good afternoon ladies and gentlemen this is the second in a series of oversight hearings on the digital future of the united states that began with testimony last week from the inventor of the world wide web se timothy berners lee today we examine the radio industry and assess its power and its promise and we have a diverse panel of witnesses before us to eliminate many of the issues in the radio field radio has a long history of democratizing access to information it is a medium that reaches virtually every area of the country and radio stations  communications assets for the communities that they serve noncommercial low power and full power radio in particular help reach under served areas air neech programming formats and provide local information of value to diverse community segments i hope that we can continue to protect and enhance the role of noncommercial voices through low power radio moreover as the f c c prepares to open an application window for new full power noncommercial stations it is vital to ensure that adequate notice is given to the public about opportunities to obtain licenses to ensure that aspirants for such licenses may broadly repartee then the great diversity and richness of the country the area in the area of commercial over the air radio more than one thousand radio stations are already broadcasting digital content digital technologies allow free over the air radio broadcasters to provide upgraded audio quality as well as the ability to multicast their signal into multiple feeds these multiple audio feeds may permit for example a radio broadcast or to air news sports weather traffic and talks on one feed while two others simultaneously broadcast music from distinct musical  move towards the digital era we must also assess the public interest obligations of broadcasters and the effects of the marketplace consolidation the commission is in the midst of reviewing its media ownership rules and this review will analyze the effect of this consolidation on competition localism and diversity of viewpoints among many issues in addition i am concerned about the abysmal lack of broadcast licenses that are held by minority owned and women owned businesses while many licenses were obviously given out to a original licensees decades ago it is important to remember that half of the country is women and approximately thirty five percent are minorities yet women and minorities today reportedly hold less than four percent of f c c broadcast licenses this is something that this congress and the f c c should find creative ways to remedy and the commission can take an important first step by developing accurate data on current minority and women ownership levels which today is not readily available information to the public i also want to note the recent decision by the copyright royalty board to hike royalty rates previously small internet radio providers were able to pay a percentage of revenues to cover royalty payments th decision by the copyright royalty board it's now sets rates on a per song per listener basis affective retroactively to two thousand and six this represents a body blow to many nascent internet radio broadcasters and further exacerbates the marketplace imbalance between what different industries play hey it makes little sense to me for the smallest players to pay proportionately the largest royalty fee this decision runs the risk of hurting not only fledgling entrepreneurs but also the online radio services of public broadcasters and smaller commercial stations and finally i want to briefly address the satellite radio industry obviously x m and sirius radio have stated their desire to merge this merger raises several public interest issues that this hearing will help to illuminating among these issues  of the mergers potential effect on consumer prices and consumer equipment its effect on content and content providers its effect on localism and the ability of listeners to both pay and both pay and free radio services to obtain information that is local and nature and its impact on competition broadly the merger may also impact telecommunications policy goals related to spectrum see and the prospects for a new competitive entry and innovation i want to thank all of our witnesses on this star studded panel today for their willingness to testify that we now turn and recognize the gentleman from michigan the ranking member of the subcommittee mr upton thank you mr chairman for holding to these hearing we all know that radio does play in a very important role in our lives and i commend all those dedicated folks in the industry for  g those lives the number of radio stations in america has roughly doubled since one thousand nine hundred seventy with approximately thirteen thousand five hundred stations in operation today and satellite radio now serves nearly fifteen million customers nationwide when we discuss the future of radio we must also have a concurrent discussion regarding the future of broadcast radio ownership rules and while there's been tremendous growth in advances that have been made in the world  radio not to mention the overall media world over the years the unfortunate reality is that our nation's media ownership laws do not reflect or even acknowledge such great advancement current ownership laws are especially destructive to the ability of broadcasters compete because they freeze growth they stifle experimentation and innovation and perversely diminish diversity of viewpoints common sense tells us that the recent explosion of media sources should eliminate any concern over a lack of diversity of views in the marketplace and competition which have been the principal justifications for the rule this growth remains unabated and more than makes the case for regulatory relief in the broadcast sector let's take a closer look at the local broadcast radio ownership rules in a market of forty five stations the most that a single company can own is eight in a market with one hundred forty five stations a single company can own also only eight stations where is the logic even setting aside for just a moment the competition from other media specially satellite radio there is absolutely no public good enough to justify the same local radio ownership cap for cincinnati as it is for new york chicago or l a let's remember that ownership diversity is only a proxy for viewpoint diversity the largest markets in the country tend to have more diverse populations and thus they demand a more diverse program formats yet the maximum number of formats anyone on earth can deliver is eight because th cap ownership is maintained by the f c c increasing the number of stations any one entity could own would translate into an increase in the number of formats that can be broadcast into that market result would be to increase the quality of free trustful radio services to consumers and increase the availability of foreign language programming programming to them moreover the economies of scale that are obtained when commonly owned stations are clustered in a market make it possible to take risks and new formats that would not otherwise be feasible result will be that owners will experiment with new and different formats and consumers will be the beneficiaries the public will likewise benefit from a healthy radio industry while the f c c is current regulations recognize that am and f m stations compete against each other they fail to recognize the other companies fail to recognize the other competitors in today's marketplace foremost among them obviously a satellite radio for the time being the two satellite radio licenses can reach approximately one hundred fifty channels in every market in the country compared to the current limit of only eight stations that restrict a terrestrial radio industry moreover license radio stations obviously compete against new devices whether they be i pods internet radio which will soon be broadcast bags networks the obvious shot is that terrestrial radio is engaged in extremely competitive marketplace and one that is becoming more competitive virtually every day against that type of competition i believe that it is worthwhile to lighten the regulatory restrictions on ownership that limit the ability of free trustful radio to grow in the largest markets in the country i continue to firmly believe that in markets with sixty or more radio outlets a modest increase in the number of stations that one can own or control will confer significant public interest benefits modest increase would not result in a new concentration what allow a single entity can to control ten stations would mean that no one entity would be able to control more than seventeen percent of that market cell i look forward to our testimony today from eye witnesses and looking at a number of different issues and i appreciate the chairman's hearing this afternoon you know that thank you i thank the gentleman chair recognizes the chairman of the full committee gentleman from michigan mr dingell mr chairman thank you i commend you for holding this hearing today i also thank our witnesses for appearing before the subcommittee i want to especially welcome mr peter smyth of greater media whose company owns three detroit radio stations and which does an outstanding job of serving our community welcome this is the second hearing in the committee's examination of the nation's digital future and it is an important one decisions may soon be made that will effect this structure of the broadcast marketplace and the level and quality of discourse in our democratic society since the formation of commercial broadcasting congress has acted deliberately to preserve localism promote diversity and to ensure competition in the broadcast media rather than establish a national broadcast system the congress oversaw the creation of thousands of local stations throughout the nation that are required to respond to the needs of their local communities so then what is the state of radio today many claim that the consolidation in the radio industry over the past decade has adversely affected diversity on the public airwaves and the service broadcasters provide to their local communities imust observe that there is reason to believe that there is truth in these statements these concerns then must be taken seriously yet we now find that clear channel the largest group owner is spinning off several hundred radio s of hope that the trend of declining media ownership can be reversed the last count on this matter shows that minorities own a dismal four percent of radio stations nationwide and there's reason to believe that this may be in a downward trend i would note that it has been the congress's policy for a long time longer that i have served in the congress that we should have full representation of minority broadcasting and that the federal law should and the federal regulatory agencies should encourage that that situation to go forward the f c c now then must beat up its efforts to spread licenses among added he's the better reflect the diversity of people across our nation the transition to local digital provides an opportunity to reinvigorate local broadcasting with near cd quality sound and multicasting capability digital radio allows broadcasters to improve service and to remain and vibrant and important part to the local media landscape with any luck we might even see a resurgence of classical music music on the dial something which would bring me great personal pleasure broadcasters are also joining a variety of entities using the internet to serve a worldwide audience now have a broad range of radio entertainment options including satellite radio internet radio mobile phone services and recorded devices such as i pods earlier this week the copyright review royalty review board set a new music royalty rate for commercial and noncommercial web casters i think this committee should look carefully at the implement it the implementation and the implications of that decision which i think at this time are not properly understood beyond mood music consumers are embracing pod gets and interactive modes of delivering information i have found that my own better communicate with my constituents now what can consumers expect to hear in the future well the new operate shouldn't say and the new opportunities translate into more local and more compelling and more diverse content even in this new world radio remains an important fabric of our local communities we must remember the de deliberate vision of a free and local system of commercial and noncommercial broadcasting spread among the urban and rural communities that make up our nation we must continue to promote new uses of the spectrum such as low power radio while protecting existing license from from interference even today a healthy free broadcasting service remains an important and vital source of local news culture and most importantly emergency information our national policies must continue to promote localism diversity and competition in the media marketplace those with the privilege of using public airwaves whether local or national should provide a public service that is the law that was in tension the congress when we passed the radio act in one thousand nine hundred seven and has remained so to this day  c has been far too laggard in overseeing public interest responsibilities of digital and satellite radio providers we must never forget that industries that distribute information have a greater responsibility to our society and consolidation among them poses a far more serious concern than for example those who distribute toothbrushes or toasters today's hearing begins with an it with an expert the merger of x m and sirius i look forward to learning more about this matter as the f c c and others begin what i expect will be a thorough objective competent and fully transparent review of the transaction its effect on conservers the public interest as drummer i thank you for your i think this is an important hearing and i appreciate you calling it today this is the second hearing in your series on the digital future of the united states telecommunications market i think it's good to investigate the opportunity about are changes in the radio marketplace require us to rethink our approach to regulating audio services in this country radio has not been immune to the same revolution that's making the voice video and data market so competitive we can get music baseball talk news and even other types of entertainment now over the satellites we can get what we want not only the air from radio stations but from the satellite from the internet streamers streamers yes podcasters and even cell phones broadcasters in self's are going through a mini transformation as more than a thousand stations have already embraced digital transmissions this shift should enable broadcasters to improve their sound quality an increased number of channels that each station can provide thankfully the broadcasters have not needed additional spectrum do so making their transition to high definition radio considerably simpler than it is for digital television changes in the voice video and data markets have led us to question legacy regulations some of which were written when people were sitting around living rooms listening to little orphan annie over the radio this hearing presents the opportunity to investigate whether changes in the audio market suggest that radio regulation also needs reforming to see the importance of matching regulation to reality we need look no further than the f c c is inability to justify either of  last two rounds of media ownership restrictions to the satisfaction of the courts judges have decided this trick regulations wouldn't do and neither would lose ones because no one could show how either set of rules actually promoted content diversity and localism in the real world at some point we need to figure out who's on first us or the innovators i wonder if technology and competition won't do a better job of serving radio listeners and politicians tinkering with outmoded regulations in a constant game of catch up indeed one issue we will address today the proposed merger between exim and sirius suggested technological advances make even defining the relevant market a complex task  this is an important hearing because it impacts the future of the digital revolution in radio and i'm looking forward to hearing our witnesses and then hearing of the questions to shows where this committee mr chairman i want to tell you a little story of a local local guide on good his name is greg gillis and by day he's a biomedical engineer in pittsburgh at night he deejays under the name girl talk his latest mash up record made the top albums of two thousand and six list from rolling stone pitchfork and spin magazine among others his shtick as the chicago tribune wrote a bottom quote based on the notion that some sampling of copyrighted material especially when manipulated and recontextualized into a new art form is legit and deserves to be heard in one example mr chairman he blended elton john notorious  and destiny's child all in the span of thirty seconds and while the legal indie music downloads site the music dot com took his stuff down for a possible copyright violations he's now flying all over the world to open concerts and re mix for artists like back the same cannot be said however for atlanta based hip hop mcs take king d g d j duck drama mix tapes actually made on c d s or sold at best buys in local record shops across the country and they're seen as crucial to make or break new acts in hip hop that even though artist on major labels are paying d j drama and others to get their next mixtape the major record labels are leading raids and sending people to him like him to jail i hope that everyone involved will take a step back and ask themselves if mash ups and mix tapes are really different or if it's the same as paul mccartney admitting that he nicked the chuck berry bass riff and use it on the beatles hit i saw her standing there maybe it is and maybe drama violated some clear bright lines or maybe mix tapes are powerful promotional tool and maybe mash ups are transformative new art that expands the listener's experience and doesn't compete with an artist is made available on i tunes or the cd store and i don't think sir paul asked permission to borrow that bass line that every time i listen to that song i'm a little better off for him having done so into our questions about the future of music get answered we first have to look at the future of radio i want to look at whether webcast are saddled with new royalty fees whether just one satellite radio company where low power f m radio stations can really help or to break through the clutter and be heard by enough people to be successful and i want to look at how consumers experience music and how radio shapes that i look forward to the witness talking witnesses talking about these terminal just trying to figure out half the words that mike doyle just mentioned i'm clueless but i think you'll help me later on i'll be brief i'm all about multiple pipes for competition the more pipes the better and that helps consumers choose and it stirs innovation but i also that's very schizophrenia in this new era as things change there is a local service requirement for local broadcasters that i think is very very important that we preserve for safety however then you talk about the katrina that when towers go down satellite may be able to provide a venue by which public safety information can get delivered so the the world doesn't stay the same it changes and that's why i appreciate the chairman calling this i love industries that modernize and technologically advanced quicker than we can regulate what i like because then we can't then it continues to inspire new services and we may be there in this industry in some sectors right now there are schizophrenia tendencies based upon the ability of the local service requirements based on new technologies it's appropriate that we educate us about the world wide web and clearly it takes at least five to help us with radio which has been around a much longer time from f d r to n p r radio has remained a primary source of information for millions of americans but obviously changes in radio today paralleled the great strides in internet television and other telecommunications services which we are learning about in our digital future series hearings maybe mr chairman we should have a digital future series of hearings about congress someday to digital future if any series of hearings at any rate radio is a source of entertainment to digital high quality entertainment in fact today high def definition radio stations broadcast cd quality sound over free airwaves walmart is now selling high definition audio receivers in a short time free digital quality music will be the standard in every city and town in america but digital radio whether satellite internet or over the air is an example of technology outpacing legal protections for intellectual property i know that the judiciary committee will take a long look at this issue but as you have said it's important it's an important one for this committee to competition in the radio market depends on a level playing field for radio outlets and on fair trial mn for musicians songwriters and record labels whose work they broadcast every day i hope our look at competition and fairness in the marketplace won't overlook the people who make free music in our cars homes and offices possible many of them i would observe come from los where my congressional district is located i think mr chairman this hearing is timely and our careful focus is needed and i confess it is impressive to learn that chairman dingell knows about gentlemen from oregon mr walden they very much mr chairman of course i'm very interested in this hearing i think believe i'm the only licensee on the committee and in the congress that actually owns and operates radio stations at least for a few more months we're in the process of selling them after nearly twenty one years in the business so i first always disclaim that so nobody excuses me of a conflict of interest that i haven't at least acknowledged but i have a great passion interest in radio my father was in it for thirty years i grew up obviously around the tower in the transmitter based on my receding hairline you can tell that and so i'm interested in these issues mr chairman i would point out that of your statistics on four percent of the licenses are owned by women  minorities my wife and i actually share the stock in our company so it is fifty fifty so we represent in terms of licensees probably at least half of one of those four percent in ownership because we've run it in owned it together and i have great passion for the industry i have great concern about its future i think in many markets consolidation has been very healthy and helpful to enhancing program content especially in smaller markets where many stations were on the the border of going broke in our own situation we started with two acquired two others that weren't in the best of shape and put another one on the air and we've actually brought  new programming to the marketplace and one of our stations actually one of marconi an am station and so there's a lot of really good local programming still going on in america in radio and we hear this talk of the effect that consolidation and yet i think clear channel is the largest or owner of radio stations owns less than than ten percent of the total number of stations out there and is selling four hundred of those twelve hundred just to pick a number out of out of the air this congress is also with the c authorized low power f m broadcasters to fill a need in the communities for a great diversity and virtually anyone who's not in the commercial radio business can go out and get an lp f m license and there are hundreds and hundreds of them on the air and clued in  in the markets that we're in and so i think there's enormous diversity at the end of the day though broadcasters are there when there's an emergency in our own situation we have gone commercial free and programming canceled in courses emergency to provide full time information i'm not alone in that effort many of my colleagues have done that as you mentioned in katrina in other crises around the country it's just what we do and where there were there when  the snow piles up on the road and the school buses can't run it's not other forms that are telling you that she will ride castors and so sure we can always do better but i think we've got a great record and i look forward to the panel today and hearing from them and where we go in the future of over the air free broadcasting as well as mergers and consolidations and alternatives for america's listeners thank you thank the gentleman a gentle lady from california thank you mr chairman for holding this hearing and i expect it's going to be another enlightening one just as the internet and digitization of content has revolutionized commerce digital audio has transformed the way we listen to music to news to sports and other sources of information and entertainment today i think that's indisputable it's changed has changed rapidly it's exciting a lot of people are has greatly enhanced choices for consumers for innovators and for the competition that exists in our country until very recently when i think of the only music that that i could listen to was from my local radio station from my home or my car stereo and really not all that long ago from my walkman when i was on the treadmill and that's it seems really almost humorous to think that that was not all that long ago it seems as if it's really in the distant past now our choices are no longer limited by our local broadcast radio stations or by our personal cd collection in fact the choices are almost limitless satellite radio delivers hundreds of channels to cars or portable devices i pods carry thousands of songs in the palm of our hands and the internet delivers nearly any song we've ever heard of or or radio signals from the clock across the globe to any connected device but unlike other internet content these innovations are threatened by dominant broadband providers who have the ability and the incentive to limit consumers access to the content of their choice i think it's essential that access to internet radio and content distribution services remain unimpeded and outside the control of broadband gatekeepers without net neutrality it's possible perhaps even likely i think it's likely that the broad consolidation in terrestrial and satellite radio ownership and limited consumer choice will be duplicated in the online environment as broadband providers steer users to their own services or their partners offering net neutrality is critical to ensure that internet radio and other emerging on line music and information distribution services have a chance to compete with incumbent providers so welcome to the witnesses i think that the year also eager to discuss the potential merger of the two of america's satellite radio providers and i look forward to your answering my question thank you mr chairman thanks generated gentleman from nebraska and terry thank you mr chairman for having this board and hearing of course we had the digital television hearing in the internet hearing and now the radio or oral not oh but a huge part of the digital transition and for consumers what an exciting time to look at all the consumer products where we can our music or talk radio or podcast and i just wonder what it's going to be like as we have the digital breakthroughs that are occurring right now what it's going to look like ten or twenty years from now i'm probably an example of the consumer that we're going to talk about or should be the focal point of today's hearing of how best to empower the consumer in this changing environment so that they have access to whatever mechanisms necessary so they can get the programming that they want i have my video i pod all my kids have their i pods even the six year old has to have his own my wife my wife's christmas present was serious for the car and in the house although i'll have to admit we had a discussion about whether to get serious because of one of their programs howard stern on there and my wife and i said well that probably breaks sirius at some point anyway true discussion maybe we'll get an answer to that or not but certainly having mr carson karmas on here today  prompts the discussion of whether to ask a decency question about satellite i think i'll pass on the decency question but i think we'll have a healthy discussion about whether a merger or creating within the satellite environment a monopoly  appropriate from the consumer standpoint the question that i want to ask our panels today our panelists today is how would we define the market today certainly if i  bought my music from a record store some time ago we wouldn't of really define that as competition although i guess in a way it is but yes while there is free over the air we now have for pay satellite we have all these other mechanisms do we throw anything that makes noise into the world of competition so that we don't define this merger as a monopoly i think that's one of the questions that should be answered today  certainly skeptical of these two companies coming together as one i think on the surface that is anti consumer will have felt that out today i want to thank all of our panelists for being here to aid us in our policy decisions and i yield back next to the gentleman texas mr green thank you michel for holding a hearing on the future of radio the future of radio's quickly transforming with many recent changes in the way consumers can assess programming the emergence of h d radio which has become more affordable accessible is providing new and additional programming consumers on the other hand the proposed serious and exim merger raises serious questions the implications would have on localism and consumers even  if safeguards are put in place remains unclear at best next week we'll hear from the f c c commissioners and from this panel i'm sure they'll be prominent topic in both testimony and questioning as today's new york times article about chairman martin's concerns over the merger it's hard to see how prices for satellite radio will come down when a big part of the reason for the merger is to make it profitable a related issue which greatly concerns me is the attempt by satellite radio to offer local radio programming and i've worked with mr pickering introduced legislation on this on local contact warner content were ironic but i respect respond that maybe it's backwards what's ironic is if national radio satellite radio offer local content would actually decrease localism and local news coverage and local emergency coverage under national license a satellite radio is not obligated to provide public insure services such as amber alerts coverage and debate of local issues important to emergency broadcast during natural disasters civil disturbances or terrorist attacks more importantly under their infrastructure satellite radio cannot generate local content they can only aggregate in retransmitted there are no boots on the ground so to speak to generate their own local news community affairs or emergency coverage as evidence satellite radio often  only offer the low cost profitable low proper local service like traffic weather and local lads although they are offering local traffic and weather on national channels for a handful of large cities they do not hire local meteorologists for local weather coverage or put traffic reporters in helicopters for traffic coverage in contrast local broadcasters and huge sums of money to generate that unique local content has a post just restrains meeting basic local information gathered from somewhere else has satellite radio is allowed to cherry pick cheap local content and sell local ad revenue local broadcasters be forced to reduce their expensive local content like news and public affairs the threat is more serious for local news stations which are a major source of local traffic and weather information if satellite radio is allowed to pull listeners from these stations we will see if your local news radio stations is country in fact i have that problem in my houston area our local news station is now mostly a talk station and coming from our side of the aisle the folks i have on the talk is not one of my favorite  people many matters worse when you reduce the investments at local broadcasters make in the local day to day traffic weather news coverage or reduce the assets available for broadcasters to use during local emergency the result could be catastrophic in tragedy since local broadcasters are the only ones that have the again the boots on the ground or emergencies like here canes and terrorist attacks the legislation risk picture and i've introduced h r ninety three the local emergency radio protection act clarifies satellite radio is not allowed to use their repeater network or their receivers to selectively offer low cost local programming undercut localism mr chairman i want to thank you for holding a hearing and i look forward to hearing and next week and also our consideration  i was looking at this i'm not sure that congress really has a distinct role in whether this these two radio stations should be merged or not perhaps our responsibility is more into differentiated programming undermines free over the air radio i think all of us ought agree though that these these two the merger of these two is not going to create a monopoly in any sense because there is a lot of competition out there with the broadcast in the internet and wireless and i pod this others have mentioned so in the end i think that we just have to see whether competition congressional testimony scriber it would pay the same monthly rate receives significantly more programming but then i think mr martin went on to say well i think it's going to go above the twelve ninety five and then in response m said that he meant two things subscribers wanting to keep their existing service would not face a price increase and listeners who wanted the best of both services would pay less than the combined rate of twenty five dollars and ninety cents so i think my colleagues probably want a little more clarity on that going along with what chairman martin has indicated but the long term outlook on this is that  whether they merge or don't marriages in the price of this will be decided by competition so even if they do merge they're going to have to compete pretty strongly in the marketplace have to offer a better product a better price they must  chairman and thank you for holding today's hearing on the future of radio and in the digital age i want the record to reflect on my good friend congressman mike doyle gave up the call for lent but after his opening statement i believe would be better if you'd go back on it i'm sorries not here for the common but the witnesses will provide provide a snapshot of the radio market today and instruct us as to what the market will look like in the future i think we'll find that the market is not easy to define the dorio market only understanding the market is key to congress legislating and the federal government regulating in this area for example how the department of justice he finds a radio market will largely affect whether department of justice approves a proposed merger between x and sirius satellite radio please we have mr karmazin of sirius radio with us here today to speak about the proposed merger in his view of the radio market i'd also like to welcome the other witnesses testifying while i hope we discuss other issues such as access to content royalties new platforms and technologies i think it's important that the committee look closely at the proposed satellite radio merger look at this proposed merger through the eyes or should i say that years of my rural constituents rule americans depend on local programming for crop updates storm warnings local news and sports or their remote hunting boating or driving hundreds of miles of meeting my constituents radio is my lifeline to the world i always have access to the radio i don't always have access through my cell phone local radio warns me of one another winter storm is rolling in and it provides me with play play by play action of the current hoping a high school hockey playoff run i'm not sure what my constituents would say is the more important service sell a radio has also taken off in rural america my constituents have embraced this new option for content they may not otherwise have access to the success of satellite radio in rural america similar to this success of satellite television i believe it's beneficial for my constituents of a choice  providers in both satellite television and satellite radio markets just as direct t v and echo star's dish network competing head to head man if it's mike and consumers so does head to head come to a competition between x and sirius radio and both markets competition has kept prices down increase innovation and strengthen consumer service ultimately i believe a satellite provider may be a better check than a local broadcaster in that vein i'm concerned approving this merger could start to start us down a slippery slope of approving mergers between echo star and direct t v and other providers that's not something my constituents want when echostar stop providing distant signals last year i heard from money many of my constituents upset that the one option for satellite television i urged the apartment justice of the federal communications commission to look at this merger with a critical eye and protect the best interests of the public airwaves not corporations and with that i yield back mr chairman  but also highlight some potential problems perhaps more important than that is determining whether a true problem exists at all there are more options available in the marketplace than ever before apple's i pod is a stunning success story digital audio can now be heard across multiple platforms from internet radio webcasts and wireless to h d and satellite radio in just a few short years there are more options available to our constituents than ever before i think it's safe to say that members of this panel want to ensure that the the digital marketplace remains robust and competitive in turn it's important that there remains a maximum choice for consumers and that the marketplace is a welcome  place that encourages innovation these are indeed exciting times for american consumers particularly with regard to the audio industries and that's one of the reasons why at this point i'm inclined to be supportive of this proposed merger with x m and sirius however my support is primarily contingent on there being a satisfactory resolution of the issue of adequate protection for content creators last congress i introduced the audio broadcast flag licensing act it urged that both satellite companies and broadcasters come to the table with content creators to work out fair royalties in the private marketplace the goal of my legislation was not only to ensure that intellectual property rights  respected and that content creators are treated fairly but that consumers continue to have access to new content i have long said that my preference is to see the issue of digital content protection resolved between the respective parties issue in the courts i'm eager to learn today how a newly merged company might address this particular issue thank you mr chairman again for holding this hearing radio in the digital age not only holds an exciting array of products for our constituents but also raises many questions for this panel to consider and as we strive to ensure that those options not only remain but continue to grow and i look forward to hearing from our witnesses i welcome all of you here today  and also the other panelists good to see because we're looking forward to learning a lot from you  we need to understand how to maintain a competitive marketplace that gives choices and low prices to consumers and create value for shareholders also look forward to learning how more minorities and women can get into this booming business and how these companies plan to operate responsibility and in the public interest using the new options offered to them by digital technologies i agree with some comments coming from my colleagues that we must first view this satellite radio merger from the perspective of the consumer and whether or not the combination of these two companies will benefit our nation audio uses both in terms of price and content it is clear that the audio market has changed drastically between one nine hundred ninety seven and the day when the f greenlighted the emergence of exim and sirius and now ten years ago when there weren't nearly as many audiophile options as there are today pitting these two companies gets each other was more logical in terms of diversified consumer choice now have a with i pods in every jam and internet radio in every computer the audio landscape is a bountiful place therefore we must ask ourselves if this merger will continue to provide consumer consumers with great content a wide array of choices and low prices and i emphasize low prices i eager to hear from our witnesses on these crucial considerations and i think them for taking the time to appear before us today so we can learn as much as we can and move forward thank light of the proposed merger of the satellite radio stations and i'm interested to learn more about both positives and negatives and how the merger if it is completed will affect rural districts such as mine and not only the constituency but also existing radio station operators understand there are a number of ways of course for customers to access programming i pods h d radio over the air broadcast radio however also know that there are many of my constituents who are concerned about what's going to happen if there is only one satellite radio provider in the marketplace one question that i would like to see answered is how we can be assured that this merger will not result in rising prices to consumers there continue to be an active and competitive radio marketplace what will happen to exclusivities deals and their effects on consumers well there continue to be innovation and ingenuity these are very real concerns for millions of americans i would like to end with one final observation as i listen to the various parties commenting on this merger i've been struck by one particular aspect of the debate behind the reality of whether there is competition and parity among the various industries involved  struck by this one bit of irony the broadcasters when talking about their television programming seem to have a different message than when i'm hearing from their radio interest when it comes to television programming they've been very vocal in asserting their right to negotiate compensation for their product and have asserted their power to withhold their product from anyone not willing to meet their conditions for payment however when it comes to broadcasting artists music the n lobbying congress that they should not be asked to negotiate or pay for another content owners product even though satellite radio companies and web casters do negotiate i find this a highly contradictory position when they control the content content they demand payment when they use someone else's content they don't want to provide claimant mr chairman as we consider the merger before stood a and debate whether there is parity among the various services i would suggest that we should also consider whether there is parity across the telecommunications sector on how we treat content owners and whether it is fair and reasonable thank you chair recognizes gentleman from virginia m well thank you very much mr chairman i just have a few thoughts about the serious proposed merger that i'll share with members and others this afternoon i think there are pro consumer better which suggests that the merger is in the public interest both companies maintain separate entertainment offerings at the present time the merger would extend to consumers larger choices from among program offerings including the possibility of a lot card availability to select the channels from a larger total inventory that each consumer would would desire the extra bandwidth which the elimination of duplication would produce could also result in the offering of a broader array of public interest programming than either company is offering at the present time and there appears to be and in my view no valid reason to disapprove this merger it's clear to me that the relevant market for competition purposes is the entire marketplace for audio entertainment that marketing clues all have to restoral radio as evidenced by the repeated statements of some of the major to restoral broadcasting companies that they are in competition with satellite radio i think the the opposition of the national association of broadcasters to the merger lends credence to the fact that to rest role on satellite radio or indeed in competition the relevant market also includes internet radio and both internet based streams and downloads to computers and to portable devices and in that large highly competitive market satellite radio is really a small player arbitron is a recent survey that was released last week shows that satellite radio listening accounts for only three point four percent of all radio listening that same survey shows that satellite radio listeners are also avid listeners to a restaurant radio in fact satellite radio listeners are listening to x m more serious for ten hours forty five minutes per week about those satellite subscribers are mostly listening to restoral radio for an average of fourteen hours weekly they listen to enter net radio eight hours fifteen minutes weekly these figures clearly show that satellite radio is in competition with to restoral radio and internet radio and that satellite radio listeners are listening to the combination of to rest roll out internet radio more than twice as much as they are listening either to  or to sirius there are public benefits to be derived from the merger and in the market where satellite radio competes the companies do not have market power in fact combined they represent a mere three point four percent of that market so mr chairman in my view the public interest requires approval of this merger thank you and i yield back gentleman sense expired gentleman from california mr radanovich thank you m and going to the yankee stadium here mr angle see if we can go for the cycle here well i'm afraid i'm going to have to run it mr chairman gentlemen but i'll tell you what i will do for you i won't read my speech i'm just going to speak from the heart a little deaf man i'll try to not take the full time i want to say and i've listened to to a number of my colleagues that i certainly have an open mind about this i don't think that we should automatically assume that the merger is a bad saying or a bad idea like all of us we represent constituents in the bottom line is what's best for the constituents i don't think we know that i think there are differences of opinion about that i think we should listen to all sides and and come to a conclusion i do know one thing i do know that my kids run around with i pods and all kinds of things i don't have time for and i know that when we look at the total issue we cannot i believe just look at the issue of radio standing by itself i think we have to look at the totality of the kinds of entertainment people are looking for so i would say that the onus is so years i've been on this committee things are rapidly changing in telecommunications and the genie is really out of the bottle i'm not sure that government can or should attempt to put the genie back in the bottle i think  sometimes we might be better off letting letting the marketplace decide that as well but again i have an open mind and i'm going to listen to the testimony and i think that this committee has a lot of a lot of discussion and i and i welcome the people who are here to testify and i thank you mr chairman for your indulgence i thank the gentleman and gentleman's time has expired all time for opening statements by members of the subcommittee has expired i like to inform our witnesses that you have just been an eyewitness to history this is the largest number of members of any subcommittee that has ever showed up at three o'clock in the afternoon to make opening statements on any subject at any time in my thirty years in congress so i know that you're probably wondering what's been going on in history has been made this afternoon so we welcome you we thank you for your patience and you are the main event obviously and we are looking forward to your testimony will begin by hearing from geoffrey blackwell who was testifying on behalf of the native public media and the national federation of community broadcasters mr blackwell is currently to director of strategic relations and minority business development of the chickasaw nation industries he is a member of the native public media board of the tribal advisors and he is also the chair person of the national congress of american indian telecommunications subcommittee mr blackwell you have five minutes as have each one of the other witnesses at which point we will go to questions from the subcommittee members of the my name is jeffrey blackwell and i'm honored to represent native public media and the national federation of community broadcasters at today's important hearing on the future of radio native public media represents thirty three native public radio stations in the united states native public media's primary focus is strengthening existing american indian and alaska native stations and promoting ownership for more native communities by serving as an advocate national coordinator and resource center the station serves as critical platforms for education and language preservation look affairs and cultural dialogue they meaningfully inform the understanding of localism their abiding commitment is to serve the diversity in their communities for example on the hopi reservations remote maces in northeastern arizona k e u y i broadcast the children a children's program called shooting stars every moment every morning during the ride during the bus ride to school produced at the request of the students the program engages community members and elders to read stories in both the hopi and english languages that don't offer them a nation which is responsible for almost a hundred miles of our critical international border with mexico relies on k o h in to keep its citizens informed of the local news national threat levels and homeland security activities with these experiences we have recommendations for congress and the relevant agencies to improve the status of noncommercial radio particularly native radio the first priority must to be to must be to increase federal funding and explore other avenues for supporting native public radio stations including full support for the corporation for public broadcasting and the public telecommunications facilities program and additional funding for community stations on needs based criteria in this regard keeley the lakota radio station went dark last year after being struck by lightning native public media provided keeley with proposal writing expertise that helped the station secure emergency funding from the p t s d program and c p b to repair and resume operations we learned that even small grants can make a big difference second support native public media's blueprint initiative which envisions a complete inventory of how native communities access and relate to media both traditional and new advanced telecommunications services the blueprints initiative will find the critical information on which new solutions can be premised third ensure that there is adequate public notice in advance of the f c c s upcoming applique action window for full power noncommercial educational licenses for pass legislation to lift the prohibition on the f c c issuance of certain low power f m licenses fifty protect the basic ability to stream content or post pod cast at affordable rates without receiving prior consent from major telecom providers in addition access should be increased for native programming on satellite program satellite radio services the f c c should hold an official hearing on media ownership issues related to indian country as they continue in their review of the existing rules we need an in depth examination of these issues and finally congress should provide customized tools to the f c c in the form of new legal authorities and directions based on bakes on basic recognitions of federal indian law and policy to work directly with native nations open new proceedings and create new rare new rules to address barriers to entry and streamline regulatory processes the vast majority of native americans have no access or only limited access to media that represents their voices and interests native on radio stations account for less than two point three percent of the over thirteen thousand radio stations in the united states there are more than five hundred sixty two federally recognized tribes yet we only have those thirty three licenses for native public radio stations for native people across the country it's not about having access to big media it's about having access to any media profound changes are taking place in the way americans use media native public media is focused on helping native communities leverage new digital and wireless platforms that will help make it possible to close the existing media divide critical to our efforts is ensuring that policymakers understand the impact of their actions on native communities in closing native nations face several challenges in deploying critical emerging information telecommunications technologies while they work to elop sustainable economies as you address the appropriate legal framework in a world of technological convergence native nations and organizations remain ready to consult with you mr chairman members of the committee on behalf of named public media thank you again for the opportunity to testify today i look forward to answering any questions you may have i thank you very much mr blackwell next witness is peter smyth who is the president and chief executive officer of greater media incorporated he is here today representing the national association of broadcasters since march of two thousand and two he has been the president and c e o of create a media the parent company of nineteen am and f m radio stations in boston detroit philadelphia and new jersey we welcome you mr smythe's we thank you for your willingness to testify today whenever you're ready please begin thank you that afternoon chairman markey ranking member afternoon and subcommittee members my name is peter smyth i'm the president and c e o of greater media which owns and operates twenty local am and f m stations in boston detroit philadelphia and new jersey and thirteen community newspapers in central new jersey i'm testifying today on behalf of greater media and the national associations of broadcasters i'm here to voice an a b c opposition to the proposed merger of the country's only two satellite radio companies x m and sirius but first i want to make several important parts about the future of terrestrial radio as the c e o of greater media a company that just celebrated its fiftieth anniversary in radio i am optimistic about radio's future i've learned from working for a family owned company that a radio license is not a right but a great privilege and we need to treat that accordingly respecting listeners and delivering qua all the content to serve their needs as part of this obligation we are transitioning to the digital technology h d radio to provide the quality sound and additional data that dividual service offers w also focusing on compelling local content that creates an emotional bond between listeners and their communities my colleagues understand that localism is our franchise and ours alone and that we must retain that unique connection to listeners that no other medium can provide which brings me to the satellite radio and the proposed x m serious merger as i see it there are a multitude of reasons for the government to reject this first satellite radio is a national service that provides very similar programming to each listener across the country there are only two such services and they compete ferociously against each other in the marketplace the end of novel fact is that mr parson and mr karmas on one government positions permission to take two highly competitive companies and turn them into one second x m and sirius are two companies with a track record of misrepresenting their intentions and not following through on the rules that have been established and failing to correct those past transgressions for example x m and sirius for years have operated terrestrial repeaters in blatant violation of f c c rules x m operated more than a hundred forty two repeaters at unauthorized locations and not to be outdone sirius constructed at least eleven repeaters at locations different from the city they told the f c c including one in michigan built sixty seven miles from the authorized location sixty seven miles moreover both x and sirius promised the f c c nearly a decade ago that they would have a receiver that receives both excess and sirius that receiver does not exist today and now many of the local radio companies have complained to the f c c that explicit x rated programming from satellite radio leads through to their local stations without warning viewed against this pattern of behavior why would the government trust these two companies to four monopoly third if the government sanction monopoly is approved consumers will be the loser subscription prices will rise because there will be no competition to restrain a monopoly jobs will be eliminated innovation will suffer at a crucial time in our evolution neither lister nor advertiser will benefit put simply private corporate interests will benefit the public will suffer fourth x m and sirius by their own admission are not failing companies their current highly leveraged position is due to extraordinary fees paid for marketing on air talent eighty three million in stock that sirius awarded to howard stern last month and on top of the two hundred twenty million dollars bonus but even with these single monopoly provider i've heard these companies claim that monopoly should be granted because local radio competes about access and sirius let me be very clear here local radio does not compete against saddle satellite radio in their national market local radio local broadcasters signals are not nationwide and are not subscription based were free we are not a substitute for satellite radio five years ago the only two nationwide t v satellite licenses echostar and directv tried to blaze a remarkable similar trail when they proposed to merge it failed indeed the f c c decided unanimously merger was not in the public interest for these reasons and others i respectfully ask that this government sanction monopoly be rejected i thank you and i look forward to your questions i thank ms smith is very much our next witness robert kimball who is the senior vice president for real networks incorporated he serves also as general counsel we welcome you here today sir thank you chairman markey ranking member upton and members of the subcommittee thank you for having me today to talk about internet radio real networks the company i work for invented streaming media back in one nine hundred ninety five and last year we use that technology to deliver over one billion song plays to our customers and  actually we did pay royalties to the musicians for the use of that music i'm here on behalf of both real networks and the digital media association a group of leading internet media companies including apple microsoft a o l yahoo and several small web casters i have good news and bad about the future of internet radio first the good news internet radio provides a rich and diverse music experience that listeners love and as a result they buy more music this is great for us and for the music industry now the bad news internet radio suffers from serious statutory bias that undermines our competitive opportunity because we are forced to pay higher copyright royalties than our competitors and our innovation opportunities are severely restricted this anti internet bias is bad for consumers and competition and it reduces our industry's ability to address your media consolidation concerns today internet competes at least in part with terrestrial and satellite radio speaking for real now works we believe that the sirius x m merger should be put on hold until should be put on hold if you campbell standing when we try that again we believe that the x m sirius merger should be put on hold until congress creates a level playing field to enable us to fairly compete with a larger consolidated company without fair competition further consolidation in a favored industry is just bad policy internet radio is simply radio programming transmitted over the internet several thousand web based radio services offer literally hundreds of thousands of internet radio channels to satisfy every conceivable musical taste are unlimited supply of diverse channels and features ensures that every artist can find a fan and every fan can find a station internet radio enables consumers to choose a station by more than its call letters or number on the dial with internet radio listeners can identify john rose time periods artists and moods and the service can vote can provide them a relevant station internet radio enables independent musicians who never get airplay and big radio to find an audience we enable the small town listener to have access to music and information that local radio simply cannot provide and while listening to our stations our audience can read music reviews learn more about the artist buy concert tickets we are good for local musicians and local economies we also provide simple by now buttons to sell the music on the spot if you like the song you're listening to every one of these features benefits recording artists especially those who get no airplay on big radio or even on satellite radio so with all this opportunity what's stopping us from competing fairly good satellite and broadcast radio first the copyright act of staff establishes a tiered royalty structure that requires internet radio to pay the highest royalties by far while exempting broadcast radio from any sound recording royalties just last friday the copyright royalty board imposed a new minimum of five hundred dollars per channel a charge that is likely to kill the very diversity that makes internet radio so compelling if this fee is not overturned one can easily imagine web radio looking more and more homogenized like homogenized mass market radio second the copyright act does not regulate broadcast radio programming it only lightly regulates satellite programming but it greatly inhibits the programming flexibility for internet radio companies third the copyright act allows satellite radio and terrestrial radio companies to offer recording devices and portable radio services and allows them to encourage recording of their radio stations meanwhile the copyright act punitively regulates personalized internet radio which is essentially eliminates our most compelling features and finally while broadcast radio has no copyright litigation exposure internet and satellite radio have massive exposure that is a powerful deterrent to innovation if we guessed wrong about a copyright act provision the penalty is one hundred fifty thousand dollars for every song performed i have personally had to kill several innovative projects due to legal uncertainty and the potential financial catastrophe that could result from statutory damages as tim berners lee testified in th subcommittee just last week the internet has become a more mobile and wireless environment and the next several years why macs and other technologies will strengthen mobile broadband capability and the web and internet radio will always be on and it will always be portable in the future a mobile phone just like this one is going to have three radio services available broadcast satellite and internet will compete even more directly against one another especially in a world where terrest radio is moving to digital h d broadcasts why should we pay three different royalties and have three different sets of programming regulations for radio delivered to the exact same device the current state of internet radio is dominated by two facts we pay higher world sees in our competition we are subject to more restrictions on our ability to innovate the future of internet radio and perhaps all digital radio competition we largely be dictated by whether there's a level playing field thank you i think  of radio stations in the united states working his way up he eventually became the president and chief operating officer of viacom mr commas and joined sirius in november of two thousand and four as chief executive to be here today i assume that when chairman markey invited me to attend this hearing it was because he wanted to take advantage of my forty years of radio broadcaster on this important subject but in judging by the comments that have been made by the members i think that rather than getting into talking about the health of the radio business that i was spent some time talking about the serious merger since it seems to be on everyone's mind so let me begin by saying that before we decided to attend to do this merger both sirius and x m obviously consulted its boards and had advisors in and we talked about whether or not we believe that this merger could be approved there would certainly be no advantage to either company of announcing a merger if in fact it wouldn't be approved and what the advisors told us and what we have been operating under from the time we've announced it is that there are two standards that we really need to do one standard is that we need to make sure that this merger is not anti competitive and the d o j and the f c c will take a look at whether or not this is anti competitive or not i think that you've all heard from all of these people talking about the competition that exists in satellite radio and we're absolutely convinced that this is not about t companies becoming one or do i believe becoming a monopoly it's absolutely ludicrous for anybody to think that we are not competing with all of these technologies that have been talked about i also heard that the n a v has a viewpoint which apparently is very different than its members about whether satellite radio competes with them because if in fact the c e o s of all of these publicly traded radio companies from clear channel to c b s to enter com to  cox in their f c c filings that the c e o s of all signed on signed off on they all said that they compete with satellite radio so it seems a little bit disingenuous to talk about the fact that satellite radio is not competing with them so number one we have to make sure it's not it's not anti competitive and number two we have to make sure that this merger would be in the public's best interest and that's what we're prepared to say and when we go through the process d o j and the f if in fact it is in the public best interest it'll get approved and if in fact it's not in the public interest it won't get approved and will move on there's some confusion here about what we've said about pricing so i welcome the opportunity to talk a little bit about that to clarify it if there is any confusion so the first thing that we said is that because we compete with free that the marketplace dictates it but we can talk a little bit about how you can hold us accountable for everything that we're saying and that is that this deal will not result in higher prices clearly will not result in higher prices testis and you can come up with a way of holding our feet to the fire we will also provide more choices so  in the specifics if you are a serious satellite radio subscriber you pay twelve dollars and ninety five cents you will not pay more than twelve ninety five for that service after the merger as a matter of fact we will give you an opportunity to pay a lower price because today the cheapest price you could pay is twelve dollars or ninety five cents but if you don't want all the choices we give you we will give you an opportunity to have less so that will be the first time and the same thing is true with x m and by the way sirius started at twelve ninety five and five years later we're still at twelve ninety five we've also said that if in fact you like the idea of having some content from sirius and some content from x m where today what you have to do is buy two radios pay twelve dollars and ninety five cents each that comes to twenty five dollars and ninety cents that we will make an offering available for less price so if consumer choice and lower prices equal public interest we think that we pass the test we've also heard some things that are just also not relevant from a point of view of serving the rural markets we're proud of our track record on how we serve rural markets and we think that we're really an asset when you compare us with the choices that we offer to people in smaller markets that they don't have a choice there was also an a point about how ten years ago  received our licenses and we paid for that license to use our spectrum ten years ago and what we also think is very strange is that if in fact you would use one nine hundred ninety seven policy to deal with what's going on in a two thousand and seven marketplace but again we'll let the f c c decide on that so i know my time is up i don't want to go over but i really really hope you ask me a lot of questions i think you know you won't be disappointed when i  kimelman the gene kimmelman is vice president of federal and international affairs for the consumers union he is an expert on telecommunications policy has appeared before this committee many times in the past we welcome you today thank you mr chairman mr upton members of the subcommittee on behalf of consumers union print and online publisher of consumer reports magazine we appreciate the opportunity to testify this afternoon the new technologies that have created this explosion the digital opportunities in radio in content create an enormous greater potential for consumers to have all kinds of services and it's an exciting time and for the congress we appreciate you looking into this because as you look at this burgeoning marketplace of audio vail ability there are a number of clouds hanging out there that we hope you will begin to address immediately first off you heard talk of low power f m and recent findings that there is not the interference that people had worried about before we totally endorse mr blackwell's idea that there ought to be more bail ability of low power f m across the country there are many many groups you have a submission from the promethea sree a project for this hearing today indicating those who want to offer the service consumers want to receive it we hope you will help open this market to new diversity and opportunities the other major you heard about earlier is in this enormous marketplace the few minority the few women owners of media properties from radio across broadcasts and on why is that the case there clearly is our marketplace impediments that are limiting diverse ownership we hope the committee will move immediately to address those those issues diversity of owners is very different than programming that is targeted to audiences but i controlled by few entrepreneurs who do not reflect the attitudes the backgrounds of those diverse audiences and this is an important issue to address and as you look to what the marketplace could do we believe the greatest danger to consumers are many of the proposals to allow broad consolidation of media properties that concentrate power in the hands of the few owners the great technologies will not serve the public interest if too few people control these technologies so this afternoon i'd like to just address the immediate proposed merger be for you to evaluate from a consumer perspective what this means of the sirius x proposed merger many things have already been said about market definition mr terry i certainly hope that this is not the marketplace of noise but looking carefully at what consumers need and what they use there is a very distinct difference here between a mobile audio digital service that local broadcasters do not offer and cannot offer that for immediate sports programming n f l n b a major league baseball you can't get on your i pod or other devices there are some very unique elements to the sir has that and serious or offering and so you can say that a bike and a plane and a train and a car all compete on some level but for the importance of defining a relevant market for competition that keeps prices down for consumers and options open that wouldn't make sense and we believe in this case this merger suffers from very severe anti competitive limitations and unless mr karzai who's extremely gifted can show us how there are other facts not available right now we don't believe it's in the best interests of consumers to allow this merger to go through either from the limitations of the licenses of the f c c or and i trust review is just speak for a moment about the price promise i very much appreciate mr karmas on clarifying what we could get for twelve ninety five and the fact that there will be do operations for less than twenty five dollars  he indicates there will be more choices from this but i'd like you to step back as policymakers not to review the merger but just policymakers to think about if there were one satellite radio offering what would you want to do to lock in that if that is the appropriate deal that you'd be getting do you just trust it in the marketplace if there is no other mobile satellite radio provider or what conditions what regulations would you need and let me ask you this do you think you need to licenses in the hands of one company to offer that service is it possible that what we're really hearing is if there are benefits of combining these we could free up some of the spectrum from satellite radio for mobile digital television for more broadband possibilities is there a policy option here that's really being presented to you that would create more opportunities for consumers we urge you to look at those issues in the context of what's being proposed in the marketplace and please help us and keep driving in driving more innovation in diversity and please be skeptical about consolidation thank you thank you thank him and very much a chair recognizes him self for five minutes will you permit consumers to buy channels a la carte know at this point we don't have the set top box that is existing in your home so that what we will do is offer more choices and we might be able to get to all our current like services but the idea of having somebody pay for two channels if they only want two channels is not something that is a financially viable alternative  satellite radio so will prices for consumers stay the same the prop or increase and for how long will anything that you say be binding upon your company so we are certainly willing to have discussions with this committee or with the f c c or any appropriate agency on crafting a time furry but i will make it very clear in answering that question no prices will not go up again if you're a subscriber to one service it's twelve ninety five it will not go up the only increased pricing would be if you were taking content from both companies and there the price comparison is twenty five ninety five and the prices will drop significantly from that would what the significant means so that if one of them has the n f l the other one has major league  baseball if someone wants to get what the income but the company that they now subscribe to doesn't provide well they have to pay the full twelve ninety five in order to get it will be a discount for that person as there  as they are now subscribing to the other channel and how big is a significant discount is that ten dollars off for only two dollars off there will be a significant discount to the  without getting into any specifics congress because we're not prepared to come up with a specific but i will tell you that it looks closer to ten than to two now on the issue of local content such as news weather sports etc not just national content there is some concern by the local broadcasters that this synergy is going to make it this merger will make it more possible for you to provide more local content which will cut into the local radio stations revenues let me just hold here for a second as we go back into session on the house f could so can you answer that question in terms of mr out to the local broadcaster mr chairman our business model does not provide for us to really do local advertising and local content i've heard from different people in the course of the last two weeks where some people would like to see us do more local programming and others are looking for assurance that we're going to do less or no local programming so we're happy to work with our regulators we're happy to work with this committee and getting a sense as to what it is that the  company what we're being asked for sometimes we're being asked to do more in a way of local services and some people have advanced that and other people have advanced doing less so we don't currently plan on getting into the local advertising but do you believe that you are a threat to local broadcasters yes i believe there is a fact that when we compete with local broadcast there is no question of what you mean by bright are they going to be out of business absolutely not there is an am f m button  next door to every satellite radio subscriber we are not replacing local radio so i don't know what you mean by threat do we compete with them absolutely they compete with us absolutely let's go to  respond to mr commerce on my response to mr karzai is first of all i am a local business he is a national business i do not compete with him on a national business because my signals in boston massachusetts cannot be h lansing michigan or detroit michigan he can bring if this merger is put together he can bring two hundred eighty eight signals into boston massachusetts where i currently have five radio stations i recently had to divest of one because i bought another one and my concern is twofold he would have two hundred eighty eight signals in boston massachusetts i would have five c b s would have five entercom would have four i think that there is a disadvantage in that do i compete with him in the national arena no i don't number two my question is with this stressful repeater when you start to get into exclusive programming there are some concerns there that you can start to see them come in to the local markets mr carson just said that it's been going both ways some people want to man some people do not want to hear from my colleagues they do not want him in the local markets i never heard anybody say we want you to come in let me get a quick comment from is to kill him and then my time has expired mr chairman i think it's quite clear that this is a national service that does something unique it combines national programming all major league baseball n b a with the potential for local programming mr carson says he's not really in that business but he can offer it he would offer  it some level so i can understand why local broadcasters would fear that this could cherry pick some of what they offer and what are the consequences of that mr kimmelman quickly well i think that this is something local broadcasters are going to have to address whether there's a merger or not it's just a greater problem if there's a merger to get my time is expired and recognize the gentleman from michigan mr up to thank you mr chairman i've got a number of questions as it relates to the merger request as well and i serious or exim either one able to succeed without the merger if i believe if the merger does not come through yes i believe so and let me let me go into one of mr marquis's question as one of the things that to clarify one of the things that you indicated was that you would perhaps look at lowering prices if you look at perhaps a smaller service field or a smaller number of stations not exactly our car as we would like to imagine but  increase ever the question i was going to ask could you do a six month six month or so and that's essence you could sign up for n f l in the winter and then maybe in march with the change of daylight savings time be able to move to the spring games and get baseball through i think homer currently you have the ability of you need a separate radio so in the case today of both services you have to buy a separate radio but there is no minimum required i would say the vast majority of our subscribers do an annual plan or more but you can subscribe on a monthly basis and if you wanted to to pay for a month disconnect and go to another service you can do that not a you know i'm co ch happens if i buy the do four and all of a sudden i decide that i want the the n f l and baseball to be part of that what do i do as it relates to the receiver that i have in my vehicle so before the merger today would you have my let's say the merger goes through as was always the merger go through we would hope to offer you as a forward customer is the ability to get both services on your same radio and that's where you'll be able to do that without changing the receiver of the device that i would have or not that's correct and that's where we've made the analogy of saying that today you would have to buy the second receiver to attach to it and pay a second subscription twenty five ninety and going forward there would be a substantial reduction and you'll be able to get it both on the same receiver it's just my theory not and you're shaking your head is that not   if they sirius radio in a mustang and the merger can together today you would have to have another radio in that car you could not receive both x m and sirius on a ford radio today it's inoperable so which you'd have to do is either get some type of it would cost the consumer more to do that and i so when mr karzai was saying that i mean he's far wiser than i but i was somewhat of a doubting thomas to see how that i could have is who's going to pay for this  that i'm going to get the consumer in what is the cost going to be a car and what we're saying is that every single receiver that exists today is not going to be obsolete and in order for the consumer who has that ford vehicle today if the companies merge you don't need a second receiver that will be able to provide you with content to your existing receiver without a new receiver and at a lower price than you currently have the choice today you're saying that the same chip will receive the same two signals from x m and sirius is that a question let me know that we didn't say this is same chip what we've said is that we would feed that content via the satellite into that respective service so we would take x m's contents not very complicated in the broadcast business a long time we would take the baseball content if we got permission and feed that on the sirius system into the ford vehicles my time is expired thank you gentlemen time is expired we are going to have a series of roll calls on the house floor that will require all of the members to leave here in approximately five minutes we will then recess for about fifteen minutes and come back and reconvene for perhaps only fifteen minutes then at which point they'll be another couple of votes on the house floor after which we'll have to make a game time decision as to what without objection and thank you and i thank the general a d and with the indulgence let me say this with the indulgence of the witnesses i would like to keep the committee hearing going even after the second set of roll calls  bathrooms easily accessible to everyone here perhaps during the break we can take advantage of i turn now to recognize the vice chairman of the telecommunications and of the gentleman from pennsylvania subdual and ask him at the conclusion of his questions yeah you are irish after i want that on record mr karmazin you big knowledge that both x m and sirius have limited channel capacity so if you have to cut x am stations to make space for popular sirius content like hard stern in n f l for those who want to pay extra to get that aren't the people who just want x m and want to pay twelve dollars ninety five cents aren't they going to end up paying the same price for fewer stations than they get right now congressman there has been surrendered technology advancements including where you are able to squeeze more channels into the same band with compression technologies that enable you to use the same band with that you have but to be able to make more choices we compete with free radio and if we don't satisfy the subscribers for twelve dollars or ninety five cents we don't have a very good business model so to your point about whether or not we are going to be able to accommodate a number of additional channels on top of the core channels that we have today we believe that we will technically with no disadvantage to the sirius or x m subscriber excellent so for that x m subscriber that says i like what i have i just want to pay twelve ninety five he's going to get what he has he's going to get pretty much i can't tell you exactly what because we constantly make changes so as an example right now we have we're not using all of our channel capacity today we have the ability today to put more channels into our existing service than we're using right now mr kimmelman when dish network tried to purchase direct t v in two thousand and two a merger that would have combined the only two satellite t v providers you told the senate judiciary committee and i quote that the merger could offer consumers some significant benefits so what's different about the satellite radio market that instead of seeking conditions you seem to outright oppose the merger the the video market was cable rates going up three times the rate of inflation and we were looking to satellite to try to do something to bring down prices for consumers the last time i looked free over the air radio is not going up in price so there's a huge difference here into who the adjacent market is secondly the the merger of directv and echostar that was proposed include a significant offer of spectrum divestiture at that point to cablevision systems which sought to offer a new competing video service if something like that were on the table today that would be a very interesting addition to the other kind of promises mr karzai has made mr karmas on in response to that last comment by mr kim i'm with idol of the if you take a look at the way people get free free over the television well over ninety percent of the people get it from a pay service so when you take a look at the market you're looking at a case and two satellite companies so therefore i think that merger didn't happen because there were three companies becoming too when we talk about today the vast majority of all the people are getting satellite radio in addition to their free radio two hundred sixteen million cars have free radio so the market is very different between satellite radio and the situation with echostar so we really don't see it as analogous at all we see that they didn't have free as something to hold their pricing back and it's just economics i don't know if there's anybody you know who sort of follows it a little bit but when you're trying to get subscribers and you are charging twelve dollars ninety five cents you're more apt to get a subscriber than if you're going to charge fourteen dollars or ninety five cents so if you if the option is free why on earth would there be higher prices but we've said you know what forget whether you buy into that argument ok if you don't believe the economics then we believe that we should be held accountable to everything we're saying and we're prepared to be accountable for everything that we're saying thank you i want to ask mr kimball to my final question mr kimball i've gotten a lot of calls from constituents about the copyright board's recent decision to increase the world fees which i personally think is outrageous that web casters pay for music right now if the web casters die off because they can't afford a new fees doesn't that cut into the argument that they're going to be able to compete with satellite radio i think that's exactly right i think that the problem we have today is that the entire internet radio system is at a disadvantage with satellite radio we pay a higher royalty than the satellite system pays and we are under a different standard to set that royalty than satellite pays nothing until we have a level playing field the internet will not be able to compete fairly with satellite and that's why i think that this is this merger should certainly be reviewed very carefully i think put on hold until we have a legislative framework that's fair the internet should not be disadvantaged thank you this hearing is now a stimulate ok fine mr kimball what is your reaction to the copyright royalty board's decision on internet radio royalty rates which rejected all of the arguments made by web casters and instead adopting a per play rate proposal and made this proposal retroactive through two thousand and six well to say we're disappointed to be i think a bit of an understatement i think we're very concerned that the copying copyright world the board procedure is still lacking a fundamental understanding of how the internet works what the economics are on the internet how small web casters will be affected by this kind of a ruling which for companies like real networks that are in the subscription business is is is not as significant as for the small webcasts are some of whom are going to have to pay multiples of their total revenue in back royalties and how they handle that is is really a  complete mystery to them companies that are small mom and pop organizations that could have a hundred thousand dollar plus back worldly obligations is absolutely disastrous and what's more this five hundred dollars per channel minimum really has a significant impact on the diversity of programming offered on the internet it is truly one of the best things about internet radio that we can provide so many different channels to satisfy so many different interests with a five hundred dollars per channel minimum companies like like live  sixty five and pandora and real networks that provide tens of thousands of channels of content in every possible conceivable johner and configuration what you like classical music and you know rockabilly we can put those two together if that's what you happen to like that's all going areas where spectrum is abundant rather than allocating all non commercial licenses simultaneously tell us how important low power radio is to your people in your community well german market i suspect that you've asked me that question perhaps because i'm the only man at this table that i had that wasn't afraid to wear a this inquiry in indian country we owe that we had the ability to compete with some of the entities that are sitting at this table we are among the most on served areas in the entire united  i think it would be a tremendous service to the unique local community needs to separately allocates facts room to ensure that the that that we really take care of needs of the  tribes and it would in no way harm any of the other competitive concerns spectrum allocation that the f c c needs to address noted earlier that the f c c only had twenty five megahertz of spectrum to auction for satellite radio services if subsequently it subsequently allocated all of the available generated by the merger can sirius and x m operate together on a single allocation of twelve point five megahertz mr chairman what we want to do is make sure that this is not in any way shape or form disruptive to the american public so if you have a ford vehicle as was talked about earlier for at least the next ten fifteen years we're going to have to provide service into that ford vehicle and the only way we can provide that service into the ford vehicle is through our network and the same thing would be true for ex m so we're going to put up three more satellites over you know the next three to five years each one costing about three hundred million dollars and each one having a life term of about ten to twelve years so the first time that we would be able to consider something like that would be somewhere in the two thousand and seventeen two thousand and eighteen where we would be able to have the ability use one platform and again if in fact you know there was some interest in that area in that timeframe of course like anything else we would be open to  we're not spectrum hard we bought our spectrum we paid for it and if in fact at any time that we had access in the spectrum we would certainly be open to hear any suggestions in that regard ok so mr kimmelman could you comment on the i'm just curious mr chairman that if if we can compress a lot more and get the same current base in a lot less capacity why we shouldn't at least consider as a matter of policy i don't know if it makes sense in a merger context but certainly as a matter of policy what could the government get for twelve and a half megahertz through an auction and as we've done with the digital television trans transformation and progression consider holding consumers harmless making sure that monies are used to take care of the person with the for the person with embedded base radio equipment that would need a new receiver i would just be curious to know whether there is a way to actually get more of a benefit by having the spectrum made available for other purposes broadband mobile digital holding consumers harmless and if it's believed that it would be better to have one satellite radio company rather than to cover all these  one half of your subscribers and then would you continue to operate both systems simultaneously you know and for how long if that's your choice would you operate both systems mr chairman what we've said is that we do not want the consumers to be disadvantaged because of this merger and we don't want their existing receivers to be made obsolete and that we are going to continue to have to operate on these two networks for how long i think i' mentioned somewhere in the you know the two thousand and sixteen two thousand and seventeen area because there will still be consumers out there who will have a general motors vehicle that would only be able to take content from the satellite so the serious that we can do some compression technology and shoehorn a few more channels into our twelve and a half megahertz but we can't feed their satellites you know into our vehicles and that's why when we were asked the question about the ford and getting both content what we would do is take the content and put it into our network and vice versa but we would need to do it if the time came that the technology was such that we wouldn't need it ok this is you know i mean we would certainly be open to it but that's not for the forseeable future ok so that's twenty sixteen i'm making up but it's somewhere about a twenty sixteen in ten years ago the f c c had a rule for interoperable receivers and i know that because obviously i was a part here of a big discussion at that time and we're only beginning to see them now ten years later mr chairman the idea of  spent twenty five million dollars both companies have spent twenty five million dollars on developing an interest interoperable receiver and we have developed an interoperable receiver and if there was any equipment manufacturer who wanted to make it we would absolutely give them our intellectual property so they could make it the issue on it is or is that we will not subsidize it today and the reason we will not subsidize it today because it's possible that sirius would subsidize an inner operable radio which would result in x am getting a subscription it doesn't make any sense for us to subsidize a radio where we don't get a subscription post merger we are prepared to subsidize that radio we've developed that we've lived up to our license there's not a question nobody's to find something in that line since that said anything other than that we would develop it there was never a requirement that said that we would subsidize it and bring it to the market we are prepared to do that in a post merger you know let me go to you mr smyth any comments on this area  i would have to cause comments on the chairman i think that if you said ten years ago that you were going to build a interoperability capability then you don't say what you can't deliver and what concerns me today when you put two companies today what happens is innovation is taken out of the equation number two i think is something that i had mentioned to mr karmas on and he's far wiser than about this than i that if you have the ford car that we used earlier and the ford cars the one receiving serious programming and you want to shoehorn in additional channels and they are content that's going to come in at a lower bit rate and that quality or that audio quality is going to be depreciated and therefore if the consumer's going to be paying more money eventually for that they're going to be getting a lower quality and a higher price so my question would be if you're waiting till two sixteen and i know that that's a hypothetical date that's not a fix date but still those are questions that go through my mind again the whole digital revolution is about quality of sound and the ability to use this at its best its best rates and i just think that when you start to get into cutting these bit am f m radio station my big what is the can you just give me a little bit of a sense of what's happening in the radio marketplace that is in terms of resale value of radio stations what's been the impact of the first fourteen or fifteen million people subscribing to x m and sirius in terms of the values of local radio broadcast stations i think in the major markets the values for radio stations held up ok i think that i think there's a lot of different issues there's been no growth in the overall radio advertising market of the past four to five years i think zero to negative growth and i think that that is that is definitely hurt the economic viability of it the issue about satellite chairman really comes down to when you look at not on a national basis i don't compete with mr karmas on a national basis not at all i compete with him in the local bases that he would have if you combine these companies he would have two hundred eighty eight signals to my five and under current regulations i'm allowed to have five fms and to a look so i get that let me go back to mr comes on how do you respond to that i'm really not a valid do anything you want me to mr chairman but if this is a debate so so first of all if h d radio has the ability of having an improved sound or multiplexing a whole bunch more channels and they clearly are using that spectrum to shoehorn more stations in there secondly there is clearly on i believe greater media stations i don't follow them a great deal they're carrying programs like sean hannity and rush limbaugh which i guess aren't local programs so the fact is that if in fact a local broadcaster is in fact and i'm not saying they shouldn't be able to write i'm saying it's fine i don't object anything that they're doing is that if they want to carry national programming in their local market certainly we have no objection to and i think i can give you a good answer on how to arrest a radio is doing fourteen million subscribers in two with satellite radio is clear channel is about to do an l b o which is the one of the largest l b o s in the history of business so i don't see any signs where you know they have poverty if you take the twenty one and a half billion dollars of revenue that is represented by you know what terrestrial radio is doing you know our local advertising so they do twenty one and a half billion dollars of advertising revenue our combined companies do sixty million dollars of all of advertising sixty million of twenty one billion and give give mrs smite the final word on the surrounds thank you chairman mr chairman first of all i am a local broadcaster the most successful radius i ran magic in boston for many years the reason magic was successful because it was grounded in the community and its local greater media does not carry sean hannity and the other individual that he mentioned i believe that if you look at national syndication for radio personalities there's probably two or three who have ever made it and that's additional public interest obligations placed upon the radio industry given that they will have this new digital service capability well mr chairman we've had a hard time having the radio industry and the broadcast television in this league live up to the previous public interest obligations that they've had what new ones would you impose if it makes sense to you as we get in i believe congress ought to look at a different model for how we approach public interest obligations as you do the compression in the multiplexing mr carson is talking about in the digital era there is enormous capacity for radio and for broadcast television i believe they should be asked to share that with the public make it available to the public and not try to regulate the content on those on those stations but share what has been given to them for free and in that way i think we can have more public access available on all of these platforms that will be generated by the community and b consumers rather than by broadcasters you know and i says what i would like to continue the conversation looking at back when we did the cable act in one thousand nine hundred ninety two and we were looking at what the new public interest standard should be for the direct  broadcast era for the satellite era this committee determine that four to seven percent of the transponder capacity should be for noncommercial educational programming from alternative  sources just briefly mr smyth does that make any sense to you what do you think about additional public interest obligations for the local i can speak for my company and we just introduced a program in boston where we have the new governor deval patrick has a show every thursday every thir first thursday of every month and i don't mean i don't mean my program by but i mean a generic set of rules that are on the books in terms of the public interest responsibilities i think that the broadcaster has a responsibility to be reflective of it's going on in this community so should we put that in the rules as we move into the digital era more specifically that is i think we have to have more time to discuss because i think it's very hard to make a generic rule because each market has different issues and things that need to be addressed and you know i think that the country radio know our service you know if in fact that's something that you're asking us to consider you know what we have said is that we would be open to considering things in connection with the merger i appreciate i have to again recess the committee for about another ten minutes and then the committee members will be coming again to the witnesses i think that our attention is now focus exclusively upon you the roll calls on the house floor i think pretty much over for the rest of the evening so let me turn now year i introduced legislation which and i did so because i was concerned about new portable devices that turning satellite radio or performance services into distribution services and new devices have enabled the consumers to cherry pick songs or create an unlicensed music library without necessarily paying artists that  frankly it helped make radio so compelling i'm concerned about the same thing happening when h d radio rolls out your company as i mentioned before and reach an accommodation that compensates artists and their record labels for distributions that are made possible by the fifty in the lead oh devices last week congressman berman mentioned this he commended your leadership for taking this action and you had mentioned that you tend not to like to use the perspective with the new merged company congressman congressman thank you i think you know what my viewpoint is because we're implementing my viewpoint at sirius to where we have obviously made in the combination with the various labels to compensate them for this service so that will give you a sense as to what i believe should be done i will be after the merger i will be the c e o of the combined company and all i could say is that you know my viewpoint on the subject but there is obviously a court action that's taking place as we speak i have no idea if in fact before the merger is approved hopefully that there will be a result of that either through a negotiation or watch so you know my hope is that we can continue to have a terrific partnership with the music industry because the contents very valuable to us and and we are paying for i want to pick up also on a something mr boucher had referenced earlier this recent arbitron survey showing that satellite radio currently i guess accounts for about three and a half percent of all radio listening in the fall of two thousand and six survey also found that satellite subscribers actually spend more time listening to traditional radio than satellite radio which i think i s interesting at the very least given these findings can you reply i guess or address any bees concerns or the suggestions that this is going to create a monopoly  and that is that a is that an accurate or a characterization of the market right now congressman first of all my comment on that three point four percent is that i'm sad about it because i certainly would like it to be higher and i don't mean to be so and i think that it's really very disingenuous you know we play music terrestrial radio plays music we have sports terrestrial radio has sports we have talked they have talked it's hard to see how they are not in fact competing with us and we're competing with them i just don't even begin to see it and i have to believe that the fact that they are here today must be for some reason you know they're not at the global warning warming conferences that so place today they're at the terrestrial they're at the satellite merger today so they must have a greater interest in satellite radio and if they don't compete with it i don't know how they should be worried about that they should be worried about global warming and they were not that here i was at both jim and i don't know if you know i was at both areas we were trying to keep things mockers statement about satellite radio cherry picking a low cost and i think they do compete i think what you know satellite radio in my trash year later radio i'm over there competes and my concern is about picking the low cost radio services without the high cost services and i guess you know you're doing your job as a salesman today in saying you know be real flexible about whatever conditions but if d o j and the f c c determine the merger is in the public interest and i would expect numerous conditions to be applied to protect localism and consumers my concern is with the past history the satellite operators over the years about repeaters receivers in the attempts to invade the for the better part of forty years and you should play by the rules and the f m modulator issue and the repeater issue are things that should not have happened so that's clear but those things don't challenge the character of us as a licensee or our ability to do this merger and just as an example this week a very large number of broadcasters were fined for payola rules and a number of companies have paid fin dealing with political advertising and indecency and we're not suggesting that clear channel shouldn't be allowed to do their multilingual tie billion dollar transaction because they have violated various rules in the thirty or so years that they've done it so yes we believe in following the rules you know i apologize even though i wasn't here at the time but it's a place in our company and you know we should be playing by the rules and i assure you that we will continue to play by the rules and if we make a mistake then there should be a penalty just like there was on payroll or just like there was where univision just paid a twenty four million dollars fine for violating children's programming rules on television so  you know i don't see those two related other than that we should be a good corporate citizen and i believe we are well i don't know about comparing univision with decency because i know there's been some discussion about requiring satellite radio to also match the decency requirements that for example univision or some of our radio over their radio has to compete with and i think the answer on that sir is the fact that one of the great interest on indecency was protecting children and there was no mechanism at the time and i still believe today to where you can have a radio you know that gets the boston radio stations and you can block out that station from coming through that clock radio or that car radio we are a subscription service you need to pay for twelve dollars and ninety five cents in order to get that service if you don't want any of our content we have the ability to block it from that receiver you have the ability to block it so if you don't want the cathy so we broadcast a catholic church channel there are some people in our subscription service that don't want that channel you can block it and it never comes into your home and you've paid for it so therefore we think that it's a very different model than the free over the air model where children have access to all of these radio so i think it's different well now so understand i was waiting for congress from rep jim or congressman dingell because i bought a chevy tahoe and i have what ninety days of satellite radio in there are things that i was hoping to have the astros because up here in d c i don't get even even in washington post and cover him so but there are things that i would like to actually see how you would compete and again the concern i have is that the things that i listen to over my amber alert we were involved congress was involved a few years ago to make sure that my local stations in would actually both the t v and audio would do would do amber alerts and so things like that but again we'd like to do it congressman otherwise you know we're hearing you know sort of a little conflicting thing so on some ways people are saying we don't want to give the consumer that much choice by allowing satellite radio to do some of this content and what we're saying is do you want us to do a we are but if if you're saying we shouldn't do local things like amber light or lurch now in so many to tell us i mean you know i mean we're hearing again conflicting things i'm not saying you should do it i'm just saying you need to have this if you're going to compete with over there terrestrial radio then you ought to have the same hoops they jump through which would include decency requirements even though you have a subscription service and that's a concern because again i can see why people would you know both was scription but also with taking away local ad revenue we  many many fewer stations if congressman walden trying to sell his i'm sure the value every would go down very quickly and they really are different you know i again we paid for our spectrum and thresh for radio broadcasters have not paid for the spectrum we pay royalt performers and it's a rush to radio don't so i think that there are a number of areas where we're different and i get coexist than others and we're not you know trying to say that for us to radio is not doing a good job i think that shows i've run out of my times j but in the the reality is in the post katrina world there may be some benefits in the digital carriage and we just can't dismiss dead but if we we say do it on one end and don't do it on another then so  it's good public policy concern and i don't have any answers but i readily admit schizophrenia that you observe is what we are observing also the mr kimball internet radio clearly reaches across states not to mention countries but can internet radio promote localism oh absolutely one of the great things about internet radio is that it is very simple and very inexpensive for anybody to set up a channel from anywhere so it doesn't require that you have the kind of capital the you know put up a satellite for three hundred million dollars or buy a radio tower you can get free open source software in your own you know media room connected to the internet and be broadcasting your own internet radio channel with local information i have that in my small hometown of some amateur we have the local guys who are we love the weather and put up all the information about the weather it's the same thing for radio you could you could put together a channel that is about local bands the local music scene local concerts local information and put that up on the web and it would be extremely inexpensive to do that but for the c r b minimums and some of the royalties that you have to pay which frankly the broadcasters don't have to pay at all in which the satellite companies pay less and we would just like a level playing field for those small local broadcasters to flourish thank you mr blackwell you indicate your testimony that the internet streaming and satellite transmission of radios helping native american audiences can you elaborate on that thank you very much for that question i do believe that every platform that's represented this table is utilized to one level or another in indian country and one of the challenges however is the internet service we we like broadband service in indian country while  telephony nationwide is about ninety five percent telephone service in any country is somewhere just south of seventy percent so there is no reliable data for broadband development for the deployment of broadband services one hears rumors that it's five percent or eight percent that is those are just rumors what we need are better metrics to be able to answer that question accurately but it does certainly have great possibility as each of these services doesn't in the country thank you mr can you talk about the transition to digital and how's it going and what benefits you see from that the glass is a constant thank you for asking  think it's a gradual evolution today we have about eleven hundred stations that are broadcasting in h d quality on the primary channel i can say that in detroit for example we own a station w r i f and riffed to become a station that is really targeted towards kids between the ages of twelve and probably eighteen it has given access to local bands in the community it's program by program was probably twenty one years of age it has become a very kind of it's got the buzz of detroit michigan today and what it does it gives them great access and affordability where normally they wouldn't find those in other venues so i think it's i also think that the h d channels will have a multitude of different effects as we move forward i think in terms of the community to be able to offer literacy channels i think to be able to work on head start to be able to do a lot of other different things that people really haven't thought about today and i think that those will have community and economic benefits to the people that own those i know and as i said earlier  you know we're doing an irish channel in boston kind of obvious but i do think that the limitations are only in the creative people's minds and i think that what you have to do when you move into the digital world is try to take back as many of these barriers to success as possible and open the floodgates to creative license so i feel pretty good what we're doing but we've got a long road to go we've you know we've just got some i think congressman harman said it earlier wal mart his just rack the product and we're starting to get some good retail distribution and i think was get some good distribution in detroit very shortly since the chairman is on the chair i'm going to move the previous question  whatever he likes or not i'll end by saying and i was in another hearing this morning on global warming and i talked about being the neanderthal because i'm a creationist and probably not politically correct but i do have concerns on the decencies issue and i have been on that side of saying going over the airways we should have standards so i just want to put that on public record and hope that we can help clean up the want to get into global warming now well you have just had my colleague from illinois didn't call me in and again i appreciate having this hearing today and you know you're going to hear you've heard a lot about indecency and all and i think carson you were here and we had the discussion on the wardrobe failure i think during the viacom era and c b s and so you've been here before before us and and we've dealt with those issues i want to ask a couple of questions mr carson you've said repeatedly and so of your counterparts in exim you bought your your spectrum in a sense from the from the f c c you paid for your spectrum write your license factually correct and was that in an auction i wasn't there at the time you know like you know sirius paid eighty some odd million dollars and exxon paid eighty some more million dollars for that spectrum bright eyes soon that there was an auction i sumit had other people bidding for that spectrum so mr smith don't broadcasters occasionally show up bidding for in an auction for spectrum   the frequency is why is that different between him and you then in terms of your measures different because the legacy rules that are in place right correct now i think mr carson made made it interesting reference the fact that the rules under which you all operate date back to one nine hundred ninety seven the one comment you know we were granted the license in one thousand nine hundred seven and i think what i responded to was a question about where a statement was made about rights to companies you and the rules at that time as i understand it i've not gone back and read them said two companies won't be merged to separate so we have a competing environment out there in this particular product line of delivering national satellite audio that was the theory i know i'm in a minority by not being a lawyer but i don't think he's it's a law i mean it's not as a rule i don't even a rule i think it was a policy statement that was made at the time the license was given but i don't believe rules the ninety six act and and so i think we see this industry evolving the thing that is troubling to me whether or not the merger makes sense and that will get argued out somewhere else it is the issue of this hearing which is the future of radio and as i see it the over the air free broadcasters in the communities are providing a service at no charge so anybody in america basically can turn on a radio they get that entertainment or information they can push a button if they don't like a channel somebody is indecent they can they can turn it off or they can shift they can't do exactly what you do and the they can't do subscription service all they can do is advertising and the only thing that drives advertising rates is audience and so i know you'd like to get your arbitron ratings up and i understand fire in your shoes i would too but for this committee and for public policy for the country you say what about what happens to those who can afford twelve ninety five or whatever your combined fee might be a month  what happens to them down the road if commercial broadcasters who are not only licensed by the federal government but required to do public interest litigation public commentary on what happens to that service down the road if if you in a combined effort become a market force and take a huge chunk of the audience or something a broadcaster for an awful long time and i can tell you that the first radio station went on the air in  twenty six k d k a was a westinghouse station it is still one of the top two radio station i understand but i planted a light five years right from a point ago i got our first subscriber i can assure you that local radio is very important to the consumer free radio will always co exist with satellite radio no matter how successful satellite radios and i can give you an analogy sir if you take a look at so i think the analogy is more that way than it is to cut you off i got a call or seconds i want to question and do your local translators repeaters are they mechanically electronically set up so that you could insert local programming i can't tell you whether or not they are rigged that way but i can assure you that we have no interest no interest in using the local repeaters for local advertising or local programming that's not our business model whether or not they are rigged that way or they are rigged that way is academic because we have no plans to use them that way and again remember what i said earlier i'm sure everything i said you could figure out a way to hold me accountable happens is pro competitive and so i just have a few questions and i know that you've had a discussion with the chairman mr markey as it relates to the policy at the time your licenses were granted and there is a requirement of the policy that there should be two if the merger goes forward my question it relates to the spectrum the combined spectrum of both come yes would there be any gain deficiencies between the merger of the two in such a way that there could be as part of the merger condition divestment of some spectrum so that if there were in the future a new entrant are possibility of a new entrant in the use of that spectrum so that you could maintain the policy as you strengthen the financial standing of your two companies do you understand my question i do sir and it is possible that that kind of technology could be worked out so that the consumer is not deprived of the service on their receivers today but it would probably be somewhere in the ten year time frame and i know as you look at things that may not be that long you know the question of when the spectrum things but we don't see how before two thousand and sixteen two thousand and seventeen that that could be done but it is possible that it could be done with our next generation of satellites that we can do to make the receivers and the way it would work is that we would design the satellites and the repeater network so that they could feed either of the radios that currently exist today as a way of not making those radios obsolete so it is a possibility down the road what would have to be done to make operability of the two different i think alive need to be done is that you would need to get the new satellite configuration to be able to the both companies receivers and t  repeater networks and is there a way to accelerate that timetable well we're going to be launching our next generation so we mentioned earlier congressman that we have two more satellites each one for three hundred million dollars that we're going to be launching over the next three or four years those things have been committed to those things will not be able to handle this and we haven't gotten the merger approved and we're going to be launching in two thousand and eight so the idea would be that it would have to be the next generation of satellites after this generation let me ask a hypothetical question if is part of the merger approval of the f c c they required an acceleration of that timetable and upgrading of your investment so that it could be possible to give back or divest some of the spectrum in a more rapid time period so that you could have a pro competitive possibility within your market segment is that something that would make the merger impossible unattractive i don't think it's possible for us to be able to do it but again you know i'm not an expert on satellite so i just need to you know if i'm going to give you an answer i just need to make sure that my answer is right so without being an expert on satellites i don't believe it would be possible for us to accelerate that timeframe without launching hundreds of millions of dollars of satellites and the reason we are fighting so hard for this merger is and the reason is we feel it's justified but there's also about three hundred million dollars or so that the analysts have said that are available in synergy if in fact we've said on pricing we're going to give the consumer some of that advantage on synergy and if in fact we're going to use all of the other synergy for the ability of spending more money on an infrastructure that we don't really feel serves any purpose then it really would remind him that he did run c b s radio also i wouldn't forget that and a number two i think important to note here is that the question i think he's running through my mind as you were talking congressman is if these two companies these individuals said they can run their two companies by themselves they would survive and mel just basically said that if you can reach some of these different terms you talked about why would we put these two companies together form one company and lose all that  why would we take that innovation out of the marketplace from the digital era is just starting to become come into its own and we're going to take these two companies together and we're going to stop that and again it's about two hundred eighty eight signals going to your market your market your market where the local broadcaster in your market can own a maximum of seven signals or eight and you're going to have two hundred eighty eight signals why if these companies are doing well what you're doing is stopping innovation so first of all you have that today i don't really know what he's talking about so i mean we're talking we talk about the fact that exxon has these channels and sirius does today so that's not new information out there  these channels in the market number two the innovation would not be hampered and the reason that you would if the merger is approved is because you believe that it's in the consumer's best interest because they get lower prices and more choice if at the end of day the reason for the merge would be that if you don't believe you're going to get more innovation more choice and lower price then you wouldn't approve it but this is this is my concern we're going from two companies to one and this whole bit counterintuitive say that's more choice having said that i do see some legitimacy in your argument that there are multiple platforms internet radio traditional as well as satellite and your financial health condition does not appear to be very strong at this point so it is a matter of surviving as one are losing but i don't think so i don't i mean i know it's an easy argument to make you know that we lost three point eight billion dollars so far since we started we've not made a dime probably a low power radio station has made more money than we have made to date also the idea is that this last twelve months we've lost a billion dollars we believe that we have a high fixed cost business we've launched the satellites and that when we get more subscribers our profitability will improve so we're not making a failing company argument we believe both companies if in fact it's decided that this merger is not allowed to go forward you know that x seven serious i believe both ok but i can speak for sirius will be a very healthy company so this is not about survival this is only about whether you believe the consumer is better off or not i appreciate your comments and your answers i do want to look further into the possibility  you know i have some concern that if you if you pull out the drobo drawbridge and there's the possibility of a new entrant as you go from two to one is that pro competitive or not and so i just want to see if over time we can have additional investment additional intrigue and innovation that will come from that the competition that comes from the choice comes from that and so  minutes mr campbell in your testimony before you were talking a great deal about internet radio and i took some notes before and how the internet radio is the same and it is different from over the air radio and you were talking about it don't you prove mr common sense point that there are  talking about choices we cannot just look at radio paid for radio in a box but that you can people can get have many choices they can turn on the radio am f m radio or they can go to the internet or us are you actually making that case i actually think that the market definition questions that mel is going to have to deal with is part of getting this merger approved are fantastically complicated and i won't begin to pretend i'm an economist who can solve how you slice that market it is complex i do believe that there are areas in which we compete with satellite radio particularly when somebody is in their office or somewhere where they have an existing broadband connection in their home we don't currently compete with satellite radio somewhere like the car and how an economist is going to slice that market make a decision about where you get market power it's very difficult to say but i will say that if satellite had a ten year running start to build all the radios and all the cars over ten years we very difficult for a new market entrant to step in there and win back that car business and i think the car is a pivotal place for the use of music mr karmazin someone before i made notes and you'll excuse me i don't remember who said it but it wasn't you that the merger should not go forward and they compared it to the echo star and direct t v merger i would suspect that you would disagree with that that you would say there is not a parallel i would like you to explain why it wouldn't be and why you're out of the room vote i mentioned it but allow me to repeat myself that in the case of echostar and direct t v virtually every consumer gets their television through a cable or satellite you know there's very few people who are getting it were the rabbit ears this is probably about ten percent of the population on a national level that gets hit with rabbit ears so in the case of echo star and direct t v there were three companies a cable company and t satellite television companies all pay services that war you know competing that was going down to two in our scenario and i've had conversations with this gentleman's boss about internet radio and getting into the car and things that they have plan to do with why max and things like that not only are we competing with free which is very different than echo star and direct t v but we are also competing with the internet radio we're competing with jacks that are now inserted into vehicles you can plug your i pod into it we also are competing with cell phones that have content because eight o two dot eleven  bluetooth you're able to put your cell phone in your vehicle and be able to get through your speaker system through your radio to be able to get whatever content that you have on your cell phone and there's an awful lot of talk content there's a lot of sports content there's a lot of music that's on the cellphone so unlike echostar and direct t v we are competing with all of these options and therefore that's what will encourage competition and that's what  continue basically said what mr com is and said in what i had said in my opening remarks that when we look at people's entertainment we have to look at the whole situation is the kimelman why is that not i heard your testimony to why is that not the case can we really go back to the way things were ten years ago and to ten that we can put everything in neat little package absolutely not mr angle but the point here is what segment of consumers is desiring what of radio entertainment you have it at home you have it in the office but there is a unique segment in the car and it's not just any car it's people who drive maybe more than twenty five miles can't get over the air broadcast signals to keep going across the distance people who want to see who want to hear national league baseball games from outside their own community or the n f l or the n b a there is a unique product that's been developed i congratulate mr karmas on his company for doing m more than fourteen million people by it more than fifty percent increase in subscribership last year almost sixty percent increase in revenue last year from subscribers yeah i hear all the crying about the red ink but they're growing like gangbusters because a lot of people want this but that is different from what you maybe want to do at home different from the people who don't drive more than twenty five miles so i would suggest for competition policy that's a unique segment of the public that once choice once competition and i believe that is a somewhat unique service just like cars and airplanes and trains are all forms of transportation on many levels they don't really compete for people and i would suggest that's the same here it's not going back ten years it's just realizing the reality maybe internet radio will become that maybe cellphones ultimately will have some of this but today they don't compete for that segment of the public but if i buy a car and i am locked into x or sirius and i cannot get the things that i might want to listen to why am i not better served if i can get a get a car and can get the best of both why why is that somehow hurting me as a consumer you would seem to me that if i have to choose between the n f l or major league baseball and i get a car and maybe it's already and then i can only get major league baseball why  i'm not better served by being able to get both well i think would be wonderful to get both and i wish that we had had the inner operable radio so that people could choose between one or the other and it was promised many years ago it's now like the consumer as you're describing is held hostage that we don't have radio so is the only solution to merge i would suggest there are other ways in order to get the maximum choices for consumers at the lowest prices and at the merger is not the best way mr carson is offering some concessions i think if you get to the is that we get a fair opportunity to present our case and it's amazing how people have formulated these opinions without any facts so we have yet to file our heart scott regino filing which we will do next week we have yet to make our public interest argument with the f c c which we will do shortly after it but i think that everyone has already without the facts formulated an opinion and all we've asked for is that we be allowed to go through the process and that if in fact our merger is deemed to be in the public interest to be approved then if it's not we understand but to have these people experts making comments without knowing what the facts are is a little bit troubling for me thank you i way over my time i see our chairman has arrived so i will you i thank the gentleman from new york for chairing and that completes the time for questions from the members what i'm going to ask each one of you to give us a one minute so mission what it is that you want the committee members to remember as we are going forward  in terms of all of the issues that we were discussing today what's the cool one minute message you want to give to us we'll begin with you mr blackwell the first priority would have to be increased federal funding and federal funding that works in indian country in economic distress communities second we need better metrics in indian country the blueprint initiative is aimed at getting the information that you can act on appropriately indian country can measure itself well in this regard  finally you should provide customized tools for the f c c to open up new regulations to create new procedures that deal with the challenges particular challenges in indian country th thank you mr chairman for having us here today plug your efforts in what you do and i think if i had to leave one impression on this committee i think that i would say that we're in the midst of a great digital revolution and i think that anything we should do everything to encourage that number two i think that we should recognize that what we're looking at here today are two companies that can sustain themselves on their own efforts putting them together for what reason i don't understand i think it inhibits innovation and i think it causes too much consolidation in the national radio market i think that you have to look at this is that i am a local broadcaster i compete with mel in boston massachusetts i do not compete with him on a national basis for him to have two hundred eighty eight signals in boston massachusetts in paducah kentucky with a repeater network sitting out there i think is something that everybody should reflect upon and they should also make sure that the most successful thing radio has today is its commitment to public service in the communities that it operates in and i hope that we will continue in that vein thank you for inviting me here today thank you very much mr kimball thank you mr chairman we completely agree that there is a digital revolution underway and we ask that the internet be to participate in that revolution without one hand tied behind our backs there is a clear statutory bias against the internet in this space it should not matter what method of transmission you used to send your radio station to this device in the future it simply should not matter and i think the congress to do something to level the playing field before allows consolidation thank yous kimball was to congress in my one minute i'd like to say that i believe that we ought to be thinking in terms of what is in the consumer best interest and whether or not a combination of these two companies  are going to give the consumer better pricing and more choice and if that's the case there is a public interest standard in doing it and there clearly is a public interest standard and from a regulatory point of view that this merger is not anti competitive because you've heard all of these people talking about how we compete with each other so i think we'd like to have a fair hearing we'd like to go through the process and we'll deal with what the regulators think should happen thank you and mr chairman thank you mr chairman i think we all know that technology has great promise but it really means nothing for us he cannot deliver us competition it cannot promote our democracy unless we have diverse owners the media the means of using that technology to deliver  diversity of entertainment news information from radio across all media and we hope that congress will continue to ensure that consumers get those benefits as the technology progresses we apologize to the witnesses for the inconveniences of this afternoon you have greatly enlightened our committee we thank you we if possible to be able to work with you over the next several weeks and months as we're developing policies in these areas and without objection members will be permitted to ask post hearing questions of the witnesses and the witnesses may also if they wish supplement any comments was made or answers to the questions which they are given here today without objection that will be so ordered and with that in the thanks of the committee this hearing is a