The Committee on Energy and Commerce’s Communications and Technology Subcommittee has held hearings on the “Reauthorization of the Satellite Television Extension and Localism Act” (STELA). The draft legislation, which would reauthorize the law for five years, includes:
— Limitations on joint retransmission consent negotiations in conjunction with limitations on FCC action on broadcaster shared services arrangements;
–The elimination of the “sweeps” week prohibition on signal changes; and
— The elimination of the set-top box integration ban.
The good news is the draft no longer includes a provision that would have given MVPDs the option to not include broadcast stations in their basic tiers. This, after House Republicans reportedly decided to drop the measure.
Here’s the opening statement of Communications and Technology Subcommittee Chairman Greg Walden:
“Today the Subcommittee on Communications and Technology will consider draft legislation to reauthorize the Satellite Television Extension and Localism Act, the law that governs the provision of direct broadcast satellite service to millions of Americans.
Today’s hearing follows several previous hearings on the subject, multiple hearings on the communications marketplace, a bipartisan roundtable debate on the issue of the integration ban, and an incredible number of meetings with stakeholders by members of this committee on both sides of the aisle.
It’s taken an enormous amount of work, but this draft has earned the support of cable, broadcast and satellite competitors.
I especially want to thank Vice Chairman Bob Latta and my Democratic colleague from Texas Gene Green on their thoughtful, bipartisan work on the integration ban repeal. It’s important to note that this provision still requires cable companies to support CableCARDs, it just gets an outdated, expensive,
energy consuming provision of little or no value off the FCC’s books. We believe in spurring innovation, not holding it back.
The draft legislation responds to the concerns of members of both sides of the aisle regarding Joint Service Agreements and sweeps week provisions that seem to put a thumb on the scale. I have listened to those concerns and propose eliminating the sweeps week prohibition, which keeps cable operators
from dropping broadcaster signals during “sweeps” weeks – the weeks when Nielsen runs its ratings analysis.
Further, the draft contains a provision that would limit joint retransmission consent negotiation by two or more independent broadcasters in a shared service agreement, unless the pay-tv provider agrees to negotiate jointly with those broadcasters. I have no complaints with provisions that support fair negotiating tactics – for all parties to an agreement. I am, however, very concerned by the FCC’s recently announced plans to dump Joint Sales Agreements into their local media ownership calculations, especially without
first completing their statutorily required quadrennial review of the marketplace.
In Fairbanks, Alaska, all four TV stations are operated from the same group of Quonset huts to share costs and create efficiencies that allowed the stations to provide a variety of news and entertainment to this city of about 32,000 people. Absent a JSA it’s unlikely the community could support four television
stations. I’d also draw the committee’s attention to a recent Wall Street Journal op-ed that includes the community served by the nation’s only African-American owned, full-power broadcast station. And by local broadcasters like Bob Singer, the general manager of several local television stations in my district.
There’s a positive role for consumers in Joint Service Agreements.
Unfortunately, Chairman Wheeler is putting the JSA cart before the media ownership horse. The FCC is required by law to review the entire set of media ownership laws every four years. It has consistently failed to follow the law. If a licensee of the FCC failed to follow the law, it would lose its license or suffer some severe penalty.
Chairman Wheeler is forging ahead to regulate JSAs while leaving the commission’s legal obligations for another day. This is why we’ve included in this draft a clear directive to the FCC that it should do its job and finish the quadrennial media ownership review before it tinkers with JSAs. But in the meantime, we bring fairness to the marketplace when it comes to misuse of JSAs for retransmission negotiations. Our draft finds the right balance.
Our work here is set against the backdrop of our larger effort to update the Communications Act and bring our communications laws in line with the innovation and dynamism of the communications marketplace.
We hope that the many government, industry, and consumer stakeholders in this complex discussion will engage in the comprehensive discussion of the #CommActUpdate. This will be a time-consuming process, however, and as my colleague Mr. Shimkus explained to Politico last week, “The telecom rewrite, that’s not for sissies.”
The video marketplace is not a monolithic structure by any stretch of the imagination. Today’s witnesses represent diverse parts of that ecosystem. The broadcasting, cable, direct broadcast satellite, and retail set-top box industries are all well represented by our panel, as well as the public interest community. I thank our witnesses for being here today and for their counsel.”
Opening statement of Energy and Commerce Committee Chairman Fred Upton:
“I want to thank our witnesses for coming today to discuss our draft of this must pass legislation. More than 1.5 million satellite television subscribers rely on the provisions of STELA that expire at the end of this year. The draft legislation that is the subject of our hearing will ensure that those subscribers continue to receive the service they have come to rely on.
There has been a healthy debate over what this reauthorization should and should not do, and we welcome continued input as this process moves forward. As we work to reauthorize STELA, it is important to remember that this is not the venue for comprehensive reform. As you know, the committee has embarked on a multi-year effort to update the Communications Act. This process will be driven by a thorough and thoughtful review of all aspects of today’s communications marketplace with the goal of updating our laws to better reflect today’s realities while leaving the flexibility necessary to foster continued innovation and growth. We hope and expect you all will be active participants in that process.
Thanks to the hard work of this subcommittee and input from the public and industry stakeholders, Chairman Walden has issued a discussion draft that offers practical, narrow reforms to the current video market while properly leaving comprehensive reform to the #CommActUpdate. I strongly support this draft and encourage others to do so as well.
In addition to extending the expiring satellite provisions, today’s draft also makes several targeted pro-consumer reforms to video laws and regulations. It repeals costly FCC rules that require CableCARDs in set-top boxes leased by cable companies. It removes a government guarantee of “sweeps week”
protection in retransmission disputes. And it takes action to ensure that the FCC meets its statutory obligation to review and deregulate media ownership rules, before attempting to take additional regulatory actions against broadcast sharing agreements. The draft also helps to keep negotiations fair between broadcasters and pay-TV providers for retransmission consent.
These are well-considered, deregulatory reforms – the type of intelligent reforms that Congress should think about during the #CommActUpdate. We hope you’ll join us over the next few years as we dig in to review the state of the law and the state of the communications industry. For now, let’s not lose sight of the important goal today of reauthorizing STELA by the end of this year.”
Some Witness Testimony from the hearing:
Marci Burdick, Senior Vice President of Broadcasting, Schurz Communications, Inc, on behalf of the NAB:
“Good morning, Chairman Walden, Ranking Member Eshoo and members of this Subcommittee. I’m Marci Burdick. I am Senior Vice President of the Electronic Division for Schurz Communications. I supervise 13 radio stations and three cable companies. We own eight television stations and have operating partnerships with two others. I am testifying on behalf of the NAB, where I am the Television Board Chair.
The STELA legislation that the Committee is considering is, at its core, a satellite bill. Passed in 1988, this law was supposed to be a temporary fix to help satellite carriers better compete with cable by giving them permission to provide distant broadcast channels. 26 years later, satellite is providing local broadcast channels in nearly every DMA and are a thriving competitive alternative to cable. So while NAB questions the need for the bill, the draft produced by Chairman Upton and Chairman Walden is a product NAB can support.
Our primary interest in this legislation was to prevent the picking of marketplace winners and losers which is why we have asked for a clean bill. We are happy to see that this STELA draft steers clear of these kind of provisions. While cable and satellite companies sought to use STELA to gain leverage over broadcasters in retransmission consent negotiations, we continue to believe that free market negotiations are the most appropriate place to establish prices. As to any other broader changes to broadcasting, NAB firmly believes those should be debated as part of the comprehensive Communications Act update, recently launched by Chairmen Upton and Walden. Let me tell you why.
As you know, broadcasters may only operate with a license granted to us by the FCC and are, by far, its most regulated industry. It can be hard to flip a switch without getting permission from our regulator. Let me give you some examples: while our competitors are often large, national companies with no nationwide ownership caps, we may not own more than one TV station in a market, and not more than 39% nationally. While our competitors may show provocative, cutting edge content at any time of the day, broadcasters live by decency rules that dictate what we may air. Broadcasters are saddled with innumerable regulations that are far more onerous than our cable and satellite competitors: public file requirements, children’s programming rules, political advertising rules, and a slew of required reports and administrative filings.
For all of these onerous regulations, there are some benefits that broadcasters receive because we operate in the public interest. But if Congress opts to remove the benefits of being a broadcaster, then it should only be coupled with the removal of the burdens. Deregulation should not be limited to one player in an industry.
This is why we strongly urge this Committee to take full advantage of the Communications Act update. If your goal is regulatory parity between the various video platforms seated at this table, a comprehensive examination is the only way to achieve it. We welcome that debate.
I’d like to spend the remainder of my time addressing Joint Sales Agreements, known as JSAs. These are agreements among broadcasters in a market for the joint sale of advertising. While often misunderstood, in reality, these agreements benefit the public, particularly in small and medium-sized markets, through improved news-gathering capabilities, increased local news and enhanced transmission facilities.
For instance, our JSA in Wichita provides the only Spanish language station in the state of Kansas. In Springfield, Missouri, our JSA helped take a struggling station to one that is winning awards for local news coverage.
What we do strongly oppose is the extraordinarily regulatory path the FCC is taking to make television JSAs attributable for purposes of the broadcast ownership rules. The FCC’s proposed rule will require broadcasters to unwind existing agreements, something unprecedented and amazingly disruptive to our business. Moreover, this rule is yet another example of how broadcasters are forced to play by one set of rules, while the rest of the video industry plays by another, which ultimately undermines marketplace competition.
The issue here is local competition for advertising dollars. Television stations fiercely compete not just with each other, but with cable, satellite and the Internet.
Although the FCC and DOJ have said broadcasters dominate local advertising, you can see in this SNL Kagan chart that we are seeing and expecting big gains by cable, Internet and mobile in their share of local advertising revenue.
This chart proves that today’s local advertising market is far more than just local TV, but unfortunately we’re being regulated like its 1960. And, importantly, for all the entities taking revenue OUT of a community, local broadcasters are the only ones putting it back through news and public service.
Strangely, the FCC apparently doesn’t have the same concerns as it relates to cable. The same JSA-like agreements – called “interconnects” – are routine between cable, satellite and telecos for the joint sale of advertising. What you have are cable companies selling local advertising for its direct competitors, like DIRECTV, DISH and FiOS, yet they will continue unregulated.
In conclusion, we strongly support the bill’s language that prevents the FCC from enforcing rules without first collecting empirical data studying the real world impact of JSAs. In reality, these agreements better serve the public interest. To ignore the market pressures facing broadcasting is dooming us to the fate of newspapers, and I hope this Committee will take an honest, fact-based look at the importance of these agreements to localism. We appreciate the work of this Committee and I am happy to answer any questions.”
Michael Powell, CEO, National Cable and Telecommunications Association and former Republican FCC Chair:
“Good morning, Mr. Chairman and Members of the Subcommittee. My name is Michael Powell and I am the President and Chief Executive Officer of the National Cable & Telecommunications Association. Thank you for inviting me today to offer our thoughts on “Reauthorization of the Satellite Television Extension and Localism Act.”
Mr. Chairman, we support the Committee’s effort to extend expiring provisions in the Communications Act and to make other reforms that update antiquated video regulations. As the draft bill reflects, a primary concern for Congress is the anticipated expiration of the current Communications Act provision that requires broadcasters and MVPDs to negotiate in good faith when conducting retransmission consent negotiations. By extending the “good faith” requirement for another five years, the Committee draft charts a responsible course and ensures that this bilateral legal obligation remains part of the retransmission consent regime.
In addition to extending the “good faith” requirement, the draft bill also proposes a few additional reform ideas that we believe are appropriate, and in fact, are overdue given the competitive realities of today’s video marketplace. Among these provisions, NCTA particularly commends the Committee for its inclusion of two narrow, yet very important, reforms that will prune away outdated legal requirements, directly benefitting consumers and promoting a more level playing field among competing providers of multichannel video services.
One such provision would repeal the FCC’s “integration ban” rule, which today forces cable operators – and cable operators alone – to include a separate video decryption component (e.g., a CableCARD) in their leased set-top boxes, adding extra cost, consuming extra energy, and providing no added benefit to cable customers with leased set-top boxes.
Another such provision would prohibit broadcasters that are not commonly owned from insisting on joint negotiations with cable operators and other MVPDs for the price, terms and conditions of their retransmission consent. Through a variety of agreements to share services, such as Joint Sales Agreements (“JSAs”) or Shared Services Agreements (“SSAs”), certain broadcasters have been increasing their leverage in the negotiations by banding together and acting as a single entity in the negotiations rather than acting appropriately as competitors. The Department of Justice and the FCC have raised significant concerns about these anticompetitive practices, and it is appropriate for Congress to address this issue as a complement to actions being considered by the FCC.
For these reasons, NCTA is pleased to support the reform approach outlined by the Committee. Its reforms will promote consumer expectations of increased choice and enhance competitive technological neutrality.
Congress Should Extend The Mutual Obligation To Negotiate Retransmission Consent In Good Faith.
NCTA supports the proposed five-year extension of the legal obligation to negotiate retransmission consent in good faith. Broadcast programming remains an important part of the cable service offering, and ensuring that negotiations for the carriage of broadcast programming on cable are conducted honestly, in a good faith attempt to reach a mutually beneficial carriage agreement, is essential. Continuing a duty of good faith works to constrain excessive demands for unreasonable terms and conditions and, when faithfully applied, limits the risk of blackouts or other actions that harm consumers. Accordingly, we support the extension of this requirement for 5 years, which helps to preserve consumer expectations and is consistent with the terms sought in prior efforts to extend expiring provisions.
The FCC’s Integration Ban Imposes Needless Costs On Cable Customers And Is Not Needed To Promote Competition In Retail Video Device Availability.
NCTA commends the inclusion of legislative language, also present in bipartisan legislation (H.R. 3196) introduced by Congressmen Latta (R-OH) and Green (D-TX), that would repeal a technology mandate adopted by the FCC in 1998 that eliminated a low cost choice for consumers, wastes energy, slows innovation, violates principles of competitive neutrality, and is unnecessary to fulfill the stated statutory objective of promoting the competitive availability of retail navigation devices such as set-top boxes.
Congress intended as part of the 1996 Act to create the conditions for a retail market for set-top boxes and other navigation devices. The FCC was charged with making it possible for manufacturers to develop and sell devices that could be used, for example, with any cable provider anywhere in the country. Importantly, Congress did not impose any technical requirements on existing set-top boxes leased by cable operators to their own subscribers.
In carrying out Congress’s 1996 directive to promote a new market where consumers could choose to buy set-top boxes and other navigation devices at retail rather than lease them from their provider, the FCC did two things. First, it required the cable industry – and only the cable industry – to develop a separate security device, now known as the CableCARD, for use in set-top boxes and other navigation devices that could be sold at retail and used on any cable system. If a customer moved, he could return the CableCARD to his former cable provider, and get a new CableCARD from his new cable provider. This “separate security” requirement fulfilled Congress’s mandate of facilitating the creation of a retail market for set-top boxes and other navigation devices.
The FCC, however, took a second and unnecessary step, adopting the so-called “integration ban.” It required cable operators to completely redesign their own leased set-top boxes to use CableCARDs, thereby prohibiting the integration of security (encryption) and navigation (channel-changing) functions in set-top boxes. This required operators to strip out security functions that had long been integrated in leased boxes. The idea behind this “integration ban” was that if operators had to rely on CableCARDs in their own boxes, they would have strong incentives to support CableCARDs in retail devices as well. Moreover, by eliminating a low cost leasing option, the FCC was attempting – through a little industrial engineering – to steer consumers to choose new third party options.
With the benefit of hindsight, we can now clearly see that while CableCARDs are a “fully realized solution” (to quote TiVo), the integration ban has not stimulated a consumer appetite for third party devices. Today, more than 45 million CableCARD-enabled set-top devices have been deployed by cable operators to their customers, but a mere 600,000 CableCARDs have been requested by cable customers for use in third-party devices purchased at retail. Very few televisions contain CableCARD slots. This is not for lack of cable industry support of CableCARDs, but because manufacturers have found that consumers are not interested in paying the higher price for TVs with built in set-top technology.
Consumers that freely elect leased boxes, however, are paying a penalty in unnecessary expense and energy costs. By one estimate cited by the FCC, CableCARD technology adds approximately $56 to the cost of an operator’s box. We estimate that the costs attributable to the integration ban exceed $1 billion for the cable industry. Additionally, based on EPA figures, cable subscribers also collectively foot the bill for roughly 500 million kilowatt hours consumed by CableCARDs each year. By all measures, the costs of this misguided rule clearly outweigh its benefits.
Further evidence of the integration ban’s incoherence is that these financial costs and energy burdens are borne only by cable subscribers and not video customers of satellite providers, like DirecTV and DISH, or of telco providers, like AT&T. Despite these providers being vigorous competitors, they have no CableCARD obligations, creating an un-level playing field. At the time the rule was adopted, cable had a very large market share, and there may have been an arguable case for a rule exclusively applied to cable. Today, however, that share has shrunk from roughly 85 percent to just over 50 percent. DirecTV and DISH are the second and third largest providers of multichannel video programming, and AT&T is the fifth largest MVPD. The integration ban hampers cable’s ability to compete fairly in this dynamic marketplace, and there is no substantive justification for this disparate regulatory treatment. Furthermore, the goal of advancing a national market for third party devices is illusory when the ban is applied only to half of the market.
It is important to note that even if the FCC-created integration ban is repealed, cable operators will still be required to provide CableCARDs or other separate security for devices purchased at retail. Third party set-top box makers, like TiVo, will still be able to build boxes that use CableCARDs, and cable operators will be required to support those devices. Beyond a cable operator’s continued legal obligation, it will have a strong incentive to continue to support CableCARDs, given that 45 million CableCARD-enabled set-top boxes are in customer homes and that at least seven domestic cable operators are using TiVo as a primary leased set-top box. Repeal of the integration ban simply gives cable customers more choices and lower costs.
Repeal of the integration ban also will not interfere with opportunities for innovation in retail set-top boxes. CableCARD technology is limited to decrypting video programming so that customers can view the channels to which they have subscribed. It does not prevent manufacturers from pursuing new retail products and services now or in the future. The innovative TiVo Roamio DVR is today much more advanced than prior TiVo boxes, yet the CableCARD is the same.
The fact is that the navigation device goals of the 1996 Act are being achieved. As the FCC noted in its recent Video Competition Report, “the CPE marketplace is more dynamic than it has ever been, offering consumers an unprecedented and growing list of choices to access video content.” Cable operators have been key actors in facilitating these marketplace developments by making their services available on a broad and growing array of CE devices. Numerous cable operators are delivering cable services to iOS and Android tablets and smartphones, PCs and Macs, and game consoles and other video devices, and that trend is accelerating to meet consumer demand for these options. These devices that consumers want do not rely on CableCARDs. Today’s competitive market is obviously providing plenty of incentives for cable operators to make their customers happy without needing cable to adopt the same technology solutions for their own set-top boxes.
Retail competition in navigation devices is a worthy goal, but it is now clear that this goal is best supported by embracing the innovations already occurring in today’s retail marketplace and not by clinging to an outdated and costly FCC rule. The repeal of the integration ban will not change the path for innovation in the retail set-top box but will provide more opportunities for innovation in operator-supplied boxes, which will no longer have to be engineered around the CableCARD. We appreciate the inclusion of this important provision in the draft reauthorization bill.
Prohibiting Broadcast Stations From Coordinating Their Retransmission Consent Negotiations Unless Co-Owned Would Create A More Stable Carriage Environment For Consumers.
It is important that any reform seek to promote balance in retransmission consent negotiations. Congress originally created the retransmission consent provisions in an attempt to achieve a competitive balance between the cable and broadcast industries and believed that the retransmission consent negotiation process would provide incentives for both parties to come to mutually beneficial arrangements. Given government’s substantial involvement in what would otherwise be a free market negotiation, government has an even greater responsibility to police anticompetitive attempts to gain undue market power.
In recent years, certain broadcaster practices have disrupted that competitive balance. One of the more troubling practices is that broadcasters are using a variety of sharing arrangements, such as JSAs, to coordinate the prices, terms, and conditions they agree to with MVPDs for their retransmission consent.
If multiple broadcast stations in a local market are not co-owned, then they should not be allowed to act as if they are co-owned in retransmission consent negotiations through a sharing arrangement. The Department of Justice has voiced concerns about broadcast stations that are not commonly owned jointly coordinating their retransmission consent negotiations. DOJ argues that broadcasters must exercise retransmission consent rights individually, because joint negotiations strengthen the broadcasters’ negotiating positions against MVPDs, allowing the stations to obtain better deals, and because joint negotiations eliminate competitive rivalry between the stations. As a result, these joint negotiations result in higher prices and less choice for consumers. FCC Chairman Wheeler recently recognized this point, noting that “joint negotiations have been documented to increase prices to cable systems,” which “ultimately are borne by the consumer in the form of higher cable or Direct Broadcast Satellite fees.” The Chairman is proposing, justifiably, to eliminate these practices.
NCTA appreciates the inclusion of a provision that would prohibit broadcasters that are not commonly owned from engaging in joint retransmission consent negotiations. While we continue to believe that non-commonly owned broadcasters should not be allowed to coordinate their retransmission consent negotiations in any way – whether through directly or indirectly exchanging or sharing information regarding the terms of existing retransmission consent agreements, the potential terms of future retransmission consent agreements, or the status of on-going retransmission consent negotiations – prohibiting joint negotiations is an important step towards restoring competitive balance in retransmission consent negotiations.
In sum, NCTA is pleased to support the reforms suggested in the draft bill. We appreciate your continued efforts to support a vibrant and innovative video marketplace, and look forward to working further with the Subcommittee on these important issues. Thank you again for the opportunity to appear today.”
Mike Palkovic, Executive Vice President, Services and Operations, DIRECTV:
“Good Morning, Chairman Walden, Ranking Member Eshoo, and members of the Subcommittee. My name is Mike Palkovic and I am the Executive Vice President of Services and Operations of DIRECTV. Thank you for inviting me back to testify on reauthorization of the Satellite Television Extension and Localism Act of 2010 (or “STELA”).
STELA reauthorization is critical to millions of your constituents who depend on DIRECTV for their television service. Without Congressional action, key provisions expire this December. The Energy and Commerce Committee and its staff have put in many hours to produce the first discussion draft of legislation that would reauthorize these provisions.
So my first and most important message is simple: Thank you. DIRECTV and its subscribers appreciate your hard work and your willingness to address STELA reauthorization.
I suspect you have already heard from dozens of media companies telling you what you should and should not have done with the discussion draft. Some may even be telling you to do nothing, or to simply change the date of expiration in a “clean” reauthorization—something Congress has never done before.
This, however, is the satellite home viewer act. I am here on behalf of the nation’s leading satellite provider to say that we agree with the Committee’s approach.
Does the discussion draft contain everything DIRECTV thinks it should? Of course not. But it does two critically important things. It preserves service for millions of distant signal subscribers. And it addresses one particularly egregious abuse of the FCC’s rules that is raising prices for consumers.
I’d like to talk about each of these topics in turn.
I. The Discussion Draft Preserves Distant Signal Service
With all of the other issues before this Committee, it’s sometimes easy to forget that key distant signal provisions are due to expire this December. Your constituents, however, have not forgotten about these provisions.
More than 1.5 million subscribers, many in the most rural areas of the country, receive at least one distant network signal from DIRECTV or DISH. I think we can all agree that these subscribers have as much right to receive network television as those in big cities. But only STELA permits them to receive that programming. In many cases, only STELA permits them to receive network television at all.
Were Congress to fail to reauthorize STELA, these subscribers would all lose service that most Americans take for granted.
I want to be absolutely clear on this point. Some have suggested from time to time that private licensing could take the place of STELA. That may be true for local programming. It may even be true under Congressman Scalise’s approach, which would deregulate all programming entirely.
But nobody seriously contends that, if Congress were to eliminate STELA’s distant signal provisions only, private licensing would replace them. Even NAB, which led the calls for eliminating distant signals, doesn’t believe this.
In other words, if Congress does not renew these provisions, distant network signals will disappear. So DIRECTV appreciates this Committee’s work to ensure continuity of service to millions.
II. The Discussion Draft Addresses One Particularly Egregious Abuse of the FCC’s Rules
This Committee has heard for months from all sides, including DIRECTV, regarding how the law should treat the relationship between broadcasters and pay‐TV providers. As I said in my last testimony, we see two general approaches Congress could take in the long term. One is to jettison broadcast regulation altogether and create a truly free market in which broadcast programming is no longer treated differently than every other type of programming. The other is to make the laws smarter to reflect the 21st century video marketplace.
The discussion draft takes one step toward the second approach. It addresses one particular abuse of the FCC’s broadcast ownership rules. It does so, moreover, without attempting to address the full range of policy questions surrounding retransmission consent. That, of course, will be a task for this Committee when it considers updating the Communications Act. DIRECTV looks forward to being an active participant in those efforts.
The draft bill’s step‐by‐step approach has its advantages, because reasonable people can differ on the policy questions that divide broadcasters and pay‐TV providers. For example, broadcasters think our subscribers don’t pay them enough for their programming. We wish broadcasters would pay us for delivering their signals to millions upon millions of our subscribers who would never be able to get them over the air.
(Many of these subscribers would have been able to receive distant signals because of STELA’s changes to the FCC’s “rooftop antenna” standard for distant signal eligibility. Unfortunately, the FCC failed to implement these changes, leaving some subscribers without access to network programming altogether.
Whatever one’s views on these broader issues, however, most people agree that you shouldn’t be able to evade FCC rules through legal tricks. Yet this is exactly what broadcasters are doing today—and this is exactly what the discussion draft would stop.
The FCC’s media ownership rules generally prohibit ownership of more than one “big four” network affiliate in a market. They also generally prohibit excessive concentration of broadcast ownership across markets.
Broadcasters, however, increasingly evade these rules through the joint negotiation of retransmission consent. The American Cable Association identified 48 instances in which broadcasters used a single negotiator to conduct retransmission consent negotiations for noncommonly owned stations in a single market. DIRECTV’s own internal records show that in nearly half of the markets in which we carry local signals, we must negotiate with a party representing multiple affiliates of the “Big Four” networks. This doesn’t even count the increasing practice of networks insisting on negotiating retransmission consent on behalf of their allegedly independent affiliates.
DIRECTV carries more broadcasters than just about anyone. I assure you that these arrangements harm viewers. They lead to higher prices (as much as 161 percent higher, according to ACA). They by definition cause greater harm when blackouts occur. This is why the FCC appears poised to prohibit joint negotiations between two or more stations in a single market, unless such stations are commonly owned.6 The discussion draft likewise restricts the joint negotiation of retransmission consent for non‐commonly owned stations in a single market.
We support this approach. If implemented, broadcasters will once and for all no longer be allowed to evade the FCC’s rules. This is sensible and long‐overdue reform.
This Committee may hear about what it failed to do in the discussion draft. But on behalf of DIRECTV’s more than 20 million subscribers, I would like to thank the Committee for what it did do. While no legislation is perfect, the discussion draft preserves service for millions and addresses an egregious abuse of the Commission’s rules. DIRECTV supports the Committee’s work, and hopes to assist it and the entire Congress so that the renewal of STELA will improve the video experience for all consumers.”
RBR-TVBR observation: Some valuable commentary from Walden: “Unfortunately, Chairman Wheeler is putting the JSA cart before the media ownership horse. The FCC is required by law to review the entire set of media ownership laws every four years. It has consistently failed to follow the law. If a licensee of the FCC failed to follow the law, it would lose its license or suffer some severe penalty. Chairman Wheeler is forging ahead to regulate JSAs while leaving the commission’s legal obligations for another day. This is why we’ve included in this draft a clear directive to the FCC that it should do its job and finish the quadrennial media ownership review before it tinkers with JSAs.” Amen.
