[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
REAUTHORIZATION OF THE SATELLITE HOME VIEWER ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
FEBRUARY 24, 1999
__________
Serial No. 106-6
__________
Printed for the use of the Committee on Commerce
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------------------------------
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Collier, Sophia, President and CEO, Northpoint Technology.... 50
DeVaney, Al, President, Newsweb Broadcasting, representing
the Association of Local Television Stations............... 54
Fisher, Andrew S., Executive Vice President, TV Affiliates,
Cox Broadcasting........................................... 41
Hewitt, Charles C., President, Satellite Broadcasting........ 25
Hutchinson, John, Executive Vice President and Ceo, Local TV
on Satellite............................................... 65
Kimmelman, Gene, Co-Director, Washington Office, Consumers
Union...................................................... 32
Lathen, Deborah A., Chief, Cable Services Bureau, Federal
Communications Commission.................................. 16
Moskowitz, David K., Senior Vice President and General
Counsel, EchoStar, and Bruce Franca, Deputy Chief of the
Office of Engineering and Technology....................... 70
Perry, Jack, President and CEO, Decisionmark................. 44
Material submitted for the record by:
Goss, Hon. Porter J., a Representative in Congress from the
State of Florida, prepared statement of.................... 103
Lathen, Deborah A., Chief, Cable Services Bureau, Federal
Communications Commission, letter dated March 17, 1999,
enclosing response for the record.......................... 104
Sanders, Hon. Bernard, a Representative in Congress from the
State of Vermont, prepared statement of.................... 103
(iii)
REAUTHORIZATION OF THE SATELLITE HOME VIEWER ACT
----------
WEDNESDAY, FEBRUARY 24, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Cox, Deal, Largent, Cubin, Shimkus, Wilson, Pickering,
Fossella, Blunt, Bliley (ex officio), Markey, Boucher, Eshoo,
Wynn, Luther, Sawyer, Green, and Dingell (ex officio).
Staff present: Justin Lilley, majority counsel; Mike
O'Rielly, professional staff member; Cliff Riccio, legislative
clerk; and Andy Levin, minority counsel.
Mr. Tauzin. This hearing will now come to order.
Today the subcommittee begins its review of the Satellite
Home Viewer Act. SHVA is one of the most important consumer-
related issues we will deal with as we wind down this century.
Everywhere I go Members are asking me the same thing: ``Billy,
are we going to do anything?'' and ``What are we going to do?''
Tens of thousands of Americans have contacted their elected
representative here in Washington pleading with us to resolver
the festering problem: How can they receive their local
television stations or a network feed on their home satellite
dishes? These issues are known as local and wide area issues.
In many respects this hearing is a continuation of the
subcommittee's inquiry into the state of competition in the
market for multi-channel video programming distribution. SHVA,
after all, was enacted with the intent of promoting competition
with incumbent cable operators. Now that SHVA is scheduled to
expire on December 31, 1999, Congress must begin its work now
to reauthorize and reform this important statute.
When the Commerce Committee first passed SHVA in 1988, I
stated in the committee report that satellite television was
the genie of competition, and that Congress would continue to
monitor the genie to see whether it flourishes in the
marketplace or whether it retreats back into the bottle. Eleven
years later, we can safely say that the genie has not retreated
to its bottle, nor will it. Satellite television is here to
stay.
Indeed, subscribership for satellite television services is
growing exponentially. With the advent of digital high-power
DVS systems, the industry has now moved to new levels. It is
now able to compete in urban and suburban markets that
heretofore were inaccessible. But, will satellite-delivered
television continue to flourish in the 21st century or will we
revert back to this [indicating]? Will we simply step back in
time or will we step into the future?
Isn't it ironic that broadcasters are investing billions of
dollars into new digital equipment to deliver the knocks-your-
socks-off pictures that they promised us, and yet, millions of
Americans are being told that they must hook up antennas and
rabbit ears like these kinds of antennas and rabbit ears that
formerly were hooked up to television sets in order to receive
some kind of local picture? Or are they going, indeed, to have
to wrap hangars in tinfoils to get some kind of fuzzy reception
of their important local network pictures?
I don't believe this is the new millennium technology
expected by consumers today. This is an important question, for
there are serious and substantial issues that need to be
addressed in order for competition to continue to grow.
Local-into-local is one important example. This committee
has long had an important history of removing artificial legal
barriers to competition. This, after all, was what the 1996
Telcom Act was all about. The time has now come for us to apply
that abiding principle to satellite television. Technology no
longer prevents satellite delivery of both distant and local
broadcast signals. Technology is in place, but the legal
authority is not. The law, therefore, must give way. That is
why we have introduced legislation in the 105th Congress to do
just that, and that is why I intend, with our committee's help,
to do the same thing this Congress.
Another potential regulatory impediment to competition is
the disparity in royalty fees paid by satellite provider and
cable operators. Mr. Markey and I, with the help of Mr. Bliley
and Mr. Dingell, pushed legislation through the House last year
that would have frozen these royalty rate increases. The
legislation, unfortunately, died in the Senate. But we have a
chance to address these royalty fees again this Congress, and I
expect that we will prevail this time.
Finally, we have to address the wide area dispute. In some
respects, Congress is a victim of its own success. We set out
to promote competition with cable, and we succeeded to some
extent. As the old saying goes, be careful about what you wish
for.
Indeed, the flip side of the coin of successful has been
enforcement headaches. The Federal court now in Miami has found
that satellite television distributors have violated the
Satellite Home Viewers Act.
Let me also say that we are concerned about the court
solution, and that it may go too far. Today I want to explore
with our witnesses whether the predictive model used by the
court unnecessarily terminates network programming, so many
consumers are, in fact, unserved, as defined by the act.
In the end, consumers should not be caught in the middle.
The burden is upon all of us here today, the Congress as well
as the industry participants, to find solutions for consumers.
If consumers can get access to local signals through other
means, then let's talk about what legal and regulatory
impediments exist in the development of these alternative
delivery mechanisms. Likewise, if the court's predictive model
sweeps in too many consumers, then we owe it to those consumers
to ensure that service is not unnecessarily disrupted.
Just this week we learned that 700,000 consumers may, in
fact, be divested of their right to receive network programming
over their satellite, in view of this Federal court decision.
In that light, I want to announce that Chairman Bliley and I
are preparing, with the help of the committee--and I know I
received similar requests from members on the other side--to
offer legislation as early as this week to set up a moratorium
on that, so you are going to give us some time to get the
local-into-local problems worked out. We are preparing that
legislation and will file it imminently.
This weekend, of course, we may or may not see the cutoff
of service to a great many consumers in America. When the
phones begin to ring to the Members of Congress all over this
country, I think the message will go out loud and clear: It is
time for Congress to act and to ensure that local programming
is available to satellite consumers in America.
I look forward to this hearing on more of these critical
issues. Let me say, as we proceed to the legislation, we will
continue to ask for all of your help in finding the right
answers. Our committee has devoted substantial time and
resources to finding ways to promote competition. Part of that
effort needs to be the reauthorization of the Satellite Home
Viewers Act, and we will do that, but we will reform it as
well. Our laws simply have to keep pace with technology, as
well as with consumer demand, and we will do our best to
accommodate both of those requirements.
The Chair is now pleased to welcome and recognize my good
friend, the ranking minority member, Mr. Markey, for an opening
statement.
Mr. Markey. Thank you, Mr. Chairman, and thank you so much
for calling this very timely hearing today. The backdrop for
the issues that will be raised here today are interpretations
of provisions of the Satellite Home Viewer Act, which is often
referred to by its acronym and pronounced, ``shiva,'' the way a
New Englander would describe how southerners react to cold
weather.
The debate on SHVA, which is not an ancient statute by most
standards, having been enacted in 1988 to deal with the eight-
foot dish industry, underscores both how much has changed
recently in technology and how much we need to remind ourselves
of our historic policy goals in telecommunications policy.
The cornerstones of communications are, for decades--and I
think continue today to be--universal service, localism, and
diversity. SHVA was enacted to fulfill one of those
cornerstones--namely, universal service--by permitting
consumers who could not receive an adequate signal from a
local, over-the-air broadcaster to import, by way of satellite,
the distant network TV signals from afar. People who were not
served by local broadcasters are said to reside in ``white
areas.''
Yet, we were mindful in fulfilling the goal of getting
network programming to people in white areas, not to trample on
another important communications value; namely, localism. We
sought to safeguard localism by stipulating that people who
could receive local signals should do so, rather than bypass
their local TV stations, because local TV stations need the
advertising revenue to keep on the public affairs and news
programming for people in their community. And unless there was
a good reason why not to, people should continue to avail
themselves of their local broadcast stations, for those good,
solid localism-related reasons.
Of course, in 1988, when we wrote this statute, the direct
broadcast satellite revolution had yet to begin. In 1992, Mr.
Tauzin and I and others passed a program access statute, which
gave birth to the 18-inch dish revolution, and that was our
goal. So, only beginning in 1993 has this 18-inch dish
revolution been in place.
Of course, that is not by definition the hollows of West
Virginia or farmland in Iowa that the eight-foot dish dealt
with, but, rather, we are now talking about urban and suburban
America inside of the historic area where television stations
were able to send their signals.
So while we try to encourage the 18-inch dish industry, we
come back now 4 or 5 years later with a bunch of public policy
questions to get raised in terms of the impact on local TV
stations and their ability to serve the poorest people in their
community, who can't afford cable or satellite in terms of the
quality of the programming, the public affairs, the news, which
go into those local community homes.
So the U.S. District Court, as the chairman said, in Miami,
which interpreted the white area provisions, has ruled. In
response to a lawsuit brought by a number of broadcasters, the
court issued rulings that will require the termination of
satellite delivery of distant network signals effective on
February 28 and April 30 to almost 2 million consumers. Once
again, this committee will be tasked with addressing universal
service while simultaneously balancing localism.
Thankfully, the technology is arriving that will help deal
with a portion of the problem. Satellite providers are
exploring how to provide consumers with local TV signals, which
is referred to as local-to-local service. This would help
satellite consumers offer a more comparable service to cable
operators and more effectively compete in the marketplace.
However, it is important to recognize that it will not be
possible for satellite providers to bring every local channel
to everyone in every local market in the near future. Yet,
local-to-local is an improvement over the current situation,
and Congress must help get it underway on a transitional basis
at the very least, and do so this year.
In addition, wireless cable alternatives may help to
supplement DVS signals, to provide a complete programming
package to consumers that includes local TV signals. I believe
that the Congress and the FCC should do what can be done to
foster such alternative choices and get them to the marketplace
as soon as possible.
That is because there is another backdrop to our action in
committee, in addition to the court-ordered cutoff of distant
network signals, and that is that price controls on cable
programming services will end after March 31, next month. In my
opinion, fixing the white area problem and approving
legislation permitting DVS to provide local TV signals will not
in themselves provide enough of a marketplace check on price
hikes in the cable industry.
Moreover, head-to-head wireline video competition on a
massive basis is also clearly not going to happen before cable
programming is deregulated at the end of March. My personal
feeling is that cable monopolies should be deregulated only
when effective competition makes such protection unnecessary,
and that we should not end consumer price protections on the
basis of a date chosen long ago, making an assumption that
every telephone company in America by this date would be
providing cable and telephone service. It did not happen.
That is why I believe that Congress must do more. We need
to explore how to make competitors more effective and remove
impediments to more robust cable competition, and we must make
sure that, prior to the emergence of effective competition in
particular markets, that consumers are not treated unfairly.
Mr. Chairman, this is about as important a hearing as we
are going to have this year. I am glad to get started off the
year with it, and I hope that all of the members are able to
hear these witnesses today, because it sets a wonderful table
for us to be able to work from for the rest of the year.
[The prepared statement of Hon. Edward J. Markey follows:]
Prepared Statement of Hon. Edward J. Markey, a Representative in
Congress from the State of Massachusetts
Good Afternoon. I want to start off by commending Chairman Tauzin
for calling this timely hearing today. The backdrop for the issues that
will be raised today are interpretations of provisions of the Satellite
Home Viewer Act (SHVA).
The debate on SHVA--which is not an ancient statute by most
standards, having been enacted in 1988--underscores both how much has
changed recently in technology and how much we need to remind ourselves
of our historic policy goals in telecommunications policy. The
cornerstones of communications policy in the United States for decades
have been universal service, localism, and diversity.
SHVA was enacted to fulfill one of these cornerstones, namely,
``universal service,''--by permitting consumers who could not receive
an adequate signal from a local over-the-air broadcaster to import, via
satellite, the distant network TV signals from afar. People who were
not served by local broadcasters are said to reside in ``white areas.''
Yet we were mindful in fulfilling the goal of getting network
programming to people in ``white areas'' not to trample on another
important communications value, namely ``localism.'' We sought to
safeguard localism by stipulating that people who could receive local
signals should do so rather than bypass their local station.
Of course, in 1988, when we wrote the statute, the Direct Broadcast
Satellite (DBS) revolution had yet to begin. We return today and DBS
has around 9 million customers. As we return to SHVA in 1999, the
touchstone will be to address the fallout from a series of recent court
decisions from the U.S. District Court in Miami, which interpreted the
``white area'' provisions of SHVA. In response to a lawsuit brought by
a number of broadcasters, the court issued rulings that will require
the termination of satellite delivery of distant network signals--
effective on February 28th and April 30th--to up to almost 2 million
consumers. Once again, this Committee will be tasked with addressing
universal service while simultaneously balancing localism.
Thankfully, technology is arriving that will help deal with a
portion of the problem. Satellite providers are exploring how to
provide consumers with local TV signals--what is referred to as
``local-to-local'' service. This would help satellite consumers offer a
more comparable service to cable operators and more effectively compete
in the marketplace. However, it is important to recognize that it will
not be possible for satellite providers to bring every local channel to
everyone in every local market in the near future.
Yet ``local-to-local'' is an improvement over the current situation
and Congress ought to help get it underway on a transitional basis at
the very least. In addition, wireless cable alternatives may help to
supplement DBS signals to provide a complete programming package to
consumers that includes local TV signals. I believe that Congress and
the FCC should do what can be done to foster such alternative choices
and get them in the marketplace as soon as possible.
That's because there is another backdrop to our action in Committee
in addition to the court-ordered cutoff of distant network signals. And
that is that price controls on cable programming services will end
after March 31st.
In my opinion, fixing the white area problem and approving
legislation permitting DBS to provide local TV signals will not in
themselves provide enough of a marketplace check on price hikes in the
cable industry. Moreover, head-to-head wireline video competition on a
massive basis is also clearly not going to happen before cable
programming is deregulated at the end of March.
My personal feeling is that cable monopolies should be deregulated
only when effective competition makes such protection unnecessary, and
that we should not end consumer price protections on the basis of a
date chosen for political reasons.
That is why I believe Congress must do more. We need to explore how
we can make competitors more effective and remove impediments to more
robust cable competition. And we must make sure that prior to the
emergence of effective competition in particular markets that consumers
are not treated unfairly.
Again, I commend Chairman Tauzin for calling the hearing and look
forward to working with him, as well as Chairman Bliley, Mr. Dingell,
Mr. Boucher, Mr. Oxley, Mr. Burr and our other colleagues as we
proceed. Thank you.
Mr. Tauzin. The Chair is now pleased to recognize the
chairman of the full committee, the gentleman from Richmond,
Virginia, Mr. Bliley.
Chairman Bliley. Thank you, Mr. Chairman, and thank you for
holding this hearing. I ask unanimous consent to insert my full
statement in the record.
Mr. Tauzin. Without objection, and that will apply to all
members of the committee.
[The prepared statement of Hon. Tom Bliley follows:]
Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
Thank you, Mr. Chairman.
I want to commend you for holding this hearing on reform and
reauthorization of the Satellite Home Viewer Act. It is both timely,
and critically important.
What began in the 1970s as a hobby for only a few, has become an
important and serious competitor in the market for video programming.
Satellite television now boasts about 10 million subscribers
nationwide. Two out of every three new subscribers to multichannel
systems are choosing DBS.
Satellite television, in other words, has become what many of us
predicted it would become when we first passed the Satellite Home
Viewer Act in 1988--a competitor to cable.
I have often said that the best way to protect consumers against
cable rate increases is through competition, and not rate regulation.
Only competition will discipline cable operators in the long run.
Admittedly, though, our successes in promoting competition have not
been without growing pains.
Which explains, in part, why we are here today.
Pursuant to a federal court injunction, about 2.2 million American
households will lose access to their satellite-delivered network
programming.
This concerns me, for a number of reasons. To begin with, it
indicates that some providers of satellite television service have
flaunted the law. These providers should account for their willful
conduct.
Moreover, in reforming SHVA, Congress must do everything it can to
avoid a repeat of this scenario. As many of us noted in the debates
over the Telecommunications Act of 1996, telecommunications policy
should not be made in the courts.
It should be made here, at the Commerce Committee. While I have
great respect for our courts, they often look through a very narrow
prism when making telecommunications policy. And too often, the result
is the situation in which we find ourselves today, where consumers are
caught in the crossfire of industries at war with each other.
I am also concerned about the implications of the court injunction
on competition. These 2.2 million households play a critical role in
promoting competition with cable. Satellite television, in their minds,
is simply a better product. This, in turn, forces cable to improve its
own product.
But if these subscribers lose their network programming--which is a
key component of any offering--will they be driven into the arms of
cable?
Lastly, I am mostly concerned about the impact on consumers,
particularly because the scope of the court's injunction is extremely
broad. Will the injunction terminate network programming for some
consumers who would otherwise qualify as ``unserved households''?
The court used a predictive model that is not as refined as the
model recently recommended by the FCC. If so, then it's very possible
that a large number of consumers may unfairly and unnecessarily lose
access to their network programing packages.
To this concern, some might say: ``No problem, Bliley. These
consumers can apply for a waiver.''
But I say that the burden is on the industry, and not the consumer,
to minimize service disruptions. If the law permits a consumer to
receive these signals, then why put the burden on the consumer?
I note that the FCC has done some fine work in this area, and I
commend Ms. Lathen and her staff for their fine efforts in helping
Congress find a solution.
I therefore recommend that the parties to this litigation consider
asking the court to look at the FCC's model as well. It may help to
avoid some unnecessary terminations, and in so doing, help promote
competition.
Again, Mr. Chairman, I commend you for holding this hearing, as
well as your leadership in this area. You will recall that we spoke
last December about this important matter. And at that time, and still
today, you have my support in your endeavors.
Chairman Bliley. I just want to commend you, and I look
forward to working with you as we hope to put this moratorium
in place, while we sort out these complex issues dealing with
local-to-local in the days ahead.
I thank you, and yield back the balance of my time.
Mr. Tauzin. Thank you, Mr. Bliley. The Chair is now pleased
to recognize the gentleman from Texas, Mr. Green--I am sorry,
the ranking minority member of the full committee, Mr. Dingell
is here. Mr. Dingell.
Mr. Dingell. Thank you, Mr. Chairman. I thank you for
calling this hearing today on the reauthorization of the
Satellite Home Viewer Act. I do wish it were held under other
circumstances. It is no coincidence that hearings on this topic
are being held 3 days in a row on Capitol Hill this week. We
all know too well that this rush to hold hearings on a statute
that won't expire until the end of the year is being driven by,
quite frankly, a very sorry set of circumstances.
We are faced with a situation in which satellite television
providers have flagrantly violated and disregarded Federal law
by willfully and repeatedly selling packages of distant
broadcast signals to customers they knew, or should have known,
were ineligible to receive them. These companies claim that the
eligibility test Congress wrote into the law is somehow unfair,
imprecise, or otherwise improper. This is, then, their
justification for violating the law. They claim the test needs
to be changed.
There may be some validity to these claims, and we
certainly have an obligation to examine whether it is so. Such
a claim in no way, I would note, however, justifies taking the
law into one's own hands, thwarting the will of Congress, and
consciously choosing to ignore it. And, frankly, I want the
people how have been engaged in that practice to understand
that it doesn't generate much kindness up here.
By this purposeful and callous disregard for the law, these
companies have now put Members of Congress in a difficult
position of having to choose between sanctioning illegal
behavior on the part of open and callous wrongdoers and
alienating consumers who have come to rely on the service that
they were never legally entitled to receive.
There are probably also a number of serious
misrepresentations by persons in the satellite industry about
how this is Congress' fault. It is not. The source of the
wrongdoing and the misbehavior is plain for all to see, and the
statute describes it with remarkable clarity. This may be an
effective tactic to bring one's gripes before the Congress, but
I can't say that it is either right or conducive to receiving a
sympathetic ear.
Now where does this leave us? The court correctly found
that the law was violated and has ordered satellite companies
to cease providing distant network signals to households
currently served by local stations. There is no question that
the broadcasters in this matter have the law on their side.
Unless Congress, however, acts to overturn the judge's
decisions by this Sunday, an obvious impossibility, the first
wave of nearly 1 million consumers will be turned off. Clearly,
the broadcasters have the clock at their side as well. I am
sure the broadcast industry is already focused on this matter
and performed this calculus.
I also have little doubt that this calculus has played a
role in the apparent stalemate between the two sides in
negotiating an independent private settlement of this fiasco.
The intransigence of both parties in working to solve this
problem is lost on no one and entitles neither side to much
sympathy. While it is true that the satellite companies are
guilty of breaking the law, and that behavior is inexcusable,
it is my belief that neither party comes to this hearing with
entirely clean hands.
The broadcast industry has known for a considerable period
of time that the model used for determining unserved households
was imperfect. Many households who are technically defined as
served cannot get an adequate signal over the air. Yet, the
industry has been steadfast in relying on a statutory model
that unfairly deprives these consumers from receiving a distant
broadcast signal. A similar situation obtains with regard to
the FCC, which needs to direct its attention forcefully to
defining the areas properly, and not properly, served within
the different circles of reception.
Clearly, Congress will act to reauthorize SHVA this year. I
believe the law we pass will also redefine the standards for
determining what constitutes an unserved household. This is
entirely proper. There are myriad ways in which new standards
can be designed, and key factors that will drive the breadth of
change, and this standard is the degree to which we receive
assistance from the constituents who have strong views on this
matter.
I hope both sides in this matter will consider the
situation carefully because each party independently has the
power to significantly influence this matter and the outcome. I
strongly believe that it is in the best interest of both sides
to redouble their efforts in reaching a compromise with all due
haste.
Hearing that, I would encourage the broadcast industry to
voluntarily, in good faith, minimize the pending disruption to
consumers through the waiver process or by other appropriate
means. The future of that industry and its commitment to free
community-based broadcasting is critically dependent on going
forward, distant signal rules being devised rationally outside
the frenetic environment created by phone lines, faxes, and e-
mail systems.
Mr. Chairman, I thank you for holding this hearing. I look
forward to working with you to solve the problems that we
confront. I look forward to hearing from the witnesses. Again,
I urge the interested parties to take a look at what is going
on. You have a lot at stake here, and shooting craps with the
public interest is probably something you could be comfortable
with, but shooting craps with your own interests in this matter
carries with it a significant measure of personal peril. I urge
you to look carefully at the situation in which you have placed
yourself.
Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman for his statement, and
would now recognize the vice chairman of the committee, the
gentleman from Ohio, Mr. Oxley, for an opening statement.
Mr. Oxley. Thank you, Mr. Chairman. I welcome our
witnesses.
As has been noted, the issue before is a timely one.
Satellite television has emerged in recent years as a major
competitor in the multi-channel video marketplace. This is
especially true in more rural regions, such as Ohio's fourth
congressional district. It is a development of which members of
this committee may be justifiably proud, especially the
chairman of the subcommittee, who has devoted so much time and
effort to this issue.
As we consider the reauthorization of the Satellite Home
Viewer Act, I believe it is important that we look at the
larger issue of competition in multi-channel video services.
Communications policy should be set by Congress and this
subcommittee, at the Federal Communications Commission, but not
in Federal court.
Three years ago, Congress took back the reins of
communications policymaking from an unelected judge when we
enacted the Telecommunications Act of 1996.
Satellite policy is one of the few areas largely
unaddressed by the 1996 act. But look at the issues involved:
competition, localism, the question of who is served and
unserved, the survival of free over-the-air TV. I would suggest
that the issues before us are more about communications policy
than the fine points of copyright law. The current state of
affairs isn't serving anybody's long-term interest.
We have a responsibility to the consumer to get the white
area issue out of the courts and into the hands of
communications policymakers. Last August, I signed onto a
bipartisan letter with Congressman Rick Boucher, and several
other members of the committee, urging the Commission to adopt
a technically accurate pro-consumer definition of a Grade B
standard for purposes of interpreting the Satellite Home Viewer
Act. I continue to hold the view that the standards for signal
strength need to be modernized by the Commission at the
direction of the Congress. I hope we can work together toward
that goal, and the goal of enhanced competition, better
service, and lower prices in the video marketplace.
I yield back the balance of my time.
Mr. Tauzin. Thank you, Mr. Oxley. The gentleman from
Virginia, Mr. Boucher, is recognized for an opening statement.
Mr. Boucher. Thank you, Mr. Chairman. I will simply put my
statement in the record.
Mr. Tauzin. Without objection, so ordered.
The Chair now recognizes the gentleman from Florida, Mr.
Stearns, for an opening statement.
Mr. Stearns. Thank you, Mr. Chairman. This is probably
perhaps in this subcommittee one of the most important issues,
I think, for the 106th Congress, and the significant of sorting
through this satellite programming delivery system and how we
are going to do it is going to be difficult, because we are
trying to protect the local broadcast industry who invests
billions in developing their companies and providing the most
popular avenue of entertainment for the American people.
We are tasked with determining what is in the best interest
of the consumer who deserves, and often demands--fairly, in my
opinion--to receive the latest movies, sporting events, and
local programming with the most flawless picture and audio
quality. I think everyone agrees that the delivery and
reception of local television signal is in everyone's
interest--from the local broadcaster to the cable industry, to
the satellite providers, and to the consumers. The sticking
point comes from the transition to the carriage of local
signals and the carrying of all the local broadcasters on their
satellite systems. I agree that we must insist on a must-carry
option for satellite providers just as the cable industry is
required to do.
The satellite industry is still developing itself as a
natural competitor to cable, and the industry deserves certain
regulatory and legislative privileges in the role of a
developing competitive force. At the same time, the satellite
industry should have to meet the other obligations as must-
carry that other MVPD providers are required, for reasons of
equity and fairness in the marketplace.
What I am concerned with is, what happens if a satellite
provider, for technological reasons, cannot fully comply?
Should they be denied delivering any of the local signals until
they carry all of them?
I hope, Mr. Chairman, in developing legislation, we
consider a limited waiver option for those satellite providers
who cannot, for technological reasons, carry all of the local
channels. My thinking is that when the must-carry date arrives
in the year 2002 or 2003, and a provider still cannot transmit
all the local channels, then I think that they should be able
to apply for a 1-year waiver through the FCC for the specific
markets where they cannot meet the must-carry standards. The
satellite provider would have to sufficiently prove to the
Commission that they do not have the capacity to achieve must-
carry in whatever market they apply for a waiver.
Finally, Mr. Chairman, the transition to local-into-local,
I encourage local broadcasters to continue to provide waivers
for consumers, as they must have done in many instances for my
consumers who have legitimate claims that they cannot receive a
proper television signal. Unfortunately, the current Grade B
standard, even with the current FCC revision, still does not
account for those consumers in the contour who cannot receive a
proper signal.
I represent a largely rural district in north central
Florida with many constituents who do not live near urban
centers or even near television broadcasting towers. These
constituents rely on satellite television signals, including
the reception of distant signals. But the current predictive,
Longley-Rice model still considers many of my constituents as
able to receive a local signal, even for those who cannot do
so, primarily to topographical reasons such as dense forest
covering. So providing waivers where needed, broadcasters will
stay on the better side of Congress.
But one other question I have which I hope the panelists
will address: Is there a compromise that can be reached to
allow consumers in parts of the Grade B who prefer to receive
distant network signals during the transition to local-into-
local, or would like to have distant signals in addition to
their local signals, to continue to receive distant signals? Is
there a compensation structure we can arrange so that the
satellite providers can sell the distant signals at higher
rates than they do today, and then the satellite providers
would directly compensate local broadcasters for the number of
consumers who receive the additional distant signals? Or would
this be a bigger can of worms than it is worth? So I look
forward to your response.
Mr. Chairman, I compliment you on having us here.
Mr. Tauzin. Thank you, my friend. The Chair now recognizes
the gentlelady from California, Ms. Eshoo, for an opening
statement.
Ms. Eshoo. Thank you, Mr. Chairman, for having this very
important hearing. Many of us, or perhaps all of us, are
hearing from a cross-section of our constituents about this
issue. So it is none too soon for us to hear from experts out
in the field.
I want to especially welcome Sophia Collier from Northpoint
Technology. I met with representatives from Northpoint last
week, when we were home for our in-district work period. In
fact, I think if their advanced digital wireless system makes
it in the market, that it could make the whole discussion today
actually moot. So we look forward to what they are going to be
coming out with.
Let me just say something about the issue itself. I don't
think--and I have a fuller statement to submit for the record.
In reading yesterday's Wall Street Journal, there is a quote
that especially caught my eye. Of course, it is from a
broadcaster. But he says, ``The satellite operators created
this problem and shouldn't profit from it. They may operate
above the Earth, but they don't operate above the law.''
So if we are going to go into ``shivering'' and SHVA, I
think that, obviously, we have the responsibility to correct
this and do allow for the local-to-local with the must-carry
provisions that others have to provide, but we are going to
have to stretch our vision to match the technologies that are
going to be coming on, so that the law doesn't antiquate itself
within moments of the decision and the votes that we take.
So I will yield back the balance of my time, and thank you
again for holding the hearing. I look forward to the experts
that have come from across the country to guide us. How many?
Two, four, six, eight, nine. Well, we are getting better; we
have two women at the table. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentlelady. The Chair is now
pleased to recognize the gentleman from California, Mr. Cox,
for an opening statement.
Mr. Cox. Thank you. I will be exceptionally brief. In fact,
during this period of opening statements, I have been able to
enjoy not only the wisdom of my colleagues, but also read the
written testimony of all of our witnesses.
But it is important that we do this, that we have this
hearing, and that we move on with the reauthorization of the
Satellite Home Viewer Act because the act is going to sunset in
10 months, even sooner now than when we began the hearing.
It is clear that the increase in cable rates that is much
remarked upon in several of the testimonies that we will hear
shortly has occurred under the existing regime of rate
regulation. What we have got to do is find other ways,
specifically, ways to enhance competition, so that we can
achieve the results that we seek. I don't have any question in
my mind that increased competition, far better than price
controls, will give us what we are after. It will reduce the
cost. It will improve the quality and expand the choices for
consumers.
I hope that we can change the rules that prevent satellite
broadcasters from offering signals from local TV stations, and
do so in a way that does not destroy the advertising base that
makes over-the-air local television work.
So I am just anxious to hear what you all have to say. I
will yield back. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman. We will try to get that
as soon as we can. The Chair now recognizes the gentleman from
Ohio, Mr. Sawyer, for an opening statement.
Mr. Sawyer. Thank you, Mr. Chairman. I know you have been
waiting to hear my opening statement.
I am going to have to deny you that privilege. I will
simply insert it into the record. I just have three
observations.
I would like to associate myself with the remarks of the
gentleman from Michigan. I just wish he had been a little more
direct.
I want to associate myself with the remarks of the
gentleman from Richmond, Virginia--probably just because it is
always a good idea to associate yourself with the remarks of
the chairman.
And, finally, Mr. Chairman, I want to make an observation
that that question that you cited to us at the beginning, I
suspect this is not the first time you have heard this.
``Billy, are we going to do anything? And what are we going to
do?''--you have been hearing since you have been going out on
Saturday night as a kid in southern Louisiana.
[The prepared statement of Hon. Thomas C. Sawyer follows:]
Prepared Statement of Hon. Thomas C. Sawyer, a Representative in
Congress from the State of Ohio
Thank you Mr. Chairman for holding this hearing today on the
reauthorization of the Satellite Home Viewer Act (SHVA). I also want to
thank our witnesses for coming to testify before us.
The Satellite Home Viewer Act allows a satellite company to
transmit distant broadcast signals into ``unserved'' households or into
those that cannot receive a measured local network signal of Grade B
intensity using an over-the-air antenna. Consumers must also verify
that they have not subscribed to cable within the past ninety days in
order to receive distant broadcast programming. The last time Congress
made major revisions to the SHVA was in 1994. A lot has happened since
then. Technology has become more advanced--stronger signal penetration.
Satellite dishes are much smaller than when they first arrived on the
market, and they are much more affordable. As a matter of fact,
satellite programming has become so popular that nearly 10 million
people subscribe to satellite service. Despite the advances made in
this area, the standard being used to determine whether a household can
receive a local broadcast signal, in the opinion of many, is not an
accurate calculation model and it needs to be revised. Fortunately, we
have the opportunity to revisit this law because the Satellite Home
Viewer Act expires at the end of this year. However, the circumstances
in which we have to consider reauthorizing this Act are unfortunate.
Mr. Tauzin. Thank you, Mr. Sawyer.
The Chair now recognizes the gentleman from Georgia, Mr.
Deal, for an opening statement.
Mr. Deal. Thank you, Mr. Chairman. I will submit my
statement for the record, but I wish to welcome Mr. Fisher from
my home State.
As I look to the chart that is to the right, I notice that
most of my congressional district is in the white area, and I
would concur with that.
I look forward to hearing the testimony of the witnesses
and will submit my statement for the record.
[The prepared statement of Hon. Nathan Deal follows:]
Prepared Statement of Hon. Nathan Deal, a Representative in Congress
from the State of Georgia
Thank you, Chairman Tauzin, for holding this important hearing
today regarding satellite network television. This is an issue that
greatly affects my rural district in Georgia.
As you well know, the conflicts between satellite service providers
and broadcasters over service have affected satellite subscribers, and
I am quite concerned that many unknowing constituents will lose access
to some of their television channels as of next Monday. My personal
feeling is that the federal government should be working to open up
markets and provide consumers with choices. Many people in my district
have only one cable provider to choose from and have no place to turn
if they do not like that provider. Whether competition comes from
another cable provider or from a satellite provider, I would like to
see more competition. For this reason, I feel that we either need to
modify the SHVA or assist satellite companies in their bid to provide
local-to-local service.
Toward that end, I am a cosponsor of the Satellite Access to Local
Stations Act (SALSA) which would establish a mechanism for satellite
service providers to offer local network feeds to their subscribers. I
also cosponsored the Satellite Consumer Protection and Competition Act
of 1998, introduced by Chairman Tauzin in the 105th Congress. I look
forward to reviewing similar legislation in the near future to
establish rules and regulations for the redistribution or
retransmission of local signals by satellite broadcasters.
Some areas of our rocky terrain are simply unable to obtain a clear
picture via local broadcasting. Therefore, I believe it is important to
devise remedies with respect to the reception of satellite-delivered
network signals. Many subscribers have complained that they have spent
hundreds of dollars on satellite equipment without being told that they
may not be eligible for service of certain network signals. We must
also provide subscribers, whose service of network signals is
challenged by their local network affiliates, a direct means of
determining whether they are still eligible for service.
A fair re-authorization of the Satellite Home Viewer Protection Act
is a top priority for me in the 106th Congress. I thank the witnesses
for attending this hearing today and look forward to the testimony.
Mr. Tauzin. I thank the gentleman. The gentleman from
Maryland, Mr. Wynn, for an opening statement.
Mr. Wynn. Thank you, Mr. Chairman. I won't have an opening
statement at this point. I would like to request to submit at a
later date.
Mr. Tauzin. Without objection, so ordered.
The gentlelady, Ms. Cubin, is recognized for an opening
statement. Mr. Largent, then, is recognized. Mr. Shimkus,
opening statement. Mr. Green, for an opening statement.
Mr. Green. Mr. Chairman, I will submit it, my opening
statement. But since I am in an urban area, there is nothing I
like better than seeing the weather from downtown Denver,
Colorado.
[The prepared statement of Hon. Gene Green follows:]
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Thank you Mr. Chairman for holding this hearing on the Satellite
Home Viewer Act.
Currently, over ten million people subscribe to satellite TV, and
it is one of cable's most important and viable competitors in the
multichannel video programming distribution market.
In the past few months the satellite community received a shock. A
federal judge in Miami imposed an injunction on a satellite carriers
for illegally transmitting distant network signals to ineligible
customers. Many questions arise from this problem. How do we make it so
that the 2.2 million people do not have their network signals shut off.
Do we have the FCC redefine Grade B Signal? Do we pass legislation
allowing for local into local service? If we do pass local into local
do we impose a phased or full must carry.
I somewhat understand the appeal of satellite TV. You can receive
hundreds of channels, purchase sports packages where you can watch
every college basketball game, and have a countless number of pay-per-
view channels. But right now you can not watch your local network
affiliates. If you own a satellite TV, you would miss out on your local
news, sports and weather.
If we do change the Satellite Home Viewer act I hope we act
responsibly, and I hope that we maintain the integrity of all of our
local stations from the four networks to the two emerging networks and
to all of our independent stations especially the minority broadcast
stations.
Again Mr. Chairman thank you for holding this hearing.
Mr. Tauzin. The gentleman from Missouri, Mr. Blunt, is
recognized for an opening statement.
Mr. Blunt. Thank you, Mr. Chairman. I just want to thank
you for having this hearing. I began to get calls on this last
week. I am sure I am going to get a lot more calls next week,
if we don't reach some conclusions pretty quickly. I think it
is an important matter we need to deal with in an immediate
way, and then, clearly, in a long-term way as we do what we
need to do to increase competition, and also to understand the
importance of those local franchises. Thank you.
Mr. Tauzin. I thank the gentleman. And, finally, Mr. Luther
is recognized for an opening statement. Mr. Luther.
Mr. Luther. Thank you, Mr. Chairman. First of all, I want
to tell you how pleased I am to be a member of the
subcommittee. As a new member, I am, obviously, looking forward
to the testimony of the witnesses. I thank you very much.
Mr. Tauzin. Probably with bated breath by now.
Thank you, Mr. Luther. And Mr. Fossella for an opening
statement. That is a New York signal. Terrific. We can move on.
I want to thank the gentleman.
[Additional statement received for the record follows:]
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman, for holding this hearing.
Although the issue before us is the reauthorization of the SHVA,
which is due to expire at the end of this year, the main focus of this
hearing will be the frustration and anger that millions of consumers
are going to experience this Sunday when such popular television shows
as the Simpsons and 60 Minutes will no longer be available over their
satellite dishes.
Thankfully, with your leadership and the leadership of Chairman
Bliley, the Telecommunications Subcommittee will work toward a 90-day
moratorium to give the Committee time to address issues such as local-
to-local.
Conventional political wisdom tells us to never get between a
constituent and his television set. However, this is not a situation
that Congress created, but unfortunately it's one that now has us
caught in the middle.
Thousands of satellite tv viewers bought systems under the
impression that their providers could supply them with major network
programming, but will find out differently on February 28 when that
service is ended.
The bottom line is satellite companies are providing their
customers programs from networks, such as CBS and Fox, that they are
illegally rebroadcasting. If that's not bad enough, they've acted as if
they're blameless, and have the gall to encourage their customers to
call Congress and complain about the shut off.
I would like to hear possibly from Mr. Hewitt, since there is no
representative here today from Primestar, why the company sent out
cutoff notices to its customers asking them to contact their
representatives in Washington asking them to fix this problem.
The good news is that no satellite dish owner will be left without
an alternative to receive network television shows. Fortunately,
Congress crafted the Satellite Home Viewer Act (SHVA) in a way that
enables consumers to receive network programming either from a
satellite company or a conventional outdoor roof-top antenna.
Specifically, the SHVA establishes a limited exception to the
exclusive programming copyrights assigned to television networks and
their local affiliates in order to help ensure that all consumers have
access to network programming.
My colleagues here on the House Commerce Subcommittee on
Telecommunications and I have worked hard to address this problem.
Congress, unfortunately, has no control over the February 28th cutoff
date.
There is a short term solution however. All satellite subscribers
who have had their network stations terminated should contact his or
her local satellite dealer or local television broadcaster to receive a
waiver.
Also, a valuable service is available on the web
. This easy to use web site enables consumers to
seek a waiver to ensure the continued delivery of network programming
via satellite.
I want to ensure, however, that the waiver process is fair and
expeditious, and that the strength of the signals be of a quality that
is viewable.
In the coming weeks I am hopeful that the Telecommunications
Subcommittee will address several issues dealing with the Satellite
Home Viewer Act. The obvious one is the reauthorization of the Act.
The apparent answer to the current problem we are facing with the
cutoffs, is local-to-local satellite service. This technology, which we
will hear today from ' one of the witnesses, is already a viable option
that will allow every household in a local market to receive a local
station's signal.
Another advantage local-to-local provides is the ability to carry
community-based programming and emergency warnings.
Finally, local-to-local is a viable, but more importantly, a legal
way for satellite providers to compete with cable television.
I represent a rural state and support the satellite television
industry--they provide a very valuable service to rural television
customers. I applaud them for being the only real competition to cable
tv and the driving force in lowing cable rates.
If you've been to Wyoming you know that the terrain is really not
conducive to receiving local television transmissions. Between the
trees, hills, buttes, valleys and the occasional 10,000 foot mountain,
it's virtually impossible to receive a quality signal.
The technology that accompanies satellite television is exciting. I
am looking forward to the testimony of Ms. Sophia Collier and finding
out more about the technological advances that are being made by
Northpoint Technology.
Mr. Chairman, I once again thank you for holding this hearing. I
look forward to hearing from the witnesses.
Mr. Tauzin. I invite our panel now to give their
statements. As is our usual customary rule, your written
statements are part of the record, and as Mr. Cox has pointed
out, most of us can read them, and we do. We want to thank you
for that. We ask you within 5 minutes--and I will use this
little high-technology light here to signal when your 5 minutes
are up. We would like you to summarize--have a conversational
sort of session with us--the main points of your written
testimony.
We will begin by introducing you. First of all, I want to
introduce and welcome Ms. Deborah Lathen, who is the Chief of
Cable Services at the FCC. Deborah, also, I want to thank you,
on behalf of the committee, for all the efforts you have
personally made and your staff has made in helping us prepare
for this hearing. We want to thank you for that. We welcome
your testimony.
Mr. Charles Hewitt, President of Satellite Broadcasting and
Communications Association here is. Mr. Gene Kimmelman, another
frequent witness to our committee, Co-Director, Washington
Office of the Consumers Union. Andy Fisher, Executive Vice
President at TV Affiliates of Cox Broadcasting. Jack Perry,
President and CEO of Decisionmark, Cedar Rapids. Ms. Sophia
Collier of Northpoint Technology, who has been referred to by
the gentlelady from California. Mr. Al DeVaney, President of
Newsweb Broadcasting. Mr. John Hutchinson, Executive Vice
President and CEO of Local TV on Satellite of Riley, North
Carolina. And David Moskowitz, Senior Vice President and
General Counsel with EchoStar.
Ladies and gentlemen, we thank you all for coming to share
your expertise with us. We will begin the hearing with
testimony of Ms. Lathen.
Again, welcome, Ms. Lathen, and thanks for your efforts
before this hearing.
STATEMENTS OF DEBORAH A. LATHEN, CHIEF, CABLE SERVICES BUREAU,
FEDERAL COMMUNICATIONS COMMISSION; CHARLES C. HEWITT,
PRESIDENT, SATELLITE BROADCASTING; GENE KIMMELMAN, CO-DIRECTOR,
WASHINGTON OFFICE, CONSUMERS UNION; ANDREW S. FISHER, EXECUTIVE
VICE PRESIDENT, TV AFFILIATES, COX BROADCASTING; JACK PERRY,
PRESIDENT AND CEO, DECISIONMARK; SOPHIA COLLIER, PRESIDENT AND
CEO, NORTHPOINT TECHNOLOGY; AL DEVANEY, PRESIDENT, NEWSWEB
BROADCASTING, REPRESENTING THE ASSOCIATION OF LOCAL TELEVISION
STATIONS; JOHN HUTCHINSON, EXECUTIVE VICE PRESIDENT AND CEO,
LOCAL TV ON SATELLITE; DAVID K. MOSKOWITZ, SENIOR VICE
PRESIDENT AND GENERAL COUNSEL, ECHOSTAR, AND BRUCE FRANCA,
DEPUTY CHIEF OF THE OFFICE OF ENGINEERING AND TECHNOLOGY
Ms. Lathen. Thank you very much, Mr. Chairman. Mr.
Chairman, Congressman Markey----
Mr. Tauzin. Deborah, you need to turn that microphone on.
Ms. Lathen. It says it is live.
Mr. Tauzin. Is it live and it is on?
Ms. Lathen. That is what it says.
Mr. Tauzin. Just pull it closer maybe. We are going to work
on that. Chairman Bliley has committed to me that, before this
Congress is out, this room will be high-tech. We are going to
work on that.
Thank you very much, Ms. Lathen.
Ms. Lathen. Is it working now?
Mr. Tauzin. Yes, ma'am.
Ms. Lathen. Do I still get my full 5 minutes?
Mr. Tauzin. You get it all.
We will reset you.
Ms. Lathen. Okay. Good afternoon, Mr. Chairman, Congressman
Markey, and members of the subcommittee. Thank you very much
for the invitation to appear here this afternoon to discuss the
Satellite Home Viewer Act and the Commission's recent Report
and Order.
I appreciate the opportunity to share with you the
Commission's views and perspective on these important issues. I
know the Commission shares the subcommittee's interest in
promoting strong competition and consumer choice in the multi
channel video programming distribution market. We look forward
to working with you in the days ahead to promote these shared
goals.
We also received the numerous letters and e-mails that you
received. We know that 700,000 people stand to lose their
network service on Sunday. So you might wonder, well, what has
the FCC done about this?
First, I would like to say that when we reviewed these
letters and there is a trend that runs through them. Many of
the consumers say they want choice. They believe that this is
their right. The Satellite Home Viewer Act is a copyright act,
but this is about choice in the letters that we have received.
What we did was, our overarching goal was to help as many
unserved households, unserved consumers, as we could, and at
the same time do that within the limits of the law, and adhere
to the intent of Congress. We think we achieved that goal. We
improved on two methodologies that the Commission uses. One is
testing at the home, and the other is a predictive model. The
old Longley-Rice model tested a surrounding area. We came up
with a methodology to test at the individual home.
Another thing that we did is that we know many consumers
live in one-story homes and not two-story homes. We lowered the
antenna requirement from 30 feet to 20 feet for the one-story
home and maintained it for the larger buildings.
We also recognize that testing is costly, expensive, and
inconvenient. So we came up with a predictive methodology that
can be used when the consumer goes to a store, and they can
answer the question, ``Am I eligible to receive a satellite
service?''
The model, the predictive model, also focuses on the home
and not the contour of the signal. We want to understand what
is happening in the home.
We also understand that hills and valleys and terrain and
interference have an impact on one's ability to receive a
signal. So, therefore, we attempted to take these factors into
account in this predictive model.
We know that this is not enough. It is not perfect, but we
have made improvements, and I will show you that when I have
opportunity to discuss this map. But it is not enough. Because,
as I said consumers say, ``We want choice.'' They don't care
about copyright. But the law says copyright matters, and so we
had to adhere to what the law says.
So we couldn't help many of those consumers. Many consumers
you see sitting in the red area, we could not help because the
law says that is a copyright area.
In our order we have recommended things that you may
consider to help those people, things that you have discussed
here today, such as local-into-local.
Mr. Tauzin. Would you move a little closer to the mic, I am
being asked by members. We want to hear you.
Ms. Lathen. Okay. We do need some new technology here. I am
almost kissing this microphone.
We knew that we could not help a lot of those people. Those
are Prime Time 24 subscribers in the red area. These people can
receive a signal. These people are writing you letters because
they believe it is their right, that they have a choice to get
the most recent technology that there is. The law says, no,
this is a copyright area.
What we have said in our order is that Congress can
consider things such as local-into-local that you have
discussed today. You can consider eliminating the 90-day
waiting period. Currently, if you are a cable subscriber, you
must wait 90 days, when you sign up for satellite, before you
can receive the network signals through satellite. Congress
could consider changing that.
Finally, we stated that, because our individual Longley-
Rice location model is a more accurate model than the one used
by the Miami court, we think that you should consider adopting
it as a rebuttable presumption for a service area tied with the
loser pay methodology. These are just a few of the suggestions
that we make.
I also want to say I am not an engineer. So I have brought
a very fine engineer with me here today. He is the Deputy Chief
in our Office of Engineering and Technology. He will be able to
answer technical questions.
But I look forward to answering any questions that you may
have.
[The prepared statement of Deborah A. Lathen follows:]
Prepared Statement of Deborah A. Lathen, Chief, Cable Services Bureau,
Federal Communications Commission
Mr. Chairman, Ranking Member, and Members of the Subcommittee,
thank you for this opportunity to discuss the ability of American
consumers, under the Satellite Home Viewer Act (SHVA), to receive
broadcast network television over their home satellite dishes.
We have all struggled lately with a problem involving the
television broadcast industry, the direct-to-home satellite industry,
the cable industry, and consumers who subscribe to satellite carriers
for their video programming. I would like to define the problem and
discuss some of the reasons for it. I would also like to describe what
the Commission has done to help consumers--our first priority--and what
it has not been able to do because of our limited statutory authority.
Finally, I would like to suggest some ways that the Congress and the
Commission can work together, through changes in the SHVA, to promote
competition and give consumers the television choices they want.
the problem
Under current law, most Americans are not eligible to receive
broadcast network signals (ABC, CBS, Fox, NBC, and PBS) through their
home satellite dishes, regardless of whether those signals come from
local or out-of-town television stations. This is because the SHVA, a
copyright law enacted in 1988, states that only those consumers who are
``unserved'' by local, over-the-air television stations are eligible.
The SHVA defines an ``unserved household'' as a household that cannot
receive an acceptable television signal using an outdoor rooftop
antenna. An acceptable television signal under the statute is ``a
signal of Grade B intensity,'' which is a Commission-defined measure of
a signal's strength.
Congress crafted the SHVA to serve two primary purposes: (1) to
ensure the availability of broadcast network programming via satellite
to the minority of households beyond the reach of a local affiliate
signal; and (2) to protect the integrity of the copyrights that make
possible the existing free, over-the-air national network/local
affiliate broadcast distribution system.1 Congress
determined that most Americans are, in fact, able to receive an
acceptable signal from local, over-the-air stations and believed that
most Americans would not need to use a satellite dish to watch network
programming. The House Report accompanying the SHVA states:
---------------------------------------------------------------------------
\1\ See e.g., H.R. Rep. No. 100-887(II) at 20.
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``[S]atellite carriers are provided an interim compulsory
license for the sole purpose of facilitating the transmission
of each network's programming to white areas unserved by that
network ...The Committee believes that historically and
currently the network-affiliate partnership serves the broad
public interest.'' 2 (Emphasis added.)
---------------------------------------------------------------------------
\2\ Id. at 19-20.
---------------------------------------------------------------------------
This legislative history indicates that Congress sought to strike a
delicate balance between the copyright interest of the broadcasters and
the rights of rural America and others living in areas where they could
not receive network programming. The legislative history also shows
that as a matter of policy Congress found that local broadcast stations
play an important role in delivering news, weather, and public affairs
information of local interest. Nothing in the legislative history
suggests that Congress ever intended to extend this limited copyright
exemption to those consumers in cities and suburbs who clearly receive
a local station's signal.
Furthermore, the legislative history does not indicate that at the
time of the SHVA's enactment Congress' primary objective was to promote
competition to cable via satellite. In fact, a key provision of the Act
may have hindered competition. Currently, any consumer who has
subscribed to cable within the last 90 days is ineligible to receive
satellite-delivered broadcast service. However, it should be remembered
that the marketplace has changed significantly since 1988. At that
time, the home satellite industry was nascent and just developing. The
small, pizza-sized dishes that are familiar now were not available
eleven years ago. Additionally, the early home satellite industry
delivered its products through direct feeds, not through today's
packaging and retransmission of programming. Today, broadcasters, as
well as other video programming creators, have in the satellite
industry a viable new means of delivering their services to consumers
eager for more entertainment sources. The SHVA, however, has not been
adapted to reflect the significant changes in the market or in public
policy.
Perhaps the most important development in public policy occurred
three years ago when Congress enacted the Telecommunications Act of
1996. Increased competition among multichannel video programming
distributors (MVPDs)--particularly competition to cable--has become one
of the paramount goals of the Commission. The satellite industry,
particularly the direct broadcast satellite (DBS) service, has proven
to be the largest and most successful industry at drawing new
subscribers and competing in the marketplace. Today there are nearly 9
million DBS subscribers.
In spite of the clear public policies underlying the SHVA and the
1996 Telecommunications Act, we have all witnessed consumers'
frustration when they are not allowed to receive network service
through their satellite dishes. In numerous e-mails, letters, and phone
calls, consumers have argued that they have a right to get network
television in any way they choose. Others contend that they are unable
to get local broadcast network affiliates over-the-air and that cable
does not come to their house, so satellite is their only source of
network programming. Some state that they do not want to subscribe to
their local cable company and that they prefer satellite television,
but if they subscribe to satellite they cannot get the same network
service as cable. At its core, consumers define this issue as a
question of choice, not copyright protection or localism.
As the number of satellite subscribers has increased, so has the
tension that is inherent in the SHVA regarding those who are eligible
to receive network programming via satellite and those who are not.
Moreover, the policy of protecting the copyrights and markets of local
broadcasters has clashed with the pro-competitive policy of increasing
choices among multichannel video programming distributors. Without
careful consideration by both Congress and the Commission, advancing
one policy may thwart the other.
the lawsuits
Recently, the tensions in the SHVA were brought to a head when CBS
and Fox sued one satellite carrier, PrimeTime 24, alleging violation of
their copyrights and loss of viewers resulting in lost advertising
revenue. The broadcasters sought to permanently enjoin PrimeTime 24
from retransmitting any broadcast network signals, distant or local, to
``served households.'' Finding that most of the subscribers could
receive an acceptable local signal (as defined by the Commission's
Grade B standard), the court ordered the termination of satellite-
delivered network programming to approximately 2.2 million satellite
subscribers nationwide.
the commission's rulemaking
Two satellite carriers who sold PrimeTime 24's service to their
subscribers, the National Rural Telecommunications Cooperative and
EchoStar Communications Corporation, subsequently filed emergency
petitions with the Commission requesting relief for the millions of
satellite subscribers who faced termination of their network signals
under the court injunction. On November 17, 1998, the Commission issued
a Notice of Proposed Rulemaking indicating that it would conduct an
expedited rulemaking. Less than three months later, on February 1,
1999, the Commission adopted a Report and Order that addressed the
problem.
The comments to the rulemaking ranged from recommending that the
Commission should take no action because the satellite companies had
flagrantly violated the law to proposing that the Commission create
altogether new values for Grade B signal intensity. Some commenters
argued that it was most important to protect local network affiliates
and thereby promote localism. Others argued strongly that the most
important goal is to provide competition to cable. Many commenters
advocated creation of a new, practical and affordable measurement
methodology. Virtually all commenters supported creation and
endorsement of a computer model to predict signal strength at
individual households. There was, however, considerable divergence of
opinion on the appropriate parameters for such a model.
The overarching values and goals of the Commission are to protect
consumers, promote competition and, in seeking to accomplish these
goals, maintain fidelity to the law and intent of Congress.
The Commission worked to balance these policies in the rulemaking
we completed on February 1. Our first concern--our overwhelming
concern--was to assist consumers to the extent possible under the law.
The Order, therefore, sought to more accurately identify those
consumers who are truly unserved by their local, over-the-air
television stations. The result is that consumers who do not receive an
adequate over-the-air television signal will be able to receive
broadcast stations through their home satellite dishes.
However, the law limited the Commission's actions to find a broader
solution. For example, the definition of an unserved household requires
the use of the Grade B signal intensity standard and an outdoor rooftop
antenna. Moreover, the Commission has stated that it would be unable to
avoid the termination of satellite-delivered network signals to the
majority of households covered by the Miami court's permanent
injunction. Most of these subscribers are served by an adequate signal.
We have included by way of illustration a map for the Fox affiliate in
Charlotte, North Carolina (WCCB, Channel 18). (See attachment.) The map
depicts which consumers are predicted to receive at least a signal of
Grade B intensity under the prediction model used by the court in Miami
and under the new prediction model the Commission created in its
rulemaking, as discussed below. Superimposed on this map are black dots
representing PrimeTime 24 subscribers in the area. The map demonstrates
that a substantial number of these subscribers are able to receive an
adequate television signal and are thus ineligible for PrimeTime 24's
service.
In its rulemaking, the Commission was able to achieve its
objectives without changing the definition of a signal of Grade B
intensity.
Many commenters argued that a change to the definition of a signal
of Grade B intensity would solve consumers' problems. The Commission
declined to change the definition because it believes that the Grade B
standard is still useful for determining whether a household receives
an acceptable picture consistent with the SHVA. The Grade B standard is
also used for many other tasks, including defining a television
station's service area (or contour) as well as for the SHVA.
Although the Commission concluded that it has the authority to
modify Grade B intensity values for all purposes, we believe that it is
significant that Congress tied the SHVA compulsory license to the
Commission's Grade B standard. Congress' use of the widely-used Grade B
standard in SHVA indicates that the Commission should not have adopted
a separate Grade B intensity standard for purposes of SHVA alone.
Moreover, additional considerations also led the Commission to conclude
that it would be inadvisable to adopt a separate Grade B standard for
SHVA purposes. A second set of signal strength values, also called
``Grade B signal intensity,'' would be likely to create confusion for
the segments of the broadcast industry affected by Commission
regulations.
In its rulemaking, the Commission created two accurate and readily
available tools for determining which households receive an acceptable
picture. The Order supports Congress' 1988 goal of ensuring that truly
unserved consumers are able to receive satellite-delivered network
signals.
The tools we have created--one for measuring television signal
intensity at an individual household and one for predicting signal
strength--significantly improve the situation for consumers. Both tools
reduce the number of mistakes that were previously made when
determining whether a consumer can get an acceptable television signal.
Importantly, our endorsement of these tools should reduce the
occasionally virulent conflicts between the broadcasters and satellite
carriers over how to determine who is eligible for satellite-delivered
network service.
1. The On-Site Measurement Test
The Commission created an on-site measurement test to determine the
actual signal intensity at a consumer's home. It is accurate,
relatively inexpensive, and objective and will classify any household
as unserved if that household is unable to receive an acceptable
picture using a rooftop antenna. To best serve the intentions of the
SHVA and reflect what is actually happening at a particular household,
the test must be taken as near as possible to the place where a
consumer would install a rooftop antenna. The test also requires the
tester to account for the height of the house. For one-story buildings,
the testing antenna must be raised to 20-feet, and for houses taller
than one-story, the testing antenna must be raised to 30 feet. This is
important because a television signal could be weaker closer to the
ground than higher in the air. Under an older testing methodology,
which was not created to enforce the SHVA, testers were required to
make a so-called hundred foot mobile run in the streets surrounding the
house, and were required to raise the testing antenna to 30-feet,
regardless of the height of the home.
2. The Prediction Model
Our second tool, a prediction methodology called the Individual
Location Longley-Rice (ILLR) model, is also designed to be accurate,
practical, and objective. Like the measurement methodology, it will
classify a household as unserved if it is not predicted to receive an
adequate television signal. Unlike the measurement methodology, the
Commission is unable to mandate the use of any prediction model to
create a presumption of service or lack of service at an individual
household. The SHVA as currently drafted requires an on site
measurement.
The Commission has improved upon existing predictive models in
several important ways. These changes more accurately reflect what
happens to a television signal between a station's transmitter and a
consumer's house and include:
interference from other signals
land use and land cover (e.g., vegetation and buildings)
changes in terrain (e.g., hills and valleys) every \1/10\ of a
kilometer
the height of the household (e.g., one-story or taller than
one-story)
the perspective of the individual consumer (so-called
``individual mode'' analysis) rather than the perspective of
the broadcaster (so-called ``broadcast mode'' analysis).
Several of these factors were not part of previously-used Longley-
Rice models, so their inclusion adds significantly to the precision and
accuracy of any predictive result. For example, changes in terrain were
considered every kilometer under previous models. Under the new model,
changes in terrain are considered every \1/10\ of a kilometer--ten
times more frequently. Also, under previous models, every house was
assumed to be two-stories high, so the model incorporated a
hypothetical 30-foot antenna into its calculations. Because a large
number of American houses are only one-story, the new ILLR model
incorporates a 20-foot antenna for one-story houses and a 30-foot
antenna for taller houses. Additionally, the Commission ended the
debate over whether vegetation, buildings, and other land cover and
land use affect television signals. These factors have an effect, but
the Commission could not develop, in the very short time frame before
the injunctions took effect, a reliable means of using that information
in the model. The Commission expects that the marketplace will create
one soon and that the new model will include these factors at that
time. The Commission also concluded that interference from other
signals affects a station's transmission. Unlike land cover,
interference can be accounted for in the new ILLR model and, therefore,
it is included.
By accounting for these factors, the new model has significantly
reduced mistakes that other models made. The Commission compared the
model used for digital television (DTV) allocations with the new ILLR
model. Significantly, the Miami U.S. District Court also relied upon
the DTV model for its injunctive decisionmaking. On average across the
country, the ILLR model has identified approximately 6% of unserved
consumers that were previously and incorrectly classified as being able
to receive an acceptable television signal. As can be expected, the
numbers vary significantly depending on the impact that the various
factors have in any one area of the country. The most significant
differences appear to be caused by the presence of mountains or the
proximity of television markets to one another, particularly in urban
areas of the country such as the Northeast corridor.
a. Examples Under the ILLR Model--For example, both broadcasters
and satellite carriers agree that Charlotte, North Carolina, is a
representative television market. In Charlotte, the average increase in
the population of unserved consumers was 3.3 percent for the Fox
affiliate, 6.2 percent for the NBC affiliate, 6.8 percent for the ABC
affiliate, and 12.1 percent for the CBS affiliate. Another
representative example is Birmingham, Alabama. The average increase in
the population of unserved consumers there was 6.9 percent for the Fox
affiliate, 5.1 percent for the NBC affiliate, and 5.3 percent for the
CBS affiliate. In contrast, Cheyenne, Wyoming, and Charleston, West
Virginia, provide examples of more extreme cases. In Cheyenne, which
sits on a high, mostly flat, treeless plain, the new model picks up
very few households that were incorrectly classified as unserved. For
the CBS affiliate, there was a 2.8 percent increase in the number of
unserved households; for the Fox affiliate, there was a 0.6 percent
increase; and for the NBC affiliate, there was a zero percent increase.
In Charleston, WVA. which sits in the middle of one of the most
thoroughly mountainous states in the country, the new ILLR model
corrects a large number of mistakes that were made by other models. For
the CBS affiliate, there was a 23.4 percent increase in the number of
unserved households; for the ABC affiliate, there was a 24.9 percent
increase; for the Fox affiliate, there was a 25.7 percent increase; and
for the NBC affiliate, there was a 20.4 percent increase.
b. Advantages of the ILLR Model--The Commission's new ILLR
predictive model has several other advantages. For example, it should
significantly reduce the need for and costs of potentially millions of
on-site measurements. This will reduce the cost of doing business for
the satellite carriers-a cost that would likely be passed on to
consumers--and avoid the inconvenience testing causes the industries
and the public. Perhaps most importantly for the consumer, the model
should answer the question, ``Can I get network signals through my
satellite?,'' when he or she purchases a satellite dish. This point-of-
sale advantage should improve consumer satisfaction by preventing
confusion and mistakes while cutting down on delays in the initiation
of network service to eligible subscribers.
3. Other Considerations: TIREM and Confidence Factors
Some commenters to the rulemaking suggested that the Commission
adopt the so-called Terrain Integrated Rough Earth Model (TIREM)
developed by the Department of Defense for predicting signal strength
at individual households. The Commission concluded that this model is
neither better nor more accurate than the new ILLR prediction model.
Although TIREM shows promise as a tool for predicting signal intensity
at individual locations, it is unclear that there is a publicly-
available, non-proprietary version that has undergone rigorous review.
In some cases, the Commission discovered that TIREM might even be less
accurate than the ILLR model.3 On the other hand, the
Commission has many years of experience using and evaluating the basic
Longley-Rice model on which the new prediction model is formed.
---------------------------------------------------------------------------
\3\ See attached Letter to William E. Kennard, Chairman, Federal
Communications Commission, from Larry Irving, Assistant Secretary of
Commerce for Communications and Information, at 2 n.6 (January 29,
1999) (ex parte filing in CS Docket 98-201).
---------------------------------------------------------------------------
Some commenters argued that the Commission should increase the so-
called ``confidence factor'' in its prediction model from 50% to
something higher (e.g., 90%). The term ``confidence'' in this context
is misleading, as the measure does not describe how accurate the model
is. Rather, the confidence factor is a statistical way of determining
that a model's predicted result is the most likely reflection of the
actual signal intensity at a household. Used in that context, a
confidence factor of 50% results in a prediction that neither
overpredicts nor underpredicts unserved households by weighting the
model to produce results that favor either broadcasters or satellite
carriers. A predictive model that includes truly served households in
an unserved category by gaming the statistical analysis creates several
undesired effects. First, consumers could be confused and frustrated.
If the model overpredicts the number of unserved consumers, and those
consumers subscribe to network service via satellite, they will face
disappointment when the broadcaster proves that the consumer is,
indeed, served and therefore forces termination of broadcast network
service. Conversely, if the model underpredicts the number of unserved
consumers, those consumers would be unjustly deprived of broadcast
network service via satellite. Second, the SHVA protects the copyrights
of network affiliates by making their served households off limits to
satellite delivery of broadcast networks. A 90% confidence factor for
served households would make many truly served households eligible for
satellite-delivered network service, contrary to the intent of the
SHVA. Third, if the Commission had endorsed a model that underpredicts
the number of served households, broadcasters would have a great
incentive to challenge the model's prediction by taking an actual, on-
site measurement. Satellite carriers would similarly pursue testing for
any model that consistently underpredicts unserved households. Either
result would defeat our goal of endorsing a predictive methodology upon
which all parties would rely and which the courts would accept to
satisfy the SHVA's requirements.
The measurement and prediction methodologies fulfill the
Commission's objective of more accurately identifying the truly
unserved households that Congress intended to make eligible for
satellite-delivered broadcast service. At the same time, the Order is
true to the congressional policy mandate that broadcast localism should
be preserved.
recommendations
The Commission looks forward to working with Congress in examining
alternatives to provide relief for those consumers affected by the
injunction.
The Commission and Congress can work together to fulfill their
mutual objective of promoting competition. In its Report and Order, the
Commission did what it could within the scope of its limited authority.
The Commission also recommended that Congress consider the following
proposals:
1. Authorize Local-into-Local--Congress could consider changes to
the copyright law to allow satellite companies to provide local
television stations to local markets. Cable companies already do this
to their distinct advantage vis-a-vis satellite companies. Local-into-
local could make satellite carriers more attractive to consumers, thus
increasing their competitive standing with cable. Local-into-local will
not provide a complete solution for every consumer in the immediate
future because of technological limitations on the number of stations
that can be retransmitted. Further, some satellite carriers have no
plans to retransmit local signals even if they are legally able. Local-
into-local is, however, a beginning, and could provide a new option for
a large number of television households.
2. Eliminate the 90-Day Waiting Period--Before receiving satellite-
delivered broadcast networks, the SHVA requires an unserved consumer
who subscribes to cable to terminate that service and wait 90 days.
Once the cable service ends, the consumer then would face 90 days with
no acceptable network service. He or she would be without cable, unable
to receive network programming over-the-air, and forbidden to receive
broadcast network stations via satellite. This requirement discourages
a potential satellite consumer from terminating his or her cable
service. The Commission's Order recommends that Congress consider
eliminating the 90-day waiting period.
3. Incorporate Prediction Models and Adopt a Loser Pays Mechanism--
The SHVA provides that the loser must pay for any on-site signal tests
only when parties are embroiled in litigation over the eligibility of a
household. The Commission believes that the loser pays mechanism would
be more effective if it were applied prior to litigation and if it were
used in conjunction with a predictive model. The Commission suggested
that clear statutory acceptance of prediction models for creating
rebuttable presumptions of service or lack of service would add
certainty to the entire SHVA process. It is important not to codify the
new ILLR model specifically, so that improvements can be made as
technology develops, but an amended SHVA should incorporate prediction
models in addition to maintaining the use of on-site measurements. A
broadly applied loser pays mechanism that allocates the cost of testing
to the party in error, in conjunction with the more reliable prediction
model, would likely give satellite carriers an economic incentive to
avoid enrolling consumers who are predicted to be served. Loser pays
could also discourage broadcasters from challenging subscribers who are
predicted as unserved. Less testing means less burden and inconvenience
for the industries and consumers.
conclusion
Mr. Chairman and members of the Subcommittee, I am pleased and
privileged to have shared with you my thoughts on how to ensure that
all Americans have access to broadcast network television. I also
appreciate the opportunity to discuss with you the Commission's recent
Report and Order and its recommendations to help the public determine
whether a particular household can receive an adequate television
signal. Our on-site measurement methodology and our point-of-sale
predictive model should make it easier for the industries and consumers
to comply with the SHVA. Finally, I believe the recommendations I have
offered could significantly advance competition to cable and create
more and better choices for consumers. Thank you for inviting me to
testify today. I am pleased to answer your questions.
______
United States Department of Commerce,
The Assistant Secretary for Communications and Information,
Washington, DC 20230,
January 29, 1999.
The Honorable William Kennard
Chairman, Federal Communications Commission
The Portals
445 Twelfth Street, S.W.
Washington, D.C. 20554
RE: Ex Parte Letter in Satellite Delivery of Network Signals to
Unserved Households for Purposes of the Satellite Home Viewer Act, Part
73 Definition and Measurement of Signals of Grade B Intensity, CS
Docket No. 98-201, RM No. 9335, RM No. 9345
Dear Chairman Kennard: I am writing today to applaud the Commission
for expeditiously undertaking a rulemaking to define ``over-the-air
signal of grade B intensity'' for purposes of the Satellite Home Viewer
Act.\1\ It is my hope that the federal courts \2\ will benefit from the
Commission's guidance on this important issue.
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\1\ Satellite Home Viewer Act of 1994, Pub. L. No. 103-369, 108
Stat. 3477 (1994) (codified at 17 U.S.C. Sec. 119).
\2\ See CBS Inc., et al. v. Prime Time 24 Joint Venture, Case No.
96-3650-CIV-NESBITT (S.D. Fla. July 10, 1998); ABC Inc. v. PrimeTime 24
Joint Venture, Case No. Civ. A. 1:97CV00090 (M.D. N.C. July 16, 1998).
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As noted in my September 4, 1998, letter to you, the definition of
``signal of grade B intensity'' is key to whether many consumers will
have real choice of programming providers. This Administration has
strongly supported the development of robust competition in the
multichannel video programming marketplace as the way to bring greater
viewing choices, lower prices and better services to consumers.
The Institute for Telecommunication Sciences (ITS) of the National
Telecommunications and Information Administration has provided sample
data on the number of households that could be affected by the various
prediction methods under consideration by the Commission.\3\
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\3\ A number of commenters in this proceeding supported the
adoption of TIREM (Terrain Integrated Rough Earth Model) for predicting
unserved households. The original version of TIREM was developed by the
Electromagnetic Compatability Analysis Center (ECAC) within the
Department of Defense in the 1960s and has continued to be modified by
that organization. ECAC's name was recently changed to the Joint
Spectrum Center (JSC).
---------------------------------------------------------------------------
ITS took a sample of one network affiliate station from 16 Neilsen
Media Research Designated Market Areas (DMAs) ranked by number of
households. This sample reflects significant geographic diversity,
communities of various sizes, UHF and VHF stations with varying channel
numbers, and equal numbers of affiliates of each of the four
networks.\4\ ITS maps plotting the results of this sample graphically
reveal the variations in the number of affected households of selection
by using the prediction methods: FCC F (50,50) Field Strength Charts
(47 C.F.R. Sec. 73.699 Figures 9 and 10), Longley-Rice ITM,\5\ and
TIREM Version 3.\6\ Maps for the sampled stations are available at
http://flattop.its.bldrdoc.gov/figs ntia/gifs ntia 012899/index.html.
---------------------------------------------------------------------------
\4\ For a summary of this data, see the attached table entitled
``Network Affiliate Sample from 16 DMAs.''
\5\ Longley-Rice ITM (Irregular Terrain Model, Version 1.2.2) is
available to the public from an NTIA web site at http://
elbertits.bldrdoc.gov/itm.html. The files at this site include source
code and model description.
\6\ TIREM Version 3 is available to the public from an NTIA web
site at http://ntiacsd.ntia.doc.gov/msam. The files at this site
include the source and executable code and a 30-arc second topographic
database (i.e., the database contains the terrain elevations in height
above mean sea level for every 30 arc-seconds of latitude and longitude
for the earth's surface). This version is approximately 20 years old
and was developed by ECAC/JSC. For purposes of this sample, ITS
modified TIREM Version 3 to permit access to the 3-second topographic
database commonly used for broadcast studies. TIREM Version 4 is the
latest version of the model also developed and maintained by the JSC.
This model improves on the 20 year-old coding used in Version 3 but
fundamentally uses the same technical algorithms and yields similar but
not identical results as Version 3. This version of the model, however,
has limited distribution with export restrictions under the Arms
Control Act (22 U.S.C. Sec. 2751 et seq.) or Executive Order 12460.
While NTIA is a Federal agency eligible to receive TIREM source code,
other organizations may not be eligible to receive TIREM Version 4
source or executable code without explicit permission from JSC.
---------------------------------------------------------------------------
While NTIA takes no position on the specific definition that the
Commission should adopt, we urge the Commission to adopt a definition
and measurement that will best promote competition and consumer choice.
Thank you for your consideration of these views.
Sincerely,
Larry Irving.
Enclosures
cc: The Honorable Susan Ness
The Honorable Harold Furchtgott-Roth
The Honorable Michael Powell
The Honorable Gloria Tristani
Deborah A. Lathen, Chief, Cable Services Bureau
NETWORK AFFILIATE SAMPLE FROM 16 DMAS
[CS Dkt. No. 98-201, RM Nos. 9335, 9345]
Prepared by the Institute for Telecommunication Sciences
--------------------------------------------------------------------------------------------------------------------------------------------------------
Model: Households (Grade B or
Greater)
Rank DMA Station-Channel Network --------------------------------------
Longley-
FCC Rice TIREM
--------------------------------------------------------------------------------------------------------------------------------------------------------
17 Phoenix KSAZ-10 FOX 818,000 815,000 830,000
2 Los Angeles KABC-7 ABC 4,627,000 4,549,000 4,688,000
5 San Francisco-Oakland-San Jose KTVU-2 FOX 2,504,000 2,424,000 2,403,000
26 San Diego KNSD-39 NBC 851,000 1,026,000 1,082,000
7 Washington, D.C. WRC-4 NBC 2,324,000 2,309,000 2,483,000
16 Miami-Ft. lauderdale WFOR-4 CBS 1,477,000 1,477,000 1,506,000
3 Chicago WMAQ-5 NBC 3,197,000 3,258,000 3,604,000
23 Baltimore WMAR-2 ABC 2,686,000 2,685,000 3,130,000
21 St Louis KTVI-2 FOX 976,000 997,000 1,069,000
28 Charlotte WBTV-3 CBS 1,132,000 1,111,000 1,541,000
24 Portland KOIN-6 CBS 778,000 716,000 735,000
19 Pittsburgh WTAE-4 ABC 1,251,000 1,152,000 1,482,000
88 Columbia, S.C. WIS-10 NBC 479,000 518,000 878,000
93 Tri-Cities, TN-VA WJHL-11 CBS 576,000 262,000 309,000
59 Richmond-Petersburg WRLH-35 FOX 363,000 471,000 629,000
9 Detroit WXYZ-7 ABC 1,978,000 2,022,000 2,316,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mr. Tauzin. Thank you, Deborah.
We will now welcome Mr. Hewitt, President of Satellite
Broadcasting and Communications Association, the SBCA.
STATEMENT OF CHARLES C. HEWITT
Mr. Hewitt. Thank you, Mr. Chairman. I appreciate the
opportunity to have this talk.
We have distributed maps that were to be attached to our
testimony. We will unable to get it until this morning. We
would like to have that admitted, too.
Mr. Tauzin. Without objection, that will be admitted.
Mr. Hewitt. Mr. Chairman, this year, under the leadership
of USSB and Consumer Electronic Manufacturing Association, in
conjunction with ourselves and the NAV, we launched a program
to help retailers recognize the type of off-air antenna that
was necessary by providing them maps to illustrate what kind of
antennas would be necessary to be used.
We think this program is going to be very successful, and
we are going to push very hard for it. Millions of Americans
will be able to use off-air antennas and actually see the
higher-quality signal than they could through their cable
system. However, millions of Americans will not be able to use
an off-air antenna and receive any kind of a signal. That is
why we are here.
We commend the FCC for an expedited rulemaking. Deborah and
her staff did a wonderful job with what they had to work with.
But, unfortunately, they did not have the authority necessary
to do what we believe needs to take place.
Concerning the Grade B standard, in paragraph 95 of the
rule, I quote, ``There may be better, but still objective
standards that could be developed for identifying unserved
households.'' Paragraph 43, quote: ``We do not believe we have
the authority to create a special Grade B solely for the
purposes of SHVA.'' They have also stated that they don't have
the right to mandate a predictive methodology for industry to
use. Obviously, a mandated would put us all on the same book.
Realize the 1952 standard predictive methodology was
created to determine interference between transmitting signals,
to determine who could be where, and how, at what power
structure. It is based on the 50/50/50 47 DBU, and as a policy,
that means that 50 percent of the people in an area, 50 percent
of the time, receive a signal, 50 percent confidence that it
will happen. We do not believe this is good telecommunications
policy to determine whether or not a person has an acceptable
reception system.
Now the FCC did improve the 20-foot antenna height from the
ground on a single home, up to 30 feet for a two-story house.
The interference issues, the vegetation and land use
recognition, although this map will not contain that because we
don't have the application of it, has been very helpful.
Unfortunately, ghosting is not taken into consideration in
their activities.
This map over to your right is one map of four maps that we
have put together using what is called TIREM 4. TIREM 4 is a
very similar type of system that Longley-Rice is, which is what
the court decided and what has been used by the FCC, except for
it is much more sophisticated in using a great deal more detail
in the topographical area.
In fact, this map does not contain interference. It does
not contain land use and vegetation, which the FCC has already
recognized as being necessary, nor does it contain ghosting
problems that are contained in a signal. Every place you see
red is a place that the TIREM says is an eligible receiver that
Longley-Rice says is not an eligible receiver.
Of the four maps we show, three of them, actually, show a
very interesting phenomenal. There are areas in all three of
those cities inside Grade A that do not receive a signal. There
are a good number of geographic regions within Grade B, and
converse to that, outside of Grade B there are places where the
consumer is served with a Grade B 47 DBU signal, 47 DBU being
the acceptable signal.
Congressman, Mr. Chairman, we are asking for five solutions
to be enacted here by the committee and by the Congress.
The first is to provide the FCC authority to establish a
specific standard on behalf of the SHVA.
Second, to provide them the authority to mandate a
predictive methodology for us to be utilized.
Third, for those almost 2 million who ultimately are
destined to be turned off under the Miami court rule, that that
be left to the FCC to determine if the local broadcaster is
being truly harmed by those consumers retaining their signal.
Fourth, that the FCC establish a system for a very
consumer-friendly method of terminating those consumers who
should be disconnected under the law.
And, last, that local-to-local be authorized and that there
be a 3-year phase-in for full must-carry, and also 1 year for
retransmission consent to be negotiated.
Mr. Chairman, in closing, I have one 20-second film I would
like to show you of a broad author who lives in Dillard,
Nebraska. He has been notified that he is going to be
disconnected. This is the signal he now receives under the
Longley-Rice methodology. In just a second, it will show a
side-by-side film, what it shows when you have a distant
network signal applied. That is the distant network signal, and
now a side-by-side comparison.
We don't think in 1999 that this an is acceptable standard,
and we believe the FCC should be given the authority necessary
to accept a standard--to create a standard for SHVA and to
create and mandate a predictive methodology to support it.
Thank you.
[The prepared statement of Charles C. Hewitt follows:]
Prepared Statement of Charles C. Hewitt, President, Satellite
Broadcasting and Communications Association
Mr. Chairman, and members of the Subcommittee. I am Chuck Hewitt,
President of the Satellite Broadcasting and Communications Association.
We are the national trade association for all the segments of the
Direct-To-Home satellite industry. That includes the Direct Broadcast
Satellite companies that offer subscription services to consumers; the
C-Band (large dish) side of the industry; the major programmers who
license their offerings to service providers for viewing by consumers;
the manufacturers and distributors of home satellite receiving
equipment; and the retailers, mass merchandisers and cooperatives who
are the direct point of sale to the consuming public. The SBCA is one
of the few trade groups in Washington, D.C. that encompasses all the
elements of the industry.
Mr. Chairman, I greatly appreciate your inviting me to testify
before you today. While I have had that privilege many times in the
past, I can't remember when a hearing such as this one has taken place
at such a critical moment. It comes at a time when the DTH industry is
beginning to make great strides to be the kind of competitor to cable
that is envisioned by the policies set by this Subcommittee, the
Congress and the Federal Communications Commission. Yet, in spite of
the hope set for our industry, it is still besieged by competitive and
regulatory stumbling blocks that have to be removed if satellite is to
maximize its potential to deliver a superior video service to American
consumers.
Our industry needs Congressional help to find a better way to deal
with the vexing problem of ``white areas'' and the issue of how an
objective television viewing standard can be devised to ensure consumer
satisfaction. The Federal Communications Commission has just tried to
address the problem, but, as I will discuss later, was only able to
make modest adjustments in this area. The FCC stated clearly that it
did not believe it had the authority to go further than it did in
dealing with television signal strength issues as they relate to the
Satellite Home Viewer Act. Our request to you today is to give the
Commission that authority to settle this issue once and for all so
consumers together with our industry can know with finality their
rights with regard to the reception of distant network signals.
The backdrop for this hearing is critical. There is enormous
frustration in the satellite video marketplace because there has been
no satisfactory resolution to the ``white area'' crisis. Instead,
consumers are being trapped between the desire of the local television
broadcast affiliates to rightfully maintain the viability of their
service areas and the need of the satellite industry to be able to
compete on equal grounds with cable. The result has been predictable.
Consumers--the satellite television viewing public who is supposed to
benefit from video marketplace competition--is instead being made an
innocent victim because of a vague and impractical regulatory regime
established by the 1988 Satellite Home Viewer Act.
A very non-consumer friendly result is becoming the hallmark of the
current ``white area'' system under SHVA. Consumers who, while located
within the Grade A and B contours of their local television station,
still remain ``unserved households'' by virtue of the fact that they
are not able to receive an acceptable signal using a conventional
outdoor rooftop antenna. Finding a remedy to this situation constitutes
a major challenge: how to identify these consumers so they can receive
the distant network service that they are entitled to receive under the
SHVA.
The DTH satellite industry has already been supplying consumers
with television antennas for a long time. We believe that every
consumer has the right to receive network television service. To the
extent that acceptable local signals can be received off-air, our
companies make every effort to see that their subscribers have the
proper antenna equipment to facilitate their reception. So the claims
of the broadcasters notwithstanding, satellite providers have been
diligent regarding the ability of their subscribers to pick up local
signals.
A great debate has been taking place over the effectiveness of the
Grade B standard as an appropriate measurement to apply to households
under the SHVA. The standard was established by the FCC in 1952 for the
purpose of, among other things, predicting the propagation area of a
television signal emanating from the tower of a local broadcaster. Its
main parameters are that its contour, when drawn on a map, should
indicate a service area in which 50% of the households should receive a
signal of 47 dBu 50% of the time with a 50% confidence factor. It is
designed to predict areas of service coverage and prevent interference
from other stations. However, it is not a signal reception standard,
and there is no guarantee, and never was there intended to be one, that
a viewer located in the Grade B will, by necessity, receive an adequate
television signal using a conventional rooftop antenna.
Nonetheless, that is the standard which is currently applied to
consumer households through the SHVA, and which has now become so
contentious. In its place, consumers deserve a receiving standard for
the express purpose of applying the ``white area'' provisions of the
SHVA. It should be based on the realities of today's electronic
environment, not on the outdated assumptions that governed adoption of
the Grade B standard in 1952. It should be promulgated to benefit
consumers while at the same time taking into account the needs of the
free, over-the-air marketplace.
In an attempt to accomplish this, two of our member companies, the
National Rural Telecommunications Cooperative and EchoStar, petitioned
the FCC to establish a Grade B standard solely for the purpose of the
SHVA. The FCC launched a rulemaking proceeding, and we assured both the
Commission and the broadcasters that it was not our intention to
``shrink'' the Grade B contour as some have claimed. In fact, the Grade
B contour is not relevant in this instance because we were seeking a
standard based on signal reception. We simply wanted a better
definition of signal strength at the receiving location that would
enable our industry to determine in an exact manner which households
should be classified as ``unserved,'' in the context of a realistic
appraisal of the current television signal propagation environment.
Frankly, Mr. Chairman, a lot has changed since the FCC developed
its Grade B standard in 1952. Areas that were once rural are suburban
or even urban today. There is substantially more interference in the
environment today, caused by the exponential growth of wireless
electronic devices, microwaves, computers and many other electronic
usages of modern society, as well as more automobiles and electric
utility lines. Also, the existing models used to determine Grade B
signal strength do not consider the effects of signal propagation
interference, vegetation or land use (buildings), important components
which must be taken into consideration. Within the household, other
factors also come into play such as ``ghosting'' on the television
screen or the use of splitters to feed several video devices at the
same time. So it was important to our industry that these factors be
taken into consideration so as to make as realistic an accounting as
possible of the current climate for television signal reception.
The FCC is to be commended for implementing its rulemaking in such
a short period of time. Chairman Kennard delivered the Commission's
report and order on time and as promised. The Commission was clear to
state, however, that its authority in this area was limited under SHVA.
In light of this circumstance, the rules that the Commission
promulgated make some minimal changes with regard to the impact of the
Grade B standard on SHVA consumers. So the benefit to consumers,
unfortunately, is only slight. Nonetheless, we believe that there is a
lot more in this area that can be accomplished, and it is important
that the FCC be given the go-ahead to deal with it.
On the positive side, the Commission adopted certain measures which
can help make a more realistic assessment and prediction of signal
strength at a television household possible. While they do not directly
address the principal hurdle faced by a SHVA consumer--i.e., whether or
not a truly acceptable and viewable television picture can be received
with a conventional rooftop antenna--the rules are a first step toward
addressing this core issue. First, it provided for a new measurement
process at an individual location, requiring five individual
measurements at a predetermined location instead of the 100-foot mobile
run measurement that is utilized by broadcasters today.
Second, the Commission endorsed a slightly modified version of the
Longley-Rice predictive methodology for determining beforehand whether
a consumer can receive a Grade B strength signal. The advantage of
using any predictive methodology is that it reduces the cost and
necessity of conducting an on-site measurement. While there are several
different predictive models to choose from, it is important to remember
that any model is only as good as the technical parameters that are fed
into it. That is an extremely important qualification which, as I will
graphically demonstrate to you, dictates varying results, each with
different consequences as to whether or not a consumer household
actually receives a Grade B signal and is thus either ``served'' or
``unserved.''
The satellite industry, on the other hand, proposed using a highly
accurate prediction methodology termed Terrain Integrated Rough Earth
Model (TIREM) developed by the Department of Defense and the National
Telecommunications and Information Agency. For reasons explained in the
FCC's Report and Order, it elected not to endorse TIREM at the present
time. It elected instead to remain with the existing Longley-Rice
methodology, slightly modified to take into account interference from
other stations, antenna height variations, and, eventually, the effects
of buildings and vegetation. In any event, the appendix to my testimony
will show the greater accuracy with which the TIREM model can predict
Grade B coverage at an individual location, compared with the Longley-
Rice Grade B propagation model.
The Commission acknowledged that its traditional Grade B contour
methodology does not take into account many topographic features in a
station's area; does not factor in interference from other electronic
signals; and does not include vegetation and land use. It stated that
the existing Grade B model is an ``imperfect methodology for predicting
whether an individual household can receive an adequate signal.''
(para. 67; our emphasis) As I stated earlier, it is designed to predict
television coverage at certain given levels within a local television
station's service area. That is the fatal flaw in trying to apply it to
the ``white area'' provisions of the Satellite Home Viewer Act to
consumer television signal reception because the Grade B standard as
used in SHVA up to now has been formulated by the FCC as a propagation
model, not a receiving standard. That is why we are here today trying
to seek a more precise and equitable approach for the satellite
consumers around the country who deserve better treatment with regard
to their right to receive television service.
I would also like to clarify at this point that a Grade B contour
line, by itself, is not an indicator of whether or not it is possible
to receive a viewable television signal within the area depicted by the
contour. It is not a guarantee to consumers that an adequate picture
will be available, but is simply a predicted zone of signal propagation
for the purposes which I cited above. That is a very important
distinction to make as you try to make a determination about the best
course by which consumers will benefit.
In any event, the Commission did adopt in its Report and Order the
predictive methodology termed the Individual Location Longley-Rice
model (ILLR). It is a point-to-point model that had been previously
adopted by the Commission in the digital television proceeding and can
be used to identify at a particular location--namely a consumer
household--television signal intensity. The model, however, does not
presently account for the effects of land use and vegetation, and those
factors when they become available must be factored in to give more
accurate predictions in the current environment. I would also note that
the FCC was very careful to point out that application of the ILLR
model would be for the purposes of SHVA and would not replace the
Commission's standard procedures for predicting signal strength and
service contours for individual television stations.
In its Report and Order, the Commission also pointed out that ``the
Grade B signal intensity standard was originally designed to depict a
television station's service area, and that it may not address all the
factors that determine the quality of a consumer's television picture''
and later that, ``the Grade B standard is still useful for determining
signal strength and signal intensity, there may be a better ,but still
objective, standard that could be developed for identifying unserved
households.'' (para. 95; our emphasis) As I already stated however, the
Commission does not believe it has the authority to go further than it
did. Because Congress established the Grade B standard as the benchmark
for ``white areas'' under the SHVA, the Commission felt constrained
from exploring other alternatives.
It is important that I describe for you now the effect of different
methods of identifying those areas within Grade A and B contours that
cannot receive a viewable television signal with an outdoor, rooftop
antenna. The attachments to this testimony comprise maps from Atlanta,
GA, Miami, FL, Missoula, MT, and Mobile, AL. The set for each city
shows how Grade B can be measured at individual locations using the
ILLR methodology and TIREM, using the 50/50 probability data at the
normal Grade B signal strength of 47 dBu for low-band VHF stations and
56 dBu for high-band VHF stations. We have overlaid the ILLR and TIREM
results on the FCC's standard Grade A and B contours.
1) The Individual Location Longley-Rice model that the Commission
just adopted in its SHVA rulemaking. This technique, in addition to
identifying signal strength characteristics at specific sites, also
takes into account interference from other stations, but does not yet
include the effect of buildings and vegetation. As the Commission has
recommended, the addition of data dealing with land use and vegetation
will improve the utility of the ILLR. We are working to obtain that
information and plan to apply it to the model if and when it is
available.
2) The TIREM model which the satellite industry recommended that
the FCC adopt as the preferred method of signal measurement. It
identifies more accurately the effects of specific topographic features
along a transmission path than does the ILLR model, and, from the
perspective of predicting whether a receivable signal is present at a
particular location, it is much more accurate.
The use of TIREM also helps to raise the principal issues we are
trying to address. We have clearly stated that it has never been our
intent to reduce the Grade B coverage area. We are only trying to
identify more readily those locations and households which cannot
receive a Grade B intensity signal with a conventional rooftop antenna.
The Grade B contour originally implemented by the FCC is solely for the
purpose of defining an area of signal propagation from a television
transmission tower. It is not meant to be a predictor of signal
reception at a specific household, but satellite consumers must have
that ability under the SHVA. That is why it is so important that the
Congress give the FCC the authority to formulate a receiving standard
for consumers so their viewing rights under SHVA can be exercised. In
fact, there may even be other methods for predicting individual
location receiving strengths. The Commission, as the expert agency in
this field, should be given the task of searching out the best possible
technique so as to avoid in the future what we are witnessing today.
The fundamental question before us now is how do we accomplish
this? The Commission has acted to what it believes is the extent of its
authority. It endorsed a slightly improved model for predicting Grade B
signal strength but was not able to go beyond that, namely the
development of a standard governing signal reception. In order to
address these critical competitive issues, we would ask you to
undertake the following actions:
Grant the Commission the authority it needs to implement a
television receiving standard for the purpose of accurately
identifying under the SHVA an ``unserved'' household. That
should not be too difficult a task. For many reasons, Grade B
may not be an acceptable viewing signal strength for many
consumers. While the Grade B standard was established in 1952
for black and white television, consumers' expectations today
and their reliance on television for entertainment and
information demand much higher quality reception than before.
Also, loss due to ghosting, the use of splitters, and other in-
home interference factors can add to signal deterioration. In
our filings with the FCC during its recent SHVA rulemaking, we
suggested that a 90/90 probability was the standard which was
more applicable under the existing television environment.
Imagine, for example, telephone service based on the same
principle as the current Grade B television standard. It would
hardly be satisfactory, and in this day and age, consumers
demand the same reliability from their television service as
they do from their telephone company. Therefore it is important
that the FCC embark on such a rulemaking as soon as possible.
Because the FCC concluded that it lacked the authority to
mandate the use of any predictive methodology in its
rulemaking, it could only ``endorse'' the ILLR as a predictive
methodology. As noted above, the SBCA believes the TIREM model
is much more accurate and should be used for SHVA purposes. In
any event, the Commission needs the authority to adopt a model
that will enable a consumer to know with a reasonable degree of
certainty whether or not, at that location, a television signal
at the new standard that has been created can be received with
a conventional rooftop antenna.
Consumers have become the innocent party in the ``white area''
dispute. Congress should take their interests into
consideration by directing the FCC to determine whether or not
local broadcast affiliates are being harmed by continued
distant network service to existing satellite subscribers. The
standard proposed in S. 303, legislation introduced in the
Senate by Senators McCain and Burns which the satellite
industry supports, is whether or not continued service would
cause ``projected loss of audience or revenue of such a
magnitude as to cause material harm to the viability of local
stations.''
Congress should direct the FCC to work with the affected
parties in order to develop a joint, consumer-friendly approach
to terminating distant network service to any households where
distant network service is required to be disconnected.
Consumers deserve an orderly, agreed upon transition so they
can continue to receive network signals by other means and with
a minimum of disruption.
Finally, it is important that Congress authorize local-into-
local satellite service quickly. It can go a long way to
reducing the uncertainty attached to the ``unserved'' household
approach because in many areas local affiliate service by
satellite would be offered in conjunction with a satellite
subscription package. For that to happen however, we recommend
that 1) a reasonable transition period be granted for a
satellite carrier to attain a full must-carry status; three
years is a reasonable period within which a satellite carrier
could comply; and 2) a period of one year be given to allow a
satellite carrier to obtain retransmission consent for the
carriage of local broadcast signals; that is what the cable
industry was granted in the 1992 Cable Act, and satellite
providers should be afforded the same benefit.
It is important to note, however, that the advent of local-into-
local service will not obviate the need for distant network signals.
There will still remain a large population of satellite viewers in the
smaller television markets, or those who live in rural areas, who will
not have access to either local-into-local service nor be able to
receive adequate local television broadcasts with a rooftop antenna,
even when the changeover is made to digital terrestrial broadcasting.
Distant network service via satellite will be the only means for them
to receive the news, sports and entertainment programming which other
viewers in more metropolitan areas already take for granted. We urge
Congress to be aware of this issue because it, too, will be impacted by
whatever new ``white area'' rules will be in effect at the time local-
into-local service is available.
I would now like to turn my attention to another issue that, while
not implicated in the discussion over SHVA, has serious ramifications
for the satellite industry. I am referring specifically to the
Northpoint project which would entail the delivery of a subscription
video package not MDS or MMDS in the frequency bands reserved for the
Direct Broadcast Satellite service (Ku-Band). I will not delve into the
engineering and technical arguments as to why the Ku-Band is not the
right place for the Northpoint proposed service. I will state for you
as a general matter, however, that while the Northpoint concept fits
well in a professionally engineered environment, it does not work with
receive systems installed for consumers where antenna placement cannot
be engineered. Furthermore, interference from the Northpoint system is
probably unavoidable. It is simply a question of how much will result
from the reflections of the Northpoint beam from buildings, trees,
poles and towers. But engineering considerations are not the only
factors involved in this matter. There lies another, equally important
consideration which has been given short shrift , namely the policy
grounds surrounding this issue. They have not been adequately
considered, but are nonetheless a vital, if not the most important,
component in the mix.
The primary issue is why a basically terrestrial service utilizing
microwave techniques be allowed to share the spectrum reserved for DBS.
It is not for lack of spectrum at other locations that can accommodate
the system application that Northpoint is proposing. Yet ironically,
the FCC is considering the use of the Ku-Band for just that purpose.
DBS and Northpoint are dramatically different services, and what
Northpoint is proposing is hardly new. What is new is the idea that a
transmission technique such as Northpoint's should be allowed to share
in a band which was not intended for that use nor for any other use
except DBS.
We are deeply concerned that, whatever technical evaluations are
made by the Commission of the Northpoint project, they do not factor in
the broader policy issue of satellite competition with cable,
regardless of the outcome of the FCC's tests. Frankly we are puzzled
that Northpoint would even be considered for the Ku-Band just as DBS is
beginning to make its mark in the video marketplace. Why would the
Commission want jeopardize the only viable competition to cable and, in
that regard, even entertain the thought of frequency sharing by a
fundamentally different video transmission technology. SBCA believes
that it would be a tragic decision to allow such sharing to occur,
irrespective the arguments that have been submitted in an attempt to
show that it may be ``technically'' possible to avoid interference to
DBS receiving systems. It would be devastating to discover too late
that an entire subscriber base would be vulnerable to interference,
simply because policy grounds were dismissed in favor of ``technical''
assurances. We would urge the Subcommittee to direct the Commission to
find other, more suitable frequency locations for the Northpoint
service.
In summary, Mr. Chairman, I would like to reiterate that this
hearing has come at a most propitious time. Now more than ever
consumers need the intercession of the Congress to look after their
interests. They deserve a clear solution to the Grade B dilemma, and
only the FCC, with authority granted by you, has the expertise to
produce standards and rules that will be truly helpful.
I have pointed out to you how much more accurately the TIREM
predictive model can be in identifying, on a point-to-point basis,
individual locations where a Grade B signal cannot be received. But the
FCC also needs Congress' authority to proceed with a rulemaking to
adopt a predictive methodology that is specifically designed to locate
accurately ``unserved'' households. We urge you to act quickly to
alleviate the impact the current environment is having on consumers.
Thank you for the opportunity to testify before you today.
Mr. Tauzin. Thank you very much, Mr. Hewitt.
We will now hear from Gene Kimmelman, Co-Director of the
Washington Office of the Consumers Union.
STATEMENT OF GENE KIMMELMAN
Mr. Kimmelman. Thank you, Mr. Chairman. On behalf of
Consumers Union, publisher of Consumer Reports, we appreciate
the opportunity to testify today.
Without even seeing it, I would like to warmly welcome your
moratorium legislation. I appreciate your collaboration with
the chairman to attempt to resolve this issue before consumers
are harmed.
I would like to bring a slightly different perspective to
this issue and give you two choices. Cable rates are up about
22 percent since passage of the 1996 act. That is between 3 and
4 times the rate of inflation.
The whole purpose of the act was to inject competition into
the market. Obviously, we are not seeing enough of it. In the
few communities where there actually are head-to-head wireline
competitors, rates on average are at least 10 percent lower
than where there is a monopoly, and we have examples in our
testimony of communities where there is head-to-head
competition now where there have been no rate increases the
last year or 2 years, as compared to rates going up three to
four times the rate of inflation, where there is only cable
company. That is the underlying market problem out there for
the vast majority of consumers. They don't have the competition
they were hoping for, they were promised.
You are going to hear--you have already heard some; you are
going to more--important principles, business concerns that are
totally legitimate. The concern about localism will come next
from broadcasters--a totally legitimate concern, something that
consumers care a lot about. The concern of the satellite
industry about providing a good product to the consumer,
equally legitimate, and normally, we are in the position of
suggesting that you balance all these legitimate business and
consumer concerns.
However, I have to suggest a different model this
afternoon. With regulations that do not work and regulations
expiring, unless you do what Mr. Markey suggests and go back
and really crack down, it seems to me there is no balancing.
Consumers are paying, even with 5 percent cable rate increases
per year, about $2 billion more at the hands of a monopoly each
year. There are some advertising dollars at stake for localism.
There is some money for an industry that wants to compete.
There are a number of other competitors who need changes in the
law to try to come in and take on cable. Two billion dollars,
though, coming out of consumers' pockets per year from a
monopoly, if we are not going to go back in and do something
meaningful with cable rates through regulation.
I would like to suggest that you not balance these
interests; you declare a war on the monopoly and do everything
in your power to break bottlenecks, impediments to competition.
It starts with changes in the copyright law. Many of the things
that Ms. Lathen suggested from the FCC we heartily endorse.
Making sure that everyone can get access to local broadcast
signals, every competitor, every potential competitor to cable,
making sure that copyright fees are equalized, making sure that
we have a compulsory license that is comparable for all multi-
channel video providers, making sure people can get a clear
signal for broadcast stations--these are all critical changes
in the law that are absolutely essential. We need them now.
Mr. Dingell points out a number of very troubling issues
related to whether the law has been broken in regard to the
Satellite Home Viewer Act. I can't speak to whether it has or
has not. There clearly has been aggressive marketing. The last
thing in the world I would suggest is that you condone breaking
of the law. I think Mr. Dingell had it absolutely right.
However, think of this perspective: For the consumer who
has been urged by all in Congress to go out and look to
competition as the solution, to go out, get off your couch, got
out to Circuit City, go out to some store, and invest in a
competitive alternative. If you don't like your cable TV
company or if you are not willing to pay their price, invest
hundreds, if not more, dollars in an alternative. Is it fair to
tell that consumer, ``You are going to lose broadcast signals''
because something isn't working right? Maybe someone broke the
law. I would suggest that that is not a fair resolution of this
matter.
And, more importantly, looking forward to the future, if we
want to promote more competition, it will chill that
marketplace if, all of a sudden, consumers have to worry about
investing all that money and not getting the product that is
promised.
So, in conclusion, Mr. Chairman, I urge you to move
expeditiously, as fast as possible with legislation that truly
promotes more competition to cable. Thank you.
[The prepared statement of Gene Kimmelman follows:]
Prepared Statement of Gene Kimmelman, Co-Director, Washington Office,
Consumers Union
introduction
Consumers Union 1 believes that the need to promote more
competition in the cable industry could not be more obvious. Cable
rates have risen about 21 percent since passage of the 1996
Telecommunications Act 2 and continue to climb three to four
times faster than the rate of inflation (see Attachment A). Even the
chairman of the Federal Communications Commission (FCC) admits that
rates are going up excessively under his agency's ``liberal''--in other
words, meaningless--regulatory structure (see Attachment B). As a
Congressionally mandated prohibition on regulating the most popular
cable channels approaches (March 31, 1999),3 now is the time
to act.
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\1\ Consumers Union is a nonprofit membership organization
chartered in 1936 under the laws of the State of New York to provide
consumers with information, education and counsel about good, services,
health, and personal finance; and to initiate and cooperate with
individual and group efforts to maintain and enhance the quality of
life for consumers. Consumers Union's income is solely derived from the
sale of Consumer Reports, its other publications and from noncommercial
contributions, grants and fees. In addition to reports on consumers
Union's own product testing, Consumer Reports with approximately 4.5
million paid circulation, regularly, carries articles on health,
product safety, marketplace economics and legislative, judicial and
regulatory actions which affect consumer welfare. Consumers Union's
publications carry no advertising and receive no commercial support.
\2\ Public Law 104-104, 110 Stat. 56 (1996)
\3\ 47 U.S.C. Sec 543 (c)(4), Public Law 104-104 Section 301
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lack of competition to cable
So far, despite rapid growth at the high end of the market,
satellite television has failed to offer true price competition to
cable. In inflation-adjusted dollars, cable rates are rising just as
fast today as they did before the Direct Broadcast Satellite (DBS)
industry began offering service.4 With up-front costs (for
the satellite dish and related installation charges) running three to
five times the cost of installing cable, and lacking carriage of local
broadcast channels, satellite TV has been unable to discipline pricing
for the most popular cable services.
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\4\ Dr. Mark Cooper and Gene Kimmelman, ``The Digital Divide
Confronts the Telecommunications Act of 1996,'' Consumers Union and
Consumer Federation of America, February 1999 at 38
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In addition, nearly one-half of satellite TV subscribers purchase
both DBS and cable TV services.5 Even as satellite attracts
previous cable subscribers, the cable industry makes more money by
raising prices to all its remaining and new subscribers. For example,
since passage of the Act, cable's rate increases yielded almost three
times more revenue than cable lost to the growth in DBS subscriptions.
See Attachments C and D. Obviously, satellite TV does not discipline
cable prices.
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\5\ Id
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In contrast, FCC data show that where cable faces head-to-head
competition from another transmission ``wire,'' cable rates are about
10 percent lower than where cable faces only satellite TV
challengers.6 Just last weekend officials from Montgomery
County, Maryland announced an agreement with Starpower Communications,
Inc. which proposes to offer service for about $5 per month (15
percent) less than Cable TV Montgomery currently charges--while
offering 21 more channels.7 That is real price competition.
And a recent Detroit News survey provides further evidence of the need
to discipline cable monopolies:
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\6\ In the Matter of Annual Assessment of the Status of Competition
in Markets for the delivery of Video Programming, FIFTH ANNUAL REPORT,
CS Dkt. No. 98-102, Dec. 23, 1998, at F-4, footnote 18
\7\ Scott Wilson, ``Starpower May Take On Cable TV Montgomery'',
Washington Post, February 20, 1999
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The News' survey found competition does matter. Of roughly
100 Metro Detroit communities with cable, 34 also have a second
cable company, Ameritech, which is preparing to wire six more
communities.
Overall, The News' survey found the price of the average
basic cable package went from $ 26.31 to $ 29.03--a 10.3-
percent increase.
Prices went up less in areas where Ameritech competes with
longtime cable providers such as Comcast, TCI, MediaOne and
Time Warner. Ameritech, which first opened for business in
Canton Township in spring 1996, serves about 200,000 customers.
About two-thirds of Metro Detroit household get cable.
In southern Oakland County, for instance, where longtime
provider TCI and Ameritech compete, prices are down. Downriver,
where Ameritech and TCI also compete, prices have stayed flat
for two years.
Of nine Metro Detroit Comcast systems, six did not see price
increases for basic cable in November. The six have cable
competition. In the three systems that instituted increases--
the Grosse Pointes, Pontiac/Waterford Township and Inkster--
there's no competition. Each community saw a 5.7 percent
boost.8
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\8\ Tim Kiska, ``Cable Bills Soar 10% in Two Years,'' Detroit News,
February 16, 1999
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the need for policy adjustments
The failure of federal policy to ensure reasonable cable rates
makes it necessary for policymakers to devote greater attention to
promoting increased competition to the cable industry. Legislation that
puts cable's potential competitors on the same legal footing as cable
companies could open the door to more choice and lower prices for all
TV services.
Recent deals that combine EchoStar Communications Corporation's DBS
business with DBS facilities owned by News Corporation and MCI/
WorldCom, and DIRECTV's combination with United States Satellite
Broadcasting and PRIMESTAR, dramatically consolidate the satellite
industry. However, these deals also could offer consumers more choice
and lower prices if the consolidated satellite companies more
aggressively compete against cable.
We believe it is critical to both enable and require these
satellite companies to become head-to-head competitors with cable for
the core TV services that consumers watch the most. This requires:
Passage of legislation, which gives satellite and other
potential competitors comparable treatment under our nation's
communications and copyright laws;
Expansion of previous laws designed to hold down cable rates
and make popular TV channels available to cable's potential
competitors;
Aggressive regulatory oversight of potential competitor's
access to cable equipment, cable-owned programming or
programming that cable companies exert monopolistic influence
over; and
Strong antitrust/regulatory review of satellite mergers to
ensure that satellite companies continue to reduce up-front
costs and eliminate other market impediments to direct price
competition with the cable industry.
Because of the highly concentrated nature of the cable marketplace,
policies designed to foster increased competition throughout the market
require giving potential competitors breathing room as they seek to
enter the market and expand their businesses. The two largest cable
companies, Tele-Communications Inc. (TCI) and Time Warner, own a
substantial stake in cable systems serving about one-half of all cable
customers, and TCI has an ownership stake in 67 national programming
channels while Time Warner has a stake in 30 national
channels.9 In addition TCI owns about 9 percent of Time
Warner. Most importantly, 29 of the 50 most subscribed-to channels, and
nine of the top 15 prime-time watched channels are substantially owned
by the largest cable companies.10
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\9\ FIFTH ANNUAL REPORT, op. cit., at Appendixes C and D
\10\ Id.
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Congress must enact legislation which enables consumers who, in
good faith, purchased satellite TV services, to continue to receive
broadcast network channels. These consumers, who have made an enormous
investment in exactly what Congress has been promoting--a potential
competitor to cable TV--must not be held hostage to a battle between a
highly profitable broadcasting business,11 and satellite
companies over slightly greater profits.
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\11\ Comments of Dr. Dean Alger, In the Matter of Local Broadcast
Ownership, FCC En Banc Hearing, February 12, 1998 at 26.
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In addition, Congress should ensure that satellite and other
potential cable competitors have an opportunity to challenge cable's
dominance and gain a large enough market presence to offer a mass-
market alternative to cable. To achieve this goal, Consumers Union
urges you to enact legislation which equalizes copyright payments and
the compulsory license for cable, satellite and all other potential
competitors. Obstacles to the transmission of local broadcast signals
by satellite TV providers, or other potential competitors, should also
be eliminated.
Unfortunately, experience under the 1996 Telecom Act and its
predecessor, the 1992 Cable Act 12 demonstrates that market
entry does not always translate into mass-market competition. The
satellite TV industry has been enormously successful by focusing on
high-end consumers who are willing (and able) to pay hundreds of
dollars for a dish, want hundreds of channels, desire specialized
programming (e.g., sports, movies) and are interested in higher quality
(digital) signals. While recent satellite industry efforts to reduce
up-front cost to consumers are promising, they are not enough to
promote rapid price competition with cable.
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\12\ Public Law 102-385, 106 Stat. 1460 (1992)
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Consumers Union therefore believes that, as policymakers open the
cable market to more competition from satellite TV providers, the
satellite companies must be responsive to the public's demand for
competition to the most popular cable offerings. Efforts to promote
price competition by reducing up-front costs and adding local broadcast
signals to popular cable programming packages must be encouraged, to
jump-start mass market rivalry with cable. Only when satellite TV
offers the vast majority of cable subscribers an alternative that meets
their needs will cable companies be forced to bring down prices.
conclusion
Immediate, forceful public policy measures designed to promote
mass-market competition to the cable industry and block cable's
monopolistic practices can offer consumers relief from spiraling cable
rates. It is time for Congress, antitrust and regulatory bodies to
ensure that potential competitors like satellite TV companies have a
fair chance to compete on price with the cable television industry.
Unless Congress puts a regulatory lid on cable rates, the only way
consumers will see an end to spiraling prices is through a single-
minded governmental assault on all barriers to competition.
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Mr. Tauzin. Thank you very much, Mr. Kimmelman.
Now we are pleased to recognize Mr. Andy Fisher, the
Executive Vice President, TV Affiliates, of Cox Broadcasting.
Mr. Fisher.
STATEMENT OF ANDREW S. FISHER
Mr. Fisher. Mr. Chairman, thank you. It was very reassuring
to hear the remarks of the committee members. This is obviously
a group that has looked at these issues carefully, and the
amount of knowledge here is very impressive. The issues are
well-defined.
Why are we here today? Essentially, we are here today
because two Federal courts and the FCC have finally said that
it is time to enforce a fundamental copyright law that the
satellite companies, in the words of the judge, ``willfully and
repeatedly violated'' for 10 years.
The second reason we are here is that enforcement is about
to begin. It begins this weekend.
Last, it is because of all of the people who are victims of
this lawbreaking--they are your constituents, and they are our
viewers--are really mad, and they have every right to be mad.
They didn't deserve to be put in this spot. You are hearing
from them, and we are hearing from them, and it is simply not
fair.
So the question is, what are we going to do about it?
Before I get into some solutions, I would like to clear up some
myths that periodically get circulated about this issue.
One myth is that consumers are going to lose their network
service. That is simply not true. As two courts and the FCC's
Cable Bureau have determined, 90 percent of the people who are
illegal subscribers, who were convinced that they could do it
when they shouldn't have been told they could, can receive
these signals over the air. Every time this situation is looked
at, the same results occur. The overwhelming percentage of
these subscribers can see these television signals, and they
can see them with a conventional rooftop antenna.
I am 51 years old. Some of those items you had on your
desk, Mr. Chairman, were interesting. I haven't seen them
before. I have lived in Brooklyn. I have lived in the flatlands
of Oklahoma. I have lived in a number of markets around the
country. I just have only dealt with rooftop antennas. So I am
not sure I know what those items were. But they truly work, and
they work better than ever before.
The second myth is that a Grade B picture is a bad picture,
and that just isn't true. I would like to roll a tape that was
made as part of the process of the court battle for a Raleigh
television station. Now the first picture you are going to see
is not a very good television picture. It is a non-Grade B
picture. If you see this at home, you deserve to have direct
service from an out-of-market distributor. But the next signal
you are going to see is 70 miles from the transmitter of WTVD,
70 miles.
The predictives were that this would be a Grade B signal.
They went out there and measured it, and it was a Grade B
signal. Ladies and gentlemen, I would suggest to you that is a
terrific signal. It is better than most cable companies
deliver. That is the Grade B standard predicted; that is the
Grade B standard as measured. It is a good signal. These
comments that sometimes Grade B isn't good--a Grade B signal
over 90 percent of the time tends to work.
Now let's talk about solutions. The FCC did a pretty good
job, and they are not an agency that we are always real
comfortable with because they are tough on us. But they went
back and they looked again, at Congress' urging, at the current
Longley-Rice model. They tweaked it. They in some cases shrank
our market areas a little. They have improved the terrain
mapping. They have said we now have got to be able to have
computer equations that can basically predict less than the
distance of a football field mark after mark after mark. They
are taking interference; they are taking vegetation.
Our industry has accepted it flatly and completely. We have
filed with the Miami court and said we are comfortable with you
immediately amending the decision in court to accept every
aspect of the FCC's recommendations. That is what the broadcast
industry is right now using as their measurement standard.
We support the proposal for loser pays. If the equations
say that service, in fact, can be achieved, and the tape
station turns that down, and it is measured, we should pay the
price if it turns out that service should have been granted. We
are comfortable with loser pays. We are doing everything we
know how. We are granting waivers. There are hundreds of
thousands of waivers for individual stations and individual
consumers that have been granted across this country, and you
are going to hear about that process.
What about the satellite companies? Is it fair that they
get a free ride? We suggest that they have made half a billion
dollars--half a billion dollars--illegally selling this
service. Those are the numbers from that industry. We think
that some of that money ought to go to a fund to buy antennas
for the people who were ripped off. The folks who were told
they were legal and they weren't should be able to have access
to the money that the satellite services have illegally been
achieving for all these years.
We think the ultimate solution is before this committee. It
is local-to-local. It should include must-carry at a date
certain. We think once local signals are available, let's get
them in the house and get distant signals off. We are working
hard to solve a problem that is not of our own making.
We don't think that having continued illegal activity and
revenue flow is right. Put the onus where it belongs, on the
people who created the problem, and pass local-to-local with
the same rules as cable.
Thank you, Mr. Chairman.
[The prepared statement of Andrew S. Fisher follows:]
Prepared Statement of Andrew S. Fisher, Executive Vice President,
Television Affiliates, Cox Broadcasting
Mr. Chairman and distinguished members of this subcommittee, thank
you for the opportunity to speak to you today. I am here as a member of
the television board of the National Association of Broadcasters and on
behalf of local network affiliates.
This Sunday, Feb. 28, the Satellite Home Viewer Act is finally
scheduled to be enforced. This is the culmination of literally a
decade-long struggle in which broadcasters have tried to get satellite
companies to adhere to the law.
This legal battle has included two lawsuits filed by broadcasters
in federal courts in North Carolina and Florida, resulting in decisive
rulings that the satellite industry had willfully violated the
Satellite Home Viewer Act.
U.S. District Judge Lenore Nesbitt, who presided over the Florida
lawsuit, observed the following:
``PrimeTime 24 willfully and repeatedly broadcast copyrighted
network programming to served households in violation of the
SHVA.''
She further noted:
``Plaintiff's signal intensity testing at randomly selected
homes in a variety of markets provides overwhelming evidence
that the great majority of PrimeTime subscribers are ineligible
to receive its network service.''
Subsequent to these court rulings, the FCC earlier this month,
released its own decision on the SHVA matter. After a carefully
considered rule-making proceeding, the FCC declined to change the
definition of Grade B intensity and endorsed the continued use of
Longley-Rice mapping technology with some modifications. In addition,
the FCC acknowledged that the ``overwhelming majority'' of PrimeTime 24
subscribers are receiving distant network signals illegally and stated
that it could not assist any household receiving such illegal signals.
While we have occasionally disagreed with the Commission, we believe
they did an admirable job.
The net result of all of this is that several hundred thousand
satellite home dish owners will lose satellite delivery of CBS and FOX
feeds on Sunday. But they are not losing access to CBS and FOX
programming. They will simply be required to change their means of
receiving it. That is because it is available to them, right now, via
the local affiliates of the CBS and FOX networks for free.
Mr. Chairman, broadcasters do not relish the fact that this is
happening to these consumers, who are our viewers. We also appreciate
the sympathy that you, the members of this subcommittee, have for these
consumers, who are your constituents. And no one has a more vested
interest in making sure the greatest number of people can see our
programming than does the broadcast industry.
But the question before you today is how can we assure this? For
our part, broadcasters are granting literally thousands of waivers for
anyone scheduled to have their service terminated who cannot receive a
quality Grade B signal. But the burden also should fall on the people
who broke the law--PrimeTime 24 and the satellite industry.
In most cases, for satellite subscribers covered by the termination
order, the only thing preventing clear reception of network programming
from local affiliates is the lack of a properly installed antenna.
Certainly the satellite industry knows this. Two large telephone
companies, under co-marketing deals with DirecTV, are right now
offering turnkey satellite services, including powerful new antennae
capable of tapping local TV channels with the mere zap of a remote
control. Let me also quote from DirecTV's Web site: ``Consumers are
realizing that the combination of a DSS system and an off-air antenna
is unbeatable.''
If such a solution is good enough for the satellite companies' new
customers, why isn't it good enough for the customers facing
termination? We think the satellite industry ought to use some of the
estimated $557 million in revenue from selling illegal service to buy
and install antennae for those customers who are being terminated.
As Judge Nesbitt observed:
``PrimeTime and its distributors have made large profits by
ignoring the legal standard that governs their businesses, and
have spent minimal amounts on compliance.''
It seems only fair that the satellite industry should take some of
these illegal proceeds to reconnect your constituents with their local
CBS and FOX affiliates.
What role should Congress play?
As many of you know, advances in technology will soon help solve
the problems underlying this entire controversy. Satellite operators
will be able to deliver local stations to customers in their own local
markets just like cable operators already do. In addition to satellite
delivered local-to-local service, other terrestrial options are
emerging, such as Northpoint.
To create a level playing field for satellite operators, Congress
should add local-to-local language into the Satellite Home Viewer Act
this year. These provisions--which both broadcasters and satellite
carriers support--would give satellite systems essentially the same
rights and responsibilities for the carriage of local broadcast
stations as cable systems now enjoy. Bills introduced in both the House
and the Senate Judiciary committees accomplish this goal.
In our view, must-carry should be attached to local-to-local, along
with SYNDEX and network non-duplication protections similar to those
found in a cable environment.
There should be statutory language that affirms the recent FCC
order on the distant network service provisions of SHVA, the highlights
of which are:
Continued use of an improved Longley-Rice predictive model,
Elimination of the 90-day waiting period for former cable
subscribers and,
Enactment of a ``loser-pays'' provision for signal-strength
testing.
Finally, Congress should mandate that when local signals are
provided in a given market that the provision of distant signals will
no longer be legal.
What should Congress not do?
We urge Congress to resist the urge to negate the judge's decision
by grandfathering illegal subscribers. Why?
For the same reason that people who buy counterfeit satellite
access cards should not be permitted to continue to use those cards. In
Washington State, a federal grand jury last week indicted four people
for selling counterfeit satellite access cards. DirecTV, whose signals
were being stolen, rightfully praised the government's enforcement of
their franchise rights.
We only hope that they will extend the same courtesy to us as we
try to protect our franchise rights.
Grandfathering also has serious implications for our local
broadcast system. It is local broadcast stations, not national
satellite networks, which communicate with local communities. It is
local stations that issue emergency weather reports and local news
bulletins. It is local stations that host candidate debates and provide
other critical information about campaigns for public office.
There is a far larger universe of consumers--the millions of
Americans who do not own satellite dishes, and rely on free, over-the-
air television--who will be the losers if you make an exception for
these few illegal subscribers.
Grandfathering also creates an expectation that it is acceptable to
violate copyright law. And it overlooks the issue of whether or not a
signal is available. As I said earlier, if it is available, the
solution is an antenna. If it's not, then the consumer is eligible NOW
to receive distant network service.
And grandfathering continues to allow the satellite companies to
enrich themselves to the tune of millions a month from illegal distant
network service.
Mr. Chairman, in closing let me reiterate a number of key points:
We hope you will allow the law to be enforced; avoid
grandfathering; enact local-to-local with appropriate marketplace
protections; and assist your constituents in reconnecting to their
local stations by requiring satellite companies use their ill-gotten
gains to buy antennae for these affected satellite customers.
As the debate moves forward, we pledge to work with you and the
members of this subcommittee, toward these meaningful solutions.
Mr. Tauzin. Thank you, Mr. Fisher.
We are now pleased to welcome Mr. Jack Perry, President and
CEO of Decisionmark, Cedar Rapids, Iowa.
STATEMENT OF JACK PERRY
Mr. Perry. Thank you, Mr. Chairman, distinguished members
of the committee.
I am here today on behalf of 38 pioneers at Decisionmark
who have dedicated time, energy, and considerable resources to
solving many of the problems related to the Satellite Home
Viewer Act. What I have discovered in the last 2 years is the
crucial need for a conduit between satellite providers and
broadcasters and consumers.
First, we are a technology and data company. Most germane
to today's discussion is how our technology and data answers
the question of consumer eligibility.
Second, and I think most importantly, we are a company that
has developed the technology that will let the consumer
prevail. If the consumer prevails, so do the broadcasters and
so do the satellite providers.
One year ago I came to Washington to introduce to the world
our Geneva technology. For the first time ever, technology
existed to solve the question of eligibility at the point of
sale. Primetime 24 and all but one of their distributors are
today deploying our Geneva technology. Geneva is accurate,
cost-effective, and flexible enough to be installed at any DBS
company in one business day.
While, admittedly, we are initially focused on answering
the question of eligibility, sometimes appearing to be to the
benefit of the broadcasters, we are today focused on consumer-
centric solutions. These solutions, used proactively by all
parties, can only promote needed competition with cable.
By starting from the basis of eligibility, we have
developed the following solutions: GETAWAIVER.COM. This
Internet site went live several weeks ago and has already
facilitated over 67,000 waiver requests. In fact, yesterday it
did 10,933 requests for waivers. The most important feature of
our GETAWAIVER.COM website is it requires waivers from the
appropriate broadcaster on behalf of the consumer.
Our WAIVERTV.COM website allows broadcasters to process
waiver requests in a timely, pro-consumer fashion. Today it is
used by more than 82 percent of the broadcasters to proactively
address waivers. Without a tool like WAIVERTV, the 65,000
waiver requests to date might have cost the broadcasters over a
million dollars in time to assess them at 20 minutes per
waiver.
The same technology that is used to determine eligibility
and process waivers today forms the basis of our antenna
selector technology. By doing the equivalent of looking up in
the sky at each household and saying, what stations are
received at this household, we can tell that household the
optimal off-air antenna they would need. From where I sit, this
is the best way to promote free over-the-air television.
Today the committee is faced with the challenge of crafting
legislation that will impact more than 90 million households.
Technology is available to give consumers choices. Our
technology, put to use by the broadcasters and the satellite
companies, can only help the consumer prevail.
Thank you, and I will be happy to answer any questions.
[The prepared statement of Jack Perry follows:]
Prepared Statement of Jack Perry, President and CEO, Decisionmark Corp.
Good afternoon and thank you for inviting Decisionmark to testify
in today's hearing. Decisionmark is an Iowa-based computer software
company. Our company has expertise in mapping and data mining and has
created various software tools to assist the broadcast and satellite
industries, as well as consumers, with the vexed issues surrounding the
Satellite Home Viewer Act (``SHVA'' or ``Act''). Decisionmark's
homepage on the World Wide Web is located at www.decisionmark.com.
Decisionmark has developed computer software and data to facilitate
the use of a Individual Location Longley-Rice methodology as a
predictive aid in determining which households are likely to receive an
over-the-air signal of Grade--B intensity. In addition, Decisionmark
has developed an algorithm for recommending an appropriate off-air
antenna for any household in the United States. Decisionmark's services
are available to assist the broadcast and satellite industries and the
public in implementing the Act in quick, simple, and cost-efficient
ways. Furthermore, Decisionmark can go beyond simple enforcement of the
Act to provide a complete solution that ensures consumers' enjoyment of
the network programming that is so important to them. Decisionmark's
solution is market-based, and above all, neutral. The tripartite
Decisionmark solution consists of accurate point-of-sale eligibility
screening, appropriate selection of off-air antennas and efficient
processing of SHVA waivers.
i. decisionmark history and background
In August 1996, a local ABC affiliate contacted Decisionmark. It
was having problems evaluating the eligibility of satellite subscribers
within its local viewing area who were receiving distant network
service. The affiliate was using paper maps to identify, manually, the
location of satellite subscribers in the station's service area. After
a subscriber was located, the affiliate would then determine whether
the subscriber was likely to receive a signal of Grade B intensity from
the affiliate. Not surprisingly, this process was slow, cumbersome, and
expensive. My company, at that time, had already developed a desktop
mapping program, Proximity', that it then customized to
identify and locate subscribers for the affiliate more easily and
accurately. The affiliate was pleased with the results, and,
consequently, Decisionmark began to market this new software,
Proximity'TV, to other affiliates. Soon, three of the four
broadcast networks, ABC, CBS, and Fox, came to rely upon ProximityTV as
a method of identifying households that are predicted to receive Grade
B service from a local affiliate. ProximityTV remains widely used today
by major network affiliates, including several NBC affiliates, for SHVA
compliance monitoring. Using a proprietary procedure, Decisionmark's
software displays each subscriber's resident address as a specific
point on a map. Once the location of a subscriber's satellite dish is
known in relation to an affiliate's predicted Grade B signal, the
affiliate can decide whether to challenge the subscriber's eligibility.
Decisionmark was subsequently selected by the broadcast and
satellite industries to perform the data processing for the ``Red
Light/Green Light'' settlement between the National Association of
Broadcasters (``NAB''), Primestar, and Netlink. The ``Red Light/Green
Light'' agreement relies on ``presumptions'' of eligibility within a
local station's Designated Market Area (``DMA'') DMA-plus counties,
based on the Longley-Rice model. The presumptions may be rebutted with
an actual signal measurement test. Under the agreement, the predicted
signal strength across each ZIP Code is analyzed. A ``Red Light''
status is assigned to those ZIP Codes within a local station's DMA that
are predicted to receive a signal of at least Grade B intensity.
Households located within these ZIP Codes are presumed to be ``served''
by one or more local stations affiliated with that network and will not
be sold distant network service unless the presumption of ineligibility
is rebutted and overcome by an actual signal strength measurement test.
A ``Green Light'' status is assigned to those ZIP Codes within a local
station's DMA that are predicted to be unable to receive a signal of at
least Grade B intensity. Households located within these ZIP Codes are
presumed eligible to receive a distant network signal unless, again,
the presumption of eligibility is overcome by an actual test.
Decisionmark provided technical support for negotiations between the
representatives of the NAB and the two satellite providers.
Under the broadcast industry/Primestar-Netlink agreement, the
parties agreed that the relevant geographic area for each station is
its DMA, as noted above. Obviously, predicted Grade B signal
intensities are not aligned with ZIP Code boundaries. The ``Red Light''
or ``Green Light'' classification of a ZIP Code area is resolved on a
population percentage basis, i.e., if 50+% of the population in a given
ZIP Code is predicted to be able to receive a signal of at least Grade
B intensity, then the entire ZIP Code is given ``Red Light'' status.
Consequently, within certain areas, some consumers may be presumptively
classified as ``served'' when they cannot receive an actual signal of
Grade B intensity from their local affiliate(s). These consumers can
request waivers from their local network affiliate(s). Conversely, some
viewers are presumptively classified as eligible to receive distant
network service when, in fact, they receive a signal of Grade B
intensity from their local affiliate(s); in these cases, the
affiliate(s) can rebut the presumption with an actual measurement. The
``Red Light/Green Light'' agreement, as implemented through
Decisionmark's technology, provides both broadcast stations and
participating satellite providers a quick determination of presumptive
eligibility for each household requesting distant network service.
Although the Red Light/Green Light agreement provides a workable
compromise, it is imperfect. Its limitations are what drove
Decisionmark to develop other technological solutions, most notably
WaiverTV and getawaiver.com, both of which are discussed below.
ii. decisionmark technology
The Geneva Technology
In the course of the development of the software used in the
broadcast industry/Primestar-Netlink agreement, it became clear to me
that a ``household-based'' point-of-sale solution was needed. It was
then that I set Decisionmark on a course to create what we now refer to
as the ``Geneva'' technology, which is based on the Longley-Rice
model.1 Essentially, the Geneva technology combines
household-level geocoding, Decisionmark's proprietary television
transmitter database (Coronado), Federal Communications Commission
(``FCC'') terrain data and point-to-point Longley-Rice calculations to
produce extremely accurate predictions of signal strength.
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\1\ The name Geneva was chosen because it universally connotes
neutrality. Decisionmark has filed for a patent on the Geneva
technology.
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Using Geneva, the address of a particular household may be entered
and a list of all stations that are predicted to provide the household
with Grade B service or better can be instantly displayed. Geneva
yields ``address specific'' data while the ``ZIP Code'' methodology
yields data aggregated over the area of an entire given ZIP Code. There
are inaccuracies inherent with any aggregated grid systems that make
such systems unfair to consumers. Consumers living within an area
aggregated as ineligible may in fact be unable to receive a Grade B
signal. The Geneva system, therefore, is more precise and more accurate
for each household. The speed, accuracy, and ease of use of this system
are unmatched, and the technology can be easily integrated into
existing business systems for high volume usage.2 In
addition, although Geneva, as currently implemented, provides results
for predicted Grade B service, it is readily adaptable to any service
standards adopted by Congress, the FCC, or negotiated industry
agreements.
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\2\ See .
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The Coronado Data Warehouse
An important component of the Decisionmark technology is
Decisionmark's comprehensive data warehouse, Coronado. Coronado
contains broadcasting-related data on television viewers, satellite
consumers and broadcasters. The cornerstone of Coronado is
Decisionmark's proprietary television engineering database. This
database is widely viewed in the industry as a standard for signal area
data, and Decisionmark is committed to maintaining its accuracy.
Coronado began with the FCC's public domain information as its
baseline, but it has been updated extensively. In fact, Decisionmark
has invested close to one million dollars in the development of
Coronado.
Coronado includes affiliate-based information about which stations
have satellite stations and translators, how many they have, and the
call letters for each. The public domain FCC databases provide no
correlation between main stations, satellite stations, and translators.
Not only does Decisionmark maintain the link between the main stations
and their satellites and translators, but it also makes corrections to
any detailed information in the database, such as tower height,
effective radiated power (``ERP''), and latitude and longitude. This is
possible because Decisionmark is in continuing contact with broadcast
affiliates. Decisionmark's team of experts has spent more than 15,000
hours in maintaining contact with affiliates and updating the database.
The result is a highly accurate, widely relied upon signal area
database.
Decisionmark's Proprietary Individual Location Longley-Rice (ILLR)
Software
Decisionmark has implemented a proprietary version of the ILLR that
has been highly optimized for performance on readily available
platforms. It uses the ILLR method as outlined in the FCC's Report and
Order of February 2, 1999. The technology incorporates interfaces that
allow our software to be integrated into mainframe-based call center
software, client-server systems and browser-based systems. Because the
rules and regulations of signal strength prediction pursuant to the
SHVA have been fluid, we have designed the software tool to be both
flexible yet highly efficient. In fact, we are confident that if any
new methodology were mandated or agreed upon, we could have our clients
in compliance within days.
Antenna Selector Technology
Decisionmark has developed antenna selector technology to predict
the performance of an individual antenna at an individual location when
receiving broadcast television signals. This technology utilizes the
same ILLR signal strength prediction methodology described above. It
also accounts for factors such as the number of televisions fed by the
antenna, line loss, the signal gain associated with a given antenna,
the orientation of the antenna relative to the position of the
transmitting tower and so on. These factors are then used to predict,
with a high degree of accuracy, the quality of a television picture at
a specific household using a specific antenna. Decisionmark's antenna
selector technology can be incorporated into e-commerce sites to
provide antenna recommendations for purchase online either on a
standalone website or as part of a DBS provider's site.
iii. decisionmark solutions
Decisionmark's technology has made it possible for us to develop
solutions that go beyond simple enforcement of the Act to provide
genuine resolution for the problems of consumers who want to view
network programming. At the same time, these solutions help promote
competition in the multi-channel video programming distribution market.
Decisionmark's solutions are market-based, and above all, neutral.
Decisionmark's solutions deal with accurate point-of-sale eligibility
screening, appropriate selection of off-air antennas and efficient
processing of SHVA waivers. Perhaps most importantly, our solutions can
be combined to provide a complete system that will guarantee compliance
with the law but will also serve consumer's interests.
Eligibility Solutions
Decisionmark's Geneva technology has been implemented to provide
eligibility screening in a number of different ways. Our implementation
of ILLR is optimized for SHVA eligibility determinations at individual
households. To the best of our knowledge, no other company offers or
has developed an interactive method for SHVA compliance that uses
household-level geocoding and point-to-point Longley-Rice predictions
of signal strength and potential interference, both of which were
called for in the recent FCC Report and Order. Decisionmark has also
developed versions of the ILLR optimized for bulk processing of
subscriber lists and for signal area mapping and demographic
calculations.
For example, the satellite carrier Primetime24 has implemented the
Geneva subscriber-base analysis and point-of-authorization eligibility
screening for all but one of its distributors. The subscriber-base
analysis determines which current subscribers are predicted to be
eligible to receive a distant network package under the SHVA. The
analysis is superior to any other system now in use.
Primetime24's distributors now have the ability to enter a
potential subscriber's address and, within seconds, determine if that
address is likely to receive from a local affiliate a signal of at
least Grade B intensity. Some distributors have implemented the
technology into their call center software. The satellite provider can
then make a decision whether to conduct a site measurement. The Geneva
technology permits Primetime24 to comply, in a quick, cost-efficient
way, with the terms of the court injunction issued in CBS, Inc. v.
Primetime24 Joint Venture, No. 96-3650-CIV-NESBITT (S.D. Fla. July 10,
1998). That injunction prohibits Primetime24 from supplying CBS or Fox
distant network programming to any consumer within an area shown on
Longley-Rice propagation maps as receiving a signal of at least Grade B
intensity of a CBS or Fox primary network station, unless written
consent is obtained or an actual test is conducted at a consumer's home
showing the household is ``unserved'' within the meaning of the SHVA.
Another eligibility screening solution provided by Decisionmark is
our Internet-based product www.getnetworktv.com TM.
Getnetworktv.com is a subscription website for satellite retailers. It
is a point-of-sale tool to determine a customer's eligibility for a
distant network package. If a customer is deemed ineligible, he or she
can request the necessary waivers from the appropriate local affiliates
at the point of sale. In addition, if it seems unlikely that the
customer would receive waivers, the retailer can direct him or her to
one of Decisionmark's antenna selector technology solutions. To view
screen shots of www.getnetworktv.com, see our attached supplemental
materials.
Antenna Solutions Using Decisionmark's Antenna Selector Technology
www.iwantmyfreetv.com TM--Our antenna selector
technology is currently being implemented in two web-based products. In
partnership with the Winegard Company, a leading manufacturer of
television receiving antennas, Decisionmark is launching
iwantmyfreetv.com. This website recommends an antenna that is optimized
for the consumer's choice of over-the-air broadcast television stations
and allows him or her to purchase the antenna online. To the best of
our knowledge, no other company has deployed an equivalent consumer-
oriented system.
www.AntennaSelector.com TM--In addition, in February
1999, Decisionmark will introduce www.antennaselector.com, an online
educational antenna resource. This site will be available to both
consumers and retailers. The consumer portion will be informational and
list which stations' signals can be received at a particular consumer's
household location and display a list of local antenna retailers. The
retailers' portion of the site will assist them in making the
appropriate antenna recommendation at the point of sale. To view screen
shots of www.antennaselector.com, see the attached supplemental
materials. All of these tools are designed specifically to assist the
consumer in receiving broadcast network television service.
Waiver Solutions
WaiverTV TM--Last fall, Decisionmark incorporated the
Geneva technology into its waiver products, WaiverTV and getawaiver.com
TM. WaiverTV is a waiver-processing tool designed for
network broadcast affiliates. It is an Internet-based application, free
to all broadcasters, that streamlines review by network affiliates of
consumer requests for a waiver to receive satellite delivery of a
distant network station. WaiverTV was launched in October 1998, and
this tool is now being used by over 80% of the network affiliates.
Decisionmark's WaiverTV website is located at www.waivertv.com. For
screen shots of what WaiverTV looks like on the Web, see our attached
supplemental materials.
The court's injunction in the Miami case underscores the need for
WaiverTV. Network affiliates have needed and will continue to need
assistance in the coming months in dealing with subscribers whose
distant network satellite service must be terminated by February 28,
1999. Some of these subscribers may not be able to receive a signal of
Grade B intensity from a local affiliate. This technology enables local
affiliates to identify and locate each subscriber and will assist
affiliates in determining whether an actual signal measurement is
warranted. An important feature of WaiverTV is its ability to
electronically queue waiver requests submitted from individual
subscribers online, which simplifies the waiver request review process
and helps assure that viewer communications with a station do not go
unanswered.
Getawaiver.com for Consumers--Getawaiver.com is an Internet-based
service offered free to consumers. The service streamlines and
simplifies the waiver requesting process for consumers. In the past,
when subscribers were told by their satellite carriers that they needed
a waiver from one or more local network-affiliated stations,
subscribers frequently had to make numerous telephone calls to
determine which stations should be contacted. For example, some
households in Lake Geneva, Wisconsin, would have to request 15
waivers--three from different ABC affiliates, four from different CBS
affiliates, four from different Fox affiliates, and four from different
NBC affiliates. With getawaiver.com, a consumer needs only to access
the getawaiver.com website and enter his or her address. After an
address has been entered, getawaiver.com then determines from which
network affiliate(s) a waiver is required, the consumer enters
comments, and it automatically sends the requests to the appropriate
affiliate(s). We have included 100 random consumer comments in our
supplemental materials. For screen shots of what getawaiver.com looks
like on the Web, see our attached supplemental materials.
Where an affiliate does not participate in WaiverTV, getawaiver.com
provides that station's address and phone number so that the consumer
can contact the affiliate directly. Although not automated in such
circumstances, getawaiver.com is still a time saver for consumers. It
provides the consumer information instantly on which non-WaiverTV
participating stations need to be contacted and how to do so.
Getawaiver.com and WaiverTV work together and complement each
other. A consumer's getawaiver.com's waiver requests are automatically
fed into the electronic queue with the affiliates' customized WaiverTV
implementation. The entire process is, therefore, automated. In
addition to this double streamlining for broadcasters and consumers,
satellite operators also benefit, for now they have a place to which
they can direct customers who think they may qualify for a waiver.
Getnetworktv.com is also integrated into Decisionmark's waiver-
streamlining process. As mentioned above, getnetworktv.com is an
Internet-based tool for satellite retailers. The waiver requests that
are generated on behalf of consumers through getnetworktv.com are
queued in WaiverTV.
iv. conclusion
Decisionmark is a neutral provider of market-based solutions.
Because Decisionmark has been working with all interested parties for
the past two years, we are in a unique position. As a neutral
technology solution provider, we stand ready today to serve the
interests of both the satellite and broadcast industries. More
importantly, we can protect and serve the interests of consumers while
promoting competition in the multi-channel video programming
distribution market.
No other company in the industry can deliver the technology and
data as accurately and timely as Decisionmark. What I have discovered
is a crucial need for a conduit through which satellite providers,
broadcasters, and consumers could go in dealing with SHVA compliance
issues and the overwhelming consumer interest in network programming. I
believe that, above all, such a neutral conduit--utilizing one agreed-
upon or mandated methodology and one agreed-upon or mandated database--
is needed so the consumer doesn't suffer needlessly.
In addition to being in a position to provide assistance and
solutions for all sides of the SHVA issues, Decisionmark has
demonstrated the capacity to implement any ``predictive'' signal
strength standard that may be proposed by the FCC, Congress, or the
affected industries.
Mr. Tauzin. Thank you, Mr. Perry.
Now we are pleased to welcome Ms. Sophia--you helped me
with this before--``Sophia,'' right?
STATEMENT OF SOPHIA COLLIER
Ms. Collier. ``Sophia.''
Mr. Tauzin. Sophia Collier, President and CEO of Northpoint
Technology. Sophia.
Ms. Collier. Mr. Chairman, Mr. Markey, and other members of
the subcommittee, it is a pleasure to appear before you today.
My name is Sophia Collier, and I am the President and CEO of
Northpoint Technology. I am here today to tell you about an
exciting new technology that can provide a complete solution to
this vexing local-into-local problem and launch us as a
formidable new competitor to cable.
Northpoint Technology is a tested and proven broadband
digital system which reuses the very same spectrum used by DBS
satellites. We have a large capacity, and therefore, can
provide all local stations to all 211 television markets. We
will comply with full must-carry and retransmission consent in
the very same manner as the cable companies do. Our low-cost
service can be provided wholesale to direct broadcasters, as
well as directly to consumers, as a standalone service.
But in order to launch our service, we need the go-ahead
from the FCC. We already have 68 local affiliates in Broadwave
USA, whose applications are pending before the FCC. Together,
we will serve all television markets with our high-capacity
system. We can begin service in some markets in just 6 months,
and then have all 211 markets covered within 2 years. We,
therefore, will enter markets that have no near-term prospect
of cable competition.
Let me briefly describe how our technology works.
Northpoint brings satellite frequency sharing principles down
to Earth. Right now DBS satellites are spaced 9 degrees apart
from one another. This amount of separation allows them to
reuse the very same frequencies that one another use. This
spectrum can be reused again for terrestrial transmissions.
DBS satellites orbit around the equator, and therefore, all
DBS antennas in the United States are pointed to the south. We
reuse this very same spectrum by transmitting from the north;
hence, our name, Northpoint Technology.
Our system will be deployed in local markets as a series of
low-cost cascading cells. This little device here is actually
our transmit antenna. This weighs just three pounds. So you
compare this to a big, over-the-air television antenna. This
little antenna can cover 100 square miles of area. It can be
easily located on existing towers and buildings. It can be
tucked here and there in a very site-specific manner that will
cover those parts of the community that are flat, but also
those parts that are in a valley or on a hill or in a
mountainous region. In fact, our customers will have at least
three places to point to receive our service, maximizing the
reception strength.
We have operated successfully under two experimental
licenses issued by the FCC since 1977. We have made detailed
technical reports about the success of our work. This is our
latest report from our latest test.
In December we are operated our system in downtown Austin,
where there are several thousand DBS customers. We established
a hotline to Direct TV's national call center to see if there
were any disruptions from our operations. We ran our system day
and night. We ran it rain and shine. We ran it in every type of
weather condition, and there was not one call on that hotline
from harmful interference to a direct broadcaster.
Our system works, and I would like to tell you about our
plans. We seek to compete head-to-head with cable. We can
provide a high-quality digital service to customers at under
$20 a month, approximately half the price of basic cable. Our
reception equipment is also low cost because we use the same
consumer equipment as DBS providers, where it is on the
experience curve and available in consumer electronic stores.
We can solve the local signal problem in two ways. We can
offer our customers local signals and other programmings
directly through our affiliates or our affiliates can make our
local signals available to DBS providers on a wholesale basis.
In either case, Northpoint Technology provides a solution to
the local signal problem, combining local television signals
and satellite signals with the single click of a remote
control. Northpoint has an Internet option and will be able to
have a high-capacity broadband service.
The Commission is now seeking comments on our proposals and
has the information needed to move forward. We ask your support
in urging them to take a serious look and expeditious look at
our system. Thank you very much.
[The prepared statement of Sophia Collier follows:]
Prepared Statement of Sophia Collier, President and CEO, Northpoint
Technology, Inc.
Chairman Tauzin, Ranking Member Markey, and other members of the
Telecommunications Subcommittee: Thank you for providing me the
opportunity to testify.
While a lot of our discussion today will focus on regulatory
aspects of the Satellite Home Viewer Act and its impact on cable
competition, I am here to present a technology-based solution to both
the local signal problem and the need to provide real competition to
cable.
Northpoint Technology is an advanced, broadband, digital wireless
system that has the capacity to offer all local television signals,
analog and digital, with a full must carry obligation. The Northpoint
service would operate in the 12 GHz band, reusing spectrum used by DBS
operators. Our service can be provided on a wholesale basis to DBS
carriers, and it can be offered directly to customers as a stand-alone
service. In addition to carrying local stations, we will offer other
multi-channel video programming and Internet service.
We already have a network of 68 locally-based affiliates, operating
under the name BroadwaveUSA, with license applications, currently
pending before the FCC, for all 211 local television markets. In order
to deploy our service, the FCC must also act upon a rulemaking (ET
Docket No. 98-206). Once regulatory approval is achieved, our service
can be deployed in the first markets in as little as six months, with
nationwide coverage within two years.
Northpoint and our affiliates stand ready to solve the local to
local signal problem once and for all, with full must carry and
retransmission consent obligations. We are also eager to launch
ourselves as an effective new competitor to cable. Let me emphasize
that Northpoint and its affiliates are prepared to enter markets that
have no near term prospects of a real competitor to cable.
An Exciting New Technology
The strength of Northpoint's technology is that it is very low
cost. By reusing existing spectrum, we can make use of existing off-
the-shelf equipment that is already tested, proven and available at low
cost.
Let me tell you how it works:
Northpoint takes proven and efficient satellite frequency-sharing
principles and applies them to terrestrial earth-based broadcasting.
For many years satellite carriers have been able to share frequencies
with one another by spacing their satellites a sufficient distance
apart. This ``sharing geometry'' is well known and understood, and it
is the basis of all FCC satellite allocations. For example, DBS
satellites are designed to share spectrum with one another when they
are at least 9-degrees apart. Satellites in other bands are able to
share when they are as little as 2-degrees apart.The reason this works
is that satellites broadcast directionally from space to earth into
reception dishes that are designed to see only a small part of the sky.
Once these dishes are pointed at their chosen satellite, they cannot
see the other satellites that are transmitting on the exact same
frequencies.
Northpoint's technology extends this frequency-sharing principle to
terrestrial transmissions. By staying at least 9-degrees away from the
beam of any DBS satellite, we will share the 12.2-12.7 GHz band with
the DBS satellites, just as they share with one another.
All DBS satellites orbit around the equator, and thus all North
American DBS dishes point to the south. To receive our service, our
customers will point their 12 GHz dish antennas to the north, hence our
name, ``Northpoint.''
Each of our local systems operate with a single headend where we
will pick up and encode all of the local over-the-air signals, as well
as other multi-channel video programming. We will then retransmit this
programming to our customers on the 12 GHz band through a series of
low-cost cascading cells, each with a transmitter serving just over a
100 square mile area. These cells will be strategically located in a
terrain specific manner to include service to those parts of a
community that are in a valley or over a hill. In the Northpoint
system, most customers will have at least 3 directions to point their
dish to pick up our service. These multiple line-of-sight options will
enable better delivery of local broadcast stations signals.
Low Cost to Deploy/Low Cost to Consumers
The Northpoint system can be deployed at low cost, made possible in
part by the very small size of the Northpoint transmit antenna.
Northpoint transmit antennas are only 10 inches tall, weigh less than
3-lbs and can be easily located on buildings and existing towers.
This low cost deployment will enable Northpoint services to be
available to consumers at low costs, and bring about market pressure to
reduce the prices charged by our competitors. We anticipate that our
basic package might be priced at under $20.00 per month, approximately
half the price of basic cable. We will also offer customers flexible
programming options.
Because we will operate in the 12 GHz band, Northpoint service can
use existing DBS customer equipment. Over 10 million antennas and set-
top boxes are in the marketplace, having already reached an economy of
scale that has fine-tuned the products and lowered the cost for
purchase by consumers.
The Northpoint System Works
We have tested Northpoint under experimental licenses since 1997
and demonstrated that can co-exist without harmful interference to
existing DBS services, in both a rural and an urban area. We have filed
detailed reports with the FCC on these tests that were conducted with
the certification of outside engineers.
For the month of December 1998 we operated our system in a single
100-square mile cell centered in downtown Austin, Texas. DirecTV
advised us that they had several thousand subscribers in the area, so
we established a hot line to DirecTV's national call center and our
transmission facility to address any interference issues. The customers
could call DirecTV if they experienced a disruption in service, and we
would turn off our transmitter to see if it solved the customer's
outage. During the entire month we did not receive a single call on
this hotline that was attributable to interference caused by our
system. We continue operating under our experimental license in Austin
today and still have not had any reports of interference.
This testing proved not only that we don't interfere with DBS, but
it also demonstrated that our system is viable. We operated the system
day and night, under a variety of weather conditions, including heavy
rain, freezing rain and dense fog, with excellent results. Sites at
almost 14 miles received a usable signal, and our signals also
penetrated through foliage.
Local-to-Local Solution
A key focus of the Satellite Home Viewer Act policy discussion has
been to ensure that satellite customers have access to local signals.
Northpoint's locally-based, terrestrially-delivered transmission system
can be expeditiously rolled out at reasonable cost, in all markets.
Northpoint's capacity is sufficient to carry all stations, and for that
reason we will be able to comply with a full must-carry requirement. In
fact, transmission of all local stations, analog and digital, is a key
element of Northpoint's business plan. The Northpoint-type technology
will help preserve and expand the audience for local signals, and the
NAB has recently endorsed this new approach.
DBS customers could receive local signals via Northpoint by direct
subscription to the local BroadwaveUSA affiliate. In this case, the
subscriber would be able to switch from terrestrial Northpoint
programming to satellite DBS programming with a single click of the
remote control.
The BroadwaveUSA affiliate network has also offered to make local
signals available on a wholesale basis to DBS providers. Under this
option, DBS providers would be able to have all local signals, in full
compliance with all must carry requirements, available encoded in their
own formats and integrated in their own program guides. To effect this
solution, the DBS consumer will need a Northpoint antenna and a simple
network interface device attached to the back of their existing DBS set
top box. These upgrades are anticipated to cost $50-$100. In either
case, Northpoint Technology provides a solution to the local signal
problem.
Promotes Transition to HDTV
An aspect of the local signal issue is the capacity of satellite
services to carry local-into-local HDTV programming, which will be even
more bandwidth intensive than carriage of the 1,500 plus local over-
the-air analog stations. Northpoint systems will be able to carry HDTV
programming without compression because the locally-based systems will
have adequate bandwidth to accomplish this job.
Interestingly, Northpoint may actually be one of the first to
provide HDTV transmissions into many markets, thus helping to
facilitate a rapid transition from analog to digital technology.
A Vibrant Competitor to Cable
In addition to addressing the local-to-local problem by providing
local signals to satellite carriers, our intention is also to be a
stand-alone competitor to cable. We have enough capacity to carry at
least 96 channels, and we expect to offer programming packages that
offer our customers dozens of cable-like channels in addition to their
local stations.
This competition will bring reduced prices prices to the consumer.
Simply by rolling back last year's average 7.8% cable price hike, $1.6
billion could have stayed in the pockets of consumers. Moreover,
because our programming will be digital, cable systems will have an
incentive, not only to rein in prices, but also to upgrade their
systems digitally.
We look forward to competing head to head with the cable industry
on price, quality and service, the traditional dimensions of
excellence. I think now, with the end of rate regulation before us, it
is essential that new entrants such as Northpoint and its BroadwaveUSA
affiliate network have the chance to offer services to consumers.
Puts Rural Customers on Par with Urban/Suburban Counterparts
While Northpoint is a good solution in an urban and suburban area,
it has particular relevance in rural areas. Because it is a simple and
inexpensive technology, it is economically feasible for it to be
deployed in rural areas, where laying cable or fiber to sparse
populations can be cost-prohibitive. Northpoint may be the first chance
for rural consumers to gain access to low cost digital services.
Because a Northpoint system is wireless and uses low cost repeaters to
propagate its signal, its services can reach areas where cable has
never served.
Access to the Internet
The Northpoint system can offer consumers more than simply multi-
channel video programming. It is also ideally suited for the delivery
of high-speed Internet services. The technology is easily capable of
burst transmission rates of 1.5 megabits per second or more. And
because our systems are locally-based, communities will be able to use
our Internet gateway for locally-geared uses, such as interactive
distance learning, or the ability of parents to monitor children in day
care. The possibilities of these broadband services are vast and very
promising.
At the present time, Internet services offered through Northpoint
Technology would have a telephone return channel, however, in the
future Northpoint could also install a simple transceiver (that is, a
combination transmitter/receiver) in the customer's home and provide an
all-wireless Internet service, as well as potentially telephone service
via a wireless local loop solution.
Opportunities for Small Business Competitors
Another aspect of the Northpoint system, related to its low cost,
is its potential to bring new entrants into the telecommunications
field. Northpoint's 68 BroadwaveUSA affiliates are led by capable local
business and community leaders. The involvement of such people will
bring greater local participation and diversity to the media
marketplace.
The FCC Role
Let me briefly review our status before the FCC. In 1994 we first
presented the Northpoint concept to the FCC. We received an
experimental license in 1997 to operate in Kingsville, Texas, in a
rural setting, and last year we received a second experimental license
in Austin. On January 8, 1999, Northpoint and our 68 affiliates filed
license applications to serve all U.S. television markets.
In order to operate in the 12.2-12.7 GHz band, we need the FCC to
make a few rule changes. Accordingly, a year ago we ago we petitioned
the FCC to operate a point-to-multi-point video and data terrestrial
service in the 12 GHz band. Our petition is currently the subject of a
Notice of Proposed Rulemaking (ET Docket No. 98-206), with comments due
March 2nd and reply comments due March 29th.
As part of the rulemaking, we seek co-primary status with any other
new entrants into this band. While we are willing to be secondary to
existing DBS services, we must be co-primary with the low earth
orbiting satellites now under consideration, and we are fully confident
this can be done with properly designed low earth orbiting satellites.
In fact, two of the LEO applicants are proposing systems which appear
compatible with terrestrial sharing. Moreover, co-primary status would
be consistent with applicable ITU regulations.
Conclusion
Given the need to address the local-to-local and cable competition
issues, we hope that Congress, specifically this committee, will
encourage the FCC to act expeditiously on the rulemaking and
applications.
Mr. Chairman, thank you, again, for providing us the opportunity to
speak before your subcommittee today. I welcome any questions you might
have.
Mr. Tauzin. Thank you, Ms. Collier.
We are now pleased to welcome Mr. Al DeVaney, President of
Newsweb Broadcasting of Chicago, Illinois. Mr. DeVaney.
STATEMENT OF AL DEVANEY
Mr. DeVaney. Thank you, Mr. Tauzin and committee members,
and thank you for the opportunity to testify this afternoon.
The company that I represent owns two television stations,
WPWR in the Chicago market and KTBD. Both of these stations are
UHF stations and both are affiliates of the UPN network.
I also serve on the board of directors for the Association
of Local Television Stations, otherwise known as ALTV. I appear
today on their behalf.
ALTV represents the interests of hundreds of local
television stations in this country which are not affiliates of
ABC, CBS, or NBC. Most of our member stations are either Fox
affiliates, UPN, WB, or PAXTV.
We have two primary concerns today. First, we wish to
search for a resolution to the must-carry issue with respect to
satellite carries. And, second, we wish to urge you to
establish rules preserving the program exclusivity rights of
local television stations.
To that end, I want to emphasize the essence of local
television, and that is that every minute of every programming
on our stations is selected, whether it is public affairs,
entertainment, news, or sports, selected because we believe it
appeals to our local community. This is not simply about
network programming.
For example, we know that some syndicated programming will
work in Denver, but not Chicago, and vice versa. Therefore,
even nationally produced programs are specifically selected by
our stations for their local market appeal. The point is we are
still a hometown television station and a big part of our
community.
UPN currently programs 15 hours a week of network time. We
program the remaining 153 hours. Our news web stations are, if
I may, excellent examples of local television and why it is
important to ensure the continued survival and growth of all
local television stations, particularly those affiliated with
emerging networks.
WPWR in Chicago is the most recent general market station
to sign on in that television market. We were losing money as
recently as 1987. By 1992, our performance had improved, and we
chose to give back to our community by forming the WPWR TV
Channel 50 Foundation. Now, a short 7 years after the formation
of that foundation, it is one of the 25 largest foundations in
the State of Illinois.
In Denver we purchased KTVD in a bankruptcy auction in
1994. Today, 5 years later, it is a viable property with a
substantial community-giving program that funds many Denver
area nonprofit organizations. These giving programs are, of
course, in addition to an ever-growing schedule of local public
affairs programming and public affairs announcement.
The point is this: Stations like those that ALTV represents
are extraordinarily important to our U.S. broadcasting system,
and as we grow, our communities benefit in many ways, both on
the air and off the air. Remember, the Fox Network began in
1987 amid predictions of failure by many experts. By creating a
distribution system using mostly ALTV member stations at the
time, that network has matured to rival the original three and
has added another choice for U.S. viewers and strength to those
local television stations.
In the past 4 years, UPN and the WB have emerged, and have
begun to gain a toehold in their markets, with a distribution
system made up largely of our member stations. Now with the
local station lineup, PAXTV has added yet another broadcast
voice to the landscape.
But the current EchoStar marketing plan, and probably the
plans of the future for other DBS providers, will not include
these emerging network affiliates unless you properly step in.
Even a must-carry solution 3 years down the road is
problematic. How much revenue loss should these stations
suffer? How much of their ability to provide the best
practicable service to the public should be diminished? How
much loss should broadcasters absorb to enrich satellite
carriers in the hopes of stimulating competition to cable?
Capacity is not just a technical issue. It involves
business decisions. Should a carrier which has known for 3
years that it would have a must-carry obligation get a waiver
at the end of those 3 years if it has done nothing to increase
its capacity in order to comply with must-carry?
Before you answer all of those questions, though, please
consider the following: DBS providers have absolutely no
obligation to provide programming which addresses the concerns
of local communities. We do. DBS providers charge subscription
fees for their program service. We do not. The vast majority of
excluded stations are significantly more popular than the vast
majority of cable networks which they carry on their satellite
services.
Why are the affiliates of entrenched networks already doing
quite well on their own essentially granted preferential
treatment, while the stations which have brought an
unprecedented level of competition and diversity to
broadcasting once again are saddled with a competitive
disadvantage? Why are viewers who rely exclusively on local
broadcasting being asked to bear a part of this burden? You,
the Congress, made a judgment to assure the viability and
vitality of local television in the face of noncarriage by
cable systems. What sense does it now make to undermine that
decision by letting satellite carriers impart the very same
injury you sought to prevent in the cable industry through the
must-carry rules?
But we are faced with that same situation today. Some
stations will be carried; others will be excluded, including
the likes of Una Vision, Telemundo, and local PBS stations,
along with the aforementioned local affiliates of emerging
networks.
Ironically, these are the stations least able to withstand
the effects of not carriage. No one would deny that cutting off
a portion of our market will cause us financial harm. In
broadcasting, audience is revenue; it is our only source of
revenue, and it is that simple.
Consequently, we are now placed at a competitive
disadvantage. As independents and affiliates of newer broadcast
networks, ALTV's members have done more to enhance competition
than anyone would have imagined 10 or 15 years ago. We,
frankly, find it inconceivable that Congress would contemplate
dulling that competition in today's highly competitive video
marketplace.
Thank you very much.
[The prepared statement of Al DeVaney follows:]
Prepared Statement of Al DeVaney, President, Newsweb Broadcasting on
Behalf of the Association of Local Television Stations, Inc.
We are very grateful for the opportunity to testify this afternoon.
Indeed, Mr. Chairman, at ALTV's recent convention in New Orleans, you
initiated a dialogue with us and our fellow broadcasters on satellite
use of broadcast signals and other issues. This is our first
opportunity to respond formally, and we look forward to continuing our
discussions with you and the subcommittee.
I am president of Newsweb Broadcasting (``Newsweb''). Newsweb is
licensee of two local television stations: WPWR-TV in the Chicago
market and KTVD-TV in Denver. Both our stations are affiliates of the
UPN network. Both operate on UHF frequencies.1
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\1\ KTVD-TV operates on channel 20; WPWR-TV operates on channel 50.
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I also serve on the Board of Directors of The Association of Local
Television Stations, Inc. (``ALTV''), and appear on behalf of ALTV
today. ALTV represents the interests of the hundreds of local
television stations in this country which are not affiliates of the big
three networks--ABC, CBS, and NBC.2 Most ALTV member
stations are affiliates of the Fox, UPN, WB, or PaxTV networks. Some
remain traditional ``independent'' stations, which continue to offer
innovative programming specifically tailored to their
communities.3 All of us define ourselves first as local
television stations. All of our programming decisions reflect our
efforts to serve our particular local communities. Every minute of
programming on our stations, be it public affairs, entertainment, or
news or sports, appears on our schedules because we consider it most
responsive to the needs, interests, tastes, and concerns of our local
communities. Our ability to reach and engage our local audiences is the
key to our success.4
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\2\ ALTV's membership includes stations from every region of the
country. Their ownership spans the continuum from local single station
owners to large media conglomerates. Their interests range from those
of nationally distributed ``superstations'' to those of small local
``mom and pop'' stations. More than any of the popular cable networks,
these stations have stimulated competition and enhanced program
diversity for all viewers in local markets throughout our country.
\3\ Such program formats include foreign language programming,
religious programming, and other program genres of interest to
particular segments of the local community.
\4\ At our stations we are especially proud of our local
programming and community involvement. Examples of our programming and
outreach efforts are described in an attachment to my statement.
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The point is we are still a home town station. We are their local
source. Our studio is up the street. Our antenna is down the road. We
share the same concerns about government, about schools, about local
teams, about the weather. As much as every local station serves its
community, it is a part of that community, as well.
Local programming and outreach are very much a part of the Newsweb
stations. We are particularly proud of the following contributions to
our communities:
The WPWR Chicago 50 Foundation, which was formed in 1992 and
is now one of the top 25 foundations in Illinois. It funds many
non-profit community programs, which include children's
education, the arts, and arts education.
A local children's education and information show called UP'N
Running, which plays at 8 a.m. on Sundays and has grown to a
nine share of audience in the first two weeks of February.
A show called Concerning Chicago with 45 original productions
per year.
A Chicago public affairs show called Talking with Aaron
Freeman, with 50 original productions a year.
Dimensions Northwest Indiana with 52 original productions a
year.
Four prime time specials per year entitled Power to Make a
Difference.
In Denver, Newsweb purchased KTVD in a bankruptcy auction in 1994 and
now, five years later, the station is a viable property with a
substantial community giving program that funds many Denver area non-
profit organizations. In Denver we also broadcast 35 original
productions a year of Colorado Profiles, a public affairs show, and 32
original productions of Focus Colorado, another public affairs show.
Indeed, this is just what Congress intended over 50 years ago when
it enacted the Communications Act of 1934. It sought to engender a
system of local broadcasting, where as many communities as possible had
their own station or stations. Consequently, the Federal Communications
Commission (``FCC'') has allotted television channels in such a way
that provides larger communities with more stations, but also assures
that many smaller communities have their own station or stations, as
well.5 Thus, for example, while Denver and Chicago have
multiple stations, many smaller communities still have at least one or
two channels assigned to them.
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\5\ Sixth Report and Order, 41 FCC 148 (1952). The Commission
essentially reaffirmed this system by allocating digital channels in
precisely the same manner that the current analog or NTSC channels were
allocated. Sixth Report and Order, 12 FCC Rcd 14588 (1997).
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Over 30 years ago, when the FCC allotted channels to hundreds of
communities across the country, it had a dream and hope that each and
every channel someday would host a vibrant local television station.
Today, we can safely say that that dream has come true. Only a handful
of channels remain vacant, primarily in sparsely-populated
areas.6 Hand-in-hand with the increase in the number of
local television stations has been concomitant growth in the number of
broadcast networks. Last year saw the emergence of PaxTV, the seventh
national broadcast television network. Meanwhile UPN and WB have
emerged and gained a toehold in the market, and Fox has become
established as a fourth major network. Each of these new networks has
developed despite heavily UHF affiliate bases.7
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\6\ However, with the adoption of a new table of digital or DTV
channel allotments, many of these channels no longer are available for
analog stations.
\7\ UHF stations continue to suffer from inferior coverage, due to
the propagation characteristics of UHF television signals. Whereas
cable television carriage has offset this disadvantage to a certain
extent, UHF stations continue to operate at a disadvantage vis-a-vis
their VHF competitors.
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As the decade of the nineties began, few would have predicted the
existence of seven broadcast television networks in 1999. Many stations
were running headlong into an impenetrable barrier to survival and
success--the refusal of many cable systems to carry their signals.
Although the FCC as early as 1966 had adopted rules requiring cable
systems to carry all local television stations' signals, cable
interests had persuaded the courts that such rules were an unnecessary
infringement of cable operators' editorial discretion and, therefore,
violated the first amendment. Most stations were carried by most cable
systems. Some stations might be suffering some injury, but most
stations were surviving if not thriving. No blood. No foul.8
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\8\ In the gap between 1986 and 1992, when no must carry rules were
in effect, many television stations, in fact, lived on the margin,
flirting daily with bankruptcy and providing only the most limited
service to their communities. Many stations were rescued from the brink
of financial ruin in 1992, when the current cable must carry rules were
enacted. See Turner Broadcasting System, Inc., v. FCC, 1997 U.S. LEXIS
2078, 42 et seq. (1997) [hereinafter cited as Turner II].
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Congress found this reasoning repugnant! It had not directed the
FCC to allocate television channels in an equitable fashion just to
watch many channels lie fallow or many stations limp along, cut off
from the audiences they were licensed to serve. It insisted that all
channels allocated for television stations present the opportunity for
success. It insisted that every station have the opportunity to serve
its local community. It insisted that all stations be carried by cable
systems in their local communities.9 This time the Court
understood. It understood that Congress long ago had contemplated a
nationwide system of television stations, licensed to and serving local
communities.10 It understood the value of such a locally-
oriented broadcast television system, particularly to viewers who
depend exclusively on broadcast television service.11 It
also understood that a station deprived of access to its audience would
suffer, its service would deteriorate, its viability would be in
jeopardy.12 It, therefore, upheld the cable television must
carry rules which Congress had enacted in the 1992 Cable Act.
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\9\ 47 U.S.C. Sec. 534.
\10\ Turner II, 1997 U.S. LEXIS 2078, 24 (1997) (``We have noted
that `it has long been a basic tenet of national communications policy
that `the widest possible dissemination of information from diverse and
antagonistic sources is essential to the welfare of the public.' ''
Turner, 512 U.S., at 663-664 (quoting United States v. Midwest Video
Corp., 406 U.S. 649, 668, n. 27 (1972) (plurality opinion) (quoting
Associated Press v. United States, 326 U.S. 1, 20 (1945)); see also FCC
v. WNCN Listeners Guild, 450 U.S. 582, 594 (1981). ``Increasing the
number of outlets for community self-expression'' represents a ``long-
established regulatory goal in the field of television broadcasting.''
United States v. Midwest Video Corp., supra, at 667-668 (plurality
opinion).'').
\11\ Id., 1997 U.S. LEXIS 2078 at 19-20. (``We have been most
explicit in holding that ``protecting noncable households from loss of
regular television broadcasting service due to competition from cable
systems' is an important federal interest.'' Id., at 663 (quoting
Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 714 (1984). Forty
percent of American households continue to rely on over-the-air signals
for television programming. Despite the growing importance of cable
television and alternative technologies, ``broadcasting is demonstrably
a principal source of information and entertainment for a great part of
the Nation's population.'' Turner, supra, at 663 (quoting United States
v. Southwestern Cable Co., 392 U.S. 157, 177 (1968)'').
\12\ Id., 1997 U.S. LEXIS 2078 at 50-52.(``The harm Congress feared
was that stations dropped or denied carriage would be at a ``serious
risk of financial difficulty,'' 512 U.S., at 667, and would
``deteriorate to a substantial degree or fail altogether.'' Id., at
666. Congress had before it substantial evidence to support its
conclusion. Congress was advised the viability of a broadcast station
depends to a material extent on its ability to secure cable carriage.
JSCR PP597-617, 667-670, 673 (App. 1544-1553, 1580-1581, 1582-1583).
One broadcast industry executive explained it this way: ``Simply put, a
television station's audience size directly translates into revenue--
large audiences attract larger revenues, through the sale of
advertising time. If a station is not carried on cable, and thereby
loses a substantial portion of its audience, it will lose revenue. With
less revenue,the station can not serve its community as well. The
station will have less money to invest in equipment and programming.
The attractiveness of its programming will lessen, as will its
audience. Revenues will continue to decline, and the cycle will
repeat.'' Hearing on Competitive Issues, at 526-527 (statement of Gary
Chapman) (App. 1600). See also JSCR PP589-591 (App. 1542-1543); id.,
P625-633, 636, 638-640 (App. 1555-1563) (repositioning). Empirical
research in the record before Congress confirmed the ``direct
correlation [between] size in audience and station [advertising]
revenues,'' id., P591 (App. 1543)), and that viewership was in turn
heavily dependent on cable carriage. See id., PP589-596 (App. 1542-
1544).'').
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The history of the television industry in the wake of the 1992
Cable Act and the Supreme Court's decision upholding the must carry
rules stands as testament to the wisdom of those rules. With renewed
vigor, many stumbling stations found new lives as affiliates of the
emerging networks.13 The viewing public in community after
community enjoys better programming from more stations, stronger
stations, and additional broadcast networks. Never would this have been
possible if cable systems had been permitted to slough off carriage of
weaker stations.
---------------------------------------------------------------------------
\13\ Notably, many stations were able to abandon home shopping
formats which helped them remain marginally viable despite lack of
cable carriage in favor of more conventional formats. The home shopping
format on broadcast stations largely was a product of the lack of must
carry rules prior to the 1992 Cable Act. Many new and marginal stations
which were refused carriage by local cable systems turned to home
shopping as a means of survival. Since the new must carry rules for
cable became effective, many of these stations have gained sufficient
economic strength to discontinue their home shopping formats. Of these,
many have become affiliates of the emerging UPN and WB networks. In
short, they have gained a foothold and begun to provide an increased
diversity of informative and entertaining programming to their
communities.
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Now Congress appears to us poised to take a step backwards,
although it will be under the guise of a giant leap forward. Some
satellite companies are urging you to permit them to retransmit the
signals of local television stations to subscribers in the stations'
home markets. This so-called ``local-into-local'' service would allow
satellite companies to provide a complement of local signals just like
cable operators do. They say, and conventional wisdom has agreed, that
the ability to provide local signals will make them a true competitor
to cable television. Fostering such competition to cable television is
seen as a good thing. Therefore, permitting satellite carriers to
provide local stations' signals to their subscribers will be a positive
step, or so they say.14
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\14\ The availability of a few local signals in a very limited
number of markets may fall well short of expectations as a means of
attracting new customers to DBS (and away from cable). Substantial up
front costs, which include not only a dish and receiver (or more if the
consumer wishes to connect all sets in a multi-set household), but also
installation costs and often advance payment of program service fees,
are a considerable price to pay for an incomplete line-up of local
signals. How many cable subscribers would trade even a high monthly
cable bill for a lesser service (in terms of local signals) with
substantial upfront costs?
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As true as this may be, it must not obscure the dangerous setback
it portends. Whatever the benefits of local-into-local satellite
carriage may be, the ability to carry local signals under a compulsory
license unaccompanied by rules prohibiting discrimination among local
stations also would impose costs. In our view, these costs are
unacceptable--and avoidable. Thus, ALTV has favored amendment of the
compulsory license to permit local-into-local signal carriage, but only
if satellite carriers also are required to carry all local signals in
any market where they elect to provide local-into-local
service.15 Such a provision assures that local market
competition will not be skewed in favor of some stations and to the
detriment of others.
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\15\ ALTV does not propose that satellite carriers be forced to
carry local signals in every market (as is required of cable systems).
However, if a satellite carrier retransmits the signal of one local
television station in a market to subscribers in that market, then it
should be required to carry all local stations in that market or at
least provides a satellite subscriber with the same local signals a
comparably situated cable subscriber would have available from its
cable system. This would maintain parity between competing media by
assuring that the satellite carrier were subject to no more rigorous
obligations than a directly competitive cable system.
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This concern is no less genuine than it was in the case of cable
television. We know that many stations stand to be excluded from
EchoStar's complement of local signals in their home markets. As was
the case with cable, satellite carriers like EchoStar are poised to
provide a local-into-local service which includes only the big network
affiliates in the markets it serves. Whereas EchoStar boldly advertises
carriage of the ABC, CBS, NBC, and Fox affiliates in markets where it
is providing local signals, carriage of the local UPN, WB, or PaxTV
affiliates and any independents is doubtful. Indeed, in testimony
before the Senate Antitrust and Business Rights Subcommittee last
month, EchoStar CEO Charles Ergen testified that, ``[W]e offer the four
network stations, and in some cities a couple of independents as
well.'' 16 A visit to EchoStar's Dish Network website
confirms that ``the four network stations'' are the only commercial
stations carried in their local-into-local markets.17 As for
the local UPN, WB, and PaxTV affiliates, little or no carriage is
contemplated. Therefore, we are faced with the same situation which
confronted Congress in 1992 with respect to cable carriage. Some
stations will be carried; others will be excluded, including the likes
of Univision, Telemundo, and local PBS stations.
---------------------------------------------------------------------------
\16\ Testimony of Charlie Ergen, before the Antitrust and Business
Rights Subcommittee of the Senate Committee on the Judiciary (January
27, 1999) at 6. [Hereinafter cited as ``Ergen Testimony''].
\17\ See, e.g., www.dishnetwork.com/programming/local/dc.htm.
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More to the point, the excluded stations will be the same stations
which owe their vitality, if not their very viability to the cable must
carry rules. Ironically, these are the stations least able to withstand
the effects of noncarriage. No one would deny that a station cut off
from a portion of its audience will suffer financial harm. In
broadcasting audience is revenue, our only source of
revenue.18 It is that simple. Consequently, literally having
been rescued by the cable must carry rules and having struggled to
establish a beachhead in their assault on the three entrenched
network's dominance in their markets, these independents and emerging
network affiliates again find the sand eroding beneath them as they are
placed by EchoStar at a distinct competitive disadvantage in their
local markets.
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\18\ Turner II, 1997 U.S. LEXIS 2078 at 50-52.
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Some might respond cavalierly that broadcasters are making enough
money anyway. Some are. Others are not. As illustrated in Table One,
below, at least one quarter of the nation's stations operate at or
below the fringe of profitability. Thus, not all Fox affiliates in the
lower 25th percentile operated at a profit in 1997; none of the
affiliates of UPN and WB and none of the independents in the lower 25th
percent operated profitably. These, of course, are the stations for
which must carry remains essential.
Others might respond that whereas cable systems have enormous
market power, serving over 60 per cent of television households,
satellite carriers serve less than 10 per cent of the nation's
television households. Therefore, if a local station is excluded from
carriage on a DBS service, the impact would be negligible. Wait, they
say, until we are really a factor, like cable.
Table One
Lower 25%ile--1997--All Stations
------------------------------------------------------------------------
Affiliation Net Revenue Pre-Tax Profits
------------------------------------------------------------------------
ABC.................................... $5,782,003.00 $80,911.00
CBS.................................... $5,850,992.00 $42,180.00
Fox.................................... $4,306,143.00 $27,907.00
NBC.................................... $5,870,325.00 $393,136.00
UPN.................................... $2,543,646.00 ($424,570.00)
WB..................................... $3,085,436.00 ($1,331,907.00)
Independent............................ $2,451,508.00 ($228,336.00)
------------------------------------------------------------------------
Source: 1998 NAB/BCFM Television Financial Report
That is easy to say when it is someone else's money. That is even
easier to say when that someone else is something of a competitor.
Injury is injury, and we will feel it, whether it be a trickle of blood
from a minor scratch to a gushing artery from a slash to the bone. Even
where revenue reductions are less than fatal, they still affect a
station's ability to provide the best practicable service to the
public.19 At best, a local station which a satellite carrier
refuses to carry would be placed at a demonstrable disadvantage vis-a-
vis competing broadcast television stations which are
carried.20
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\19\ See Memorandum Opinion and Order, 8 FCC Rcd 8270, 8294, n.64
(1993), affirmed sub nom. Capital Cities/ABC, Inc., v. FCC, No. 93-3458
et al. (7th. Cir.,decided July 12, 1994) [citations omitted](``[W]e
believe that . . . enhancing the financial well-being of independent
stations . . . inevitably helps to support local programming efforts .
. . [S]uch efforts further enhance program diversity.'')
\20\ See also Turner II, 1997 U.S. LEXIS 2078, *51-*55.
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Furthermore, is anyone in the DBS business to stagnate? The whole
point of this effort to gain use of local signals is to enhance the
competitive appeal of DBS service. If, indeed, it does, we must assume
that the number of DBS subscribers will increase. Is this not the
vision of Congress, the FCC, and, certainly, every DBS provider? They
hope to attract not only noncable households in remote areas, but also
cable subscribers in core market areas. Indeed, they would hope to
supplant cable as the home's multichannel video provider. One easily
may anticipate the day when nearly all television households are served
by a multichannel video provider, most likely cable or DBS. Together,
they will serve the vast majority of television households, and each
will have a sufficient market share, such that if either of them failed
to carry some local stations, the stations' viability would be
threatened.21
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\21\ At the very least passed over stations would be placed at a
meaningful competitive disadvantage not only against their local
broadcast competitors, but also against the competing multichannel
video providers.
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Let me put it another way. How much revenue loss should my stations
suffer, how much of their ability to provide the best practicable
service to the public should be diminished, how much loss should
broadcasters absorb to enrich satellite carriers in the hope of
stimulating competition to cable?
Before you answer, consider the following:
DBS providers have no obligation to provide programming which
addresses the issues of concern in Chicago or Denver or any
local community. We do.22
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\22\ Competitive injury to broadcast stations raises serious public
interest issues absent in the case of exhibition of nonbroadcast
programming by multichannel video providers. Unlike other video
providers, local television stations are licensed by the federal
government to operate in the public interest. They must provide
programming dealing with issues of local concern in their communities.
Their political programming is subject to strict requirements to assure
equitable treatment of opposing candidates. Programming responsive to
the educational and informational needs of children must be broadcast
in specific amounts during specified portions of the day. Indecent
material is confined to late night hours.
---------------------------------------------------------------------------
DBS providers charge subscription fees for their program
service. We don't.
The vast majority of excluded stations are more popular than
the vast majority of cable networks carried by satellite
carriers.23
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\23\ As the Court repeatedly and consistently has observed,
``[B]roadcasting is demonstrably a principal source of information and
entertainment for a great part of the nation's population.'' Turner II,
1997 U.S. LEXIS 2078, 19, 23, 46. (``Even aside from that, the evidence
overlooks that the broadcasters added by must-carry had ratings greater
than or equal to the cable programs they replaced. Second Meek
Declaration P23 (App. 1863) (ratings of broadcasters added by must-
carry ``are generally higher than that achieved . . . by their
equivalent cable counterparts''); Meek Declaration P21, at 11-12
(Record, DAE, Vol. II.A., Exh. 2); see also Hearings on Cable
Television Regulation, at 880 (statement of James Hedlund) (``in
virtually every instance, the local [broadcast] stations shifted are
more popular . . . than the cable program services that replace
them''); JSCR PP 497-510 (App. 1505-1509) (stations dropped before
must-carry generally more popular than cable services that replaced
them).'')
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Satellite carriers, like cable systems, will enjoy a
compulsory license which insulates them from a highly
competitive programming marketplace with respect to their
carriage of local television station signals.24
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\24\ We do not begrudge them the compulsory license, but we do
oppose that compulsory license's becoming a vehicle for upsetting the
balance of competition in local television markets. Historically--and
rightly--the cable and satellite compulsory licenses have carried with
them the complementary obligation to use broadcast signals in a manner
consistent with preserving the many benefits of free broadcast
television service. Notably, Congress determined to adopt a compulsory
license for cable only in conjunction with FCC rules which defined the
scope and prerequisites of the license. Cable Television Report and
Order, 36 FCC 2d 143 (1972). Thus, the adoption of FCC rules in 1972
preceded the establishment of the compulsory license in the 1976
Copyright Act. See Letter from The Honorable John L. McClellan,
Chairman, Subcommittee on Patents, Trade-Marks, and Copyrights, United
States Senate, to the Honorable Dean Burch, Chairman, Federal
Communications Commission (January 31, 1972), reprinted at Appendix E,
Cable Television Report and Order, supra, 36 FCC 2d at 287 (``[I]t is
the intention of the subcommittee to immediately resume active
consideration of the copyright legislation upon the implementation of
the Commission's new cable rules.''). Had the compulsory license
preceded the adoption of the FCC's signal carriage rules, then the
rampant unregulated use of broadcast station signals by cable systems
would have become impossible to harness. Even in 1972, the FCC
grandfathered all existing signal carriage so as to avoid depriving
consumers of signals to which they had become accustomed. Cable
Television Report and Order, supra, 36 FCC 2d at 185.
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Why are the interests of viewers who rely exclusively on local
broadcasting asked to bear a diminution in service?
Why are affiliates of the entrenched networks like ABC, CBS,
and NBC essentially granted preferential treatment, while the
stations which have brought an unprecedented level of
competition to broadcast television once again are saddled with
a competitive disadvantage?
You, Congress, made a judgment to assure the viability and
vitality of local television stations in the face of
noncarriage by cable systems. What sense does it make to
undermine that decision by letting satellite carriers impart
the very same injury you sought to prevent in the cable must
carry rules?
As independents and affiliates of, first, the fledgling Fox
network, which now has become a powerhouse, and emerging networks,
which also will grow, like UPN, WB, and PaxTV, ALTV's members have done
more to enhance competition than anyone would have imagined. We frankly
find it inconceivable that Congress would contemplate dulling that
competitive edge of competition in the video marketplace.
You also may hear, as Charlie Ergen is fond of saying, that injury
to us UHF stations will be insignificant because UHF stations have such
small coverage areas anyway. Thus, he would say, most of his
subscribers reside in areas which we could never hope to serve anyway.
What he ignores is the fact that many UHF stations enjoy cable carriage
throughout their markets. Indeed, if the DBS providers are seeking to
compete with cable, they will be targeting cable customers. Every time
a cable subscriber in my market drops his cable service (which is
required to carry my signal) in favor of DBS service (which is not
required to carry my signal), my station will lose access to that
viewer.
In a similar vein, we find demonstrably inadequate the concept of
providing local signals via an off-air antenna sold and installed in
conjunction with a DBS dish. Off-air viewers will enjoy none of the
benefits of digital picture quality, none of the benefits of inclusion
in the DBS on-screen program guide, and none of the benefits of
seamless surfing. We hardly are saying that anything is wrong with off-
air reception. The true issue, though, is whether my competitor, an
entrenched affiliate of a big network will have advantages in access to
consumers that are denied my station.25
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\25\ As Congress recognized in the channel positioning requirements
in the must carry law, access alone often is insufficient. Many
stations were carried, but on channels far removed from the major
network affiliates, where consumers had trouble locating them.
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You also will be told that viewers will lose nothing because the
DBS provider will offer them the signal of a UPN, WB, or PaxTV
affiliate from another market. Suggestions that availability of
national feeds of emerging network signals is an adequate substitute
for carriage of the local affiliate are specious. First, from the
viewer's perspective, critical elements of local service would be
lacking. A national feed or the signal of a distant affiliate of the
network offers no local programming, whether public affairs or
entertainment programming, news, information, or weather, all selected
because it responds and appeals to local needs, tastes and interests.
Indeed, on most emerging network stations, the majority of programming
is non-network programming. Second, the damage to the local affiliate
is compounded. Instead of making any effort to watch the local
affiliate, viewers searching for network programming likely will take
the path of least resistance and watch the readily available satellite-
fed station or national network feed. Third, networks thrive on the
strength of their affiliates. Strong affiliates attract larger
audiences for the network. A national network feed or a distant
affiliate offers the network none of the boost provided by a popular
local and locally-attuned affiliate station. Nothing could strike more
cruelly at the heart of our nation's system of local
broadcasting.26 Again, it is the local station which serves
and programs to the local community. Not only is it obligated to do so,
it thrives on doing so. From a consumer perspective, how will a viewer
watching Dilbert on a station from a thousand miles away be alerted to
a tornado blocks from his home? My station, the local station, would be
broadcasting a warning. The substitute station will not. Neither would
the DBS provider. Indeed, viewers might well fail to realize that their
network programming is coming from a distant station and, therefore,
expect to receive local weather warnings. Charlie Ergen has labelled
this concern ``a little bit of hysteria.'' 27 No hysterics
are at work here. Distant network stations are no substitute for local
affiliates. The lack of local weather information is just the tip of
the iceberg.28
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\26\ Indeed, this reflects the concern of the major network
affiliates with respect to the availability of distant affiliate
signals in other than unserved households.
\27\ Hearing before the Subcommittee on Telecommunications, Trade,
and Consumer Protection of the Committee on Commerce, House of
Representatives, on H.R. 2921 and H.R. 3210, No. 105-80 (April 1, 1998)
at 130 [hereinafter cited ``1998 Hearing''].
\28\ Notably, the tip of the iceberg sank the Titanic. See also
Letter of July 8, 1998, to Chairman Tauzin from James J. Popham, Vice
President, General Counsel, ALTV, referring to Electronic Media (July
6, 1998).
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We are well aware that Congress is sympathetic to the need to
assure carriage of all local stations--and we are, indeed, deeply
appreciative that you understand our concerns. Our anxiety, as you also
well know, arises from proposals to defer the effective date of a must
carry regime for several years. We made plain our objections to
deferred must carry in hearings before this subcommittee in the last
Congress.29 While we are reticent to belabor those
objections, they are real, they are sound, and we hardly may ignore
them.
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\29\ See 1998 Hearings at 91-101.
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Delayed must carry handicaps my stations and any station not
carried in a tremendously competitive marketplace. The big three or
four network stations are carried, while UPN, WB, and PaxTV affiliates,
to say nothing of numerous independent stations are not. This
disadvantage will increase with every new satellite subscriber. Even if
a transition to full must carry is completed as scheduled, many ALTV
member stations will have suffered a setback in their efforts to
establish a truly competitive position against their entrenched
competitors in their markets.30
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\30\ In addition, the impact will be felt at a time when local
stations are spending millions of dollars to convert to digital
transmission, pursuant to FCC imposed deadlines.
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Moreover, we remain deeply concerned that must carry deferred is
must carry denied. Such deadlines can slip and often do. For example,
when Congress enacted the original satellite Home Viewer Act in 1988,
it contemplated termination of the satellite compulsory license in
1995. However, once the public began to receive broadcast television
station signals on their satellite systems, Congress essentially
forfeited the ability to eliminate the compulsory license. It was
extended in 1994, and no one seriously expects Congress to let it
expire at the end of this year. The public simply would not stand for
being deprived of signals they have received for years under the
compulsory license.31 The same result is predictable under
deferred must carry. If (we dare say ``when'') satellite carriers
protest that compliance with must carry requirements would be
impossible and threaten to withdraw all broadcast signals from their
services to sidestep the must carry requirements, Congress will find
itself in the same untenable position.32 We are dubious of
the satellite industry's willingness and ability to comply with must
carry rules within the near future.33 Therefore, we look for
some assurance from them that they will be able to comply with must
carry rules and will comply, that they will not come rushing back to
Congress in two or three years claiming that they just have not had
long enough to come into compliance. We humbly ask some assurance from
Congress that it will stand by any deferred must carry law it passes.
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\31\ We distinguish here between the equities in favor of satellite
subscribers who have long enjoyed superstation and network signals on
their satellite systems in a manner consistent with the law and those
that have taken advantage of satellite distributors' willingness to
blink the restrictions on providing network signals in other than
unserved areas.
\32\ Section 337(b) of the bill (page 7, lines 9-10) subjects only
``satellite carriers retransmitting television broadcast signals'' to
the must carry requirement. Thus, a satellite carrier could escape the
must carry rule by carrying no broadcast signals.
\33\ Indeed, the testimony of EchoStar CEO Charles W. Ergen at the
hearing last week confirms that EchoStar ``will not have the space'' to
carry all local stations in each market. In the face of readily
predictable public outrage at the threatened reduction in their
satellite program options, Congress, rather than adhere to the
deadline, would have no choice, but to extend it. Ergen Testimony at 6.
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Let me emphasize that unlike Nikita Kruschev at the United Nations,
we are not here to pound our shoes on the table and leave in a tantrum.
We heard the Chairman's call for dialogue and we heed that call. We
want a solution that is sound and realistic. So, to move the dialogue
along, I am posing some alternatives for discussion.
At the outset, ALTV continues to believe that a ``carry-one, carry-
all'' requirement, effective immediately, but on a market-by-market
basis, would provide the best short and long-term solution. The
practical effect of imposing such a requirement on satellite providers
would be marginal. As EchoStar's conduct illustrates, satellite
carriers would be likely to carry some local stations voluntarily.
Therefore, such a requirement typically might require a satellite
carrier to provide only a few additional local signals, such as those
affiliated with newer networks like UPN, WB, and PaxTV. At worst, under
current technological limits on capacity, compliance might require a
satellite carrier to forego local signal carriage in a few markets in
order to accommodate all local signals in other markets.
EchoStar's behavior confirms this. EchoStar continues to add
national networks and pay services to its array of available
services.34 While invoking a self-imposed limit on capacity
devoted to carriage of local signals, it continues to use its system
increasingly as it was designed to be used-- to provide programming of
nationwide interest on a nationwide basis.35 EchoStar's
alleged capacity shortage also is a function of EchoStar's decisions
with respect to the aggregate number of channels devoted to local
carriage and the allocation of those channels among markets. EchoStar
has made a decision to use a finite portion of its overall capacity to
provide a few signals to a substantial proportion of the nation's
households. Alternatively, EchoStar might have provided all signals,
but in fewer markets initially. Again, this is much more a function of
EchoStar's business plan than any shortcoming in satellite distribution
technology.36 In sum, attempts to provide local signals on
satellite systems designed to provide national services on a nationwide
basis, rather than inherent technological limitations on satellite
capacity, create an appealing, but ultimately specious basis for
satellite carriers' alleged lack of capacity to carry all local
signals.
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\34\ See copy of a recent Dish Network promotional flyer, attached
hereto.
\35\ Purported technological limits on satellite channel capacity
result from poor planning rather than inherent limitations on satellite
distribution technology. Nothing stopped EchoStar from designing its
system to accommodate local signals. Satellite systems may be
configured to provide for carriage of all local signals. The Capital
Broadcasting plan erases any doubt in that regard.Capacity becomes an
issue, however, when satellite systems have been designed with limited
capacity for local signals. EchoStar, currently employing only CONUS
and half-CONUS footprints for local-into-local, is a prime example. In
contrast, Capital Broadcasting system will be configured to provide
local carriage via use of spot beams. Spot beams, of course, provide
signals to geographically isolated areas and, thus, permit re-use of
frequencies in multiple areas. Such systems permit efficient use of
spectrum, which expands capacity to the extent that full carriage of
local signals in all served markets can be accomplished.EchoStar's
system never was designed to operate with comparable efficiency. Even
when local signals are carried by EchoStar, they are transmitted all
over the country. This is an enormous waste of spectrum. A system
designed to provide nationwide and regional services necessarily will
claim capacity shortfalls in the context of providing local services.
In reality, however, this really boils down to a matter of system
design rather than inherent technological constraints on satellite
system capacity.
\36\ EchoStar now apparently wants an ex post facto Congressional
imprimatur on its limited local service, a few signals in a few
markets, which appears more an afterthought and epitomizes poor
planning and consummately wasteful use of satellite frequencies.
However, no reason exists to mold a federal statute to accommodate the
business plan of a single satellite carrier.
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In the context of a deferred must carry requirement, our concerns
would be eased considerably if satellite carriers were permitted to
offer local signals in a market only upon a showing to the FCC that
they would be capable of complying with the must carry requirement when
it became effective. This showing also would have to include a
certification that the satellite carrier would comply with the must
carry rule on the effective date. Furthermore, the failure to comply
with the rule in full on the effective date would result in automatic
termination of the ability to carry any local or distant signals in the
noncompliant market, as well as suspension of the compulsory copyright
license in that market.
Another provision, something of a safety valve, also would allay
our fears and limit our susceptibility to harm. Under the provision we
propose, the must carry rules would become effective immediately
(regardless of the deferred effective date) in any market where the
satellite carrier provided any local signal and served a specified
percentage of households in the market. Mr. Ergen has said that ``must-
carry, if imposed at all, should be pegged to a penetration test in
each market.'' 37 We may joust over what that percentage
should be. Indeed, we may never agree, but the shared embrace of the
concept does suggest the need to explore this proposal as a solution to
our concerns and establishment of an effective must carry regime.
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\37\ Ergen Testimony, supra, at 6.
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I also want to mention another problem which may arise in
connection with satellite carriage of local signals. Satellite
carriers' access to local signals under the compulsory license also
must come only with the assurance that sound technologies exist to
prevent out-of-market access to such signals. Under some plans to
provide local signals (e.g., EchoStar), most (if not all) local signals
will be available throughout the nationwide footprint of the satellite
retransmitting the signals. The potential for mischief is great--as
evidenced by the contretemps which has erupted over provision of
network signals outside unserved areas. Adequate legal sanctions must
exist to penalize and deter effectively unauthorized out-of-market
access to the signals of retransmitted broadcast signals.
The satellite compulsory license also must be accompanied by
provisions preserving local stations' exclusive rights to their network
and syndicated programming.38 Presently, cable television
systems are subject to FCC rules which protect the exclusive rights of
local stations to exhibit network and syndicated programming in their
markets. These rules generally prohibit a cable system from
retransmitting a program broadcast by a station carried by the system
if a local station has exclusive rights to the program in the
geographic area served by the cable system.39 This rule now
ought be applied to satellite carriers as well.40 No reason
exists to provide stations the ability to secure exclusive rights in
one portion of the copyright law, but negate that right in another.
Indeed, in an ever more competitive marketplace, any video provider's
ability to maintain its exclusive rights becomes even more valuable and
critical to its ability to offer a distinctive, competitive program
schedule.
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\38\ ALTV in like vein urges retention of the current prohibitions
on commercial substitution, which appear in both the cable and
satellite compulsory licenses. 17 U.S.C. Sec. Sec. 111(c)(3) and
119(a)(4), respectively. Commercial substitution involves far more than
a mere secondary retransmission and is inimical to the interests of the
station carried, local stations, and copyright owners. As such, this
limitation on the compulsory license should remain beyond controversy.
\39\ Thus, for example, a cable system in Washington, D.C. must
delete a broadcast of Home Improvement from a distant signal if a
Washington, D.C., station has an exclusive right to exhibit the program
in Washington. (N.B. Under Sec. 73.658(m) of the FCC rules, a station
may secure in its program license agreement geographic exclusivity
within a 35-mile radius of its community of license.).
\40\ This need is recognized implicitly in the Satellite Home
Viewer Act of 1994, which imposed a higher fee for satellite
retransmission of superstation signals which otherwise would be subject
to program deletions under the FCC's syndex rules. See 17 U.S.C.
119(b)(1)(B)(I). This is a poor substitute for the ability of a station
to preserve the exclusive rights it bargained and paid for in acquiring
local exhibition rights to a syndicated program.
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Congress initially directed the FCC to adopt exclusivity rules for
satellite carriers in 1988. However, the FCC found application of a
``syndex'' rule technically unfeasible in 1989. Now question of
feasibility deserves another look.41 Technology has advanced
on numerous fronts. Satellite carriers already protect local sports
blackout requirements. Provision of syndicated program exclusivity
would add only bulk, but no additional complexity to the
process.42
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\41\ The need for similar network exclusivity or nonduplication
protection is equally compelling, depending on the ultimate scope of
the satellite compulsory license. Under the current satellite
compulsory license, network affiliates may be retransmitted only to
subscribers without terrestrial access to the network's programming via
a local affiliate of the network. Thus, infringement of a local
affiliate's exclusive rights to its network programming is unlikely. A
network exclusivity or nonduplication rule has no purpose in the
context of the current ``white area'' limitation. Similarly, if
satellite carriers may secure a compulsory license to retransmit the
signals of network affiliates only in their home markets, then such
rules would be unnecessary. Again, with the emergence and development
of Fox, UPN, WB, and, now, Pax Net, more stations ultimately may fall
under the definition of network affiliate for purposes of the satellite
compulsory license.
\42\ Compliance burdens also would be reduced by the fact that some
superstations are, indeed, ``syndex-proof'' (i.e., their national
satellite feed contain no programming which would infringe the
exclusive rights of local stations).
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Moreover, we are in a far different world in 1999. In 1988,
satellite carriers were C-band services transmitting signals to large
dishes in rural areas. Now tiny DBS dishes are very much in evidence in
populous urban areas as well as the countryside. Millions of dish
owners now receive not only distant network stations, but also
superstations. As much as the public will wish to keep their
superstations, the local stations deserve the right to protect the
exclusive program rights they have bought and paid for in a free,
marketplace negotiation. Thus, syndicated, network, and sports
exclusivity rules ought be adopted now.
Finally, we must express our full support for the NAB position on
the controversial issues surrounding service to unserved households
under the Satellite Home Viewer Act. The utter disdain for the law
exhibited by some satellite carriers is intolerable and ought not be
rewarded. Furthermore, the FCC has reached a sound decision in its
consideration of this matter. It offers the opportunity for a solution
to the issue which will be fair to all.
Again, we reiterate our desire to join and accelerate the dialogue
Chairman Tauzin offered at ALTV's convention last month. When all is
said and done, we know that our stations provide an invaluable service
to the public--a service that never ought be sacrificed injudiciously.
When all is said and done, we know that our stations provide
unprecedented competition to cable--and to entrenched networks. When
all is said and done, we know that Congress has stepped in to assure
that cable systems not rob local television stations of the opportunity
to compete in their local markets. When all is said and done, we ask no
more than that today.
Mr. Tauzin. Thank you very much, sir.
We are now pleased to welcome Mr. John Hutchinson,
Executive Vice President of Local TV on Satellite of Riley,
North Carolina.
STATEMENT OF JOHN HUTCHINSON
Mr. Hutchinson. Thank you, Mr. Chairman, distinguished
members. I am really excited about bringing the good news of
another great solution to this dilemma we find ourselves in.
I am John Hutchinson from Local Television on Satellite,
known as LTVS, with our headquarters in Raleigh and our
technical team in Los Angeles. We were founded by Capital
Broadcasting Company and its subsidiary, Microspace. Now
Microspace is the largest provider of transponder capacity for
data and audio services around the world. So we have been in
both businesses.
Our mission is to address the No. 1 obstacle that limits
direct broadcast satellites from offering consumers a truly
competitive alternative to cable, the lack of the local TV
stations. LTVS has innovated a means of using the new KA band
satellites with market-specific spot beams to effectively
multiple our capacity 20-fold. Now that means that, for the
first time, most U.S. satellite homes can get all of their own
local stations on the same dish.
We have integrated this new technology with a business plan
to deliver the entire signal of all full-service local stations
in each market served upon the initial launch. That should
address 75 percent of the U.S. households just as soon as
possible, therefore, alleviating many of the Satellite Home
Viewer Act problems. The distant signals will not be needed for
most subscribers.
Now by entire signal, we mean the new full digital
bandwidth that delivers the highest-definition television
standard and multicasting that is the future of American
television.
Two bidding satellite builders have our designs ready to
begin construction on July 1 of this year. However, we cannot
practically move forward on this 30-month construction project
until Congress passes the enabling legislation. So my primary
purpose today is to seek passage of that legislation, to make
local-to-local TV on satellite a reality.
In order to move the LTVS plan, or, for that matter, a
similar plan by any other entity, we first need a compulsory
copyright license. Cable presently has such a compulsory
license like we need. The legislation we seek would match cable
by being subject to retransmission consent and must-carry. Such
parity provisions mean broadcasters maintain control of their
signals and no qualifying stations are denied access to their
viewers. The broadcast economics that support free over-the-air
television and localism are preserved.
Last month Representative Richard Burr introduced the
Satellite Access to Local Stations Act, H.R. 89, which already
has more than 50 sponsors. LTVS supports the Burr bill either
as part of a comprehensive bill or as a standalone bill.
Now as for this must-carry issue, any legislation that
would permit transitional must-carry until the year 2002, as
some have suggested, must explicitly provide for all stations
in the market being mandatory by the end of that transition
period. To assure timely compliance, DBS providers who choose
to carry local stations must file a report with the Federal
Communications Commission on January 2001, a year ahead,
demonstrating that they will be in compliance by 2002, a date
certain for must-carry.
Our business plan is aggressive, but it is realistic if
passage occurs now or by early in the second quarter. That
timetable will allow local service to be available by January
2002.
Turning briefing to the technical plan, two high-powered
satellites are to be launched in the fall of 2001. They will be
co-located in the same orbital arc as the present Direct
Broadcast Satellites use, the Direct TVs and the EchoStars.
What that means is a single dish at the subscriber's home would
see both the national DBS channels and all that market's local
stations, including their broadcast networks.
Our higher digital standard does require about five times
the transponder capacity of the analog television we have known
in the past, but our high-definition, full-digital design is
going to be required because of the 15-year life of these
satellites. Otherwise, the system would quickly become
obsolete. Hence, the evolution of our plan to stretch to 75
percent of America at a standard that will survive.
While we do have a technical plan for phase 2 to address
the remaining 25 percent and more satellites, we invite your
ideas for a viable business plan to support its very different
economics. Yet, without timely passage of the enabling
legislation, neither LTVS nor any other company can begin to
develop local-to-local satellite solutions. This is a giant
first step, but we need the lead time.
Finally, from a public policy perspective, LTVS is good for
the consumer, good for the DBS industry, good for broadcasters.
The plan furthers the goal of making DBS more competitive with
cable, with the bonus of facilitating the rollout of digital
high-definition television across America.
With your enactment of the legislation, LTVS can level the
playing field as basic cable in the sky. One dish, one box, one
bill--the long-term solution for subscribers who want choice.
Thank you for giving me this opportunity to talk about it.
[The prepared statement of John Hutchinson follows:]
Prepared Statement of John Hutchinson, Executive Vice President and
Chief Operating Officer, Local TV on Satellite, LLC
Good morning, and thank you for inviting me to appear at today's
hearing. I am John Hutchinson, Executive Vice President and Chief
Operating Officer of Local TV on Satellite, LLC (``LTVS''). I have been
a broadcaster for almost thirty years and have served in almost that
number of different roles, ranging from creative production to business
management. Immediately prior to joining LTVS this past summer, I
served as television group head for Jefferson-Pilot's stations in the
Southeast. In addition to myself, the full-time officers of LTVS
include Jeff McIntyre, Vice President of Broadcasting, Jerry Parker,
Vice President of DBS Distribution, and Teresa Artis, General Counsel
and Vice President of Business Affairs. LTVS is a Delaware limited
liability company founded in 1997 by Capitol Broadcasting Co., Inc.,
its subsidiary, Microspace Communications Corporation (``Microspace''),
and certain shareholders. Microspace is the largest provider of
transponder capacity for broadcast data and audio satellite services in
the world.
LTVS was founded to develop a basic local television station
satellite delivery service, like basic cable, that will deliver via
Direct Broadcast Satellite (``DBS'') all local television stations in a
given market. I am pleased to inform you that LTVS has developed a
local-to-local solution for DBS. LTVS has developed a business plan and
the technology to distribute via satellite all over-the-air, full
power, commercial and noncommercial television stations within a given
station's television market, known as Nielsen's Designated Market Areas
(``DMA''). LTVS will provide service to all stations in approximately
the top 70 markets in the United States and reach approximately 75% of
the U.S. television households. Our intent is to deliver individual
local station packages to all DBS providers, who will then retail these
packages to their subscribers. We are very excited about our ALL
STATIONS IN A MARKET plan that will enable consumers to receive their
local broadcast programming through their DBS provider. This assumes
satellite parity with existing cable must carry.
MY PRIMARY PURPOSE TODAY, HOWEVER, IS TO SEEK PASSAGE OF THE
LEGISLATION NECESSARY TO MAKE LOCAL-TO-LOCAL A REALITY. IN ORDER TO
MOVE THE LTVS PLAN OR A SIMLAR PLAN BY ANY OTHER ENTITY FORWARD, WE
NEED A COMPULSORY COPYRIGHT LICENSE FOR LOCAL-TO-LOCAL.
That is, in order for LTVS to become a reality we need legislation
that would grant a compulsory copyright license to satellite carriers
for the retransmission of local television signals in their DMAs
subject to retransmission consent. Satellite carriers whose
retransmissions are subject to the compulsory license would have to
offer to carry all full-service television stations in any local market
served. Satellite carriers would have to obtain retransmission consent
from local stations prior to retransmitting their signals. In addition,
LTVS supports legislation to require satellite carriers to comply with
limitations on sports broadcasts, network nonduplication, and
syndicated exclusivity, similar to cable's rules.
Last month, Representative Richard Burr (R-NC) introduced the
Satellite Access to Local Stations Act (SALSA - H.R. 89), which already
has over 50 co-sponsors. The Burr bill would amend the Copyright Act of
1976 to provide a statutory license, not subject to any royalty fees,
since the stations' signals are not extended beyond their present
coverage area, for the retransmission of television stations into a
given station's local market by satellite carriers. The legislation
would enable consumers to receive via satellite all over-the-air,
commercial and noncommercial television stations within a given
station's local market. LTVS supports the passage of the Burr bill
either as part of a comprehensive satellite bill or as a stand-alone
bill.
As to the must carry issue, any legislation that would permit
interim or transitional must carry until the year 2002 must explicitly
provide that the full must carry requirement will be mandatory at the
end of the transition period. To assure such compliance, a satellite
carrier must file a report with the Federal Communications Commission
(``FCC'') on January 2, 2001 demonstrating that it will be in
compliance in 2002. After the transition period, a reporting
requirement, such as the one included in the Burr bill, should be
sufficient to monitor compliance with the carriage obligations.
In addition to the passage of the necessary legislation, LTVS also
needs changes at the FCC. Earlier, I mentioned that LTVS would cover
approximately 70 markets. LTVS is seeking several changes in proposed
FCC rules that may increase the number of markets we can serve.
Briefly, the FCC's proposed rules limit the number of transponders to
420 with a corresponding limitation on the number of markets covered.
Under the FCC's proposed rules, LTVS will be able to provide a maximum
of 420 transponders, which limits the number of markets served. The
FCC's proposed rules regarding the possible sharing of 250 MHz in the
18 GHz band and maximum operating power impose coverage limitations.
Now, I would like to turn to the specifics of our business plan.
Under our ALL STATIONS IN A MARKET plan, LTVS will deliver individual
local station packages to all DBS providers, who will then retail a
local station package to their subscribers. The DBS industry has long
recognized that the lack of local stations in their program offerings
is a primary reason that consumers who consider DBS do not buy. LTVS's
local station product will overcome that competitive barrier.
LTVS's goal is to become the unified platform that allows DBS as an
industry to compete more effectively with cable television and other
competitors in the multichannel video programming market. Further,
viewing of local stations in satellite homes is lower than in cable
homes and the LTVS plan will assist in protecting local stations'
economics and, in turn, service. Our business plan is aggressive in
that, with the passage of the necessary legislation by the second
quarter of this year, we intend to have the receivers in the stores by
December 2001 and begin LTVS service in 2002. To date, in addition to
having developed the technical plan for our project, which I will
describe in greater detail momentarily, we have (1) shared our plan
with the DBS and broadcast industries in order to confirm the need for
our project and to assess their interest, (2) retained Babcock & Brown,
an international investment firm with particular financing expertise in
the satellite and DBS industries, (3) obtained a design for the
satellites from two satellite manufacturers, and (4) fostered the
introduction of the necessary legislation.
Our priority now is to obtain passage of the necessary legislation.
It will take approximately 30 months to build and launch the satellites
needed for the LTVS service. Therefore, if LTVS is to begin service in
2002, the necessary legislation must be passed now so that the order
for the satellites can be placed. Once this is accomplished, we will
enter into formal negotiations with DBS providers for the delivery of
the local station packages and with local television stations for
retransmission consent. I will turn now to the technology behind our
plan.
In the past, one of the obstacles to DBS providing local television
signals was the lack of an efficient technology. That technology is now
available with spot beams. We plan to operate two satellites in the Ka-
band at an orbital slot between 101 deg. and 119 deg., which would
provide coverage to the continental United States. Consumers will be
able to receive the current high power DBS signals and the local
television signals from one dish and with one receiver box containing
the encoders for both DBS and the local signal service. Also, consumers
will receive only one bill for both the DBS service and the local
television service.
Last year, LTVS reported that it intended to carry all stations in
all markets. That plan was based on the satellites' carriage of analog
signals at 4 megabits (Mbps) per station. Our intention now is to carry
the entire signal of a station. In other words, every station can be
carried in full HDTV at 19.4 Mbps. Because these digital signals
require much more bandwidth than analog signals, the two LTVS
satellites will be unable to carry all stations in all markets.
Nevertheless, we think this is a better plan. As mentioned earlier, the
satellites will take more than two years to build and will last
approximately 15 years. Thus, they must be designed for the future
digital environment. LTVS will be able to accommodate the DTV/HDTV
rollout as well as multiplexing which is the future of television.
Also, it would be impractical to build satellites to carry analog
signals now and then be unable to efficiently modify the satellites to
carry HDTV signals in the future. Further, the ability to carry digital
signals will enable DBS to be competitive with cable in the future.
Currently, cable operators are equipping their systems to carry digital
signals. In fact, it has been reported that CBS and Time Warner have
reached an agreement for Time Warner to carry all of the CBS-owned
stations' full digital signals on their respective systems in those
markets served by Time Warner.
As I mentioned earlier, our two Ka-band spot beam satellites will
have the capacity to carry the entire signal (full HDTV) of all
stations in approximately the top 70 markets. The satellites have been
designed and LTVS is in a position to move forward with the satellite
manufacturers to begin building the satellites as soon as the necessary
legislation is passed. While LTVS has also developed a technical plan
that would require another orbital location and two additional
satellites for carriage of stations in smaller markets, LTVS has been
unable to develop a viable economic plan. However, without timely
passage of enabling legislation, neither LTVS nor any other company can
provide this service.
The stations carried will be uplinked from regional uplink sites.
In early April 1998, we invited vendors to respond to a Request for
Proposal (``RFP'') for the equipment and services needed for the
uplinks, as well as receivers, dishes and master control center. These
vendors were selected from those responding to our original Request for
Quotations (``RFQs'') issued in mid-1997. Worldwide Satellite
Broadcasting, Doctor Design and several other manufacturers are
assisting in the continued development of our receiver design.
Finally, from a public policy standpoint, LTVS is good for
consumers, DBS providers, and broadcasters, and our plan furthers
Congress' and the FCC's common goal of making DBS more competitive with
cable on a nationwide basis.
LTVS provides consumers with a one stop shopping alternative to
higher priced cable television. LTVS responds directly to consumers who
want more choice in the multichannel video programming market, but also
want their local television stations delivered in the same medium and
quality in which they receive other channels. Our plan provides
consumers with the convenience of receiving their DBS signals and local
television signals with ONE-DISH-ONE BOX-ONE-BILL.
For DBS providers, LTVS is the long-awaited and much needed
solution to their prior inability to deliver local television signals
to their subscribers. LTVS will make a significant contribution to
leveling the playing field by enabling DBS to offer a basic satellite
service like basic cable. Our ALL STATIONS IN A MARKET plan should spur
the development of the DBS industry and increase DBS competition with
cable. For DBS providers, LTVS provides a convenient and seamless local
solution for 75% of the U.S. television households. That's 3 out of 4
Americans served from day one. DBS providers will be able to attract
new subscribers by offering a one stop shopping entertainment package
including all local broadcast stations in a given market.
Broadcasters too will benefit from our plan because LTVS will
enable distribution of local television stations within their DMAs.
Under our plan, every full power station in the covered markets will
have the opportunity to be carried because we propose to carry all
local stations that consent to be carried. Local stations will continue
to control the distribution of their signals. The LTVS plan should help
stop the television ratings erosion in DBS homes. Finally, LTVS should
help facilitate and accelerate the HDTV rollout.
The time has come for the DBS industry to take a giant leap forward
in its development. The DBS industry served its first customer in 1994.
Since that time, DBS has provided some competition for cable, but the
lack of local television signals within the DBS programming package has
placed DBS at a competitive disadvantage and stifled its growth rate.
Today, more than 67.4% of U.S. television households subscribe to cable
compared to only 7.9% for DBS. Indeed, market research shows that the
primary obstacle for DBS in competition with cable is the lack of local
television signals. LTVS solves this problem by providing DBS with the
local station packages in the full 19.4 Mbps that they need to compete
long term with cable. Furthermore, our plan will enable DBS subscribers
to receive local originated programming such as local weather, local
news, local sporting and charity events, and public affairs
programming, all of which serve the public interests
I thank you for having given me the opportunity to tell you about
Local TV on Satellite and I would be pleased to answer any questions.
Mr. Tauzin. Thank you very much, Mr. Hutchinson.
Finally, David Moskowitz, the Senior Vice President and
General Counsel of EchoStar. Mr. Moskowitz.
STATEMENT OF DAVID K. MOSKOWITZ
Mr. Moskowitz. Mr. Chairman and distinguished members of
the committee, thank you for inviting me to testify. I am David
Moskowitz, and I am the Senior Vice President and General
Counsel for the DBS company based in Denver, EchoStar. We serve
over 2 million customers today.
Ever since EchoStar launched its DBS business 3 years ago,
we have had a single focus: to compete aggressively against
cable's poor customer service and constantly increasing rates.
But DBS still faces many obstacles. Most importantly, DBS needs
the full statutory right to provide local channels by
satellite. Consumers cite the lack of local channels as the No.
1 reason why they don't switch from cable to DBS.
EchoStar offers local channels by satellite today, but it
requires two dishes. Believe me, that is a tough sell. With FCC
approval of our recently announced deal to acquire additional
DBS spectrum, EchoStar will launch two additional satellites
this year and be better positioned to provide consumers that
added ingredient, local channels, in addition to the popular
cable TV programming they desire, on one dish. With this
additional capacity, we will be able to provide popular local
stations to nearly 50 percent of the U.S. population.
But this will only be possible with congressional action to
allow efficient and comprehensive local-to-local service
without the burdensome limitations such full must-carry. Put
simply, if must-carry is imposed on satellite today, the number
of consumers to whom we will be able to offer true choice will
be significantly diminished.
Right now satellite cannot bear the cost of full must-carry
compliance. Give us a chance to get off the ground as an
industry. Cable had 20 years to develop before must-carry was
imposed. When satellite realizes significant market share, then
we could economically launch additional satellites with the
capacity necessary to comply.
Today EchoStar is the only company committing its capital
to local programming by satellite, and may be the only company
ever to do so. Today must-carry would only serve to stifle the
creation of competition.
Broadcasters have announced record profits in 1998 and have
made billions over the years from the spectrum they receive
from the government for free. This industry does just fine and
doesn't need the protection of a satellite must-carry today.
EchoStar's failure to carry a local station would do no
harm because we lack market power. We urge you not to impose
must-carry on satellite in any DMA until our market penetration
reaches at least 15 percent in that market.
This lack of market power compared to the leverage of cable
also has us concerned that broadcasters will have no incentive
to give us their signals on reasonable terms or perhaps at all.
Exclusive contracts between broadcasters and cable or higher
prices for satellite to obtain retrans will hurt the consumer.
With the notable exception of Fox, our efforts to reach retrans
agreements with the major networks and their affiliates to date
have been disappointing. If we are to get off to a sound start,
it is imperative that your legislation allow local-to-local
with a grace period to obtain retrans and include language that
will prevent discrimination against satellite providers.
Further, for 3 years anti-competitive provisions of the
SHVA have handcuffed our ability to vigorously compete. Current
law requires consumers to disconnect from cable for 3 months in
order to get network channels by satellite. Current law
specifically entitles cable to deliver network channels to
restaurants and apartment buildings while satellite typically
cannot. Current law requires DBS to pay a copyright fee that is
many times more than cable pays. These disparities must be
eliminated.
Lower prices and better quality for consumer will result
where EchoStar provides local channels by satellite. However,
consumers to whom we cannot provide local channels today will
still need to rely on a combination of off-air antennas and
distant satellite signals for the network programming so
crucial to competition.
EchoStar implemented a predictive model that complies with
the FCC recommendations when it commenced providing distant
network signals about a year ago. But, as the FCC has noted,
current law is unfriendly to consumers, unrealistic, and denies
network channels to tens of millions of customers who receive a
poor off-air signal as a result of ghosting and other
impediments.
Continued use of the antiquated Grade B standard developed
during the 1950's, when any signal was a good signal, is
especially incongruous, given the push for HDTV. Absent a
change in law, many consumers will not consider satellite as a
good alternative to cable. We urge Congress to direct the FCC
to eliminate standards left over from the 1950's and establish
guidelines that take into account the expectations of viewers
today. No one should be denied access to clear network
programming.
With the help of Congress, EchoStar is ready to offer
American consumers full competition to cable from a single 18-
inch dish this year. Please, with cable deregulation imminent,
consider our request and help us give consumers real choice.
Thank you. I look forward to answering your questions.
[The prepared statement of David K. Moskowitz follows:]
Prepared Statement of David K. Moskowitz, Senior Vice President and
General Counsel, EchoStar Communications
Mr. Chairman and distinguished members of this Committee, thank you
for inviting me to testify before you today as you consider reform of
the Satellite Home Viewer Act. My name is David K. Moskowitz, I am the
Senior Vice President and General Counsel, Secretary and Director of
EchoStar Communications Corporation, a Direct Broadcast Satellite (DBS)
company based in Littleton, Colorado. EchoStar was started in 1980 as a
manufacturer and distributor of C-band dishes that grew by the mid-
1980's into the largest supplier of C-band dishes worldwide. EchoStar's
founder and Chief Executive Officer Charlie Ergen had a vision of a
dish in every home, school and business in the United States and of
providing true, effective competition to cable. That vision could not
be realized with large dishes. Consequently, in 1987 EchoStar applied
for a DBS permit with the Federal Communications Commission (FCC). The
FCC granted EchoStar its first DBS spectrum assignments in 1992. Since
then, EchoStar has launched four DBS satellites and has invested over
$2 billion in satellite television technology, working to give
consumers a true alternative to cable.
EchoStar was the first DBS company to drop the price of a dish to
below $200 when the competition was charging $800 for its product.
EchoStar was the first to allow subscribers to pay a low monthly fee as
they do with cable. EchoStar was the first to allow consumers to choose
the 10 channels they watch the most, then pay for those ``a la carte''
without having to buy an entire package of programming they do not
want. EchoStar was also the first company to guarantee it will not
raise prices until the next millennium. These are just some of the
measures our company has taken to compete vigorously in the marketplace
and make satellite technology affordable and accessible for all
Americans.
In trying to compete against cable television, EchoStar soon
realized that the most significant handicap hampering satellite service
is the lack of local signals. Most of the consumers walking out of the
store without a satellite dish cite the unavailability of local signals
(which they can receive from cable) as the reason. As I will detail
below, EchoStar has started providing limited ``local-into-local''
service in an effort to alleviate that handicap. That effort, however,
is hindered by (a) spectrum constraints and (b) the Satellite Home
Viewer Act, at least as read by some parties. EchoStar is working to
overcome the first of these impediments, principally with the MCI/News
Corp. transaction that I will briefly describe. We will need your help,
and that of your colleagues on the Judiciary Committee, to overcome the
second.
In December 1998, EchoStar announced its intention to acquire from
MCI/Worldcom and News Corp. an FCC authorization to use 28 frequencies
at the 110 deg. West Longitude orbital location that can serve the
entire continental United States, or ``full-CONUS.'' EchoStar also
intends to acquire two satellites to be launched in 1999 and an uplink
center located in Gilbert, Arizona, which will provide back up
capabilities to our existing uplink facility in Cheyenne, Wyoming. In
turn, EchoStar will give the two companies non-controlling equity
stakes in EchoStar.
The spectrum at the 110 deg. W.L. slot, combined with EchoStar's
existing full-CONUS spectrum at 119 deg. W.L. (21 frequencies) as well
as the half-CONUS locations at 61.5 deg. W.L. (11 frequencies) and at
148 deg. W.L. (24 frequencies) will alleviate the capacity handicap
that currently hampers EchoStar, helping us to compete more vigorously
against cable. While the transaction is necessary to introduce more
competition into the subscription video marketplace, it is not enough.
Action by this Committee and others in Congress is key to our ability
to provide American consumers a true alternative to the ever increasing
prices and poor customer service of cable companies.
reform the satellite home viewer act.
We need reform of the Satellite Home Viewer Act to give DBS the
unambiguous copyright license to retransmit local signals back into
local cities. In areas where off-air network signals are not available,
or where spectrum/capacity constraints inhibit DBS providers from re-
transmitting local signals, Congress needs to define realistically who
can and cannot receive distant network signals from the DBS provider.
The law does not provide for either of these pro-competitive conditions
today and, in fact, provisions of the SHVA as it exists today are
clearly anti-competitive.
DBS cannot fully compete as an industry against cable when the law
says customers must wait until 90 days after disconnecting from cable
before our service can turn on their network signals. DBS cannot
effectively compete as an industry when the law says our signals may
only be received in a private home and not at commercial
establishments. DBS cannot compete as an industry when it must pay
several times more than cable companies in copyright fees for access to
distant network signals. And DBS certainly cannot compete when it must
conduct burdensome and prohibitively expensive tests to determine
whether a viewer receives an off-air broadcast signal.
The legislation proposed by Rep. Howard Coble is a terrific first
step in the effort to reform the Act, and we applaud the work he and
his staff have done to help our industry. We encourage you to work
closely with Chairman Coble as this committee works through the tough
issues that will be involved with transforming this bill into law.
echostar's local into local plan
We believe EchoStar can finally offer a breakthrough in what has
been the single greatest obstacle for consumers when deciding whether
to choose DBS over cable or whether to switch from cable to DBS.
EchoStar is planning to offer consumers a digital local-into-local
service, on a single dish solution, to nearly 50% of the U.S.
population, while at the same time overcoming the challenges in
offering interactive television, Internet solutions, and High
Definition Television (``HDTV'').
Currently, EchoStar offers limited local-into-local service in 13
markets. The local service we offer, even if we could make it available
to all subscribers, is not perfect. It is tough to sell because it
requires customers to install a second dish on their roofs. With the
new orbital location at 110 deg., consumers in 20 major metropolitan
cities would receive local programming using one dish while consumers
in many smaller markets, who are currently unserved with local signals,
will be offered a two-dish solution for local channels by satellite.
Independent studies and our many years of experience as a satellite
TV company match the conclusions of the FCC: most people who walk into
a satellite dealer's showroom turn around and walk out because they
can't get their local TV channels through DBS.1 Surveys show
that viewers watch their local channels 70 percent of the time.
---------------------------------------------------------------------------
\1\ See Annual Assessment of the Status of Competition in the
Markets for the Delivery of Video Programming, FCC 98-355 (rel. Dec.
23, 1998) at para. 63 n.274. See also Annual Assessment of the Status
of Competition in the Markets for the Delivery of Video Programming, 13
FCC Rcd. 1034, 1072 n.201 (1998).
---------------------------------------------------------------------------
In 1998, EchoStar began offering satellite-delivered local network
stations to qualified consumers in the Washington, D.C., New York,
Atlanta, Dallas, Boston, Chicago, Los Angeles, San Francisco, Phoenix,
Salt Lake City, Denver, Miami, and Pittsburgh markets. With the
additional spectrum at 110 deg. W.L. and the two new satellites to be
launched in 1999, EchoStar plans to expand its local channels service
to Sacramento, Portland, Seattle, Las Vegas, St. Louis, Minneapolis,
and San Diego, as well as offer local-to-local service in Alaska and
Hawaii. In each of these markets we offer the four most popular network
TV stations, and in some cities we offer highly-demanded independent TV
stations as well. We strongly believe the resources and money EchoStar
has devoted to providing Americans news, sports and weather from their
local stations will best serve the public interest; our plans offer for
the first time to many consumers in those markets a true choice between
satellite television and cable. But without your help in reforming the
Satellite Home Viewer Act, American viewers will continue to have
little choice from the monopolies of cable.
There have been some, outside the DBS industry, who have proposed
``solutions'' purporting to give DBS the ability to carry local signals
into the local market. These proposals, however, are inadequate on
their face.
Northpoint Technology (Northpoint) seeks to use the 12.2-12.7 GHz
band for a point-to-multipoint terrestrial system that would, among
other things, deliver local signals to DBS customers and compete in the
MVPD market. However, EchoStar does not believe that Northpoint would
offer an attractive local-into-local complement to satellite services,
primarily because consumers find the combination of a satellite dish
and a terrestrial off-air antenna cumbersome. Furthermore, all DBS
operators have serious concerns that use of the same band for a
different service could cause harmful interference for DBS services now
enjoyed by more than 10 million subscribers. When the FCC allocated
this band for use by DBS companies, it relocated terrestrial services
because of the high-power, ubiquitous nature of DBS. While EchoStar
welcomes competition from all sources, the first and fundamental rule
that should be observed to promote effective competition to cable is
``first, do no harm.'' The FCC should not consider allocating the DBS
spectrum to another terrestrial service if it risks compromising the
reliability and quality that makes DBS so competitive.
EchoStar also strongly believes that the FCC should not allocate
DBS spectrum to a terrestrial wireless provider in an attempt to
establish competition to cable. The FCC has already set aside spectrum
for ubiquitous or high-density terrestrial services such as
Northpoint's and has licensed Multichannel Multipoint Distribution
Service providers. In 1998, the Commission also auctioned broadband
terrestrial spectrum for Local Multipoint Distribution Services, which
could be used to compete in the MVPD market if such use proves viable.
But because wireless cable in other bands has not proven to be a viable
alternative to cable thus far, it would be inappropriate for the FCC to
allocate DBS spectrum for yet another wireless cable solution and
endanger the integrity of DBS, the only service that has proven a
viable alternative to cable.
Capital Broadcasting--a coalition of broadcasters--has proposed a
plan that would make its service available to DBS providers in about 67
markets nationwide. Unfortunately, that plan is four to five years away
and is technologically speculative. Capital has not even begun
construction of its satellite system. The system would use very high
frequencies--the Ka band--which experience signal attenuation and rain
fade problems. The technology for using these frequencies has yet to be
implemented commercially--let alone for the purpose of direct-to-home
video. The FCC requires satellites using the Ka band spectrum to be
positioned very close to one another, necessitating larger dishes. In
fact, the permissible size of the dish using Ka band satellites is
still unknown. The integration of such an offering with the current DBS
services, which use different spectrum, conditional access, and digital
transport standards, may also be problematic.
must-carry is inappropriate at this point because satellite carriers
lack market power
While the additional spectrum we intend to acquire at the 110 deg.
W.L. orbital slot will allow us to serve many more markets, this will
not be possible if DBS distributors were to become subject to
unreasonable, and probably unconstitutional, must-carry obligations.
EchoStar believes it would be inappropriate for Congress to impose a
must-carry requirement on satellite carriers at this point. The main
reason why Congress imposed must-carry provisions on cable operators,
and why the courts found it constitutional, was due to the bottleneck
characteristics inherit in cable systems. Satellite carriers in
general, and EchoStar in particular, lack that characteristic. Indeed,
it was only when cable operators indisputably gained real bottleneck
power in the early 1990s that Congress imposed must-carry rules and the
Supreme Court, after careful review, upheld them.
Specifically, in enacting the 1992 Cable Competition Act, Congress
found that: 2
---------------------------------------------------------------------------
\2\ See Turner Broadcasting System, Inc. v. FCC, 117 S.Ct. 1174,
1190-96 (1997) (Turner II).
Cable operators had considerable and growing market power over
local video programming markets.
Cable served at least 60% of American households in 1992 and
evidence indicated cable market penetration was projected to
grow beyond 70%.
Cable operators posses a local monopoly over cable households,
with only 1% of communities served by more than one cable
system.
``Cable operators thus exercise control over most (if not all)
of the television programming that is channeled into the
subscriber's home . . . (and) can thus silence the voice of
competing speakers with a flick of the switch.''
``The structure of the cable industry would give cable
operators increasing ability and incentive to drop local
broadcast stations from their systems, or reposition them to a
less viewed channel.''
``Horizontal concentration was increasing as a small number of
multiple system operators (MSOs) acquired large numbers of
cable systems nationwide.'' In 1992, the 10 largest MSOs served
almost 54% of all cable subscribers compared to less than 42%
in 1989. By 1994, the 10 largest MSOs controlled 63% of the
cable systems, a figure projected to rise to 85% by 1996.
``Vertical integration in the industry was also increasing.''
In 1984, cable operators had equity interests in 38% of cable
programming networks. In the late 1980s, 64% of new cable
programmers were held in vertical ownership.
``Cable systems would have incentives to drop local
broadcasters in favor of other programmers less likely to
compete with them for audience and advertisers.'' As the Court
explained, ``Independent local broadcasters tend to be the
closest substitutes for cable programs, because their
programming tends to be similar, and because both primarily
target the same type of advertiser: those interested in cheaper
(and more frequent) ad spots than are typically available on
network affiliates.''
Cable carriage greatly increases the ability of broadcast
stations to compete for advertising, which substantially
increases viewership.
``Cable has little interest in assisting, through carriage, a
competing medium of communication.''
Significant numbers of broadcasters had already been dropped
and a substantial percentage of independent stations were not
carried.
In parallel with clustering, cable systems were looking
increasingly to advertising, especially local advertising, for
revenue.
Stations that are dropped or denied carriage would be at
``serious risk of financial difficulty.''
On the basis of this evidence, the Supreme Court found that ``it
was more than a theoretical possibility in 1992 that cable operators
would take actions adverse to local broadcasters.'' 3 A
majority of the Court accepted that cable's bottleneck power
represented a sufficient enough threat to the broadcasting system to
justify an important government interest in the promulgation of must-
carry rules.
---------------------------------------------------------------------------
\3\ Turner II, 117 S.Ct. at 1192.
---------------------------------------------------------------------------
Cable wasn't always such a behemoth. Like DBS, cable was once a
fledgling technology and Congress, recognizing this, took a series of
actions to help it grow.
In fact, the history of cable television can easily be
characterized as one of special favors from the Federal Government,
allowing cable to compete against the monopolies of earlier eras. Back
when broadcast television and telephone companies occupied the monopoly
positions that the cable industry occupies today, cable regularly went
to the government looking for help that would enable it to compete. As
Rep. Edward Markey, ranking member of the House Commerce Subcommittee
on Telecommunications, Trade and Consumer Protection, said in a recent
hearing:
``What we've done . . . over the years, is we've said, to
industries, to the cable industries, tell you what, we'll give
you access to every television station for free, in the 1970's.
We'll give you access to every telephone pole or electric pole
in America, because we don't want you to have to build your own
poles. Now, that's not perfect, but it gets you in the game.''
4
---------------------------------------------------------------------------
\4\ Video Competition: Multichannel Programming: Hearings Before
the House Subcommittee on Telecommunications, Trade and Consumer
Protection of the Committee on Commerce (Apr. 1, 1998) (Remarks of Rep.
Markey).
---------------------------------------------------------------------------
More specifically:
When cable was in its infancy, broadcasters tried to subject
cable to common carrier regulation, arguing that cable's growth
threatened them. The FCC, at cable's request, refused. Indeed,
the FCC put a ``heavy burden'' on broadcasters who claimed
economic injury from cable systems.
At the same time, broadcasters did not want to allow cable
systems to retransmit their signals without permission. The
cable industry fought against such a so-called ``consent''
requirement. In 1959, Congress sided with the infant cable
industry, refusing to adopt a consent requirement for
retransmission of local broadcast signals. Eventually, in
Fortnightly Corp. v. United Artists Television, Inc., the
Supreme Court held that cable systems did not have to obtain
consent of the copyright holder or pay royalties to retransmit
copyrighted material on distant television signals. Congress
left this decision unchanged until 1976. With the 1976 Act,
Congress gave cable operators a broad compulsory license to
retransmit broadcast signals.
In the 1960s and 1970s, local telephone companies refused to
allow cable operators access to utility poles, utility ducts,
and conduits, effectively preventing some operators from
reaching their customers. Again, the cable industry looked to
the government to step in, and Congress in 1979 enacted the
Federal Pole Attachment Act in order to prevent telephone
companies and other utilities from charging unreasonable rates
for the attachment of cable television equipment to poles,
ducts, conduits, and rights-of-way.
Not many years later, Congress, at the request of the cable
industry, enacted the Federal Cable Act of 1984, allowing state
and municipal governments to grant cable operators exclusive
franchises (which were prohibited only in 1992). That same 1984
Act granted cable operators the right to use easements or
rights-of-way dedicated for electric, gas, telephone, or other
such utility transmission--rendering unenforceable private
arrangements which seek to restrict a cable system's use of
such easements or rights-of-way. Indeed, the 1984 Act
introduced vast deregulation of the cable industry. Congress
re-regulated cable only in 1992, when its market power had
become too formidable and the abuse of that power had become
too blatant to ignore.
EchoStar is not asking for government favors like those that cable
operators secured so many times. At the same time, it is simply
inappropriate to saddle EchoStar with must-carry obligations that were
imposed on cable operators only after (and because) they had amassed so
much monopoly power. Further, we believe any reform of SHVA you
consider in conjunction with the House Judiciary Committee should allow
DBS to offer local stations without having to carry all of the stations
in a given market until the DBS industry has some level of market
penetration.
fair retransmission consent agreements are essential
Accompanying local signal carriage should be the ability for DBS
providers to get retransmission consent agreements with broadcasters
under the same terms broadcasters give to cable. Our hope is that when
we unequivocally win the full-fledged right to provide local stations
to local markets, the TV stations we seek to carry in each of these
markets will give us retransmission consent agreements to the extent
required. Since EchoStar launched its DISH Network service in 1996, we
have been seeking those agreements with broadcasters nationwide. We
believe the broadcaster has, to the extent required, the right to
control its own signal, but our lack of market power as an industry and
as a company gives broadcasters no incentives to offer us fair terms.
Conversely, the cable industry's market power translates into great
leverage over whether the broadcasters deal with us enthusiastically or
not. In seeking agreements with the broadcasters, we have had numerous
executives tell us that they would be willing to give us agreements,
but they have declined because they fear angering the cable companies
they deal with. We urge you to make sure there are provisions, in any
legislation passed, that will ensure that DBS is able to get
retransmission agreements from broadcasters on terms that are
comparable to those enjoyed by cable operators--terms that are fair and
equitable.
distant network signals
This Committee's decision concerning the retransmission of distant
network signals to households that cannot get truly adequate network
signals is as important to EchoStar as the decision concerning local-
into-local retransmission. It is important to distinguish between
retransmission of local signals from distant signals.
Retransmission of local signals does not threaten the network
affiliate relationship, which the ``unserved households'' restriction
was intended to protect. The signal being retransmitted by satellite is
the local network signal, not that of another affiliate of the same
network. For that reason, EchoStar believes that local-into-local
retransmissions are within the scope of the current copyright license,
although legislation is still necessary to confirm this.
With respect to distant signals, EchoStar acknowledges that
retransmission of a distant signal where a local signal is truly
available would compromise the network-affiliate relationship. We
recognize the legitimate concerns of the broadcasters and we are not
requesting that such retransmissions be permitted. On the other hand,
the consumers' interests are paramount for this Committee and for
EchoStar, and it is important for all of us to work to ensure that each
and every consumer without an adequate network signal has access to a
distant network signal by satellite. In its recent Grade B
Order,5 the FCC made several decisions in connection with
the definition of ``Grade B intensity.'' While the FCC's actions were
well intentioned, they also highlight the need for congressional action
to clarify when a household can receive distant network service by
satellite.
---------------------------------------------------------------------------
\5\ Satellite Delivery of Network Signals to Unserved Households
for Purposes of the Satellite Home Viewer Act, FCC 99-14 (rel. Feb. 2,
1999) (Grade B Order).
---------------------------------------------------------------------------
The FCC found, first, that it has no authority to adopt a higher
value for Grade B intensity, corresponding to modern consumer
acceptance standards, specifically for SHVA purposes. Second, it
adopted a methodology for measuring television signal intensity at
individual households. However, several aspects of that methodology,
including the need to re-orient the test antennas to each and every
station and make several measurements at different locations after each
re-orientation, make it cumbersome and expensive, and thus a non-viable
solution for testing at millions of households. Third, the FCC endorsed
the so-called ``Individual Location Longley-Rice'' (ILLR) model for
predicting whether or not individual households can receive signals of
Grade B intensity. While this method is an improvement over the one
used by the broadcasters in the Miami litigation, it still penalizes
consumers who can only receive a strong signal with 50% confidence.
Finally, the FCC identified several options for improving the SHVA and
the Communications Act to better serve customers, including the
following: confirming that copyright law allows satellite companies to
provide local television stations to local markets; finding a ``better,
but still objective, standard'' for determining which households are
``unserved;'' repealing the 90-day waiting period for former cable
customers; and providing for a ``clear statutory acceptance'' of
predictive models and loser-pays mechanisms.
We join with the rest of the industry in urging you to reform SHVA
so that the law gives the FCC the authority to set a signal reception
standard that ensures, with a high degree of probability, that the
signal can be received in the home at the television set.
conclusion
DBS as an industry has to be able to say to potential subscribers,
as we have in one of our most recent advertising campaigns: ``dump
cable--we can give you what they can give you.'' We are asking you and
your colleagues in the Senate to reform the Satellite Home Viewer Act
so that it ultimately lets the consumer decide whether we have a
product that competes. We think our product will compete more
vigorously if placed on a more equal footing. Reform the law so that
DBS can retransmit local programming without having to bear the burden
of must-carry until the DBS industry can become a more vigorous
competitor to cable. And finally, we ask that you encourage the FCC to
develop a realistic method for predicting who is eligible to receive
broadcast signals and for measuring signal strength.
If you take action now, you will help the Direct Broadcast
Satellite industry fulfill the promise made by Congress to the American
people when Congress signed into law the Telecommunications Act of
1996. The promise was for effective and uninhibited competition. That
is what consumers want and they should not have to wait.
Mr. Tauzin. Thank you very much, Mr. Moskowitz.
The Chair himself for a round of questions, and we will try
to quickly and carefully limit everyone, including myself, to 5
minutes, so we can get through. If we have time, we will try to
do a second round, if anybody wants any further questions.
Let me start by asking Mr. Perry, using your technology and
assuming that the FCC would implement its new predictive model,
how many of the viewers who are going to be cutoff this weekend
would not have to be cut off?
Mr. Perry. Approximately 10 percent.
Mr. Tauzin. How many households is that?
Mr. Perry. There are 744,000 scheduled to be disconnected.
So 75,000.
Mr. Tauzin. Seventy-five thousand households would not have
to be disconnected. And of the 2.2 million households
eventually affected by the order, would that number still be
about 10 percent?
Mr. Perry. It should hold true, yes.
Mr. Tauzin. So we are talking about over 220,000 households
might not have to get disconnected, right?
Mr. Perry. That is correct.
Mr. Tauzin. Let me turn to you, Mr. Fisher. I understand
that Direct TV has said that they intend to requalify of all
Primetime 24 subscribers. Using the FCC's new predictive model,
if those 220,000 citizens who would be entitled to receive the
long-distance network signal would not have to be disconnected,
why cannot you and the satellite industry go to court and
voluntarily ask for a delay in time to let this happen, so
that, instead of disconnecting these people and reconnecting
them later, we can have an orderly process of this matter?
Mr. Fisher. Mr. Chairman, to the best of my knowledge, of
the 70,000 that Mr. Perry has just referred to, overwhelmingly
they are in fact receiving the authorizations; they are
receiving the waivers. The crisis does not exist, sir.
Mr. Tauzin. Mr. Hewitt, you had showed us some picture
indicating a satellite consumer who was going to get cutoff. I
don't know if you dispute whether that citizen is going to get
cutoff or not, but, Mr. Fisher, having looked at that, would
you agree that that person ought not get cutoff of a satellite
signal?
Mr. Fisher. If that is the signal that results from a
conventional rooftop antenna that is properly aimed, clearly,
that person should not be cut off. I would only say that, when
the satellite industry brought tape after tape to Federal court
and we went back to those same locations in place after place,
wonderful Grade B signals were visible.
Mr. Tauzin. Well, again, if there is a process underway
whereby the 220,000 subscribers who are not supposed to get cut
off are not going to get cut off, that is one thing. But if
those folks, or a goodly number of them, are not going to get
cut off and have to be reconnected, it seems to me that some
agreement to--what is it going to hurt to allow some time for
the new FCC predictive model to be implemented, then for these
citizens to be legally qualified, rather than waivered or
anything else, to get the network signals over their
satellites?
Mr. Fisher. Mr. Chairman, I don't believe there is any
reason that people in the white areas should be cut off at the
end of February. And I believe our industry is working very
hard to assure that is the case.
Mr. Tauzin. But the concern is, obviously, for those
citizens who will be cut off, nevertheless, and who under the
new predictive model would not necessarily have to be cut off,
and you are telling me that is not going to happen. And I am
hearing from an awful lot of people that it is going to happen.
Mr. Fisher. Mr. Chairman, I appreciate that, and I know the
noise level on this has been extremely high. We have called
upon Decisionmark to, as rapidly as possible, use the FCC
suggestions. And I can only tell you that our industry believes
in the most fervent way that we are, in fact, providing those
waivers to everyone who is qualified under the newest
interpretation of the FCC regulations.
Mr. Tauzin. How many waivers have been allowed so far?
Mr. Fisher. I believe it is in the tens of thousands, sir.
Mr. Tauzin. How many? Twenty thousand, 30,000?
Mr. Fisher. We let 3,000 go in Seattle ourselves.
Mr. Tauzin. Well, you are up to 75,000, because that is the
number that is going to cutoff this weekend, absent the
implementation of the FCC's new predictive model.
Mr. Perry. As of last night at midnight, 67,000 individuals
had requested waivers on their own.
Mr. Tauzin. And how many have been granted?
Mr. Perry. Approximately 37 percent.
Mr. Tauzin. Thirty-seven percent of the 60,000?
Mr. Perry. Yes.
Mr. Tauzin. So we are talking about a considerably smaller
number than the 75,000 who should be qualified under the new
FCC predictive model to receive the signal.
Mr. Perry. We are running in parallel here. We have the
customers who come in through our GETAWAIVER.COM website, and
then we have the process whereby we are requesting waivers on
behalf of the NAB for CBS and FOX, and that number is very
different than the GETAWAIVER.COM site.
Mr. Fisher. Mr. Chairman, can I add a note, because it is a
little confusing? There are two systems simultaneously. There
are people who are cognizant that they need to request a
waiver. Mr. Perry has just explained the rate of waiver
production in there. At the same time, our industry is
proactively going forward to try to find the people who have
not requested waivers, but we know should get them.
Mr. Tauzin. But you are talking about nationwide, and not
necessarily those subject to the injunction, too. The numbers
are awfully fuzzy here. All I am saying and all I am asking is
that, before the Congress has to leap into the breach with the
moratorium, which we are going to do if we have to, it seems to
me that the parties going to court and asking for a brief time
to let the new FCC model be operative would be a wise course of
action. And I will leave you with that thought.
I yield to my friend, Mr. Markey, for a round of questions.
Mr. Markey. Thank you, Mr. Chairman, very much.
It is an interesting dilemma that we have because we all
know that the largest percentage of the people we are talking
about who are going to be affected are middle and upper middle-
class people who in no way are affected by buying because they
are going to get a lower price from satellite than they are
going to get from cable. It is not in any way affecting cable
rights that we can identify in the country.
We also know that a lot of these people like to pick up the
New York City news or the Chicago news when they are at home
because it is part of a mobile upper middle-class group of
people as well. So they are not as closely tied to the local
community. They don't have the attachment to it.
So that is kind of a countervailing consideration here,
too, because we do create this disconnect to the local
community, the people we get into this era without a solution
to the local-to-local issue, because, clearly, you have got a
problem which doesn't affect ordinary consumers. It is
affecting a very special slice of consumers that advertisers
are targeting. This is the special little group of people with
money in their pockets in the above-average income groups that
people market Oldsmobiles to and market these products that
clearly fuel a lot of the local news and public interest
programming on local television stations. I mean, that is the
bottom line on this. I am not getting any calls from blue
collar or poor people about this issue. We all know who is
calling in. So it is an interesting set of issues.
What I would like to ask you, Ms. Collier, if I could, I
understand that your service, which brings in local TV
stations, can help consumers get a more comparable service to
what cable offers. But what will your service cost and how soon
will it be running?
Ms. Collier. Our service will compete head-to-head with
cable television and will compete primarily on price and
quality. It will be a digital service. I understand digital
television here in the District is $80. Our intention is to
sell our service for around $17.95 for a comparable service.
Mr. Markey. And when can you do that?
Ms. Collier. And we can begin selling this service after we
are authorized and licensed within 6 months in 10 of the top 30
markets, identifying those that have the least amount of
competition, and then on a nationwide basis within 2 years.
Mr. Markey. How long does the FCC tell you that it will
take in order to get this process completed?
Ms. Collier. They haven't given us an indication.
Mr. Markey. How long will it take, Ms. Lathen?
Ms. Lathen. As I understand it, the applications are
currently pending before the Wireless and International
Bureaus, and I can't speak on behalf of the Wireless or
International Bureau, but I understand that they are going to
be looked at this summer.
Mr. Markey. Yes, well, clearly, we need to integrate this
process. If the solution is in one bureau and the problem is in
another, we have to have some way of bringing together the
various bureaus.
Ms. Lathen. Can I correct that? I have someone here from
engineering who could speak more specifically to that, if you
like.
Mr. Markey. On the timing?
Ms. Lathen. Yes.
Mr. Markey. Okay, yes, quickly, please.
Mr. Franca. Deborah was quite correct in that this is
related to another proceeding. There are competing parties that
also want to use the DBS spectrum for----
Mr. Markey. Would you get in closer, please?
Mr. Franca. They want to use the same spectrum that
Northpoint is suggesting to use for other purposes, and the
Commission is going to have to address and make a decision on
which of these competing uses is most appropriate. So we will
be addressing that in this summer, and then after that we can
address the----
Mr. Markey. Does that mean you have to auction or do you
have another way of dealing with it?
Mr. Franca. Well, Northpoint is suggesting that its
operations would be secondary to the DBS operations. So I think
that gives us some flexibility on whether or not we have to
auction for this particular service.
Mr. Markey. Okay, thank you.
Mr. Tauzin. Before you leave, would you identify yourself
for the record?
Mr. Franca. My name is Bruce Franca. That is F-R-A-N-C-A.
I'm Deputy Chief of the Office of Engineering and Technology.
Mr. Tauzin. Thank you.
Mr. Markey?
Mr. Markey. If I may, obviously, when we passed this law
originally, it was to deal with people who live in Mr.
Boucher's district. That was why we passed it.
Ten years later, you have the 18-dish satellite with people
in my district who have purchased them, and they are well
within the Grade B, and that is where it gets complicated,
because it is moving over into my territory and my
constituents. I am trying to weigh--well, in Massachusetts, you
know, we have a--anyway, it becomes more of an urban and
suburban issue as you move to the 18-inch dish. We have to
weigh the equities under these local TV stations.
Mr. Kimmelman, obviously, from a consumer perspective, we
are in dire need of more effective competitors to incumbent
cable operators. Do you believe that the FCC should explore the
possibility of competition from terrestrial wireless
technologies such as Northpoint?
Mr. Kimmelman. I think the FCC should move very quickly to
explore that possibility.
Mr. Markey. On an expedited basis?
Mr. Kimmelman. Absolutely. We have a problem here of
competing competitors who are about to knock each other out
before they ever get in the ring. There is a claim of--multiple
claims for use of a spectrum. I think we need very quick
regulatory action, and I hope also reinforced by the Congress
because we haven't gotten the competition.
Mr. Markey. And, yes or no, do you believe that the
committee should look at inside wiring problems in multiple
dwelling units and apartments that cable competitors are
encountering?
Mr. Kimmelman. As I said, I think we should get away from
the business of balancing interests here. We should go single-
mindedly toward competition. I think everyone should have
access to the wires out there. Everyone should have access to
the spectrum who wants to compete in a fair manner, and phase
in other obligations like must-carry, so that we get more
competition faster.
Mr. Markey. Ruthless Darwinian, Adam Smith competition?
Mr. Kimmelman. Absolutely.
Mr. Markey. I am with you, Mr. Kimmelman. I just say, take
off the gloves and let them go at it.
Thank you.
Mr. Tauzin. Thank you, Mr. Markey.
Just for the committee's purposes, let me tell you that at
a meeting with the chairman this morning it was agreed that we
will sometime this year hold hearings, hopefully very soon, on
the question of inside wiring and competition for multi-family
dwellings, as well as multi-commercial tenant buildings. There
are some heavy issues of competing legal systems there that we
are going to need to discuss at that hearing.
The Chair is pleased to recognize Mr. Cox for a round of
questions.
Mr. Cox. Thank you.
I would like to ask Mr. Moskowitz to expand on his point
that must-carry--and address that specifically; you also
mentioned retransmission consent--would be a burden and an
impediment to your expansion. You are only serving 2 million
people right now nationally. Tell me, for example, in the
context of Los Angeles, where, according to your written
testimony, you are providing Fox, ABC, CBS, and NBC, and I take
it nothing else of local programming or----
Mr. Moskowitz. No, we actually provide KTLA as well.
Mr. Cox. And KTLA?
Mr. Moskowitz. Yes.
Mr. Cox. Tell me what kind of burdens you are seeking to
avoid, using that example?
Mr. Moskowitz. Well, I guess probably the easiest way to
explain it is that, for every five additional signals that we
have to carry as a result of a must-carry in a particular
city--and L.A. is a good example because it has got probably
five more stations which we would be obligated to carry as a
result of must-carry. For every five additional we have to
carry, that is one less city that we can provide local channels
to. So if we have to comply with a must-carry in Los Angeles,
it means that we probably have to take Salt Lake City or
Phoenix, or one of the second-tier, not top 10, cities off of
our service until such time as compression increases and we can
put more channels on per transponder or the market tells us
that our idea is right, and Wall Street will be willing to
finance the construction of spot-beam satellites, which all the
re-use of the beams.
Mr. Cox. And if I were an EchoStar subscriber in Los
Angeles and must-carry were imposed, what would I be getting,
in addition to Fox and CBS and NBC and ABC and KTLA--and did
you say PBS, also?
Mr. Moskowitz. We do not have the PBS from L.A., but, of
course, PBS has applied to do a national feed to supply it
there.
Mr. Cox. What would be the half dozen other things that you
would add?
Mr. Moskowitz. There would be----
Mr. Cox. It may not be a fair question. You may not know
off the top of your head.
Mr. Moskowitz. No, it is a fair question. I believe I can
answer it.
Certainly, there would be a PAXNET channel, but we already
have a national agreement with PAXNET that they are going to
provide us a national feed, and not going to ask us to carry
the local feed in every community. There would be a UPN and a
WB, but we certainly carry a UPN and WB today. There would be a
Home Shopping Channel that has no local content, and a number
of other services that have absolutely no local content to Los
Angeles, but which we would be required to carry and which we
already carry on a national basis.
Mr. Cox. You already Una Vision in L.A.?
Mr. Moskowitz. I am sorry?
Mr. Cox. Una Vision, do you have that on your L.A. system.
Mr. Moskowitz. We have asked to carry Una Vision in L.A.,
and Una Vision has asked us to carry a national signal instead.
We probably--I believe, actually, we already carry their
national signal.
Mr. Cox. And would a must-carry requirement impact that?
Mr. Moskowitz. It is unclear. It depends on how the law was
structured. Certainly we have reached agreement with Una Vision
about whether we should or should not. We wanted to carry Una
Vision, Los Angeles, because it has a wide market share. They
did not want us to do so.
Mr. Cox. It looks like I have a moment remaining for
perhaps an additional question. Ms. Collier, you stated in your
testimony that there ought not to be any interference from your
use of the same bandwidth that is being used for other
purposes. Do you want to expand perhaps technically on that?
Ms. Collier. We intend to operate as a second basis to DBS.
So we wanted to prove that we do not have interference and
prove that, on an actual demonstrated basis, it is certainly
reasonable for people to have a concern about interference, but
there has to be actual interference for it actually to be a
problem. So that has been the focus of our testing work for the
last 2\1/2\ years.
In our most recent report, which I show here, we did a
very, very comprehensive test with the participation of both
USSB and Direct TV in our work, and we operated our hotline and
we tested many, many different sites. We show that there was
not interference to the system through the DBS customers. We
tested the EchoStar customers also. Even though they weren't
present, we tested those customers also.
So we showed that we didn't have interference. The reason
that we don't have interference is we used the exact same
principles to share spectrum that satellites share spectrum
today. The EchoStar and Direct TV today use the very same
spectrum as one another. We use that same principle to share
spectrum on the ground.
Mr. Cox. Thank you. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Cox. The gentleman from
Virginia, Mr. Boucher, is recognized.
Mr. Boucher. Thank you very much, Mr. Chairman.
Let me pick up on the question that my friend from
California was just asking concerning the use of the DBS
spectrum by Northpoint in order to offer a competing service.
Mr. Hewitt, do you have any concerns about the potential for
interference with the DBS signal if that spectrum is used by
other providers?
Mr. Hewitt. Congressman Boucher, we are very, very
concerned about the interference issue that could occur. We
would embrace the Northpoint proposal should they use a
different spectrum than DBS. Engineers from Direct TV,
EchoStar, and USSB have all indicated to us that it is not
really possible in a consumer environment to coordinate the
signals, both in a transmit and receive area.
The consumers place their dishes all over--rooftops, the
ground, and on patios. Reflections of the signal off buildings
and other things will cause interference. The FCC has just
cleared out the DBS spectrum in order for us to compete. We are
now competing, and we believe very strongly that this is a
high-risk thing to cause the jeopardy of existing consumers and
the future consumers of DBS.
Mr. Boucher. I trust you have made those views known to the
FCC in the proceeding that is underway there?
Mr. Hewitt. I believe we have, yes.
Mr. Boucher. If you haven't, I would suggest you do.
I have a question for our friends from Raleigh, North
Carolina about local-to-local. My district is quite rural. We
have smaller television markets in my district, but we are just
as anxious for the local-to-local service to arrive for us as I
am sure many viewers in the cities are.
I was given some confidence that we would get that service
quickly, when last year Mr. Goodman from your company was
indicating at that time an intention to uplink and then spot-
beam down into the market of origination all 2,000 local
broadcast stations across the United States--in essence,
serving all of the 211 television markets in the Nation. Is
that your business plan today?
Mr. Hutchinson. Two things have changed since last year.
Mr. Boucher. I was afraid of that.
Mr. Hutchinson. One is that the digital standard is now
known, and we have better projections of how fast it is going
to be upon us. I think one of the most telling events recently
has been the announcement by the CBS television network and
Time-Warner Cable that the cable system will carry on the CBS-
owned and -operated stations the full high-definition digital
signal. And other cable systems, digital cable, are sure to
follow.
So if we are unable to offer it at a digital standard, even
though it takes more spectrum, then we cannot make DBS truly
competitive with digital cable, not long-term. We might have a
3- or 4-year business, but certainly not a 15-year business,
the life of these satellites.
Mr. Boucher. So how many markets do you intend to serve?
Mr. Hutchinson. Our current projections with the current
frequencies that we know we have are somewhere on the order of
about 68 markets, chosen based on where the most people were.
How do we serve the most Americans?
Now we started out with a sincere concern for all of the
markets, as you know. That was the goal. We would be very
willing to share the technical plan with any entity that felt
they could build that out. It is really an economic problem. It
has been suggested, for example, that we might want to use a
model from the rural co-ops. Perhaps there is a way to look at
this more creatively financially and extend it.
Additionally, we have been to the FCC and asked for some
special consideration on an additional mid-band of 250
megahertz, that if we could use those signals, those
frequencies that aren't being used, we could extend the markets
farther right now.
We also recognize that, with digital compression in the
future, we may very well be able to use what we have to extend
out, but we don't want to overpromise today beyond what we know
we can deliver.
Mr. Boucher. Well, that is a thorough answer. I am
disappointed in the result, but I appreciate the specificity
with which you announced it.
Let me just ask one additional technical question of you,
and then I have a question of Mr. Fisher. I was interested in
what I have understood your statement to be concerning the
ability of the subscribers of both EchoStar and Direct TV to
have access to your local-to-local service without having to
buy a second dish. Did I understand you correctly, and is that,
in fact, the situation?
Mr. Hutchinson. That is correct, in that we propose a
uniform, unified platform that is in the same arc as both of
them, so that a single dish can see both. We are proposing that
we put our KA encoder chip in each of their boxes, that we
cooperate on that, and that the single dish bring in both.
Mr. Boucher. Mr. Chairman, with your indulgence, I do have
one question for Mr. Fisher, and it is very much in pursuit of
the line of inquiry that you announced earlier.
Mr. Fisher, we heard from Mr. Hewitt earlier that he is
very interested, his industry is very interested, in having the
Commission be given the opportunity to develop a specific
standard for determining who is eligible and who is not to
receive a network signal delivered by satellite. That would be
more far more reliable than the standard that was put into
effect by the U.S. District Court in Florida, which is
essentially the Grade B, or the standard that is based on
Longley-Rice.
Now Mr. Hewitt has recommended TIREM. The Commission on its
own recently, in a very short period of time, came up with a
standard that is better than Longley-Rice and offers a greater
degree of predictability. I would assume that the organization
for which you speak today would have no objection to the
Commission having an opportunity to develop that special
standard, so that all of our interests are better served by a
higher degree of predictability in the future as to who and who
cannot get signals from local stations. Would I be correct in
making that assumption?
Mr. Fisher. Mr. Boucher, if the current standard turns out
to not effectively predict, which so far it has, clearly,
anything that helps to improve that standard is worthwhile. I
am tempted to say that each time the facts have been asked for
it keeps emerging that the Longley-Rice formula, now with
additional amendments, seems to do a heck of a good job. I fear
that, no matter how good a job it does, those who just don't
like the predictions to come out will keep saying, let's change
the standard.
Let me pass along one piece of information which to me was
pretty illustrative. You are known widely as both thoughtful
and expert in this area, and I have struggled with the
realities that you have noted that many people in your
district, notwithstanding that the old standards seem to
suggest they should get a signal, you felt convinced they
really couldn't.
I was handed information today that in, in fact, the
Longley-Rice model, as refined most recently by the FCC, that
one of the stations whose statistics were handed to me a couple
of hours ago, the CBS affiliate from Tri-Cities, would in fact
have its service area cut in half. In other words, your
suggestion over the years that many people in your area simply
couldn't see a Grade B signal now are justified by the Longley-
Rice formula itself.
Again, my summary to you is, if standards don't predict, we
want them to predict. Remember, we are willing to go with loser
pays. So the last thing we want are standards that don't
predict. But every information we keep coming up with is that
the standards, in fact, do predict.
Mr. Tauzin. I can say with certainty that the gentleman's
time has expired. Thank you.
The Chair will yield to the gentleman from Georgia, Mr.
Deal.
Mr. Deal. Thank you, Mr. Chairman.
In my rural north Georgia area, we have some cable systems,
and somebody who has a cable running to their home doesn't have
to ask the question of whether or not they meet the Longley-
Rice formula or anything else. So I am one of those that wants
to cut to the chase and ask, why can't we just solve the
problem, instead of spending a lot of time and money deciding
whose formula is right or whether you have an adequate Grade A
or Grade B signal. Why don't we just get to solving the issue
of local-to-local?
In talking and asking that question, most people agree that
is really the first issue we ought to deal with. So if we all
are pretty much in agreement that the local-to-local is an
issue we ought to solve, then I think this committee
understands that we can begin that process, hopefully.
Let me ask a couple of other questions. I understand that,
Mr. Fisher, a local affiliate would prefer that they have the
opportunity to provide that broadcast signal because they are
local and they sell advertising. But, for example, if you miss
the CBS news on the eastern time schedule, what is so wrong
with having the opportunity to pick it up 2 hours later on the
western broadcaster? I am not particularly concerned about
going down to Pete's Hardware in San Diego, California. Their
advertisers are not a threat to your advertisers from an
Atlanta affiliate. What is the problem with that?
Mr. Fisher. Well, there are a couple of problems. The first
thing is that we would love to think that somebody could, after
all these years, have a VCR that would allow them to just punch
it and watch that CBS news when they wished with their local
advertis-
ers and their local weather warning and their local public
safety announcements and their local channel announcements
right in there.
But the difficulty is that we have negotiated and paid
dearly for program exclusivity, for the right to occupy the air
time with programs that we purchase and fill it with
advertisements. When the CBS Evening News is run several hours
later from the West Coast, those folks are now looking at a
program source that was ours exclusively--that is, the
provision of the CBS news at a specific time of day with our
advertisers in there--and now suddenly they are looking at it
with somebody else's advertisers. It is a real economic problem
to us.
All we have is advertising. When the revenues are trimmed
or dried up or unable to serve all those other folks--I might
point out a third of the country isn't wired. They have chosen
not to and in some cases will never be able to afford to be
wired, and they need to have stations with strong economics.
Mr. Deal. Okay, I am not sure that I buy totally into that
solution, but let me ask another one because you are familiar
with my area. Mine is one of those where it is not common,
since the FCC's broadcast areas do not go by State lines, in
the northwestern corner up there, as you know, Chattanooga is
the dominant area. Those people in northwest Georgia are in the
primary signal from Chattanooga. But they don't particularly
want the Chattanooga local news from that national affiliate.
They would much prefer to have yours. How do we solve that
problem with satellites?
Mr. Fisher. That has been a tough discussion internal in
the business, and it is one of the compromises we all made.
Many smaller television communities were very concerned that
larger stations would bleed in if satellite technology existed.
For folks in smaller communities I consider that to be a
realistic concern, that regional superstations would sprout up.
So those of us with larger stations agreed that we would only
allow our signals--and we would be comfortable with a system
that only allowed our signals--to be transmitted in our local
market area.
The good news is that, as digital television unfolds, we
think that those signals may, in fact, get out there much more
cleanly than they do. In fact, there are a fair number of
rooftop antennas of the new kind that are available that may,
in fact, bring WSB television signal out to northwest Georgia.
But it is a problem. It is the nature of the television
business. I would be loathe to tell the Chattanooga market that
they ought to simply allow WBS television to come on into their
area.
Mr. Deal. But how do we eliminate the discrimination
between the fellow who has the cable in his home and the fellow
who has to rely on a satellite transmission?
Mr. Fisher. Well, now----
Mr. Deal. The cable fellow has yours and Chattanooga as the
affiliates.
Mr. Fisher. There are a small number of areas in which that
is the case, and those are grandfathered from the beginning of
the system. Today, in general, you must rely on a television
station from the market in which you are located.
Mr. Deal. I don't think long term that is a good solution
because you still put the satellite subscriber at a
disadvantage with this cable competitor over here. For those
who don't even have cable access, I don't think that is quite
fair.
I would ask the industry to start looking at a solution for
that, because in my district it is not only Chattanooga on the
northwest; it is Greenville, Spartanberg coming in on the east.
Mr. Fisher. That is a good question. That is worth looking
at.
Mr. Tauzin. Thank you, Mr. Deal. The Chair is pleased to
recognize the gentlelady from California, Ms. Eshoo, for a
round of questions.
Ms. Eshoo. Thank you, Mr. Chairman, and thank you to
everyone that has testified. I have two questions. The first I
would like to direct to Mr. Hewitt, and the other to Ms.
Collier.
My question to Mr. Hewitt is the following: Yesterday a Mr.
Hartenstein from Direct TV told a Senate hearing that he would
donate subscriber fees to charity if illegal customers were
grandfathered under Senator McCain's bill. Today Direct TV says
that they will continue providing service to illegal
subscribers using a company other than Prime 24 to avoid the
court order.
So my question is I think pretty obvious. Is the offer to
commit or donate the revenues to charity still on the table? I
just want to add that, in any event, I mean, since the Miami
court issued the injunction based on the notion of irreparable
harm to broadcast stations, don't you think they deserve the
money to replace the lost viewers and the ad revenue?
Mr. Hewitt. Well, those are two separate issues.
Ms. Eshoo. Are you dividing them or----
Mr. Hewitt. They are truly divided. I don't think they are
directly related. I think what Mr. Hartenstein said that Direct
TV is willing to do is take future profits from Fox and CBS and
provide them to a charity, so long as Fox and CBS would
grandfather those existing consumers in the marketplace.
What also took place, which is a relationship between
themselves and Primetime 24, which I am not privy to those
contractual agreements, but what they have announced is, which
is different than what I think the perception is, what they are
going to do is, now that they are uplinking from other sites,
they are going to go and put in the FCC new ILLR, which is the
new predictive model, and go back through and requalify all
these consumers. They will terminate consumers who do not
qualify under the FCC's new rule. So they are proceeding to
abide by the FCC rule and are going to implement the FCC rule.
Ms. Eshoo. We live in interesting times.
I am not going to pursue that. I think that it is important
to place these issues on the table. My interpretation of what
was said over in the Senate yesterday is a little different
than yours, but that is fair enough.
Mr. Tauzin. Would the gentlelady yield?
Ms. Eshoo. I would be glad to.
Mr. Tauzin. Mr. Markey and I would like to suggest that you
give the money to save social security first.
Thank you.
Mr. Blunt. Mr. Chairman, that would have to be 100 percent
or 62 percent or 57.
Mr. Tauzin. The gentlelady has the time.
Ms. Eshoo. Thank you.
Ms. Collier, thank you for your testimony. I think that you
have not only heightened the committee's expectations of where
your company is going and what its capacities and capabilities
would be, but also I think piques our interest in the whole
issue of multi-channels, video market, and what we can do to
really realize competition.
Can you tell us more about your Internet capabilities? What
kind of broadband applications do you anticipate seeing for
individuals, for community groups? Give us a taste of that.
Ms. Collier. One of the most intriguing aspects of
Northpoint is its ability to offer Internet services, and to do
so at a low cost, to be not only highly competitive with cable/
modems, but perhaps bring these services to people's homes at
lower cost. This will enable, because it will be locally based
Internet service, it will enable new type of applications that
might include distant learning, applications where persons can
keep an eye on children in a daycare setting or nursing home
contact. All different types of applications; it will be more
community-based Internet applications. These, to me, are some
of the most intriguing parts of the future of Northpoint as a
local broadband system.
Ms. Eshoo. Thank you. Mr. Chairman, I am going to do
something unusual and yield back.
Mr. Tauzin. That is. Thank you very much. The Chair is
pleased now to recognize Ms. Barbara Cubin for a round of
questions.
Mrs. Cubin. Thank you, Mr. Chairman.
I wanted to comment, when these members say they have rural
areas, they need to see my district. I am from Wyoming. I
represent 100,000 square miles with 480,000 people in the
State. EchoStar has a big presence in our State, and we really
appreciate it. We appreciate the expenditures that have been
made.
So I would like to refer to Mr. Markey's constituency,
where middle-class and upper middle-class people are the 18-
inch satellite users. Well, in my district the poor people and
the people who live in towns of 100--and there are many of
those--that are 100 miles apart, those are the folks that are
using the satellites. So they don't have to be wealthy. It is
just a big difference.
But, anyway, I would like to address some questions to Mr.
Moskowitz. You said that you would like the policy to be that
you should not have to comply with must-carry until you had 15
percent of the market. How close are you to that now?
Mr. Moskowitz. I wish we were closer, but we have a very
small percentage of the market, less than 5 percent in every
area, and in most cases less than 2 percent in any particular
market.
Ms. Eshoo. And have you been working on technology, or how
close you are to have a program like North Star, or technology
like North Star?
Mr. Moskowitz. Well, Northpoint Technology is----
Ms. Eshoo. Northpoint.
Mr. Moskowitz. [continuing] a terrestrially based system.
Obviously, we are a satellite-based system. There have been
historically other systems that have tried to deliver video
programming terrestrially. Wireless and MMDS obviously comes to
mind. It is a system that didn't work. We certainly hope that
Northpoint's technology is successful because we would prefer
not to use our scarce bandwidth to deliver local programming by
satellite. We have more valuable uses for it. We think we have
to do this to compete with cable.
We have some concerns with Northpoint in terms of
interference issues, some significant concerns, but we
certainly they are successful in it.
Ms. Eshoo. Have you seen the studies that Northpoint has
done, the tests, the results of the test? Have you seen those?
Mr. Moskowitz. Yes, we have. Our engineers have evaluated
those.
Mrs. Cubin. And do you have any problems with the
methodology or the models that are used?
Mr. Moskowitz. Well, we have some problems with some of the
results. Our indications are, at least preliminarily from our
engineers, that particularly within a mile of the transmitter
site, there is interfence with DBS services provided by
satellite. Those interference issues may or may not be capable
of being worked out, but certainly there are millions and
millions of people who would live within a mile of the
transmitter site in any particular Northpoint, and those things
I think we would have to try to work out.
Mrs. Cubin. Ms Collier, would you like to respond to that?
Ms. Collier. Yes, I would. Actually, that Mr. Moskowitz is
making is not accurate in the sense that the very first testing
we did, we did in 1997 on the King Ranch, which is a very rural
area. If you are speaking--the King Ranch is about the size of
Rhode Island, and it was a complete piece of private property
where we were able to test. Northpoint turned the power all the
way up, turned it all the way down, pointed the dish here and
there, and really put the system through its paces.
It is true that at certain very high power levels we were
able to turn off the EchoStar dish service at a mile at very
high power levels. We would never operate at those power levels
in an urban environment or in a real-world environment. So we
were able, because we were on the King Ranch on private
property, to test to failure.
I think that the work that we did in an urban setting
showed how we could operate. We have a number of techniques
available to us that make the service area completely immune
from interference to their services.
Our report that we just filed in December, I hope you will
have the opportunity to also evaluate more recent work that we
did, and to take a look that we have done over a period of
time.
So I think that with any new technology, you want to learn
what its envelope is, where it works and where it doesn't work,
and, therefore, to focus it to where it does work. One place
that we will work very well is actually in a rural area because
our technology is very, very low cost. Therefore, it may
actually be one of the first and best ways to bring advanced
broadband systems to very rural areas.
Mrs. Cubin. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Ms. Cubin.
The Chair recognizes the gentleman from Illinois, Mr.
Shimkus, for a round of questions.
Mr. Shimkus. Thank you, Mr. Chairman.
An interesting debate--free over-the-air broadcast has
really been a hallmark of our society for a long time. Now,
since we have the opportunity for profit through the selling of
more signals, either direct satellite or to cable, we have more
dilemmas.
My district is also--actually, it is covered by four media
markets--St. Louis, Quincy, Springfield, and some part of
Paddukah, Kentucky. In that, there are many white areas in that
I have two river systems, the Mississippi River and the
Illinois River, which causes reception problems.
But the basic premise of the local broadcast signal, and
the importance of it, is critical not just for the local
economy, but a local identity, and also, really health and
safety concerns. We experienced in 1993 the Great Flood and
levies breaking, especially on the Missouri side of the city of
Quincy, in which lives were saved because of the coverage by
the local affiliate on a 24-hour watch of the levy system.
Also, during the spring and summer, we are in Tornado
Alley, in which the technology is there by local broadcast
standards to not only hear the sirens, but if you run down and
turn on the TV, the local broadcast station--and I get mine
through cable locally, so my wife can follow the C-SPAN
activities--but they will now marry it down to the block. They
will pinpoint. Not only if you hear the broadcast in the whole
St. Louis metropolitan area, you can see if the tornado is
heading toward Colinsville or Maryville or Edwardsville and be
even more prepared.
Sometimes we lose sight of----
Mr. Tauzin. Would the gentleman yield?
Mr. Shimkus. I will.
Mr. Tauzin. Just to emphasize this point: We were in Peoria
with the committee in the middle of one of those tornado
alerts, and I will never forget how all the local broadcast
stations, which were giving us block-by-block information as to
where the tornado was coming, it was shut off the air so that
the emergency broadcast signal could be turned on. All we heard
on the emergency broadcast channel was that there were
tornadoes in the area.
The local systems were telling us block by block where it
was, and that truly made the point for our committee members
who were in Peoria at the time.
Thank you, gentlemen, for letting me make the point.
Mr. Shimkus. And, you know, the point that I am making is
that, in this era of competition--and I really applaud the
Direct Satellite Broadcast because we do need a competitor to
cable--they have to carry the local signal for health and
safety reasons, and, also, I think just the good government
aspect of helping us keep our communities together and focused
on even the good things, the public service announcements, the
public service carrying of the Cancer Society and all those
other activities. So I want to put that plug in.
During my district work period, I was taken to a home at
which time we, from that home, called to subscribe to a Direct
Satellite Broadcast, which they said, okay, and you are in an
area in which you can receive all the network signals. From
that home, you could see the broadcast tower of the local
affiliate. So there is a problem that has to be resolved,
because we are talking about franchise and franchise rights
that are important to keeping the local broadcast affiliate
afloat. That was a pretty startling district work period, when
you could make the call and then over the phone you hear you
can get all these Chicago, New York affiliates, and then the
tower is right there. Again, I think the point is made.
I need to ask my two quick questions with that intro. Ms.
Collier, the fact that I represent a rural area, I think in
your testimony, in the questions that you answered, you think
that you will have a great ability to serve a rural area with
your technology, is that correct?
Ms. Collier. Yes, it is. And as a matter of fact, we have
affiliates, actually qualified, financially qualified business
people who stand ready to offer this service in every
television market in the country, and to offer it promptly and
completely.
Mr. Shimkus. And I need to ask a question to Ms. Lathen.
The FCC recently revised its program access rules, but in doing
so, declined to apply the rules to programming delivered
terrestrially and to non-vertically integrated programming.
Does the Commission believe it has the authority to send its
rules to these two areas?
Ms. Lathen. You are correct; we recently revised our rules.
We did not believe that we had the authority to extend the
rules to prpgramming delivered terrestrially. We believe that
that was something that Congress could have done and did not
specifically do that.
Mr. Shimkus. Thank you.
Mr. Moskowitz. Congressman, might I take a moment and
address----
Mr. Shimkus. The tower issue? Go ahead.
Mr. Moskowitz. Permit me, Mr. Chairman?
Mr. Tauzin. Yes, you may, please.
Mr. Moskowitz. Thank you. I think it is important to keep
in mind that we certainly agree that delivery of local news and
weather alerts is very important. To the extent that a consumer
living in a particular local area can receive his or her local
programming with an off-air antenna, that consumer can and
should do so, and can make the choice to do so, and would get
those local alerts, whether they get DBS programming or not. To
the extent the consumer lives so far from the tower that they
can't get it with an off-air antenna, then certainly our
providing distant network signal doesn't injure that consumers.
But the other thing that came to mind is, even the consumer
who lives in close proximity to the tower, can be in a position
where they can't get a good signal. There are plenty who can
get a good signal. But urban and suburban areas with tall
building and other obstructions--the biggest problem we have
today isn't really a signal that doesn't meet a Grade B
standard; it is not strong enough. It is a problem with the
ghosting that occurs that was okay in the 1950's because you
couldn't expect anything better, but today people expect
better. A signal that has 10 ghosts in it because it bounced
off of 10 buildings around the consumer right around the tower
isn't acceptable for consumers today.
Mr. Shimkus. I will bring in my own show next time, but
this was in a rural part of Illinois, farmland. The biggest
building is the hog barn.
I understand your point. The issue is there is a problem
with the marketing of the ability for other network signals
clearly within all of the parameters that we have to make a
determination of, but I appreciate--we can solve this, though.
We have got good competitors here and we are fighting and
kicking and screaming, but we have got to fight for the
consumer and for public safety concerns also.
Mr. Moskowitz. I would say EchoStar, and I think others as
well, have implemented systems that certainly would not allow
that consumer close to the tower to get a signal without an
actual test. That is how we operate.
Mr. Shimkus. But you understand, if the consumer has to get
two antennas and rely on two opportunities in two different
ways, there is never going to be the competition that is need
for cable. It is just not going to occur. It gets too
confusing.
Mr. Moskowitz. It is complicated and difficult.
Mr. Shimkus. Thank you for your patience, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Shimkus. I want to point out he
has big hogs in his district. He could have a log of bounced
signals among those hogs.
I want to recognize the gentlelady, Ms. Heather Wilson, for
a round of questions.
Mrs. Wilson. Thank you, Mr. Chairman. I think, like Mrs.
Cubin, my constituents as elite and cosmopolitan as Mr.
Markey's in that we have the fifth largest State in the Nation
geographically with some of the fewest people in New Mexico.
Indeed, in our State we have 40 percent of the Navajo Nation,
which is the size of the State of West Virginia, that does not
even have telephone service yet. So the idea that cable will be
coming out to Windowrock is something that may be waiting until
the 22nd century.
In New Mexico, between 11 and 15 percent of people are
already served by satellite dishes, not because they are the
high end of the market, but because that is the only way they
can get get a signal. In reality, in New Mexico we have a
system where we have 298 translators from our stations, mostly
based in Albuquerque, in order to cover all of New Mexico. So
we are in a place where we are talking not people per square
mile, but square mile per person.
That is a different situation than most of my colleagues on
this committee with few exceptions.
Mr. Fisher, one of the concerns that I have--and has been
expressed and explored by some others--has to do with the
effect on a change for allowing Wild West, shall I say,
competition and eroding the local broadcast market on what will
happen to local broadcasters and local news. I would guess in
that in most areas the first people to get satellites are not
like my rural constituents, but those that are the high end of
the economic scale, who are probably who your advertisers are
looking to attract.
From your business models, and the business models of the
people that you represent, what percent of the market share
lost would result in elimination or scaling-back of local
television news?
Mr. Fisher. I'm sorry, could you repeat the question,
ma'am? I had a little trouble hearing it.
Mrs. Wilson. Let me try.
Mr. Fisher. Just the last part is where I lost you.
Mrs. Wilson. What percent of the market share of your
market do you need to lose in order for local broadcast
television to no longer be a viable business?
Mr. Fisher. I understand. Losses are losses. The television
industry has engaged in substantial layoffs in the last 4 to 5
years. Competition has intensified. That is the way of the open
marketplace. So it is really simply a function of more pain
will mean more layoffs.
The economic crunch has already visited our industry. We
have been through a couple, and we are ongoing now. The
headlines are full of discussions about network cutbacks. So I
can only tell you that this is a real issue for us. As the ad
revenues dry up, it is harder and harder for us to provide the
local programming, which is the basis of our service.
Mrs. Wilson. Mr. Hutchinson, I have a question for you. You
talked about 68 markets that you are planning on serving. This
may be a technological question. When you talk about which
markets or prioritize those markets, does your technology look
at customers available or is it a concentration of people in a
particular area?
Mr. Hutchinson. No, it is not concentration of people. It
is simply based on how to reach the most Americans with the
capacity that we have.
Mrs. Wilson. I guess what I am trying to get at here is,
are rural areas going to be disadvantaged by this? Are you
likely going to be concentrating where there are more people in
the East, or is local-to-local by your system is not viable in
a State like New Mexico?
Mr. Hutchinson. Because the way the population is
distributed, the logical way is to go down through market rank,
largest market to second largest to third largest, and so on,
and we were able to the 68th largest market before we ran out
of capacity. That is with the first two satellites.
When I reference the phase two, the other two satellites
that we would like to put up, we could do the rest of the
country. There are 800 television stations that can be served
on two satellites. On another two, we could hit the other 800,
for a total of 1,600. We could hit the whole country.
Mrs. Wilson. So the fact that in Albuquerque, for example,
and all of New Mexico, we have ABC, CBS, NBC, Una Vision, Fox,
and PBS--we are the 49th largest market, but we have 289
translators to cover that area; that is not a factor?
Mr. Hutchinson. No, it is not. If you are the 49th largest
market, you would be included.
Mrs. Wilson. Mr. Moskowitz, I have a question for you.
Despite our best efforts to keep America reading, 95 percent of
Americans are principally relying on television to get their
news. Where do your customers get their local news,
particularly your customers--and you have some--in downtown
Albuquerque that are calling me to complaint that they are
getting turned off, even though our signal comes from the
mountaintop outside of town? Where do they get their local
news?
Mr. Moskowitz. Well, a satellite customer may get local
news, to the extent we are doing local-to-local, obviously,
from television; obviously, they can get it from print,
newspapers, as well. To the extent, obviously, that we are
delivering a distant signal, they can't get that local channel
by satellite, except that EchoStar is at the forefront of
delivering data services by satellite as well. Our interactive
data services do allow you to click on a button--and those are
introduced this year with a Web TV problem, with an open TV
product, and if you are connected by twisted pair, you will be
able to get your local weather, your local news, if you want
it.
Mrs. Wilson. From the television or from an Internet site
or----
Mr. Moskowitz. From Internet sites. Some of it we will
actually do by satellite as well. A lot of the data we will
download by satellite. We are looking at a service that we
would add later this year that would actually provide your
local weather for all 211 DMAs on data bases by satellite. So
if you clicked on a button, if you had the right product and
you clicked on a button, you would be able to get that. You
wouldn't be able to get your local weather man showing you the
whole map, but you could get a stream of data that told you
about your local weather.
Mrs. Wilson. If I may ask one final question, Mr.
Chairman--yesterday afternoon we had a wildfire outside of
Moriority, New Mexico that was moving three directions at the
same time over 2,000 acres. Where would your customers learn
about that if they couldn't get the broadcast local news?
Mr. Moskowitz. If they couldn't get it with an off-air
antenna?
Mrs. Wilson. I am a techno-peasant.
I don't know whether they can get that or even if they are
set up to get that if they have your system.
Mr. Moskowitz. To the extent they could get it--oh, our
system actually integrates off-air antennas. So we have a slot
in the back of every one of our receivers where you can plug in
an off-air antenna and switch seamlessly between off-air
channels and satellite-delivered program. So to the extent that
customer can receive a decent off-air signal, we can respond in
that manner as well.
Mr. Tauzin. When I was demonstrating outmoded and old
technologies, I would have done smoke signals, too, but they
wouldn't let me make a fire in this room.
But, obviously, that continues to be a problem out West,
where the local-into-local is still not available in many
communities.
Mr. Pickering from Mississippi for a round of questions.
Mr. Pickering. Mr. Chairman, thank you, and I want to
commend you for having this hearing. This is very important in
my State, as you can imagine, similar to Louisiana. The
percentage of people who have satellite dishes, as well as the
importance of the local-to-local in the local community
responsibility is carried by the local broadcasters, trying to
find a way to address our objectives here resolving this.
Mr. Moskowitz, you have been very aggressive in trying to
crack down and enforce copyright law on those individuals who
pirate satellite signals. Because of that, I would assume that
you believe it is very legitimate for those who also want to
enforce the law in the case of the Satellite Home Viewer Act. I
guess the first question is establishing the premise that we
should enforce and comply with the law whether it is pirating
of satellite signal or whether it is in violation of the
Satellite Home Viewer Act. I just wanted to see if you agree
with that.
Mr. Moskowitz. I absolutely agree that we should comply
with all of the laws, and EchoStar believes that it does so.
Mr. Pickering. As a result, we are where we are today,
trying to see if we can get to local-to-local as quickly as
possible. For my district my question is: For a place like
Meridian, Mississippi, or Columbus, where there are 20,000,
30,000 people, rural areas, can you do local-to-local from a
technological point of view within 2 years?
Mr. Moskowitz. I am sorry, but the simple answer is we
cannot. You have to crawl before you can walk. If Congress had
dictated that no one could drive on an interstate highway until
the system served all 211 of the largest cities in the country,
we would never have built an interstate highway system. It is
the same with satellite; we have to do it a little bit at a
time. We are risking huge dollars of our capital and our money
to try to prove that local-to-local does work, and we can
create effective competition and people will take it. If we are
successful, then we will be able to do more cities, and Wall
Street will finance spot-beam satellites for us, and we will be
able to carry more cities. But, today, the only thing I can
tell you is that we do have receivers with inputs for off-air
antennas that a consumer can get an off-air signal with
antenna. They can hook it up to our system and watch it
seamlessly.
Mr. Pickering. How long do you think it will take, both
from an economic market perspective and technological
perspective, to get to the towns that I mentioned in a place
like Mississippi or other rural areas across the country?
Mr. Moskowitz. I can't make a prediction. We have been in
support of local-to-local and went out and spent our money to
do it. Most people have called us crazy and said it is not an
efficient use of our resources. We think we are right. We are
betting we are right. We will have to wait and see what the
market dictates.
Mr. Pickering. Now some of the legislative proposals
mandate a 2-year transition or a 3-year transition local-to-
local. Can you meet that mandate?--I guess is my fundamental
question.
Mr. Moskowitz. Can we meet it? Could we meet a 2- or 3-year
implementation of providing local-to-local for all 211 DMAs?
The answer is no; we simply do not have--there is not enough
spectrum in the sky to do that.
Mr. Pickering. Mr. Chairman, if you could indulge me just a
few more minutes?
There have been some proposals at different points in this
process trying to address the issue of lost revenue for the
local affiliates. Have there been any projections, any
estimates? I know some of us have asked you this question. What
is the economic cost or consequence or displacement to the
local affiliates in lost revenues? Is there any dollar figure
that the broadcasters have projected?
Mr. Fisher. There is no specific dollar figure that has
been created, no, sir.
Mr. Pickering. Would there be a way to determine the harm,
the economic harm?
Mr. Fisher. I doubt it. I can you give you a common-sense
answer. You all buy advertising, and you see the headlines. A
big ad cost, for example, for commercials in the Super Bowl or
``Seinfeld''--those costs are not straight-lined. It is not
like you have double the number of viewers, so that the
commercial is double the cost.
We are a reach medium, and there is a premium for reach. As
you cut back that reach, it is not just a straight-line
cutback. It is a complicated formula. I wish there was a
formula. I mean, it is a complicated process. The bottom line
is all to sell is reach. When you trim that reach, the law of
unforeseen consequences is operating at a real high level.
Mr. Pickering. Would there be any way to have a
compensation system to compensate the local affiliates for the
displacement during the transition period?
Mr. Fisher. This has been asked to me, and it is kind of
like, do we want farm support? To be honest with you, we are
more happy in an unregulated, unsupported, ``let us just fight
it out in our local community'' basis. Give the chance to serve
the viewers, and we will go after it.
Technology is moving pretty quick. We thought that by
offering 2 or 3 years of transition, we were trying to go on
with the program here. We really hope that that is the way it
can be accomplished.
Mr. Pickering. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman. The gentleman from Ohio,
Mr. Oxley, for a round of questions.
Mr. Oxley. Thank you.
Mr. Fisher, there has been some discussion about the
possibility of going into court and asking for a delay as
opposed to passing legislation. Has that been considered? And
wouldn't it seem it would be at least an indication that most
people believe the FCC standards are perhaps more accurate than
have been proposed before, and it would give the opportunity
for everybody to take a deep breath and perhaps select, or at
least get an idea about, who is underserved and who is not?
Mr. Fisher. Mr. Oxley, I really want to say yes, but I
can't. We delayed filing suit because folks asked us not to. It
took a couple of years for those suits to be accomplished.
When the first set of deadlines arrived, the industry
agreed to compromise, much of that at the suggestion of Members
of Congress. We worked very hard during that period to assure
the Decisionmark system was up and running, and that we could
process quickly.
Someday this deadline has to come. We think we are moving
very expeditiously to grant people those waivers under the
newest of the FCC definitions. We just honestly and sincerely
believe we have got to get by this hump, that most people are
going to realize they have always been able to see TV; they are
going to get it, and we are going to be past it.
Mr. Oxley. Mr. Hewitt, what do you think about that?
Mr. Hewitt. Well, we commend the broadcasters who have been
forthright in providing waivers. We think that is very
commendable. But it has been very, very sporadic. There are
many affiliates that have provided no waivers, and it is not a
kind of system that is assuring a consumer who does not have
access to a signal the guarantee that they will get access to a
network. That is why we have gone forward saying the FCC should
establish a standard for reception under SHVA, and on top of it
should mandate--mandate--a predictive model, methodology, so
that we could know ahead of time--there is no question between
ourselves, the broadcasters, and the consumer that they
qualify.
Now if you take a look at the number of waivers, some of
waivers are granted, by the way, for other reasons than the
fact they can't receive a signal, many of them for business
reasons. Again, we certainly don't oppose that, but the fact
is, if you look at all these black dots over here on the
yellow, the broadcasters went to Miami asking for the yellow to
be invoked. All those people, if the FCC hadn't ruled, would
have been turned off. Now they may still be turned off, because
it is my understanding the judge has not ruled on the motion by
the broadcasters in conjunction with Primetime 24 or the
implementation of the FCC order. We hope she does. We commend
the broadcasters for joining us on that.
So certainly there is more time needed for us to implement
the FCC standard, even though we don't believe that predictive
methodology is the best.
Mr. Oxley. Mr. Fisher, is that correct, what he said?
Mr. Fisher. I disagree with a great deal of it. Let me add
one 15-second postscript. There is no change in the standard
that will save 90 percent of these illegal customers. They are
getting clear signals. We are talking about just at the margin.
Mr. Chairman, I think you isolated that well when you got down
to the 70,000 folks. Further delay doesn't get at the root
problem. The root problem is that 90 percent of these people
were misled, and what they ought to get is antennas from the
satellite industry, which is exactly what they are giving to
the new customers who sign up as of tomorrow.
Mr. Oxley. Let me ask, Mr. Perry, how long would it take to
run the new numbers?
Mr. Perry. We could submit the new numbers tomorrow.
Mr. Oxley. Tomorrow?
Mr. Perry. Yes. We are ready. In fact, we serve over 82
percent of the broadcasters, ABC, CBS, Fox, many of the NBC
stations, the entire C-band industry, and we have yet to serve
EchoStar and Direct TV.
Mr. Oxley. An obvious question would be, what is another
week, since the suit was filed in March of----
Mr. Perry. Well, we will be ready. We are ready to run the
names. It will take a period of about 4 hours to rerun the
names according to the FCC guidelines. We stand ready to do it.
Mr. Oxley. Thank you. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Oxley. We will do a second
round, to the extent you would like to do one. I do want to
recognize myself for a round. I want to try to get something
understood.
One of the concerns I have as we move past the immediate
problem of the decision which is right upon us--is the reason
why we are suggesting that perhaps you give some breathing room
to us as we get this immediate problem, and into the question
of, what do we do as a permanent solution to local-into-local,
so that competition, Mr. Kimmelman, is real, not imagined in
the communities of America?
This question arises: What happens if, Ms. Collier, you get
authorized to use this spectrum by the FCC? What happens if we
pass the bill that authorizes EchoStar to move immediately
under some limited time period for must-carry to be fully
implemented? What happens if we do that?
Mr. Hutchinson, does your system fall financially because
there are alternatives now competing with it?
What happens to satellites, Mr. Hewitt, if Ms. Collier's
system can launch and offer to citizens, not a supplement to
your service, not just the local signals to complement your
satellite signals, but a full complement of cable programming
together with local signals, more like the OMDS system in New
Orleans or Atlanta that Bell South has launched? What happens?
Are we going to see one system defeat the other and the
financial plans of launching delayed? Do we have to consider
that?
Obviously, we shouldn't be the ones to pick the winners and
losers, and I don't want to be. That is the last thing we as a
committee of Congress or Congress ought to be doing.
What I suppose I am getting to is, I want to make sure
there are some competitors left standing at the end of the day.
If we write the bill in such a way that you can't launch,
because we have written it in such a way that the economics of
your launching on these new systems is dramatically damaged by
the language of our bill, then I have to be concerned.
Obviously, the optimum solution would be if you could all
launch. There could be a K-band launch and a Northpoint
successful strategy, together with an EchoStar strategy, that
would not knock satellites out of the sky as a competitor, nor
defeat one of your other plans simultaneously.
But is that a problem? Do we need to be concerned about
that? Do any of you, in other words, make your decisions based
upon whether or not these other systems go or don't go? Anyone
want to handle that? Mr. Hewitt?
Mr. Hewitt. Well, Mr. Chairman, the marketplace should
decide who the winners and losers are. If Northpoint launches
with any other spectrum but DBS, they are welcome to the fray,
and certainly we will have no problem. MMDS and LMDS have been
proven not to be very effective competitors in the marketplace,
as we all know. We are very concerned about the interference
with our signal. If there is no interference, if they use
another spectrum from then BBS, then power to them. The more in
the marketplace, the better for consumers.
Mr. Tauzin. Let me ask, Ms. Collier, how are you different
from an LMDS system?
Ms. Collier. I think, in particular, the LMDS area, LMDS,
of course, is in a much higher frequency, and the reach of
those cells is much, much smaller. LMDS I don't think is a
viable frequency for broadcasting. It is really more for local
loop solutions, telephone solutions. So LMDS I don't think will
ever be a viable thing for broadcasting. Listening to some of
the members in the rural areas, LMDS is simply not going to be
effective in working even in suburban areas; it is certainly
not going to be a rural application.
Mr. Tauzin. But, to get back to this, assuming the
interference problem can be resolved--Mr. Moskowitz has pointed
out that his engineers spotted it; you challenged the
conclusion, and you are concerned about it. Assuming that can
be solved, and Ms. Collier's system is launched as a full-blown
competitor to cable and to satellite, using the same frequency
that satellite is launched on, but, nevertheless, not
interfering with you, if that is achievable, can you live with
that?
Mr. Hewitt. Absolutely. We will beat them.
Mr. Tauzin. All right. Can you live with the fact, Mr.
Hutchinson, that Ms. Collier is out there competing with a new
terrestrial system and EchoStar has been given a grace period
in which to upgrade its system to full must-carry?
Mr. Hutchinson. Yes, we are prepared to take that risk. I
want to emphasize that the bill we seek is not a Capital
Broadcasting bill. It is a bill to enable local-to-local. That
is our primary mission. Now we think we have the best idea. We
think we can win in the marketplace. We have confidence in
that.
What we do know is, if we don't get compulsory copyright,
retransmission consent, and must-carry, we don't have a chance
of solving it----
Mr. Tauzin. But my point is it is not essential to your
build-out plans for us to deny EchoStar the right to move
forward under some local-into-local that at least gives a grace
period for full must-carry?
Mr. Hutchinson. No, it is not. In fact, we accept
transitional must-carry.
Mr. Kimmelman. Mr. Chairman, may I interject something?
Mr. Tauzin. Yes, Mr. Kimmelman.
Mr. Kimmelman. Not at all speaking from the business side,
but as an observer of how this has unfolded in the areas you
have tried to interject competition, these people are all very
civilized at the table, but I think you should expect lawsuits
and challenges. It may not be from the people sitting before
you, but from those around the industry. I think there will
always be problems. I think you should expect mergers, as we
have seen in the past.
Some people have a lot of investment already ineffectively
in the ground, in the sky, and they have got to do something
with it. I think you should expect a lot of market activity
that is not obvious at this point in time.
Mr. Tauzin. That is probably always correct. But let me get
to one of those competitive features.
Ms. Collier, if you are applying for use of this spectrum
simply to complement the DBS signal with local channels, that
may be one thing in terms of your not having to pay for that
spectrum. But if you are going to use the DBS spectrum to fully
compete against DBS, who has to pay for their spectrum, should
not be required to also bid in that spectrum or pay for it at
the same rate as DBS?
Ms. Collier. Well, I think that there are--I don't believe
that the original DBS applicants were subjected to an auction
proceeding. So that wouldn't be completely----
Mr. Tauzin. News Corps was, I think, right?
Ms. Collier. But I believe that Direct TV----
Mr. Moskowitz. Last I checked, we paid about $700 million.
Mr. Tauzin. Yes, there are some big checks paid out there.
What I am asking is, if you become a full-blown competitor
rather than a tie-in to the DBS competitor, is it fair for the
FCC to allow you to use that spectrum without any charge? Is
that fair competition?
Ms. Collier. As a member of the private sector, of course,
I am against auctions.
So I think in the case of our particular situation, we
applied for licenses subject to a cutoff. We applied in a
satellite proceeding where a number of other applicants came in
there. As the FCC person referenced, there are several
applicants in there, and we are the only terrestrial applicant
who stood up to do this work. So we are here. We are ready to
go, and we are the only one here.
Mr. Tauzin. Well, I think you got my drift. We are
concerned not only that we have competition, but that we have
as much fair competition, so that all of you can compete for
service and prices and terms on an equal basis for consumers'
dollars.
You have taught me a lot today. Thank you. I was concerned
that one or the other of you might not move if the other moved,
but I think I have gotten some good signals here today.
The Chair will recognize Mr. Markey, if he has a round.
Mr. Markey. That is funny because I got a fuzzy signal
today.
Mr. Tauzin. You did?
Mr. Markey. Yes. I have got a Grade B seat over here.
I always try to apply, what would Tip O'Neil think about
the issue? How would he deal with it? I think what he would say
here is that all satellite politics is local-into-local.
If we can figure that out, then it is a done deal; we've
got the whole thing solved.
So I guess the way I view it is the same way I view the
telephone, the cable, the terrestrial issue, the wireline
issue. Clearly, we didn't want every single company to have to
put their own telephone poles going down the street. We had to
find out some way could use the common telephone pole if we
wanted competition--and cable, and electric, and telephone.
People didn't like it at the time, but we had a higher public
interest agenda that we were trying to advance.
Clearly, when we were trying to introduce competition into
the long distance marketplace, AT&T didn't like the way in
which we were forcing them to let MCI and Sprint and others at
that nascent stage of competition to gain access to stuff, but
we had a higher public policy interest that we were seeking to
achieve.
It seems to me here that we have to find some way of
ensuring that the new players here that weren't anticipated 4
and 5 years ago are able to get in, because we are only going
to get the real consumer benefits if you have this ongoing
technological challenge to the incumbents that forces everyone
to make the new investment and to reconfigure the way in which
they serve consumers.
So, Ms. Collier here and Mr. Moskowitz and Mr. Hutchinson,
along with the incumbents, both terrestrial and spectrum-based,
each has kind of an understandable stake in the position that
they are holding today.
But this committee historically has looked at the issues
from the perspective not of the incumbents, but the perspective
of the consumer. What is the best way in which we can achieve
the goal of having more and rapid deployment of technologies.
Over the years we have been the biggest fans of the cable
industry, in the 1970's and early 1980's; I am the biggest fan
of the satellite industry, and we continue as each succeeding
generation comes along to try to find ways of accommodating
them.
So I guess what I would say is that you are probably right,
Mr. Kimmelman, that whatever we try to do here is going to be
in court; that is also part of the tradition here, although we
are undefeated.
We win every time, but it just delays it by an extra couple
of years, which in corporate parlance is a pretty good
strategy, if you can get that extra couple of years of market
share at the highest possible percentage.
But, nonetheless, I think what you are finding up here on
the committee is a consensus that we are going to have to move
forward on this set of issues. Local-into-local is going to
have to get solved. It is going to have to get solved really
fast, and we are going to have to ask for the cooperation of
everyone in achieving that goal.
Again, it is not toward the goal of undermining any
incumbent. It is toward the goal of advancing the historical
tradition and philosophy of the committee. Otherwise, we might
as well not exist.
But I thank each of you for your testimony.
You, Ms. Lathen, you have got to be happy that you came to
a hearing on an issue like this and you weren't the focus of
anybody's attention.
I mean, this is an historic--the FCC just sits over here on
the sidelines. But you can help us, I think, to think through
on an expedited basis what the best way is of resolving some of
these technical issues, and then leave to us the formidable
political choices that we have to make. But I think we should
make them.
I think actually the crisis being created by the imminent
cutoffs is the best thing that has ever happened to us because
it is going to focus us on the solutions that we are going to
have to create for the long term. It might turn out to be a
real blessing for the committee that we are going to have this
short-term crisis. We will respond to it; we will try to create
a moratorium, but not to make it permanent, only to give us the
time to--we want to find a permanent solution, not a permanent
moratorium defining the solution. I think today's hearing is
going to advance that goal mightily.
I thank you, Mr. Chairman, for this hearing.
Mr. Tauzin. Thank you, Mr. Markey.
Ms. Lathen, let me also point out that the committee went
extremely light on the FCC today. In fact, you have tried to
help, and we want to thank you for that. But you also helped
make my case for FCC reform when you pointed out that this was
a cross-bureau problem in terms of getting as simple a thing as
a new solution invented for this problem. So, again, I want to
thank you for the effort, not only your staff has made in
trying to find a solution, but, hopefully, to suggest to the
parties again that they use some time to implement your new
suggestion in a way that at least minimizes this crisis and
gives us some time to work it out, instead of having to work it
out in the heat of emotion, as we so often have to do, when
every Member on the floor who does not sit through these
hearings, and does not understand many of the very delicate
balances we have to make, as Mr. Kimmelman pointed out, between
all of your very personal, special interests in what you want
to accomplish for your business purposes, and doesn't
understand the value perhaps of some of the localisms that are
at stake here. All those Members just receive phone calls from
people saying, ``The lights are being turned off on my
television. What are you people doing about it?''
You understand, if you can just give us some time, and
perhaps come to some agreement to utilize the new information
provided by the FCC to minimize the problems, then we would
deeply, again, appreciate it and suggest it again.
Let me also mention something that Mr. Markey alluded to
that I want to draw all your attentions to: It will do us
little good for us to solve the local-into-local issue if we
are faced with a whole cadre of Americans who live in multi-
family dwellings, in some cases who own their own dwelling in a
condominium-type setting----
Mr. Markey. Anyone we're thinking of?
Mr. Tauzin. [continuing] Yes, someone real close to me--who
are not entitled to receive services from any competitor
because they are tied into a single provider.
The issue of wiring in buildings is a very important one. I
know building owners have a great stake in that issue, and we
want to hear from them, and we will. But if the building
becomes a bottleneck or the development project or the
commercial building is a bottleneck to tenants and co-owners
receiving the benefits of competition in the delivery of all
these services, we have left out an awful lot of Americans from
the new competitive systems that all of you are planning to
deploy. I can't put up a DBS on my townhouse. Because we have
an exclusive agreement with cable, I am being deprived of the
benefits of that competition. People like me are complaining
already, and we are hearing more and more from them.
We will hold a hearing on the issue of access from the
building site at some point, and try to resolve some of these
very thorny issues of property rights and contract law and
communication access competition.
Again, I want to thank you very much. This has been,
indeed, an illuminating session--while the picture may be so
fuzzy we may need a waiver to understand it.
Before too very long we will be drafting. If you have
anything that you want to add to this record, we will keep the
record open for 2 weeks. If you wish to make a submittal, by
unanimous consent, the record will stay open for 2 weeks for
either additional testimony or documents or other extraneous
matter you wish to submit to us. If you have suggestions for
the language of the legislation we are drafting, now would be a
good time to put your legal minds to work and suggest them and
bring them to us.
Again, my thanks for a long afternoon, but a very
productive one.
The committee stands adjourned.
[Whereupon, at 5:40 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Hon. Porter J. Goss, a Representative in Congress
from the State of Florida
I am very pleased to present my views to the subcommittee regarding
recent problems associated with receiving network signals via
satellite. I commend Chairman Tauzin and Ranking Member Markey for
their leadership on this issue and for taking the initiative to look
into this matter. This is a problem that is ripe for action and well
deserving of Congressional oversight and attention.
During the past several months, I have heard from well over a
thousand of my constituents who are angry because they will soon lose
some of their network signals, which were previously provided via
satellite. In fact, this is currently the single biggest issue in my
mailbag. Through this correspondence, I quickly became aware that the
Satellite Home Viewer Act prohibits a person from receiving network
signals, such as CBS and FOX, through a satellite dish unless the
person lives in an ``unserved'' area.
The current law, which is now being enforced, states that a person
must be unable to receive a ``Grade B'' signal and must not have
subscribed to cable within the past 90 days in order to be eligible to
receive network signals via satellite. The problem in my district--and
in most places, I assume--is that just because a person can be defined
as being in a Grade B area, does not necessarily mean that they can
actually receive a signal. What we are left with is a situation where
people simply do not have access to some of the larger network stations
at all, unless they opt to pay twice and order cable as well. This
problem is particularly prevalent in the rural and island areas in
Southwest Florida.
While I understand that the Federal Communications Commission has
completed a rulemaking to redefine the Grade B contour, thus providing
a partial solution, there are some larger issues still at stake which
will need to be addressed. It concerns me that the millions of people
who thought they were purchasing a certain product--with no intention
of violating the law--are now being denied a major component of the
product. However, I also recognize that importing distant signals into
local markets could potentially be damaging to the local network
affiliates, and we should certainly keep this in mind in trying to
solve the problem within everyone's best interest. What we need is an
appropriate balance that provides flexibility for satellite consumers
without offending the legitimate rights of our local affiliates.
I do not claim to have expertise in the area of telecommunications
copyright laws, but I would like to assist in developing a legislative
solution. In particular, I would like to offer my assistance at the
Rules Committee stage, to ensure that your Committee's work product may
be expeditiously moved to the House floor for consideration.
______
Prepared Statement of Hon. Bernard Sanders, a Representative in
Congress from the State of Vermont
Mr. Chairman, I support changes to the Satellite Home Viewer Act
which will prevent the disconnection of distant network programming for
customers who cannot receive over-the-air signals from their local
broadcasters--including many of the 65,000 satellite subscribers in
Vermont.
The Satellite Home Viewer Act (SHVA) established criteria for
satellite companies to provide distant signal network stations to
people in ``unserved'' areas--those who are unable to receive over-the-
air broadcasts of their local network affiliates. Last summer, I co-
signed a letter asking the FCC to redefine the measurements used to
determine if a waiver may be granted for a subscriber to receive
distant network service via satellite. Although the FCC adjusted the
requirements for waiver eligibility at the beginning of this month,
only legislative changes to the SHVA will allow satellite companies to
deliver network signals to all of their customers.
The ``Grade B'' contour must be redefined, in consumer friendly
terms, as an area in which 100 percent of the population, using readily
available, affordable equipment, receive over-the-air coverage by
network affiliates 100 percent of the time with 100 percent
reliability. With that definition, only those consumers who in fact
receive local network signals over-the-air would be prevented from
receiving network signals by satellite. The constituents most strongly
effected by the ``Grade B'' definition are in rural, mountainous
areas--like Vermont.
These service terminations also raise serious concerns about
competition. In the last year we have seen cable rates rise more than
four times the rate of inflation. Unless direct broadcast satellite
service is allowed to be a viable option for multichannel video
service, cable rates will continue to soar.
______
Federal Communications Commission
March 17, 1999
The Honorable W.J. ``Billy'' Tauzin, Chairman
Subcommitee on Telecommunications, Trade and Consumer Protection
U.S. House of Representatives, Committee on Commerce
2125 Rayburn House Office Building
Washington, D.C. 20515
Dear Mr. Chairman: I am enclosing my responses to the follow-up
questions from Congressman Gillmore, to the February 24, 1999 hearing
on Reauthorization of the Satellite Home Viewer Act. Please let me know
if there is any additional information I can provide to the
Subcommittee, or if I can be of any further assistance.
Sincerely,
Deborah A. Lathen
Chief, Cable Services Bureau
Responses to Questions from Rep. Gillmor
Question: Do you agree that wireline cable systems are the dominant
providers of multichannel video programming today and in the near
future?
Response: Yes. As the Commission reported to Congress in its Fifth
Annual Report on the status of competition in markets for the delivery
of video programming, we find that competitive alternatives and
consumer choices in the multichannel video programming distribution
(MVPD) market are still developing. Cable television continues to be
the primary delivery technology for the distribution of multichannel
video programming and continues to occupy a dominant position in the
multichannel video programming distribution marketplace. As of June
1998, 85% of all MVPD subscribers received video programming service
from local franchised cable operators compared to 87% a year earlier.
It is also important to note that the cable industry has continued
to grow in several areas such as subscriber penetration, channel
capacity, the number of programming services available, revenues,
audience ratings, and expenditures on programming. In terms of
subscribership, for example, the number of cable television subscribers
had increased to 65.4 million as of June 1998, a 2% increase from June
1997.
Question: Does the FCC believe that DBS providers are the entities
most likely to mount a significant competitive challenge to wireline
cable operators in the near future?
Response: Yes. In the Fifth Annual Competition Report, the
Commission found that there has been an increase in the total number of
subscribers to noncable multichannel video programming distributors.
Much of this increase is attributable to the continued growth of direct
broadcast satellite (DBS) service, which is attracting former cable
subscribers and consumers not previously subscribing to an MVPD.
DBS continues to represent the single largest competitor to cable
television operators and DBS subscribership continues to show strong
growth. As of June 1998, the four DBS providers supplied programming to
more than 7.2 million subscribers. This is an increase of more than 2.2
million subscribers since June 1997, or an increase of nearly 43%. DBS
subscribers now represent 9.40% of all MVPD subscribers compared to
6.85% a year earlier. In addition, industry reports indicate that 2.2
million of the 3.6 million new MVPD subscribers in 1998, or almost two-
thirds, are choosing DBS. It is projected that DBS subscribership will
grow to 20 million by 2003, with its share of the multichannel video
market growing to 25%.
Finally, it is likely that, over time, the differences between
cable and DBS will continue to diminish. Currently, it appears that DBS
represents a substitute for some consumers, especially for those with
access to local broadcast stations. As DBS equipment prices continue to
decline and if DBS operators are authorized to offer local broadcast
signals, DBS could become a closer substitute to cable for an
increasing number of consumers.