, it keeps going up, up, up. The blackouts
increase. People are ticked off. They are still paying. They
are still paying while there is a blackout. I don't know anyone
in the country that has gotten a refund when there is a
blackout. So are you thinking of something else? Are you just
going to hold on to this thing that is kind of a homely child?
Mr. Smith. I would just share with you, Congresswoman, the
STELAR reauthorizations are not my favorite time of year, every
five years.
Ms. Eshoo. I can imagine so.
Mr. Smith. It usually amounts to an opportunity to pound
away at retransmission consent, and the point I keep making is,
this is one of 2 ways in which we support localism. It is the
way you have----
Ms. Eshoo. Yes, but at what price, though, localism?
Mr. Smith. You can get it for free. I am the only one up
here that offers everything we do for free. If they want it
that way, if they can get a signal.
Mr. Doyle. The gentlelady's time is expired.
The Chair now recognizes Mr. Scalise for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I guess I will
follow-up where my colleague and dear friend, Ms. Eshoo, left
off, and you are right, the signal is available for free and
you are seeing more people choose that option. The reason you
are seeing such a growth in people cutting the cord, which
means you don't get any retransmission consent dollars is
because the laws don't work for today's marketplace, and so, if
you can go one place and have a broader experience and a wider
array of options than the other place that is confined by the
1992 Cable Act, you are seeing consumers walk.
And so what I have been suggesting is, when STELAR comes
up, you shouldn't look at it in a negative way. I mean, it
absolutely is an opportunity for us to look at the video
marketplace. If we look at the video marketplace and recognize
that the laws just don't work for today's world, then maybe we
can also help solve the problem of why you are getting less
retransmission consent dollars because people are cutting the
cord. They are walking away from the entire system.
And so, if we say, OK, maybe you want to cherry-pick and
say let STELAR expire. I don't associate myself with that
because I do think we shouldn't just look at STELAR, we should
look at the whole thing, and maybe in 1992, they wrote a
perfect law. There is no such thing, but let's say they did in
1992.
Does anybody want to come up to this table and suggest that
when they wrote the law in 1992, they took into account how the
world works today, how people get their video content today? Of
course they didn't. You can talk to the people who wrote the
law. We weren't around when it happened, but the people that
were there when it happened, they recognize that the world's
different today. Why hasn't the law been updated?
And so, what I would suggest is, as we talk about
retransmission consent or any other, you ought to get paid for
your content, that is the bottom line of it. The deal with
retransmission consent, and again, when you talk to the people
that created it, was that they wanted to help keep that local
content that you talked about.
The problem is, I think Mr. McNerney talked about this
earlier, more and more you are seeing the motherships, the
national networks, take a bigger and bigger chunk of the
retransmission consent. So your local stations aren't even
getting that money, and that was the deal for the free spectrum
that is out there that--again, the reason why you have to make
it available for free, people can go buy a $30 dish and get a
better high definition signal off of the local stations than if
they went through their local cable company.
And so, all I would ask, and I would like to ask everybody
to comment on this: If you look at STELAR in a silo, regardless
of where you are on expiring or being renewed, do you think the
current laws, especially the foundational 1992 Cable Act, needs
to be updated to reflect the world we live in today? I will
start with you, Ms. Boyers?
Ms. Boyers. Thank you, Congressman. Absolutely. I would
love to be part of that.
Mr. Scalise. I would love for all of you, including Mr.
Smith. I know we have had some conversations. We might not
always be in the same place, but I do think we want to get to a
similar place, and can get to a better place; and I know Ms.
Eshoo and I have worked very hard on how we can have a
bipartisan approach that, hopefully, every member of the
committee that wants to be a part of it as well as everybody
here that wants to be a part of updating and modernizing our
laws to reflect the world we live in. Mr. Thun?
Mr. Thun. Absolutely. We commend your efforts with
Representative Eshoo's efforts to try to modernize these laws.
They are clearly outdated, they are broken, and they need to be
fixed, so----
Mr. Scalise. Thanks. Mr. Smith?
Mr. Smith. Congressman, I really appreciate your noting
the, sort of, symbiotic relationship between my network members
and my affiliate members. They actually really need each other.
Affiliates need the networks for their sports programming and
their weekly shows and they have very high ratings, and yet the
networks really need the locals to provide the tornado alerts.
They need this lifeline.
Mr. Scalise. Don't sell yourself short. I want my local
broadcasting brother in local sports. I want to know--when I
watch the Saints and the LSU Tiger updates, I am not going to
get that from Iowa, I want to get it from my local station.
Mr. Smith. Exactly, and they are mindful----
Mr. Scalise. And the Warriors. They go up 2-1. So would you
be open to working with us on reforms to the 1992 Cable Act
that create some of these problems?
Mr. Smith. Of course. I am tempted to quote Reagan, there
is nothing permanent----
Mr. Scalise. You are always in a good place if you quote
Reagan.
Mr. Smith. With that said, we are always open to new ways
to do it, but what I want to emphasize is that the earlier Act
created a system that is a benefit and a blessing to the
American people.
Mr. Scalise. I only have 12 seconds left. I do want to get
to Mr. Bergmayer.
Mr. Smith. And my concern is that somehow a reform would
just focus on national and forget the local.
Mr. Scalise. We absolutely want the local content. Ms.
Eshoo does--she has talked about blackouts for that very
reason. Don't sell yourself short. People want that content. I
am sorry. Finally, Mr. Bergmayer.
Mr. Bergmayer. Yes. I think you need a lot of policy
measures to promote localism, address consolidation, increase
diversity to programming, but absolutely, an important first
step is to totally rethink the 1992 Cable Act, and we are with
you on it.
Mr. Scalise. Thank you so much. Appreciate it, Mr.
Chairman.
Mr. Doyle. The Chair now recognizes Ms. DeGette for 5
minutes.
Ms. DeGette. Thank you, Mr. Chairman. So I hear all of my
colleagues here and I completely agree that local broadcasters
provide great coverage of local events, weather, disasters, as
well as, Senator, you talked about holding elected officials
accountable for their actions because they are invested in the
community. I think that is really an important role, and one
that we continue to see dissipate.
Something else we have seen in the Denver media market and
I know we are seeing this around the country, is we are seeing
venture capital and private equity start to buy up some of the
media outlets, in particular, in the print industry, we saw
with this with the Denver Post and we have seen it other
places. And so, I want to start with you, Mr. Bergmayer. How do
you think the incentives of venture capital and private equity,
the financial incentives, align with this other incentive that
I am talking about that local TV provides, which is coverage of
local events, weather, in-depth coverage of politics and other
issues? How do you think that the profit motive and those--and
the need to staff up and invest in the local news weigh, and
how is that going to work in the long run?
Mr. Bergmayer. Absolutely, I agree. A huge problem
throughout the economy, but it is particularly noticeable in
media is when you have these investors who take over companies,
and they just have such a short-term perspective. They are just
interested in extracting as much cash in the short-term from
these businesses as possible, and just walking away and
forgetting that, you know, particularly with media, with
newspapers, with local broadcasters, it is really about a long-
term commitment to serve the community.
Ms. DeGette. How do those goals--how do those challenges
line up as we look at reauthorization of STELAR?
Mr. Bergmayer. Well, I think STELAR offers an opportunity
to look at a wide range of different media and video industry
policies, including media ownership rules, and I think
something like, you know, the short-term investor kind of
thing, that sort of relates to the broader media ownership and
consolidation points that have come out in today's hearing.
Ms. DeGette. Senator, do you have anything to add to that?
Mr. Smith. Yes. I would just re-emphasize to those who may
want to invest in broadcasting. If you invest and you not focus
on local, you are not going to make any money because people
are going to change the channel. And what I am telling you is
that my members who are successful financially are the ones
that keep a focus on local to avoid the Denver Post kind of
situation.
Ms. DeGette. Well, but that is assuming that there is that
competition, and that if there is no channel to change it to,
then that is where you run into that trouble, and so that kind
of----
Mr. Smith. We have lots of competition, I will tell you
that, particularly from over-the-top now and we have got--some
of our members do and people are going right directly to the
internet to get--to get our product, and there is lots of ways
to get our product. We want people to see it, but where others
try to sell our product to their advantage, we are entitled to
retransmission consent.
Ms. DeGette. So, I do want to talk a little bit about this
consolidation issue that I kind of alluded to a minute ago. Mr.
Thun, you said that some ownership groups are using loopholes
to get around the FCC rules, prohibiting a single owner from
controlling more than one station affiliated with a major
network in some of the areas. Can you talk very briefly about
that?
Mr. Thun. Yes, and I am not sure if that ownership changes
the emphasis on localism between those broadcast stations, but
what I am discussing is, in the negotiations that ensue when we
go into a renewal of a particular deal, if the broadcast
station owns more stations in that particular market beyond
what they were initially entitled to, or what the law intended
for them, it makes it more challenging.
They hold on to their positions, they hold on to their
economics, and they are extremely stubborn, and it often yields
blackouts.
Ms. DeGette. And I want to, of course, close with you, Mrs.
Boyers, and ask you what does media consolidation do to
consumers when broadcasting groups can't reach agreement of
video providers?
Ms. Boyers. Well, it removes the local programming from
them, because if they were to turn the signal off because we
couldn't reach any kind of an agreement, but I would tell you
that the broadcasters themselves, the big affiliates, and the
local broadcasters, are biting their own noses off to spite
their faces. They have got over-the-top competition with
themselves.
I mean, you got CBS All Access, for God sake. I mean, those
kinds of things are competing with your own local stations, and
I would tell you that if y'all are listening to the underlying
current here, my esteemed friend down here with the
broadcasters, he is only sitting on a stool with 2 legs. He has
got his advertising and he has got me, and he is--and he is
utilizing the captured marketplace, which is the passively tree
transmitters to send our signal down to his eyeballs that he
needs to see, and so his only 2 revenue streams today are
advertising, which is dwindling, and me.
So the only people who are cutting their cords are the ones
that can. The ones who can't cut that cord is Betty Duck out
there on county road 450 who doesn't have a credit card,
couldn't get Dish. She has to have me and she is 90 days past
due all the time. The one that brings me eggs. I am just
telling you. They are utilizing me as their revenue source.
Mr. Doyle. The gentlelady's time has expired. Good Lord.
OK. Where we at?
The Chair now recognizes Mr. Long.
Mr. Long. Thank you, Mr. Chairman. Ms. Boyers, I want to
remind you that the IRS does monitor these hearings.
Ms. Boyers. Yes, sir.
Mr. Long. Talking about taking eggs for payment, you might
want to----
Ms. Boyers. I report all my income.
Mr. Long. You might not want to go there 1974, George
Foreman was going to fight Muhammad Ali and Muhammad Ali came
up with a strategy to fight a younger George Foreman, and that
is exactly right. That is the Rope-a-dope. He would cover up
and back in to the ropes and let George just pummel away on
him, and that is kind of like what I felt like the last few
weeks with the broadcasters and AT&T, and there were people
coming into my office. Everybody just wants to pummel on us and
figure out, you know, how this thing is going to come out in
the end.
Mr. Bergmayer, what is a local broadcast station? You
referenced a local broadcast station earlier, what is a local
broadcast station?
Mr. Bergmayer. Well, I guess there is two ways--any
broadcaster serves a specific geographic region so it is local
to that region, so I think that if you are in that region, that
is your station. I think the problem is when there is--when you
are short a market where there is no affiliate for a particular
broadcaster, then you just need some kind of station. I suppose
it is not going to be local to your particular market, but,
nevertheless, that station in its own market is still thought
of as a local station.
Mr. Long. So Mrs. Boyers, I believe said that--I am still
with you, Mr. Bergmayer, Ms. Boyers said that her local
affiliate Cape Girardeau is like 147 miles away. Is that a
local station?
Mr. Bergmayer. Well, I think the definition of local might
get stretched a little bit in rural areas where the stations
are, yes, fewer and far between, just due to geography and
population density, but, you know, it is certainly closer than
a station in Los Angeles or New York.
Mr. Long. When I go home on the weekends 2 or 3 days a
week, whatever we get to spend at home, I sit down to watch the
local news with my wife, and I will say who is that? Who is
that? Who is that? I mean, all the reporters are, you know--
when I was growing up, you had the same reporters, same news
people, same sports people, like, your whole life and now every
time you go home, they have got new young kids out of college
because apparently that is who they can afford to pay, and it
is just constantly shifting.
And with that, Senator Smith, you are talking about
bringing local into local, walk me through that. What does that
look like, bringing local into local?
Mr. Smith. It means where there is a demographic area that
is served by a television station, that the people within that
area get that signal and not something from Los Angeles or New
York.
Mr. Long. But if there is not, I mean, if you are Ms.
Boyers in--and it is 147 miles away, I thought you were saying
there was a way to bring local broadcast into that market?
Mr. Smith. There are translators that help beam our signals
to rural areas over mountains and into valleys. They are all
over this country, if they don't want to have a subscription. I
don't know her--in the Ozarks, whether there are a sufficient
number of transmitters to get it for free, but we offer it for
free.
Mr. Long. I was a little bit confused on bringing local
into local in the fact of--like I said, I go home and we are in
a town of 160,000 people, 250,000 people, we have got ABC, CBS,
NBC, local, but two of them, we fought this battle before, have
gone into together, NBC and the ABC affiliate moved into the
same building, they are run by the same people.
For a while, they tried to keep their news people separate
and all that, but now they are all piled in there together.
There is not a real way to bring a local station that would be
functioning and make a profit into Ms. Boyers' area, correct?
Mr. Smith. I think what you are speaking to is just the
expense of running a newsroom. Journalism is expensive.
Localism is expensive.
Mr. Long. Yes, but I mean, somebody that doesn't have a
local station like Ms. Boyers doesn't. What did y'all--moving
to you, Ms. Boyers, what did you do during the tornado--recent
tornadoes in your area? I know we were hit. Does Cape Girardeau
cover the tornadoes over in Poplar Bluff?
Ms. Boyers. Whenever you watch the weather, and it is the
same on the CBS station as it is on KBI 5 Fox, it is the same
news team once again. They--but the only time you are going to
hear Poplar Bluff is when that radar dips way off down there in
the southwest part of the circle. They call themselves Tri-
State area. But the local news is Cape Girardeau.
Mr. Long. One quick last question, you came by my office
the other day and in your testimony today you mentioned this 47
percent. Tell me, you are paying 47 percent more than your
competitors and that is because of what?
Ms. Boyers. Yes, sir, based on the FCC's report, the study
they put together at the end of the year last year.
Mr. Long. But why? Because the quantity--they have more
accounts than you do or what? I am sorry.
Ms. Boyers. That is what I am offered in my negotiations
with the off-air channels, 47 percent more.
Mr. Doyle. The gentleman's time has expired. The Chair now
recognizes Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. I appreciate the
hearing this morning.
Mr. Thun, I have a quick question I would like you to
answer supplementally for me, if you would. AT&T and DIRECTV
have made 2 commitments to serve all 210 DMAs with local
channels. I would like--and each--none of those commitments
have been met, so I would like for you to supplementally
respond as to why those haven't been done. If you would, also,
put the markets where you down convert the HD signals, and what
the plans would be to remove the down conversion features
moving forward.
I want to continue on to talk about the subject that Ms.
Eshoo and Mr. Scalise have introduced, and that is, what should
the statutory framework look like for video moving forward with
the reemergence of over the air, with OTT, with the MVPD
options that we have today.
And then, there are things that are gleams in people's eyes
today that are going to totally transform this business space.
I would like some ideas from you as to what the statutory
framework would look like for the video market of 21st century,
not relying on the 1992 Act, not relying on STELAR. What should
the statutory framework look like? And so I will give each you
about 45 seconds starting with Mr. Bergmayer.
Mr. Bergmayer. I believe it should start with copyright as
the fundamental unit of negotiation, and let's build from
there. Right now, we have a system where copyright, you have a
compulsory license, and then on top of that, you have
retransmission consent, which is negotiated in the marketplace.
I think this adds too much complication, too many layers. I
think you simplify things. You start with copyright, and you
see if that improves things for consumers. And you know, I just
think that offers a more sounder starting point, you know, for
addressing the market. That is how it works everywhere else.
Mr. Flores. Thank you. Thank you for staying within 45
seconds.
Ms. Boyers.
Ms. Boyers. For us, it would be choice. Choice for the
consumer, choice for us as the provider. In today's framework,
we are mandated by Federal law to provide those off-air
stations, first and foremost, to every one of my subscribers.
If they don't want to watch them, they shouldn't have to pay
for them. Choice is part of that, and just absolutely, more
choice. Let the marketplace set the demands.
Mr. Flores. By the way, you have been a great witness. I
appreciate you being here today.
Mr. Thun. I think for us, we are open to any and all ideas.
I mean, one of the things that has brought us here today is
that retransmission consent needs to be fixed somehow. The
exact measures around that, I am not sure. But I think it
starts with working on the 1992 Act, starting from scratch and
seeing laws that could create marketplace conditions that are
not punitive to our consumers.
Mr. Flores. I don't really want to start with the 1992 Act.
I want to start with a blank sheet of paper. What would that
look like?
Ms. Boyers. Amen.
Mr. Flores. I mean, does anybody disagree with that
approach?
Ms. Boyers. No, sir.
Mr. Flores. I mean, because the market is totally different
than it was in 1992. It is totally different than when I was a
kid, and I had three channels located 80 miles from the three
broadcast channels, and I would have to get up on a 45-foot
tower to adjust or fix the antenna after a storm.
Ms. Boyers. If the President was on, you were screwed. You
didn't get to watch anything else. You had to watch the
President on all 3 channels.
Mr. Flores. Secretary Smith.
Mr. Smith. Congressman, you know, basically, you have 2
options. You can have the Government manage prices and these
negotiations, which I would strongly oppose.
Mr. Flores. Yes, I am opposed to that.
Mr. Smith. Or you can allow the retransmission consent
process to go on, which I think is always kind of a food fight
when people are freely trying to bargain for the value of
content. And my own view is that the dollars should follow the
eyeballs. We have got the eyeballs.
Mr. Flores. OK. I think retransmission consent is part of
it, but at the same time, I do think it is thinking too small.
There is a new technology that is going to come in, and it is
going to wire around retransmission consent, and I think we
need to figure out what the statutory infrastructure looks like
so that we create the video marketplace of the future that puts
consumers first.
And with that, Mr. Chairman, I yield back the balance of my
time.
Mr. Doyle. The gentleman yields back, and the Chair thanks
him. The Chair now recognizes Mr. Cardenas for 5 minutes.
Mr. Cardenas.T1 Thank you, Mr. Chairman, and thank you to
the ranking member for having this important hearing.
I would like to point out that earlier today, there has
been testimony that no broadcaster has been fined for violating
the good faith rules. I want to point out that there was an
investigation and a settlement of $9.5 million with Sinclair.
So I just wanted to state that for the record.
The way that many consumers watch video is changing, but
for a lot of folks, they still receive local news, local
weather, emergency alerts, and local entertainment over the
air, and by way of cable and satellite. I know that this is a
complicated issue for those in the video market, so I am glad
to see so many stakeholders at the table so we can get this
right.
Above all, we need to remember the bottom line, that
consumers have access to local diverse programming. That is
important to me and to millions and millions of Americans.
And my first question is to Senator Smith, the CEO of NAB.
I understand that significant populations of Latinos and other
communities of color depend on free local broadcasts to stay up
to date on local news, disaster alerts, and other educational
and entertainment programming. Can you discuss the rate of
viewership amongst communities of color?
Mr. Smith. Yes, and it is one of the proudest things we
have to offer as free local broadcasters is that those who
exclusively rely on us tend to be minority communities and the
economically disadvantaged. And we are very proud of Univision
and Telemundo, members of our association. I think we are doing
everything we can to make sure that there is content available
to them free over the air, and those communities
disproportionately rely on us.
Mr. Cardenas.T1 Thank you for that testimony. With all of
the big players in the field, it is important that we don't
lose sight of the independent programmers who bring quality,
local, diverse content to their communities. In a space where
we see more and more consolidation, we need to make sure that
local networks can continue to operate and that there is room
for new entrants into the markets.
Ms. Boyers, we have heard from independent networks that
the retransmission consent process can cut into programming
budgets that could otherwise be used to create content that
showcases diverse and unique voices. In your experience, is
that accurate?
Ms. Boyers. Absolutely. We only have certain buckets of
money for programming, and retransmission consent fees take
away funds in my small business to provide compelling
independent programming. We are on the same side of this issue
with the independent programmers. We all have the same
financial straps. We have the same, you know, too much month at
the end of the money, and we have the same problems the
independent programmers have. We want to do everything we can
to get those folks on our station, but we only have so many
dollars.
Mr. Cardenas.T1 Well, you mentioned buckets, but I have
been visited by some of the small players in the field, and it
looks like they go around with a little tin cup.
Ms. Boyers. Yes, sir.
Mr. Cardenas.T1 Hoping they will get something to rattle in
there, and that is one of the things that really, really
concerns me, because the smaller the player, the more likely
that they are not going to be able to play, that they will just
go away. And I think one of the saddest things that we could
see in America is to see someone who is passionate, who is
heartfelt about wanting to be that, to do that as a career and
realize that there is no room on the playing field for them
because it just doesn't pencil. They can't eat and do the
beautiful, wonderful content that they can and are capable of
producing, but if you can't eat, you do something else.
Ms. Boyers. Yes, sir. That is right.
Mr. Cardenas.T1 That is one of things that is a big concern
of mine.
Ms. Boyers. Yes, sir.
Mr. Cardenas.T1 Mr. Thun, same question.
Mr. Thun. We, I believe, have an excellent track record
carrying independent channels, hitting diverse audiences. As I
testified earlier, I think we have an unassailable record. As
far as I know, we distribute more diverse content than any
other distributor in the marketplace, so we want to reach all
the different audiences. We have national platforms so that we
can touch people across the country in those different pockets,
and we try to do so with providing a robust experience for them
to touch different pieces of content that aren't from the same
voices.
Mr. Cardenas.T1 OK. Thank you.
Mr. Bergmayer, do you have anything to add to this?
Mr. Bergmayer. In think the current regulatory system as
well as just the market structure benefits primarily just the
most major programmers. It also doesn't particularly harm, I
think, the very largest MVPDs, the Comcasts, the Charters. You
have a system where you have these large players fighting each
other all the time in the interest of smaller diverse
programmers, as well as small cable systems, just simply often
get forgotten.
Mr. Cardenas.T1 So perhaps the system's not broken-broken,
but some tweaks here and there by Congress might be welcome?
Mr. Bergmayer. Well, I would favor some pretty fundamental
changes to the system, but I am totally open to lots of small
tweaks within the current framework, as well as addressing the
consolidation issues, which I don't think help either.
Mr. Doyle. The gentleman's time has expired. The Chair now
recognizes Mr. Walberg for 5 minutes.
Mr. Walberg. Thank you, Mr. Chairman, and thanks to the
panel. This has been one of the most interesting panels I have
had the privilege of listening to with a lot of good humor,
good information, and I just have to tell you. I agree with all
of you. I want you all to be satisfied. Is that OK, Mr.
Chairman? I am not sure if that will happen, but I have learned
some great new words I can use at my town halls too. Dadgummit.
I appreciate that.
Mr. Thun, one of the counties in my district, in my home
county, in fact, Lenawee County in Michigan, is an orphan
county. It is in the Toledo market, and as great as Mr. Latta's
local broadcaster's content may be, I am sure my constituents
would prefer to be watching the Michigan-Ohio State game from a
local Michigan affiliate.
Mr. Latta. They would lose anyway.
Mr. Walberg. And we have such comity.
Localism will be especially appreciated during the football
season, as Chairman Wheeler used to put it.
Mr. Thun, can you help me understand why DIRECTV can't just
import local out-of-market signals to serve subscribers in
Lenawee County, for instance, or what would it take to ensure
subscribers in Lenawee are able to receive local content?
Mr. Thun. In terms of the orphan counties, I think in every
instance that a broadcast station has come to us, we have
complied and been able to distribute it, except in cases where
it was technically not feasible. In certain cases, our spot
teams don't cover a particular area, so therefore, technically,
we wouldn't be able to deliver it.
In the case of your particular example, I am not exactly
well-attuned to what that particular area is, or what has been
spoken to us, but we are absolutely, you know, receptive to
looking at that. And if a broadcaster comes to us for the
distribution there, to provide you with a Michigan point of
view instead of the Ohio point of view, nothing against the
Buckeyes or nothing for necessarily the Wolverines.
Mr. Walberg. You are starting out well.
Mr. Thun. We are happy. We are supportive of that.
Mr. Walberg. Senator Smith, do you have anything to add to
that?
Mr. Smith. Yes. I would just note that in the last STELAR
bill reauthorization, there was a provision, an authority given
to the FCC to deal with orphan county issues. We supported
that. We worked with them. We hope that your county, if they
are orphaned, will work through that process, and we have been
able to address a number of these issues for a number of orphan
counties.
Mr. Walberg. Senator Smith, can you walk me through how the
distant signal compulsory copyright works versus the
retransmission consent process?
Mr. Smith. Well, what it means, if, for example, Mitch
McConnell's Bowling Green area, for some reason, that is not
served with the local stations that are there. A distant signal
is brought in from New York City to them. There are 12 markets
like that. These are ones that AT&T, DIRECTV has not provided
local, the way outlined in STELAR. And if STELAR went away, I
am sure they would work with us, and I think local stations
there would be anxious to find a price that they could deliver
local into local. But as long as STELAR remains, they have an
easy out.
Mr. Walberg. Could I assume that that sounds something like
a subsidy if they could negotiate directly?
Mr. Smith. It is a subsidy. And if you add up all the
market capitalization of every broadcaster in America, it will
not equal the market capitalization of AT&T. So the question
becomes, do they need a subsidy?
Mr. Walberg. Mr. Thun, your thoughts?
Mr. Thun. As I testified earlier, we do serve those
communities. We do have a solution, which is an over-the-air
antenna, and part of that falls, is incumbent upon the
broadcaster to provide a signal that is strong enough so that
other people, other folks can receive it. They are not incented
to provide a very strong signal, and we come in. We actually
don't get paid for delivering them beyond their footprint that
they are able to do, and so, they enjoy rates from us that are
very handsome and continue to go out of control.
Like I said previously as well, the 12 markets that we
don't serve, 11 of them are either duopolies, double duopolies,
or triopolies, and every time we go into those kinds of
negotiations, the prices somehow are higher. So the
deauthorization of STELAR or the lack of reauthorization
wouldn't ensure that we would go into those 12 markets by any
stretch.
Mr. Walberg. OK. Thank you. I yield back.
Mr. Doyle. Thank you. The Chair now recognizes Mr.
Butterfield for 5 minutes.
Mr. Butterfield. Thank you very much, Mr. Chairman, and let
me join my colleagues in thanking the witnesses for your
testimony today. I have been ping-ponging between
subcommittees, and I think Gordon understands that drill and
how that works, but thank you for your patience.
Let me begin by making an observation. My district, as many
of you may know, is very rural. Many of my constituents in the
1st District of North Carolina rely on satellite to receive
their local news, to receive their content that really matters
to their families.
And so, Mr. Smith, let me ask you: How would allowing the
relevant provisions of STELAR to expire promote access to local
programming in rural communities? Help me with that.
Mr. Smith. Well, if Mr. Walden were still here, I would
share with him and you a similar thing. I have a place up in
the Blue Mountains of Oregon. I am a good DIRECTV customer, and
we get L.A. News there. So I think if STELAR continues, that
will continue. And I think if it goes away, I am sure Mr. Thun
and I could work out a deal that we can fix these 12 markets,
but that is left to people at a higher pay grade than we are,
and our companies hopefully can get that done unless there is
an out that allows them to bring in a distant signal.
Mr. Butterfield. My staff has very faithfully gone through
your written testimony. I have not, I acknowledge that, but I
depend on them greatly. They tell me that you question whether
the good faith requirements currently imposed by Congress are
necessary for fair and fruitful negotiating. Without the good
faith rules, what would change from the consumers' perspective?
Mr. Smith. I think that a good side of the retransmission
consent process now is that both sides are incentivized to come
to a deal. We want them to have our product. We appreciate the
resources it brings to us. It helps support local journalism.
And they want more eyeballs, too, so we actually have a
community of interest, but these are not things Mr. Thun or I
are involved in.
Mr. Butterfield. Hopefully, Mr. Bergmayer can help us with
that.
Mr. Bergmayer. Yes, sure. I mean, first, my read of the
statute and the FCC's rules is that good faith does apply to
both sides, both MVPDs and broadcasters. I would say that just
saying that negotiations have to happen in good faith without
really clarifying what that means doesn't really get you that
far, so that is why we have advocated that, you know, we
actually put some teeth behind it so that you find that certain
kinds of negotiation tactics that tend to harm consumers and
drive up bills be considered bad faith, per se.
Mr. Butterfield. All right. Let me go to the other side of
the spectrum, no pun intended. Mr. Thun, let me ask you: How
does the distant signal license provided by the current
regulatory framework benefit rural consumers?
Mr. Thun. In a lot of rural areas, consumers are not able
to get an over-the-air signal. And for those pockets that they
can, we are able to provide a distant signal so they can get
network programming, not local, but network programming, so
that they can see the various pieces of content that they
enjoy.
Mr. Butterfield. Would expiration of that affect local
programming for the customer?
Mr. Thun. I don't know if it would do anything for local
programming, but what it would do for those customers who can't
get local programming because they get it through a distant
signal, that would sunset, and I am not sure what process would
take place for them to get that content.
Mr. Butterfield. Let me try this one: How do increasing
programming fees affect your efforts to deploy broadband in
currently underserved areas?
Mr. Thun. Well, like Ms. Boyers said earlier, we have
multiple revenue streams, and one of them being video, and if
that revenue stream is shrinking, that affords us less money to
invest in other areas of the business, one of them being
broadband. So just intuitive financial principle would dictate
that if you are making less money in your business, you are
going to have less money to spend in other areas.
Mr. Butterfield. Now, Ms. Boyers, you are in a rural
community. Is that right?
Ms. Boyers. Yes, sir.
Mr. Butterfield. How would this affect your universe?
Ms. Boyers. How would the sunsetting----
Mr. Butterfield. Yes. As an operator, how would it would
affect your community?
Ms. Boyers. It would affect us dramatically. They keep
talking about this no good faith complaints as a way of saying
you don't need good faith rules. Rule breaking--rules aren't
made for breaking, so I think that it is a testament that we do
all come to the table together under the guise of these, you
know, mandated good-faith rules. And to be able to allow even
other folks to come in under the guise guys of the good-faith
rules, I find groups like the NCTC, on our behalf, would help
us have lower rates, possibly, for those so we could have more
money to deploy. But the good-faith rules are, you know, an
important hanger for us.
Mr. Butterfield. Thank you.
Mr. Doyle. The gentleman's time has expired. The Chair now
recognizes Mr. Gianforte for 5 minutes.
Mr. Gianforte. Thank you, Mr. Chairman, and thank you to
the panel. This has been very insightful, your testimony today.
I appreciate getting the sides.
Consumers should have access to their local news. Our local
stations provide--serve a critical function in our communities
in keeping public informed, connecting rural communities. In
Montana, they really rely on the local stations for news and
weather. Some communities in our State, including our State
capital, Helena, however, does not receive their local station
through DIRECTV.
What local news can DIRECTV subscribers in our State
capital get? Well, New York or Los Angeles. People in Helena
care about their community events, local weather, the coming
wildfire season, not necessarily about standstill traffic on I-
5, or the subway breakdown in New York City.
As more consumers look to cut the cord, I think providing
viewers with their local broadcast stations would be an
effective way to keep consumers. As we look at the TV
marketplace, we should consider how to lower the cost to
consumers and increase competition, all while making sure
neglected markets like Helena and Glendive are covered.
First, I would like to focus on getting prices down for
consumers. I see constant news stories and I hear directly from
my constituents that their pay TV bills are continually on the
rise. Ms. Boyers, I appreciate your testimony today. Can you
help us with this? How can we get consumers relief on the
prices?
Ms. Boyers. To lower them. I mean, honestly, we are being
pushed into a vacuum as the passive retransmitter of broadcast
signal. We are their eyeballs. In a lot of areas, that is the
only eyeballs they have because they can't do an antenna. They
don't offer it on broadcast. So we are being penalized for
being small and for being rural, and we are subsidizing the
lack of the revenue generating in their business model. Now, if
they can come up with a different business model and lower my
rates, then I pass it on to my customer. We don't make a buck
on retransmission consent.
Mr. Gianforte. And you testified earlier that 79 percent of
your total P&L expenses are related to programming, not in
local?
Ms. Boyers. Yes, sir.
Mr. Gianforte. OK. Thank you for that.
Mr. Thun, as I mentioned, there are two markets in my
State, including our capital, where DIRECTV does not provide
local into local. Now, you have mentioned that you have an
antenna option. The challenge we have, Montana, mountains, the
broadcast doesn't work. So why can you not provide local
stations to our State capital?
Mr. Thun. Well, I think we can. Just to be clear, we don't
bring the distant signals into the heart of Helena. It is going
into the outskirts where the white areas are. So our solution,
as I said previously, is the over-the-air antenna that is
integrated into our set top box.
Mr. Gianforte. But those over-the-air antennas don't work
when you are in the mountains. Why can those citizens not get
access to local news? What is the impediment today?
Mr. Thun. The impediment is that in certain cases, the
broadcaster's signal technically probably can't get to certain
of those areas. There are probably areas within the DMAs that
you are----
Mr. Gianforte. But what is preventing it from going over
your network?
Mr. Thun. What is preventing it? We have explored looking
into these 12 markets, and as I testified previously, they are
rife with duopolies, dual duopolies, and triopolies. So, in the
absence of putting the signal over the air, it makes it very
challenging for us to come to a market when we see what kind of
prices that are being extracted in the regime.
Mr. Gianforte. Senator Smith, would you like to provide the
broadcast perspective on this?
Mr. Smith. Yes. I think there is no technological
impediment any longer to AT&T's being able to provide this.
There is plenty of competition. You have got to support the
local stations there in Montana. We do that. Obviously if
people in Helena want our stuff directly that is supported by
advertising revenue, they just put up their digital antenna,
but I do think the way you make sure AT&T does not provide it
over their system is to renew STELAR.
Mr. Gianforte. Well, clearly, we have difference of
opinions. I appreciate the transparent testimony today. I look
forward to working with you all to figure this out so our
constituents are better served at prices they can afford. Thank
you. I yield back.
Mr. Doyle. I thank the gentleman.
Mrs. Brooks, 5 minutes.
Mrs. Brooks. Thank you. Thank you, Mr. Chairman, and I,
too, apologize. I have been running between a couple of
different hearings, but what has been pretty clear to me is
that there is not a lot of agreement from the panel, and so, I
guess, I would like to start out by asking, and because I have
kind of gone in and out of this hearing.
Senator Smith, could you please share with us--and I
apologize if this has been asked. Can you explain how
retransmission consent prices are actually decided, because as
I have come in and out of this, that seems to be the sticking
point, or one of the sticking points. So can you talk about how
those prices get decided?
Mr. Smith. Obviously, I don't negotiate them, and if Mr.
Thun and I did, I am sure we would come up with a deal.
Ms. Boyers. $0.12.
Mr. Smith. Their business people and our business people,
my members, they sit down and negotiate, and I would just make
the point that they pay for their own content far more than
they pay for ours which is much higher watched. And so our
members try to get the dollars reflected by the eyeballs that
we bring to their system and ours.
Mrs. Brooks. And is that why prices might vary based on the
size of the MVPD?
Mr. Smith. Of course.
Mrs. Brooks. OK. And any disagreement, Mr. Thun? Anyone
else on that answer? I am just trying to see if there is any
agreement on----
Mr. Smith. Well, I mean, I would just say I have some
sympathy for Ms. Boyers, because I am from a very rural part of
Oregon. I know what it is like to be rural and left out, and
yet, the economics of going into those places sometimes make it
very difficult.
Ms. Boyers. I emphatically disagree. It costs absolutely no
more from my head end to pick up that signal once it comes from
their transmitter to my receiver. It comes down into my head
end, and there is where I incur the expense, by the mile, to
get an aerial air underground to that customer. What they are
charging me for is what gets to my head end, and then I turn
around and passively retransmit for them. So it costs--they
have no more for me to get that signal than for them to
transmit it right there in Cape Girardeau itself. However, I am
paying 47 percent more. I don't understand that. I was really
interested in that answer that is what we were supposed to get
that you just asked. I have no idea other than the fact that we
have no leverage, no bargaining power when we sit down, and it
is take it or leave it.
Mrs. Brooks. And going back a little bit to, and while I
appreciate you aren't actually, Senator Smith, in the
negotiations, in those discussions, and in, you know, good-
faith discussions, what are the factors as we have to explore
how to go forward with this incredibly changing landscape?
Mr. Smith. I don't know because I am not in there, but I
can imagine that comparables for other programming are
evaluated, viewership, and ratings. Those probably come in to
bear on what a broadcaster would ask, but I am just assuming
that. I have never been involved in those negotiations.
Mrs. Brooks. I have a concern about blackouts as we have
all heard from various communities and what happened,
particularly as it relates to public safety. And can we talk a
little bit more about the public safety issues that are created
when we go into blackouts? And what is the longest period of
blackouts we have had, and you know, what a kind of rules
should we have around this issue of blackouts as it relates to
public safety? Sure. All of you. I would like to finish with
each of you very briefly talking about that.
Ms. Boyers. Blackouts are happening to other ACA members as
well. I represent about 700 moms-and-pop, baby companies, and
blackouts are happening. It is an issue, and it seems to me
that although they say that even if there is a threat of a
blackout, 99.9 percent of those contracts are made,
miraculously, you know. We have a member, Liberty, in Puerto
Rico threatening of a blackout before the dadgum hurricane.
Now, do you think that the leverage of Liberty saying yes, I
will pay your high prices we are much more able to do that
because they had a hurricane coming, and they wanted to be able
to watch the radar. I find it compelling that all these
additional blackouts seem to hover around times of negotiations
of retransmission consent.
Mrs. Brooks. My time has expired, but I would certainly be
interested in any other answers in written form on how we
resolve the issue of blackouts relative to public safety.
Mr. Smith. We would be pleased to provide that.
Mr. Doyle. The gentlelady's time has expired. The Chair now
ask unanimous consent to enter the following documents into the
record: A letter from the American Television Alliance; a
letter from Consumer Reports; a letter from the National
Association of Black-Owned Broadcasters; a letter from
Representative Golden; a letter from Ride TV; a letter from
Rural Group Coalition; a statement from the Motion Picture
Association of America; a broad post from Sports Fans
Coalition; and a letter from R Street. Without objection, so
ordered.
Mr. Doyle. I want to thank all of the witnesses, and Ms.
Boyers, you can come and testify for me any time you want.
Ms. Boyers. Just ask and I will be here.
Mr. Doyle. I want to thank you all for being here today.
And I want to remind Members that pursuant to committee rules,
they have 10 business days to submit additional questions for
the record to be answered by the witnesses who have appeared,
and I ask each witness to respond promptly to any such
questions you may receive. At this time, the subcommittee is
adjourned.
[Whereupon, at 12:59 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared Statement of Hon. Billy Long,
I'd like to thank the witness' for being here, and I'm
especially happy to see a fellow Missourian (Patricia Jo
Boyers) testifying before us today.
I think we can all agree that the media and entertainment
marketplace has and is rapidly evolving. There is more
competition than ever, and government intervention is not
always the answer.
It is important for us to examine the state of the video
marketplace but as we approach a potential sixth
reauthorization of STELAR, we need to take a hard look at the
underlying policy and its relevance today rather than assuming
its passage is a necessity. We should ignore the inclination to
rubber stamp this legislation only because this committee has
historically done so.
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