subcommittee welcome to water and good morning to everyone today we will examine the state of competition for video programming in one thousand nine hundred two congress recognized that the cable industry which then dominated the market for the delivery of multi channel video programming could use its control over that programming in order to stifle competition in order to enable competition and baltacha channel video delivery congress enacted program access requirements in one thousand nine hundred two to prevent cable operators with ownership interests in video programming from refusing to sell their programmes to the emerging satellite providers that requirement is broadly acknowledged as being essential to the birth of the d b s industry and of the competition to cable that direct broadcast satellite has brought congress also in one thousand nine hundred two an active program carried requirements that prevent cable operators from discriminating against on affiliated programming in favor of their affiliated networks the rules have been broadly successful without them neither satellite television or multichannel video delivered by telephone companies such as verizon's files service or as could have entered the market the rules have also been instrumental to the success of independent cable networks like the food network and bravo but at the time that the program access provision was approved by congress in  two it applied only to programs that were delivered by satellite to multichannel video distributors today what is commonly known as the to rust real loophole has arisen as vertically integrated cable operators use fiber optics more and more frequently in order to deliver some of their programming to cable had a fiber base to restoral networks economical alternatives to satellite delivery particularly for regional sports and for news programming controlled by regionally clustered cable operators cable operators which deliver programming to rust really can block competing involves channel providers access to their highly popular program offerings these arrangements are understandably troubling for some sports fans who may have to choose between subscribing to the video programming provider of their choice or accessing the games of their favorite regional sports teams in two thousand and seven the federal communications commission found that subscribership to direct broadcast satellite was forty percent below what otherwise would be expected in philadelphia where a cable operators regional sports network has a law called the phillies the flyers and seventy six ers games in san diego the commission determined that a lack of access to the regional sports network provided by the programming about by the padres games resulted in a thirty three percent reduction in the households subscribing to direct broadcast satellite in the san diego area the problem of the availability of to rest really delivered programming on d b s systems is even worse for some rural residents for whom switching to cable service may not even be an option because a cable operator may not serve the area in which the rural residents lives if direct broadcast satellite companies and phone companies are precluded from carrying regional sports programming that effectively bars many rural fans from doing their favorite teams we're interested in hearing from today's witnesses about the to rest rolled up old as it currently exists and the consequences of it what benefits continued use of the to rest role loopholes offered to the providers multichannel video and to consumers and what are its arms and we have knowledgeable witnesses who will speak to us on that subject from a range of different perspectives this morning we are also interested in other matters the f c c has recently considered a number of programs carriage complaints by independent programmers that i'm all tied channel video programming distributor favored its own programming over the affiliated programming with respect to the terms and conditions of carriage does the f c c as program carriage complaint process work as congress intended or should we consider modifications finally that increasing amount of video content  now available by means of the internet some programming web user generated such as you tube is is user generated and available without regard to identity of the originating minutes and it's vertically integrated nature other enter internet based services like hulu and the web sites of the major television networks offer full episodes of programming that aired on television simply as the previous day the more such programming migrate to the internet the less consumers may need to subscribe to a multitude of video programming distributor out all at the same time some web sites that offer video content such as e s p n three sixty are only available to subscribers of particular multi channel video programming distributors what are the implications of these emerging business models for consumers and for  competition in video distribution i expect that our knowledgeable witnesses today will offer a thoughtful analysis of these and other matters regarding video distribution in this digital era and we thank them for their presen here and look forward very much to their testimony that concludes my remarks and i'm pleased to recognize the gentleman from florida the ranking republican member of the subcommittee mr good morning and thank you mr chairman thank you for holdin very interesting hearing the issues surrounding video competition obviously are very important i look forward to hearing from our witnesses thank them for taking their time to be here competition in the video marketplace has been a robust twenty years ago cable commanded almost one hundred percent of the multi channel television market today because of fierce competition cables market share has dropped to about sixty three percent of multichannel video households as we know consumers can choose from a variety of multichannel video providers including direct broadcast satellite in fact as of june two thousand and nine directv with eighteen point three million subscribers was larger than all the cable companies in the united states except comcast echostar with almost fourteen million subscribers was the third largest multichannel video provider in the united states competition from the phone companies such as horizon and t n t and web sites offering everything from home videos to full length movies have brought even more choice to the consumers as a result of this competition thirty seven point eight million consumers over one of every three video subscribers can now obtain multi channel video programming from some company other than their local cable operator it is a truly amazing thing how far we have come in such a short amount of time even the f c c has acknowledged the competition in the video market the f c c s two thousand and nine annual report on video competition reinforced the trend line of previous reports confirming growth and entrenchment of competition in the video marketplace the decline of vertical integration between cable operators and program networks and the emergence of a new video competition from programming that's distributed on the internet innovations a new products are still being created all the time the next frontier is internet based video which now competes with cable satellite and tell about telephone providers giving consumers even more choice applications such as hulu which the chairman mentioned which provides longer network television programs continue to experience explosive growth with three hundred seventy three million video streams per month overall online video has grown almost twenty five percent to an average of nine point five billion streams a month yet despite all this competition we still operate under regular regulatory regimes stemming from the radio broadcast provisions of the one nine hundred thirty four communications act and the multi channel video programming distributor provisions of the one thousand nine hundred two cable and one nine hundred ninety six telecommunications act and as much as we are finding in the broadband contact regulatory policies can hinder rather than help investment and the rollout of video services to consumers when competing platforms are present in the market the growth in digital video programming is requiring significant investment in the internet and beyond cable and satellite providers and now telephone companies are making large investments in equipment and capacity to accommodate next generation video content broadcasters and other programmers are incurring a large cost to create and transmit digital programming in a competitive environment network neutrality mandates and regulations in general deter investments at least put a chill on any discrimination and openness mandates and limit company's ability to differentiate themselves from the competitors and provide their customers with the unique products and a high level of service they demand as a video industry competes in a digital world where the winning business models are not clear yet it becomes even more important to rely on market forces and not on regulation in such a competitive in environment and absent any evidence that consumers are being harmed makes little sense to create a new regulatory environment that would only freeze investment and stunt innovation when congress adopted the program access rules in the one nine hundred ninety two cable act congress wanted to ensure that the infant satellite television industry and other independent television providers simply had access to content thus section six twenty eight for him but a cable operator from unfairly hindering the ability of other pay television providers to gain access to programming in which the cable operator has an ownership interest congress did however include an exception for terrestrial delivered programming as opposed to programming delivered to providers using a satellite network congress wanted to get providers and senate invest in local programming that incentive would be diminished if providers were forced to share the content they develop with their competitors especially since they would need to spread their cost to less than a national audience moreover when providers launch unique offerings to differentiate themselves from their competitors consumers benefit from a greater selection and a quality of programming as i said the video market is very competitive and at this point consumers have many choices so i look forward to this hearing mr chairman and i appreciate again the witnesses coming here to testify thank you very much mr stern the chairman of the energy and commerce committee the gentleman from california mr waxman is recognized for five minutes thank you very much mr chairman i want to thank you for holding this hearing and i want to thank all of our witnesses for appearing today we're in the midst of one of the most profound technological revolution since the invention of the wireless it heralds great abundance in the generation and delivery of content which is all to the good we need to ensure however that we have an architecture of policy and technology that ensures diversity competition choice and access as always the interest to be served first or those of viewers and users the interests of competition and not any n and emmy award winning writer and producer of some of the most popular science fiction programs in history and i welcome your participation today and i look forward to hearing your insights on the consolidation of program ownership it's very important that those who create video programming are not left out of this debate the market for the distribution of video programming is changing many consumers have the option to subscribe to at least two pay television services delivered via cable satellite or fiber optic lines in addition the transition to digital over the air broadcasts has given traditional broadcasters the opportunity to deploy more channels with new and innovative programming meanwhile more and more consumers are relying on their broadband connections to access web based video services and these new web based distribution models offer gr hope for many in the creative community as i have indicated all of these changes are creating both opportunities and challenges for example program karajan program access issues remain particularly when a distributor owns programming that is comparable to or competes with independently owned programming in this case it may be difficult for competitors to field the types of products and services that consumers want as with other areas of to me telecommunications policy the advantages of historic incumbency can be difficult for new entrants to overcome absent government intervention and i'm pleased that even the nation's largest telecommunications companies recognizes recognize this fact i look forward to reviewing all of our witnesses testimony i thank you mr chairman for holding this hearing and yield back the balance  you very much chairman waxman the gentleman from michigan mr upton is recognized for two minutes well thank you mr chairman and with all due respect i don't think that this is necessarily the appropriate hearing that we ought to be having today we should be putting closer scrutiny on the proposals pending before the f c c and why these oppose regulations car about certain companies and how regulation much needed private investment we are entering a new digital age in the new age of entertainment and more than ever the consumer is king consumers don't want their entertainment options dictated to them they want greater control over not only what they watch but also where and when they watch it and these new consumer expectations will continue to fuel investment innovation and competition but let's not forget without investment in the physical network there won't be much room for innovation or competition is my view that public policy must focus on enabling network operators to secure and utilize the investment capital to meet that demand and to build out the vast network necessary to allow for the deployment of new services while still ensuring that services remain affordable for all consumers and i've stated in the past proposed network neutrality rules  alleviate a problem that doesn't exist and threatens to detour the investment necessary to and able consumers to enjoy additional exciting new features in the internet that the internet could offer a necessary new regs such as those proposed by the  chair will stifle future broadband investment and have broad economic implications how does the think that the u s will achieve broadband deployment after the agency imposes onerous regulations that will drive investment out of the broadband sector the u s desperately needs broadband investment to help lift a nation out of economic malaise and the must not undermine that investment both the post and wall street journal editorial pages agree that the chairman's proposal would harm broadband investment the post concluded the proposal would quote stifle further investment with attempts to micromanage what has been a biber and well functioning market place so welcome to all of you who are witness mr chairman i will tell you that it is always a concern to me when i see government itself into a private sector where there is no compelling reason to do so and i think that's what we find ourselves we know that increased regulation is going to give you less of what you want and what people want to see is good solid aggressive competition example of how these issues can be resolved for the benefit of consumers without direct government intervention today we'll hear from our witnesses on challenges they have encountered in providing content to their consumers as well as their suggested solutions to the problem we should tread carefully when discussing legislative solutions have not been exhausted that is not to say that we should not act to ensure fair competition in the video marketplace it is only to say that we should act as a last resort ultimately we have a responsibility to ensure that consumers have access to the content they pay for and that the market power is not abused to their detriment thank you mr chairman for holding today's hearing to discuss it with our what we can ensure that we have fair competition in video marketplace thank you very much mr stupak the gentleman from nebraska mr terry is recognized particularly thank you mr chairman my opening statement will be simply repetitive of mr up opening statements all say all shows she ate myself with those remarks and thank you all for being here and yield back thank you very much the gentleman from pennsylvania mr doyle is recognized for two minutes thank you mr chairman just want to welcome the witnesses and i'll wave opening statement for  questions thank you very much mr doyle the gentleman from connecticut mr murphy is recognized for two minutes thank you mr chairman for today's hearing having looked at the testimony to be presented today i know that our hearing is going to be especially relevant parts of southwestern connecticut much of our witness testimony deals with the issue of competition in the new york metropolitan market between competitors that are also present there and are undergoing the same competition in my district in addition to my colleague mr himes to hear specifically about some of the issues relevant to that market i also look forward to hearing from our witnesses today to get better understanding of how the current market dynamics and what if anything this congress needs to do to ensure that our constituents have opportunities to receive the programming they desired a fair price well ensuring that we don't stifle the development of innovative and new programming especially interested to the extent that this hearing treads into the emerging new technologies which allow our constituents to receive programming online a part of this hearing may focus on some of the emerging technologies like hulu and zillion t v which i think have some very interesting and potentially transformative impacts on our constituents but this congress needs to be mindful while we want to set a foundation that allows for that innovation to be very careful about not allowing for the type of internet piracy and copyright violation that is hampered many of our efforts to try to promote the expansion of new and unique programming into the online space chairman thank you for the hearing and look forward to the testimony of our witnesses thank you very much mr murphy the gentleman from georgia mr deal is recognized for two minutes like mr chairman that we all understand that we are in an evolutionary change in media and that evolutionary changes of course informed us better and we're better connected but the growth is  emergence of trying to protect the rights of copyright owners compensating those who own the signals and on which the copyrighted program will travel and meeting the demand of consumers who want unfettered access to programming certainly the video marketplace is more competitive than ever i think the questions we have to answer is hacking would make this market marketplace completely free so that everyone from the programming owner to the programming provider to the programming and the programming consumer will be benefited last week this committee dealt with  the satellite home viewers reauthorization act at that time the committee adopted an amendment that was passed requiring the dish network to carry the public broadcasting service in high definition sooner than the parties involved able to reach an agreement under the intention of providing public airwaves to all consumers the government forced a satellite carrier to carry a station without permitting d h to choose whether or not they wanted to carry on this illustrates the problem with retransmission consent as broadcasters are able to use their government given marketplace leverage to force carriage of their programming on the distributor and on balance negotiations the practice of retransmission consent is nothing but a government regulated monopoly as congress has given authority to broadcasters negotiate on their terms it is my hope that this witness panel will be able to discuss a solution to the problems of retransmission consent in an honest and fair matter in the end it is the consumer that drives competition competition fosters innovation and innovation is what we thrive for for the future today i hope w be able to work towards solutions that help promote a free and fair market one in which broadcasters distributors and consumers are afforded flexibility transparency and more importantly choice you know back my time the gentleman from ohio mr space has recognized for two minutes thank you mr chairman today we examine video competition in a digital age the topic with relevance all americans who watch t v a lot of americans the status of competition in the video  affects all of those viewers whether they're actively aware of it or not mr chairman my in my district my case workers and by the way are very rural districts are much like your own we receive a steady stream of phone calls from  constituents complaining that they cannot get the video services they desire the cable company doesn't come out far enough to reach their homes which are some distance back from the main thoroughfare two of the five d m a is covering a house eighteenth congressional district have only one of the two major satellite providers offering service not to mention that one of the markets lacks local in the local programming and i've spoken repeatedly about the lack of broadband access in the appalachian terrain of southeastern ohio a sad state of affairs that continues to limit content availability on countless fronts so i think my constituents disagree with some of the testimony that's going to be offered today that competition is alive and well  while that certainly may be the case in more urban and suburban areas of our country and generally have just one choice for television services from a multi channel video programming distributor and one choice isn't really any choice at all i worry that once again rural america is being left behind thank you mr chairman for calling this hearing and certainly for your tireless devotion to meeting the needs of rural america is that i understand clearly how important legislation and regulation is going to be in terms of hansing the competitiveness of video broadcasting all the wrong ideas are going to make the market a lot less competitive and select winners rather than let the market select the winner so i'm looking forward to what your testimony is to learn as much as we can before we actually start marking up ideas on the paper so thank you very much gentleman from vermont mr welch just joined us and is going to waive his statement and both ms castor and mr welch as well as mr mcnerney will have two minutes added to their question time for witnesses as well as as well mr doyle our other members seeking recognition that concludes opening statements and we welcome to all our panel of witnesses and express thanks to each of you for taking part in our hearing this morning i'll say a brief word of introduction about each of our witnesses mr thomas ruttledge is the chief operating officer cablevision systems corporation one of the nation's major cable companies mr benjamin pine is president of global distributions for disney media networks mr patrick corp is the chief operating officer of sunflower broadband mr ronald moore as a writer and executive producer testified on behalf of the writers guild of america west previously introduced by chairman waxman mr terrence denson is vice president of corporate marketing for verizon and mr there as president of the progress and freedom foundation we welcome each of you and without objection your prepared written statement will be made a part of our record we would welcome your oral summaries of your testimony and ask that you try to keep those oral summaries to approximately five minutes that way we'll have ample time for questions and we'll proceed from the left and proceed to the right that's not a philosophical comment but it does coincide with philosophical positioning at least for the last w and if you could pull that microphone a bit closer and be sure that it's on we can hear you better the morning that's better german about your ranking member stearns and members of the subcommittee my name is tom and i'm the chief operating officer of cablevision systems corp i also serve as chairman of the board of directors of the national cable television association mr chairman the state of video competition is very healthy especially in cablevision's area the most competitive market in the country we face competitors many times our size by any metric and consumers have been the primary beneficiaries of this competition after the one thousand nine hundred ninety six act cablevision invested more than five billion dollars to build the most advanced communications network in the country cablevision's offers offers all not some but every household in our service area an array of new digital video voice and high speed internet services significant savings to what our customers used to pay our competitors as the congress recognized competition breeds innovation and investment in competitive markets like new york to root the rules designed to jumpstart competition where there was less multichannel video competition seventeen years ago the program access rules are no longer appropriate attempts to use the regulatory framework for competitive advantage such as by expanding the satellite delivered program access rules should be dismissed out of hand companies should continue to have incentives to compete in the marketplace not in the regulatory arena for years cablevision is based vigorous competition from dish and direct t v currently the second and third largest video distributor distributors and verizon an a t m to the nation's largest telecom and communications companies and currently the azan tenth largest video distributors these phone companies are significantly larger than cablevision more than ten times our size cablevision is always competed by investing in innovating to create products that meaningfully differentiate our service they were given was the first cable company to launch digital video service throughout its footprint including high definition offerings free of charge with our customers packages we launched the nation's best internet service optimum online ultra and then are now building the country's largest wife i network to provide our customers free access to the internet service and public spaces in our marketplace similar groundbreaking investments have been made with regard to content to ensure that cablevision continues to be wide unique value for customers examples include news twelve hundred six cablevision launch news twelve the nation's first twenty four hour hyper local news channel and now offers seven individuals local news channels and five traffic and weather channel's madison square garden high definition hundred eight cablevision became the nation's first regular provider of sports coverage in high definition cablevision's investment was a gamble acquired a sizable investment at a time when very few people had high definition television recently cablevision launched madison square garden varsity a new multi platform sweet television interactive services dedicated to local high school sports academics and activities of interest to our local communities  investments and local and regional programming programming have been both risky and substantial the program access rule adopted in one thousand nine hundred two to ensure that new competitors like directv and dish could launch with key programming is now at odds with this kind of innovation in fact congress recognizes potential negative impact and allowed for a periodic review and sunset of the program access rules the implication of keeping these rules in effect is clear if you take a risk to develop creative and often costly new programming and you fail you alone bear that cost but if you succeed you must share the fruits of your risk in innovation with your competitors the job start competition on the multi channel video distribution market nine hundred ninety two congress required that all satellite delivered cable programming be given to new satellite competitors however congress also wisely established a new opportunity for innovation and programming where cable operated could create new programming deliver terrestrially not be forced to share it with  competitors diverse this policy would undermine competition by discouraging the bad investment in new content services if a company is facing vigorous competition why would the company invest in on tested and expensive services if it had to share those services with its competitors in the interest of investment innovation and competition we strongly urge that efforts to expand the program accept regulations be rejected thank you very much thank you mr r thank you chairman boucher ranking member stearns and members of the subcommittee my name is ben pyne and i'm president global distribution disney media networks i truly appreciate the invitation to talk with you today about video competition there has never been a more competitive video marketplace never thanks to congress and the f c c consumers today have more choices and more video content available to them than at any time in history most consumers now have the choice of three four or more competitive options to receive multichannel video while cable once was feared to be a monopoly today thirty six million customers of scribes to non cable m v p days on the programming side competition for eyeballs has never been more fierce over the last thirty years the number of programming services literally has exploded according to the f c c there are now approximately five hundred sixty five national satellite delivered cable programming networks and cable and satellites most popular services now reach nearly one hundred million households at the same time vertical integration among programmers has decreased of course the exponential expansion of content on the internet whether video streams or social networking has created even more competition today subscribers to multichannel video get great value for their money for about fifty dollars per month subscribers get thousands of hours of entertainment news boards documentaries children's and family friendly programming in fact with all the great content on multi channel television consumers spend much more per hour on movies home video mobile phones print media and video games than for cable television disney realizes that as a result of all the competition that congress has helped unleash some cable operators are facing competitive pressure from satellite telco another new video entrance in an effort to provide some relief to the smallest cable operators most impacted by this increasing competition disney and a b c have granted many small cable operators free retransmission consent for the current three year cycle for the ten a b c stations owned by disney specifically disney granted free retrans consent to ninety small cable operators out of a total of one hundred thirteen operators with whom we deal in our market with respect to our non broadcast channels disney an e s p n have deals with the n c t c the small cable operator cooperative for all of our cable channels this provides n t t c members with buying power equal to the nation's fifth largest multichannel video provider given these and similar efforts the subcommittee should not get involved in the private negotiations between programmers and distributors technology has empowered the consumer more than ever before in our company we create and use technology to deliver content to reach our fans and viewers in doing so disney has been a pioneer through video downloads and i tunes video streaming on a b c dot com video on hulu video over broadband on e s p n three sixty dot com video on demand video on mobile devices in a production of high definition video video across content content across broadcast cable satellite and of course d v d these are just some examples of ways we have to develop to serve consumers in this new age of media technology and we always will continue to find new ways to get our content to our consumers durning to broadband disney an e s p n distribute content on the internet through various models three sixty dot com is our sports event broadband product and it features an online video player and access to a broad array of game telecasts and long form sports content e s p n three sixty dot com is available to any and all for a fee it is currently available to over fifty million households representing approximately two thirds of broadband subscribers in the united states it provides fans with access to more than thirty five hundred live full game telecast every year many of which would not otherwise be available in any other domestic outlined outlets nobody in the marketplace is currently delivering this volume of multisport coverage online i want to be clear on one point though contrary to what you may hear you speak three sixty dot com has nothing to do with net neutrality the entire debate over net neutrality involves network management issues and the relationship of an ice describers in contrast the business model of e s p n three sixty has nothing to do with the actions taken by any i s p such as network management or retail price now and in the future getting the balance right between convenience and pricing is the challenge facing all of us who create and distribute digital content adding to that challenges the problem of piracy we believe the best place to start to fight piracy is to bring content to market on a well timed and well priced basis disney to do just that however piracy is a growing threat to our ability to deliver great content we are all looking to increase broadband deployment and adoption and you didn't believe that it will be high quality sports entertainment video that will help drive that adoption but unless that content is protected as it flows over broadband it will be pirated and ultimately our ability to produce that very content will be undermined we believe that i speak should be encouraged to use the most effective and commercially reasonable technologies and processes to help curb the tidal wave of stolen content present on their networks today in closing thanks to congress's pro competitive policies video competition is thriving in our view no additional government regulation of this dynamic in competitive marketplace is necessary or appropriate thank you very much thank you mr payne mr korb thank you mr chairman and members of the committee the american cable association represents nearly one thousand independent cable operators that primarily invest in small and rural communities where the big guys find it unattractive to provide service our members don't own or control national or major regional programming access to video content is tightly controlled by large media companies that have built their business models on top of decades old regulation as a result our costs for this content grown exponentially over the past few years and this is why your cable bill goes up every year as an entrepreneur from kansas there is one message i hope you take away from my testimony do not believe those that say the sky will fall if you seek to improve the market for consumers by changing the status quo like to remind you that congress changed the cable laws in one thousand nine hundred two because it thought the marketplace could be better for consumers hundred sixty updated communications law because he thought consumers could get better more innovative service and he did it with the satellite home direct and most recently with the the t v transition embracing change needs to be your philosophy once again for instance congress needs to confront free federal rules that grant broadcasters exclusivity and insulate them from competition a recent study shows that retransmission consent fees will pre's from five hundred million dollars in two thousand and eight to one point two billion dollars by two thousand and eleven and a disproportionate amount of this revenue will come from consumers or by small and rural cable operators to be clear what happens today is not a negotiation for most members of retransmission consent negotiation is a take it or leave it deal between an operator and a government sanctioned monopoly network to use affiliation agreements to expand and ensure this monopoly status across every corner of a d m a is artificially raises the price and keeps consumers from receiving relevant programming like sports and whether from neighboring markets video providers should have the option to offer consumers the most relevant and affordable broadcast content available this is best accomplished by giving video providers the option of bringing in broadcast signals from adjacent markets today robust competition exists in some rural markets satellite has become the dominant provider in the area of  providers have the option to place broadcasters on a separate tier as an optional purchase this gives d b s both a negotiating and pricing advantage over small cable operators who cannot offer this option to their price conscious consumers therefore small operators must have parity with satellite to remain competitive they must have the same option to tier broadcasters more overset smaller operators and their consumers pay significantly higher programming rates not only for retransmission consent broadcast channels but also cable in sports programming just because they are small businesses with minimal market power to negotiate their terms from dominant media providers there is an additional extremely important issue for you to consider regarding how programming is being delivered via the internet the s p n is pioneering a closed internet business model with its e s p n three sixty offering where broadband service providers are required to pay a person scriber fee for ever consumer they serve if a provider does not been blocked access to e s p n three sixty and does not provide any options to consumers to access that content at any price there are multiple problems with this situation first a person that is out of work and need the internet only to apply for a job must now subsidize those who want to access e s p n three sixty on a regular basis second it would establish a precedent that content companies can restrict consumer choices in the exact way that net neutrality was designed to prevent i s p s from doing wall street loves this kind of business model as encouraging others to follow us peons lead so this will not be unique situation because e s p n embraces this model you can expect hulu youtube and others to follow suit how much will they charge if this model proliferates with millions of internet content sites consumers will pay exponentially higher rates for broadband service at a time when congress is working to make broadband more affordable a ca believes that consumers should be given a choice and a chance to access any legal content on the internet we're got marvelous of their therefore we request that if you are to proceed in addressing net neutrality legislation that you do not solely focused just on network service providers but address content providers that intend to limit consumer choice so what can be done to create a better video market there are many suggestions detailed in my testimony but i will focus on four here first prohibit any party including that work from providing a broadcast station outside of the local market o from granting retransmission consent to a smaller cable company outside of the broadcasters protected zone second to provide parity with d b s that would permit small cable operators from offering local broadcast programming on its own tier as an optional purchase third direct the f c c to review all programming contracts to empirically determine the level of programming price discrimination and take necessary corrective action finally content services and applications should not be allowed to block consumers access to their products regardless of their ah thank you for this opportunity testify today and i look forward to your questions thank you very much mr cord mr moore thank you chairman boucher chairman  waxman ranking member stearns and the other team members of the committee is an honor to testify before you today my name is ron moore and i'm the executive producer and creator of battlestar galactica i was also a writer producer on the t v series star trek the next generation deep space nine roswell and carnival and i'm currently working on my next project caprica t v series for the sideline at work i've been working writer in the entertainment business for over two decades and in that time the television marketplace has fundamentally changed in my opinion not for the better they're actually fewer places to sell ideas both in terms of the numbers of studios available to buy programming in the numbers of independent networks available to deliver it all this might seem counterintuitive in an environment where the number of number of cable and satellite channels routinely runs into the hundreds a closer look reveals that the media consolidation has resulted in the vast majority of television shows being produced by a handful of conglomerates and a vast majority of cable channels are also owned by only a small number of companies this environment is a direct result of the repeal the financial interest and syndication rules in the mid one nine hundred ninety s the challenge now is to make sure the same thing doesn't happen again that the future programming on the internet does not fall victim to the same mistakes that led to the current domination of media conglomerates in traditional television let's take a moment to look at some of the raw numbers in one thousand nine hundred ninety were eighteen production companies who were significant suppliers of the broadcast networks in two thousand and nine there are eight after the repeal of the fence and rules we went from a system where studios competed with each other for ideas and networks competing with each other for programming to a system where studios and networks are now combined into enormous entit favor doing business with themselves take a look at the next sixty six percent of the series airing on broadcast television this fall or produced by the networks own in house studios the studios no longer look for the best idea they look for the idea that best helps corporate sibling the further consolidation of the industry like the proposed merger of n b c with comcast certainly demands scrutiny and investigation into its impact on competition and diversity of programming but what is the impact on the television audience in the american public how does squeezing out the independent studio and eliminating autonomy for the writer producer affect content the answer is that fewer voices and fewer players reduces access and creates a more homogenized product for the audience before the repeal of fans and an independent studio like r c warner could produce a show like roseanne which featured a working class family dealing with the struggles and conflicts common to working families all over america roseanne was about a contractor and sometimes working sometimes unemployed wife and their efforts to keep a roof over their heads this followed a tradition of independent programming that spoke to the same sensibility of all  family where archie bunker worked on the loading dock or the honeymooners where ralph crammed and drove a bus in his best friend worked in the sewer that sensibility the voice of the broad american working class is banished from television these voices these independent voices are missing and they're missing because a mo culture has been allowed to be nurtured in t v where new ideas and new players face virtually impossible odds out of getting their shows on the air so what can be done if this committee supports competition in video programming there may things you can do first across town today the federal communications commission is taking the first steps to codify internet freedom and open internet promises to be an extremely competitive marketplace where small entrepreneurs can be matched up against the media giants of today and supporting a free open and nondiscriminatory internet will allow the next generation of creators and innovators to distribute their own content and compete for the hearts and minds and eyeballs of the audience second we must remember that traditional media still has by far the broadest reach into america's homes while broadcast networks complain of declining ratings overall television viewership is actually increasing cable viewership is growing steadily and so the relationships between major cable distributors and programmers needs closer scrutiny the practice of tying and bundling channels is one practice worthy of examination when you learn that some of these bundled channels offer nothing more than a static weather map with national viewing levels in the tens of thousands you realize that this is actually filler content whose only purpose is to block other programmers from gaining access to the cable satellite channels whether alec our cable channel selection will eliminate those barriers is an open question but it is certainly worthy of further analysis by the f c c and this committee in conclusion i would like to point out that i have worked for major studios and networks my entire career from paramount to h b o to n b c universal where caprica is being shot this very day i have found success in the corporate structure these companies are not evil they are not populated by modern day robber barons intent on stealing the bread from my children's mouth these companies are only doing what makes sense to them financially however what makes financial sense to a handful of corporations may not be in the best interest of the audience the television industry itself or the american people these companies are run by and large by good and decent people who are simply working within the regulatory environment that they have been given and therein lies the rub by setting up a regular regulatory environment in which there are no barriers to continual corporate consolidation and huge incentives to both centralized power and squeeze out smaller players even good and decent people will participate in and promote a system that ends up weakening competition monopolizing power and corrupting the free flow of ideas and opportunities for all the danger we face is not that we work for bad men and women it is that good men and women can produce bad results in the absence of a law thank you for the opportunity to appear before you today thank you m viral and its two hundred thousand plus employees are leading the way with investments in both wireline and wireless broadband broadband networks rising has invested over eighty billion dollars in capital capital expenditures over the last five years more than any other american company during that time period verizon is investing twenty three billion dollars to take fiber all the way to customers homes with our network this enables both video competition and next generation broadband networks and services eighteen million homes and businesses verizon f i o s internet access service currently provide consumers with macs up to fifty megabits  second down stream and we are already testing one hundred megabits per second service our fi os t v video service is an integral part of the business case for investment such services provide additional choices and competition for consumers bios t v brings head to head wireline video competition to the cable incumbents for the first time in several markets bios t v has more capacity than traditional cable providers and is able to write consumers with a wide range of video content including a robust lineup of programming independent programming and international and multicultural content bios t v is also designed enable innovative in interactive services for example the ip functionality of arises that work permits the company to offer unique service called bias t v which is that allow because consumers to access content in an interactive manner on their television including some content services from the internet such as facebook and twitter and other in other compelling interactive services that serve their community whether widget traffic will widgets and widgets that provide vital information to consumers when they want it and where they want it creative negotiation one significant challenge is proven difficult to solve with this market based approach access to regional sports programming controlled by cable incumbents regional sports among the most popular programming to consumers many of whom insist on the ability to see the games of their local teams given its very nature this programming is unique and cannot be duplicated by new entrants who are denied access to some incumbent providers have exerted their control over this must have programming to handicap new entrants in many cases cable incumbents have sought to exploit the so called terrestrial loophole in an effort to deny competitive providers access to this must have programming cable incumbents know full well that a new entrant lacking regional sports or lacking the format of that programming will not provide a meaningful choice for consumers there is a long record documenting that cable incumbents have used this loophole to handicap competitive providers including in san diego philadelphia and new york verizon has experienced this problem firsthand when cablevision refused to provide access to its regional sports networks m s g and m s g plus in the new york city and buffalo area while we have paid access to the standard definition version of these channels only after filing suit at the f has steadfastly refused to even discuss providing for risin access to m s g and m s g plus an h d on any terms whatsoever by its refusal cablevision is seizing on the growing import of h d technology to consumers particularly in the context of sports graham in a recent consumer survey conducted for arise and found that nearly sixty percent of new york city subscribers say they are not likely at all to consider switching to a provider that does not provide their regional sports we have urged the f c c to take action because denial of access to programming denies any meaningful choice to the many consumers for whom local sports are critical in order to eliminate any disputes however congress should adopt a targeted legislative fix to ensure access to the unique regional sports programming that consumers demand thank you thank you mr jensen mr thayer thank you mr chairman and members of the committee and i appreciate you inviting me here today to speak about this important issue my name is adam silver and i'm the president of the progress and freedom foundation a digital economy think tank here in washington d c i've written extensively on this important subject including two books on the topic and in my work of argued that regardless of underlying business structures or ownership patterns the critical question that must govern this debate about the state of the media marketplace is do citizens have more news information and entertainment choices at their disposal today than in the past and i am pleased to report that all of the evidence suggests that the answer to that question is on ambiguously yes indeed we now live in a world of unprecedented media abundance where consumers can increasingly obtain whatever they want wherever they want however they want to citizens of all backgrounds and beliefs are benefiting from this modern media cornucopia and nowhere has this abundance been more evident than in the field of video programming although the provision of video services until significant upfront investment at every step of the value chain we have more video options and diversity at our disposal today than ever before and it generally falling prices in some there's more competition for our eyes than ever before consider traditional broadcasting which was once anonymous with television itself most of us can remember when just three or four v h f channels and a few fuzzy u h f channels were all we had at our disposal today we have seven nationwide broadcast networks and the number of local broadcast stations has doubled since one thousand seven competition against in among traditional broadcasters as intense and the viewing audience has become remarkably fragmented the collective audience share for broadcast networks has fallen every year for the past decade competitions also intensifying among cable telecom and satellite based platforms better yet the number of channels available on these platforms to skyrocketed from just seventy in one hundred ninety to five hundred sixty five in two thousand and six the last year for which c data resulting diversity on the dial has been truly breathtaking and almost every human interest is now covered by some sort of video network and some of the most impressive gains have been made by minority oriented foreign language religious and children space program importantly the largest share of the growth in the multi channel video marketplace has actually come from independent programmers and owners the percentage of pay t v channels owned by cable distributors has plummeted from fifty percent in one thousand nine hundred to under fifteen percent today and that percentage is now significantly lower following the split between time warner cable and time warner entertainment in fact that percentage of vertical integration is probably in the single digits now thus while the cable act of one thousand night to was motivated by fears of excessive vertical integration and gatekeeper power in the delivery of video programming today's marketplace is actually tensely competitive and rich in its diversity meanwhile new video empowerment technologies such as d v r blu ray and so on have revolutionized the way the public consumes visual media and given viewers unprecedented control over their preferences and timetables while traditional platforms like cable and satellite offer a sea of burst programming the internet's digital distribution platforms offer oceans of new content even  fining a media outlet today has become very difficult as new technologies empower average citizens to become producers of news in entertainment themselves thanks to personal computers websites blogs camcorders digital cameras cell phones and so on anybody can be a one person newspaper broadcaster some might call it amateur media creation but it is media creation and it certainly is competing for eyeballs the internet is also empowered a growing number of consumers to cut the video cord altogether by canceling their monthly video multichannel video subscriptions and getting their video from a combination of other sources committee once a glimpse into the future i suggest you invite a few teenagers or twenty somethings to testify about how they consume video today they probably couldn't name most broadcast networks or multichannel video providers but they would regale you with stories about how they've seen or shared video platforms ranging from you tube i tunes video views boxee video hulu netflix amazon on demand sony's playstation store microsoft's x box three sixty marketplace and so on while some here in town often wring our hands about the supposed a gatekeeper power of old media providers and platforms our kids are increasingly ignoring those platforms and moving on this begs the question instead of fretting that some traditional media providers have too much power perhaps it's time to ask if some of them actually have too little a concern we have today in the newspaper business for example indeed the very viability of traditional media operators increasingly in doubt as they lack the pricing power and the ability to control when where and how their content is delivered and consume meanwhile advertising the traditional lifeblood of the media sector is increasingly spread across multiple platforms and being subjected new scrutiny in potential regulation here in town and copyright infringement is also made monetization far more challenging and place serious strains on many content operators in some traditional media operators could be in serious trouble and now certainly isn't the time to be considering new rules and red tape to get hamstrung their ability to respond to competitive pressures regardless america's video marketplace should be viewed as a pro consumer fair and thanks to each of our witnesses for joining us this morning for some very informed commentary on the subject matter before us recognize myself for the first round of questions i'm not entering this conversation with any preconceived ideas about whether or not we should legislate anything and i'd like to make that clear at the outset i did support it and in one thousand nine hundred two the program access provisions as a part of the legislation that we passed in that year i did so because cable at that time was a monopoly and we wanted to encourage competition the direct broadcast satellite industry had not really launched and those companies were not established they were clearly not in a position to generate their own content with their own expenditures at that early stage and the only way they could be successful in providing competition was to have access to the programs generated by cable so we provided that access and i think that law has been successful for the reasons i mentioned in my opening statement now that marketplace is competitive the two satellite providers have subscribers typically equal to the very large cable systems and now we welcome into the market the very large telephone companies in fact telcos across the country that are beginning to offer a ball to channel video further expanding the competitive choice and mr denson i want to ask you some questions about your revival in the market what that means for competition and whether we ought to consider making any changes in the law and order to sustain it or perhaps further encourage it some would say that a company that well financed verizon either individually or in partnership with other large telecommunications companies could finance the creation of your own content and that's a situation very unlike the situation but direct broadcast satellite industry was hundred ninety two and so how do you respond to the idea that you could generate your own content given the fact that you're a very large well established company and could even partner with others in joint ventures in order to do that i know you're particularly concerned about regional sports and i'm going to come to that in a moment but as a general matter let me just ask you about whether or not you're in a position to generate much of your own content certainly we actually have financed the creation of our own programming we created local three local hyper local news channels one long island new jersey and here in the c metropolitan area what we found is that local hyper local content was crucial in order to win over customers customers it wasn't enough it wasn't enough just to have content that address their entire region customers really wanted to know what they smelled when they looked out the door if they were smelling smoke they wanted to they wanted a channel that actually would tell them where that fire was in their neighborhood and we do that we also offer compelling stories within the community so that everyone sees themselves in the community in a positive way so we were really invested heavily in that in to be honest with you given our number of customers the true benefit for the customer is the customer itself we're not seeing that financial return but we're doing it to benefit the customer how important is the one hundred ninety two program access provision to you as a general matter i think in terms of how important that was for us in the would not have launched files without without having the assurances that were provided in the act all right let me come to the regional sports question because that's something you focused on in your commentary as i understand the situation as it pertains in philadelphia and to some extent in san diego and maybe other markets around the country one cable provider has under contract the major sports leagues i think that's true almost entirely in philadelphia and the f c c found in a study that as a consequence of that the number of d b s subscribers is about forty percent less in philadelphia than one would expect under different circumstances and in san diego the padres are under contract to one cable company and as a result of that the f c c found the d b s subscribership was about thirty percent thirty three percent less than otherwise it would have been  some would say that this is merely the functioning of the private market that these contracts expire periodically and i assume they do maybe you know how often they expire and can tell us but upon that expiration  could other competitors within the malted channel just tribute in space not go into the market for those contracts and if they offer more money prevailed and become the offer wars of those programs now assuming all of that is true why should we be concerned about this why not just let the market operate well for certain readers of all can you tell us when those contracts expire every market is different every team is different they typically typically expire on a five year basis however there are some contracts specifically between the yes network in the new york yankees which i know runs significantly longer than that in terms of the competition for  e networks are unique and we cannot duplicate that and the cost of sports rights are enormous and there's no way in which we could monetize it so to that end we would not be able to actually make a meaningful bid for those regional than i should here but we would really need to understand how this works i don't understand why it's a problem if the contract expires within a sufficiently short period of time and to that contract is then available for you and direct broadcast satellite and other cable companies to go in and was that a problem let me take the issue head on it's a problem because i don't see how we could reasonably expect a company like cable vision who owns the new york rangers it won't even offer us one even the goshi with us with respect to the dilute delivery of high definition content to entertain a bid where we would actually secure the rights for the telecast distribution of the new york rangers and their mark so you're saying cablevision has some kind of permanent right associated with the sports leagues under the terms of which it can deny definition carriage or in fact in a carriage at all to a competitor absolutely permanent right so the actual contract doesn't expire they actually own the league is that which they own the team they own the new york rangers they own the new york knicks and they are free to contract with whoever they like and they contract with themselves and then they deny the h d content to us now on the other hand a tale of two cities we look at philadelphia and comcast through creative negotiations we've actually been able to secure the rights even though that even though that content is protected by the terrestrial lupul we've been able to secure those rights with cablevision the largest provider right and it's a similar situation we are competing head to head in philadelphia and they could deny it but cable comcast took a different route and we are willing to negotiate and bargain in good faith with cablevision at any time they denied us the access so that is specifically what we're looking for in this instance all right let me just ask if anybody else on the panel wants to comment and the terrible tell other members i'll be generous with their time for questions in view of the fact that i consume so much as anyone else want to comment on this mr rutledge chairman i just want to be clear that cablevision provides every game on our regional sports networks to arise and what hasn't been provided to rise in is a high definition feed that all of their customers have access to every game on the regional sports channels we are in new york there are four regional sports channels the yankees have their own the mets have their own in and cablevision owns two channels one service and it's interesting dish t v which we do sell our service to has the right to carry the high definition feed it does not for their own competitive and business reasons they don't carry the yankees so they carry the match and they carry our services but don't carry the yankee network ever competitive reason they've decided and cablevision has been without the yankees for up to a year at a time in various contractual arrangement problems and six years in the get television on here so it appears to me that the next challenge is going to be when the t v s are sold to the consumers and they have an internet chip in it so i can decide do i want to get cable or do i want to get directv or do i want to go to the internet and get a live streaming of digital or high definition programming and that seems to me as a consumer that's where i would go i would have the digital and high definition streaming on my mobile and i'd have it is home on my television and there might be a point where i might not say i even need a cable or direct v because i'm just going to get it through the internet i think that after i went to this form it seemed to me the next really growing demand is going to be that everything is going to come through the broadband internet it will be high definition and it will be high speed so mr rutledge if i'm wrong you can tell me but it seems to me that's where you folks should be making your investment for programming over the internet in the future and i guess my question is is is that true and if it is true what kind of deregulation or react regulation should be involved and certainly you might want to comment on network network neutrality or network regulation as i call it which would be even as we speak today i think the f c c is going to have a vote on it so be curious about your opinion and then mr dense and mr more products that work really well and one of the things cablevision has done is launch the first one hundred megabit data service across this entire footprint where the fastest data service in the country and the only company offering speeds at that level all of its customers and so you've already made investment in this yeah we been putting investments in what's called docsis three point zero ok which is the most advanced platform out there in terms of high speed capacity we believe that  customers can use that network and be happy with the way that network operates that we'll be able to sell our network services and as part of that we encourage developers of programming to make applications that work on a big fat network like we sell and so our goal is to have content providers flourish and have people subscribe to us because we have the best network ok like to see it on the phone if i have it on the p c i'd like to see it you subscribe one place and then you get you get access to the content across every device and what that does is that the innovation on our side as a distributor we need to make sure that we have the fastest network and we do we need to make sure that we have the best picture quality not just across one platform but broadband and also our be cast video the verizon video wireless video service as well so we're in a building those services we're doing it across carrier so we're not we're not looking to make it unique for verizon itself we want to work with the time warner's the comcast the cable visions of the world so it doesn't matter where a customer is that customer can actually access their content by paying just one time to one distributor ok mr moore based upon what i saw the prophesies what i think's going to happen here why couldn't i get a website and i go to you and say mr moore you know i'm very impressed what you did with star trek the next generation i want you do the next next generation and i'll pay you to come on to my web site and will be through the internet everywhere and that gives you  access simple to me but based upon what i say is going to happen in the future do you see problems of you and others with your talent your skills getting this programming to the consumer market well i think i think you're correct in that that is theoretically possible i think that however the convergence that i think we all agree is coming is going to take a while and the shows is that these sorts of technologies don't completely wipe out prior technologies when television came along everyone said that the movies are going to die and when they came along they al movies and television were going to die and none of those things were proven true and i think the point is that traditional media in the way that we've known television for a very long time is probably going to continue in some form for quite for the foreseeable future an internet a web start up site like the one that you're postulating will have its biggest problem to get people to come see it so it's all about getting the consumer access did i lie in the advertising and say mr moore did this and star trek is has got something in oh and i would create a sensation like they're trying to do with  dan brown's new book the symbol they're creating all the sensations trying to sell and i have to do all that as part of the contract with you to get it is it is a viable form that you had that you're postulating again it takes a tremendous amount of money to create television programs like the ones that i've done and then create takes a tremendous amount of money to make them accessible to the audience and only the big players can do it then only the big players basically can do it and of the big players have basically own the means of their own production they tend to go to those  to this in your hypothetical if mr moore was able to put together a web site and put on his content under the business model the work concerned about where all of our broadband subscribers are paying in this case e s p n but it could be any of the existing major brands that could leverage this type of arrangement that any one any one of my customers that access mr moore's content not only paying mr moore will be paying all these other existing content providers in which case a competing entity never would be able to get ahead every time someone went to this new entrant the existing companies would make money and there would be no way that someone could get a pure connection to the internet and choose to take a different path it would carry over the existing cable business model and in many cases the existing cable participants on to the internet and replicate fact we created to help broadband adoption and today there is we have no evidence of someone raising their p c to a consumer because they've launched three sixty and if we don't force people we're only we're in fifty million homes it's doubled over the last year because of the popularity of the service but the whole purpose of three sixty was to help broadband get further adoption in our country because it is programming that drives that will help drive adoption thank you very much mr stern the gentleman from michigan mr stupak is recognized for five minutes but you must chairman mr nor in your testimony you say that the members pay ten times as much as your competitors for the same you been able to make this determination and by competitors you mean like satellite providers like dish and direct t v competitors in some cases direct t satellite in other cases larger cable operators and a lot of it is anecdotal based on smaller cable operators have acquired cable systems from larger providers see the discrepancy in the cost of programming and that is you know that that is anecdotal that's one of the things that we're putting out there is we'd like the f c c to empirically examiner review programming to determine what level of price discrimination based on acquisitions other things we know that it is occurring the documenting that is what we want to do so that we can address the problem well like in my district several districts sunrise communications paying about forty dollars for thirty five channels that's a cable but then yet the same area dish is offering for thirty dollars over one hundred channels is that what you're doing  your three hundred percent increase if you look at the number of chan i think there's a lot of things that figure into that one is the disparity in cost of programming another one is again the unique burdens of being a small operator i mean the regulatory costs re transmission cost disparities and all those costs make it more difficult for a small operator make investor day you know all those in consideration when you say ten times more than know in programming alone it can be up to that i'll give that much just in programming and then th other things would explain the disparity you're talking about of having thirty five channels for a higher price where you also said you're given a take it or leave it offer when attempting to take it or leave it when you're attempting to negotiate a program carriage specially with regards to retransmission consent how does that negotiation go it's just take it or leave it do you have any input do you have any room to negotiate or is it just we're offering that's it it varies in many cases  stations in this last round we we in fact in an effort to help we did it was a take it or leave it offer but it was free retransmission consent in other words the one thousand nine hundred two cable act allows us to make a cash offer available right or to go shoot some other consideration we have practiced that successfully for since one thousand nine hundred three actually but in this last round an effort to help our smaller operators we said ok for these ninety in the smaller territory we will not extract any cash or ads for any other consideration you can have it for the next three years and i think honestly mr prime makes an excellent point e s p n generously offered free carriage to about ninety of our this country are not so generous and that's the problem let me ask you this are you playing to sell access to that e s p n three sixty directly to consumers over there net if the service provider does not pay for get it out there whale having to go through the eyes be just sell directly to consumers again in this fascinating space of the internet  we we we are looking for a way we are looking for multiple different models to get our content to consumers and we have e s p n dot com which is for free we have an e s p n mobile product we have  insider we have e s p n vo day but in this particular case we believe this business model actually helps the adoption and we don't force it on anybody which is our which is our decision but we think it will actually help the adoption and in fact beta does research which is a sort of cable industry entity that sort of values the different programming and e s p n three sixty has been named the number one broadband service to help adoption of broadband and that that's our goal that's why we would do it but the service provider is still paying something right someone spent some somewhere along the line here is that we go on the internet we think we get access and have it pretty much free but  has it so it's a competitive product in the marketplace and i'll i'll just say is the reason we developed the product was that as we saw the internet or broadband penetration grow we saw that there would a plateau at some point and that it would need extra content and ultimately we are here trying to provide that content and the margins in the world for providers are you know depending on who you look at anywhere from forty percent to seventy percent so we're ultimately helping to support that model thank you very much mr stupak the gentleman from texas mr barton is recognized for five minutes thank you mr chairman i think we have a vote on the floor so i know that we need to i'm trying to figure out why we're having this hearing it looks like we've got a food fight going on between some of the folks that it's some point in the past decided to buy a sports team and a venue and a medium to distribute that programming and the people that didn't do that don't like it am i wrong  i'll take that i think are wrong i would go so far to say that you're wrong but what i would say is that there was a certain baseline content that is unique in a community that without it we cannot compete and we'd like very much better to compete on the services that we do have an innovation that we've created we offer over four hundred digital channels over seventeen thousand video on demand channels the highest broadband speeds the biggest  picture quality and we want to make that choice to the customer we offer more foreign languages than any other distributor yet if we do not have the regional sports networks that are germane to that particular community it's not meaningful  available well i would say in response to when you look at the dial there's a tremendous amount of competition it's a tremendous amount of choices but the point that i would like to make is that the people that provide that content become a smaller and smaller number  and they're based in the u k and only one is an actual independent and the others are multi national media even there is some bar that would prohibit entry into that arena if one was producer because the shows cost so much to produce and get on the air if you're going to set yourself up as an independent studio and risk all this capital you should be able to compete fairly but unfortunately what happens is that networks turn to their corporate sibling for programming more and more and more and that's essentially why you've seen a decrease from eighteen production studios who provided content in one thousand nine hundred ninety to only eight today and as i said only one of those is a true independent of the other two are reality providers from you mr chairman i know we're short of time i'm going to yield back to the last minute and a half but my advice to the to our witnesses is go have lunch together and work it out and you know if this is really is the yankees the seventy six whenever in philadelphia or whatever it is i just don't think chairman i mean this is an entertaining hearing been i don't think this is worthy of congressional oversight unless the barton there are a number of people who are quite interested in this subject matter and i think it is an appropriate hearing but it's going to have to be recessed because we have three votes pending on the floor of the house and we need to respond to those subcommittee will reconvene thank everyone for your patience while we are trying to do business on the floor general lady from tennessee ms blackburn is recognized for five minutes thank you mr chairman and i will probably not full five minutes i know that you all have been very patient with us and you're probably ready to move on with your day and i know some of you have polite did you want to catch it so you can get back to business couple of quick questions mr pruyn i'll start with you i've got to say if i understood you right you said the whole purpose of e s p n three sixty was for the adoption of broadband that's quite a generous offer and i thank you all for doing that  broadband i hope that we continue to make certain that we look at how that is available to people that do have broadband but thank you all for making that the whole purpose i three sixty i know that fifty million users are pleased with that decision that you all carried out a couple of quick questions and this is a yes or no and i want to just go today on the list mr rutledge i'm going to start with you currently do you think that the current marketplace needs government intervention at this time yes or no no no ok mr  yes to the extent it allows network management to help with piracy so you're qualified i'm qualified on piracy is that what you write traditionally we have not been proponents of net neutrality but as it relates to  right mr moore i appreciated what you had to say about the change in cable roles in the ninety's and i know you're concerned about you feel like to say that really impeded some of the independent producers and i appreciate the charge in the graph that you brought forward in your testimony today so let me ask you this it seems like there were few or cable channels just a few years ago and so there were fewer outlets a lot content however on the internet where we're going now what we're trying to do is with internet neutrality is to maintain an environment where we have to sell our wares to multiple places and not to have the and the channel itself an example of a station that did not exist ten twenty years ago universal and others put a lot of money into that create a platform for folks like mr moore and then third you know this whole question about is it evil to have too much ownership an in house all of them have to pay for it and that strikes me in some ways is fundamentally unfair i've read that some independent piece were quoted as much as seventy nine cents per subscriber per month for but we know our customers are all sports fans and we think the ones that are three sixty is a great product but for the ones that aren't as i said my testimony if you're just the only reason you get your internet access because you lost your job and you have to find a new one having that internet access be more expensive for those that want that product you know we don't think that's right i mean it seems to me if they're going to quote seventy nine cents per month per subscriber that wants to watch it that seems like a when we have a dozen more e f three e s p n three sixty business models what happens the broadband prices for the average consumer when when they're forced to play you know whether they're watching this or not and everybody everybody would adopt that kind of a model what would happen to pricing and mr pyne i'll let you maybe maybe discuss that as i mentioned earlier will reaffirm now for all the  research and work that we have done on e s p n three sixty no one has told us they're raising prices to consumers because of launching a three sixty and in fact when the broadband margins tell our distributors how they need to manage their retail pricing just as we don't tell people who carry e s p n how to manage the retail price and that's between them and the consumer but if we're offering a business proposition to  make them valuable in their marketplace and it is it is is actually up to them what they want to do with the new york mordant you can see it if there were half a dozen other business ventures like your own that adopted that same model that were attractive attractive content and the i had to pay for it for every subscriber they had regardless of whether every subscriber watched it or not at some point they have to pass that cost on to their especially the small i mean like doctor and more advanced broadband services or we can pass it on to our customers which raises the price of the service and if everybody's raising the price of the service i mean that's that's fine it doesn't put me at a competitive disadvantage  carries e s p n three sixty but it certainly doesn't do anything to make broadband more affordable one of the key concerns that we have is what's been stated several times by mr pyne today is that it is  it is up to the operator decide whether or not they want to take the deal that's one of our concerns is replicating one of the chief concerns of the cable business model onto the internet and that's that distributors will decide what customers can access you know i can choose to say no i'm not going to do a deal and my customers can't get it where i can choose to do a deal and all my customers have to pay for it when in the age of the internet the great promise of the internet was that customers would have control customers would be able to make choices more rolling out my district and i understand why verizon once popular poke programming in h d i mean that kind of programming certainly makes for a compelling package so it seems here that verizon supports government intervention for competitors to have access to promo programming that incumbents saying that will help competition but if my memory serves me correct i've sat in this committee and watch rising opposed to see like in the street from line  sharing you've opposed government intervention to help small wireless carrier struggling because big wireless carriers have linked the handset exclusivities contract and yesterday your c e o reiterated verizon is opposition to net neutrality rules that w ensure the companies offering competing services won't be blocked so those are all exclusivities that verizon likes what makes exclusivity that you want different i think the most important part of this exclusivity is that it benefits the consumers and it provides the consumers with the maximum amount of choice if we don't provide it's not a choice for a consumer from pittsburgh and if you could not watch the pittsburgh pirates or the penguins in high definition i could probably go without watching the that's being defeated if we don't have access to that highly highly valuable unique regional sports network programming i see my time's up mr chairman thank you thank you very much mr doyle the gentleman from georgia mr deal is recognized  only subscriber basis over the internet to individuals that's what you said i believe it is only available internet provider to participate with you and i assume that when you  so far you don't think anybody is passing that cost on to their customers correct they're absorbing it it's interest that it appears that e s p n three sixty is being so to potential violators on the basis that it gives them a competitive advantage over perhaps their competition but on the television side it appears e s p n doesn't seem to follow that same model because under current statutes a cable operator or satellite provider cannot simply enhance their offerings in a package that would include a niche two years or a per channel basis in order to gain competitive advantage over their competition why is it that it works in one environment as a free market opportunity but in the other environment it is not considered to be that i'm not sure i understand what do you mean by in the other environment well let's just take the television environment in terms of cable operators cannot simply just pick and choose their packages they were required to take i've submitted that if you want there are two most popular services disney channel and e s p n and there is absolutely nothing else a cable operator telco or satellite provider needs to take we make it available on that basis most nor is that to my knowledge i mean there is a significant financial incentive to take the bundle of services that e s p n offers on the video side and so i believe that most operators choose to take that route fundamentally whether it's the internet side and three sixty or on the programming side in this is true for most most of the top programmers there's very little options in how we can package our that content to our customers now with regard to all of this let me preface what i'm about to ask saying i believe that negotiations are private in private business they negotiations are among providers and carriers in terms of determining if in fact the rules general rules of fairness are being followed even though the type of transparency at the f c c that we currently don't have but we should be encouraging more i'll start with you since that sort of in an area you've alluded to i think generally speaking you know transparency is a good thing when we're dealing with the public airwaves where we're dealing with content providers and so on i don't know that i can speak to that specific example of whether the f c c should have the authority to look into all the details of these negotiations i think i'd want to probably confer with the writers guild and sort of study that before i give you a definitive answer try to yes mr congressman deal i think you really hit the nail on the head when you said first and foremost that sports is what's the thorn in our side around so many of these issues right but i hope the committee doesn't lose sight of the fact that that's a very very unique problem and that we don't have this problem and most other types of content second of all to the extent it is a problem i think we need to understand that some of these deals might be the role of the f c c could be more of a ripple pages from baseball if you will could ration bring parties together ask them to sit at the table hammer out a deal and then maybe set a clock and set some sort of an independent person or group together there as an arbitrator to help them hammer out that deal if they don't reach it at the end of a certain timetable but one final point let's not lose sight of the fact that exclusivity also has competitive benefits many of these regional sports networks would have never existed without a fair degree of exclusivity and i do wonder would a national service like directv have the legs it does today without exclusive video for the sunday ticket it really does help create new forms of entertainment a new platforms that weren't there before these things did not exist ten fifteen years ago are new columns created because of that yeah that's true especially about sports but that's again i think the unique situation well i would suggest is broader than that that the packaging and bundling is a much broader issue that goes far beyond just sports programming but my time is up thank you mr deal the gentleman from vermont mr welch is recognized thank you mr chairman little of seven minutes thank you very much mr rutledge your company owns the sports teams and does the distribution broadcast is that correct cablevision owns  companies well there are four providers of mix and rangers and and all the other sports services that are still in the market rising for instance access to every nixon rangers game right but if i want to get  d i have to get it don't you and they don't have it in the aid of the why won't you allow verizon or others to get it in h d i do allow others but i want to have a competitive differentiation against rising so that i can be more successful so that's good for you but not necessarily for the consumer what is good for the consumer to have companies that create products that are new and innovative we invested in created this high definition regional sports programming service more than ten years ago and we invested in created to distribute it and we're trying to get a return to it all right mr pyne i just want to make so that you were asked about your position on net neutrality what i thought i heard you say and i just want to confirm this is that you want to deal with the piracy question because at your product but if that is dealt with disney favors net neutrality or opposes  i just want some clarification on that i mean traditionally we have not been proponents of net neutrality we haven't really been as part of the discussion but we do we do support it to allow s p s to manage their networks particularly around piracy i'm not sure i understand your so you ever piracy issue but dealing i refuse to make sure that i understand what that is you've got protect your product you invested in it people are stealing it and i have some sympathy for that but dealing with that are you saying yes or no that you are for net neutrality as you're asked by congresswoman blackburn i think we we support we supported to the extent we believe i s p should have the ability to manage their networks ok i come from vermont where we have a lot of small rural carriers wait champlain valley telecom probably has fewer than a thousand folks and it's very very tough for them to bring cable programming and internet services to those rural markets that aren't served by the larger cable company's tough markets to serve there's a lot of difficulty in getting  fordable terms for programming services that make that business even more difficult and i heard some conversation back and forth really between mr pyne and mr nor and i want each of you to comment but the obstacles are and perhaps to mr moore as well but why don't we start with you what are some of the impediments that have to be addressed in order to provide fair access to the consumer i think especially when it comes to retransmission consent i think some type of balancing of the equation that's one thing that was brought up in testimony by e s p n is we have a buying cooperative but that buying cooperative is for national content it does not and cannot scale to market by market broadcasters to negotiate those agreements and i think what you said in your testimony very member is you get to take it or leave it type of correct document that i guess is faxed to you or submitted for the smaller operators often it is a fax document or here's the letter that comes in the mail with the election notice it says here's the terms and so i think injecting some fairness some transparency giving us the ability that other d channels as well i think that would in may go to mr pyne just before i want to add something to you you were talking about the three sixty and that you don't get involved in how that is priced by the people you sell it to but bottom line is if the buyers can't absorb the cost indefinitely without passing that on obviously  isn't there down the road a problem that ultimately will result in higher cost to the consumers in order to have access to this but the approach that disney is taking on this sorry i don't believe so for the following reason is that as broadband broadband is still not fully penetrated in the united states and just the point is if because he has a very strong programming service like n three sixty and it gets additional subscribers it actually will get more margin profit margin to help in fact we do reduce its overall finer standard you're saying it helps on the build out but i think mr doyle had a fair question and if he wants that service and is willing to pay seventy nine cents for the seven dollars ninety cents and i don't want it as a consumer my preference is to let doyle pay and not meet help him pay mr mr nor will i i'd like to answer that directly i mean we have in our community with very high adoption i think it might be as high as a fundamentally i don't think there's any operator and we have several right here that feel that they're the only impediment to broadband adoption is at this point price sensitivity i don't think any customers out there that are requiring incentive to get onto the internet i mean everybody the internet i mean the internet has been growing ok but i only have another minute i want to go to mr mr moore i happen to be somebody who thinks that the programming in and that we had before was an awful lot better than the programming we're having now and you mentioned a number of things in your very good testimony timing and bundling you mentioned it was a bit of a problem and i wonder if you can elaborate on that well what's happening is that as you're aware and bundling you know the operators are given here's a bundle of programs that you channels that you have to  take take it or leave it because you can't differentiate them out and what we've discovered is happening is that some of those channels are being occupied by essentially just filler their weather maps with a crawl going across the bottom of their sub jon rise of music videos and some cases and  these channels basically have national viewership in the tens of thousands and a viable cable operation needs at least the cable channel needs around two hundred thousand to just to make it sort of a going concern so when you look at what they're actually providing in the numbers of people that are actually watching this and the money that they're making it's clear that they're not actually a business opportunity they're not actually being innovative they're simply squatting on the space and keeping other people off the dial thank you my time is up mr chairman thank you mr wells the gentleman from and they provide for a case by case in portsmouth regime to stop any such discrimination moreover they arise and supported extending the program access rules  when they were scheduled to expire asserting that nondiscrimination rules were needed and so for me as i listen to this discussion and i can understand why  bigger oppose any efforts to deny it access to programming particularly sports programming although my concern for people's access to yankee games would only be crocodile tears but neutrality and the net neutrality will make it because i kind of feel that there should be a presumption that if you're going to nondiscrimination over here because it's good for the company at the same kind of principle with them be adopted  when it comes to other things that are unrelated to that issue but the principle is the same so could you talk about how you square that circle internally terms of your views on  involved in net neutrality however what i would say is that for us it's about it's about composition competition for benefit direct benefit to the customer and that our position on  the network is that it actually precludes a customer from making a choice that they might otherwise want to make or just consider another provider that they might otherwise want to know i appreciate that but you can kind of mandate to they be allowed reasonable cost to deliver long distance service into the network and they beg me you know and i work with them to give that to eighteen and in their access to  allowed in my bill and i don't think there's any of us who have ever advocated that illegal activity should be condoned in fact it should be punished the law and you know him is to dense and kind of the portfolio that does not give you authority for fear of jeopardizing your job to speak on net neutrality can you speak on net neutrality at all i cannot and i think the best way that i can for portray it here in terms of what i do and my testimony today is that teams that might be an unfair choice you might not want to have to make your determination based upon that and that's what i'm testifying on to and i appreciate that mr dense and back in one thousand nine hundred two when the chairman and working on the programming access advocating for kind of an outer limit definition here and all i'm saying is that the same thing is true in net neutrality we're trying to do i would say to your company through you know it's not your responsibility that what these items shall be admitted to the record i want to say thank you to our witnesses this morning and i will say again that this hearing from my perspective is entirely informational we wanted to get the benefit of your views on the current state of competition in the video marketplace you have provided that well we are well informed on the subject thanks to you and i think some additional questions are going to be submitted to you ms blackburn indicated her intention to submit questions to at least two of the witnesses when they are received please submit them back to us probably will hold this record open for about a two week period in order to receive your responses so with the committee thanks to our witnesses this morning this hearing