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89–765 2015

REAUTHORIZATION OF THE SATELLITE 

TELEVISION EXTENSION AND LOCALISM ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMUNICATIONS AND 

TECHNOLOGY 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MARCH 12, 2014 

Serial No. 113–126 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky7 

SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

GREG WALDEN, Oregon 

Chairman 

ROBERT E. LATTA, Ohio 

Vice Chairman 

JOHN SHIMKUS, Illinois 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan, ex officio 

ANNA G. ESHOO, California 

Ranking Member 

MICHAEL F. DOYLE, Pennsylvania 

DORIS O. MATSUI, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., NEW JERSEY

BOBBY L. RUSH, Illinois 

DIANA DEGETTE, Colorado 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

HENRY A. WAXMAN, California, ex officio 

(III) 

C O N T E N T S 

Page 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement .................................................................................... 5 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 6 

Prepared statement .......................................................................................... 7 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 8 

WITNESSES

Mike Palkovic, Executive Vice President, Services and Operations, DirecTV ... 10 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 122 

Marci Burdick, Senior Vice President of Broadcasting, Schurz Communications ....................................................................................................................... 23

Prepared statement .......................................................................................... 25 

Answers to submitted questions ...................................................................... 124 

Michael Powell, President and CEO, National Cable and Telecommunications 

Association ............................................................................................................ 33 

Prepared statement .......................................................................................... 35 

Answers to submitted questions ...................................................................... 128 

Matt Zinn, Senior Vice President, General Counsel and Chief Privacy Officer, 

TiVo ....................................................................................................................... 44 

Prepared statement .......................................................................................... 46 

Matt Wood, Policy Director, Free Press ................................................................. 52 

Prepared statement .......................................................................................... 54 

SUBMITTED MATERIAL

Statement of the National Association of Broadcasters, submitted by Mr. 

Walden .................................................................................................................. 108 

Statement of the National Cable and Telecommunications Association, submitted by Mr. Walden .......................................................................................... 109 

Joint statement from Dish Network and DirecTV, submitted by Mr. Walden ... 110 

Letters of support, submitted by Mr. Walden ....................................................... 111 

Statement of the Computer and Communications Industry Association, submitted by Ms. Eshoo ............................................................................................ 108 

Statement of various organizations, submitted by Ms. Eshoo ............................. 115 

Statement of the National Association of Black Journalists, submitted by 

Ms. DeGette .......................................................................................................... 117 

Statement of the League of Rural Voters, submitted by Mr. Latta .................... 119 

Op-ed entitled, ‘‘The Feds Target a Black TV Station Owner,’’ The Wall 

Street Journal, March 9, 2014, submitted by Mr. Walden ............................... 120 

(1) 

REAUTHORIZATION OF THE SATELLITE 

TELEVISION EXTENSION AND LOCALISM ACT 

WEDNESDAY, MARCH 12, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:39 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Greg Walden 

(chairman of the subcommittee] presiding. 

Members present: Representatives Walden, Latta, Terry, 

Blackburn, Scalise, Lance, Guthrie, Gardner, Pompeo, Kinzinger, 

Long, Ellmers, Barton, Upton (ex officio), Eshoo, Doyle, Matsui, 

Braley, Welch, Lujan, Pallone, DeGette, Matheson, Butterfield, and 

Waxman (ex officio). 

Staff present: Gary Andres, Staff Director; Ray Baum, Senior 

Policy Advisor/Director of Coalitions; Matt Bravo, Professional Staff 

Member; Andy Duberstein, Deputy Press Secretary; Gene Fullano, 

Detailee, Telecom; Kelsey Guyselman, Counsel, Telecom; Grace 

Koh, Counsel, Telecom; Alexa Marrero, Deputy Staff Director; 

David Redl, Chief Counsel, Telecom; Charlotte Savercool, Legislative Coordinator; Tom Wilbur, Digital Media Advisor; Phil Barnett, 

Staff Director; Shawn Chang, Chief Counsel for Communications 

and Technology Subcommittee; Margaret McCarthy, Professional 

Staff Member; Kara van Stralen, Policy Analyst; and Patrick Donovan, FCC Detailee. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. I will call to order the subcommittee on Communications and Technology, and welcome you all here this morning 

for our hearing. Today the subcommittee on Communications and 

Technology will consider draft legislation to reauthorize the Satellite Television Extension and Localism Act. That is the law that 

governs the provision of direct broadcast satellite service to millions of Americans. 

Today’s hearing follows several previous hearings on the subject, 

multiple hearings on the communications marketplace, a bipartisan 

roundtable debate on the issue of the integration ban, and an incredible number of meetings with stakeholders by members of this 

committee on both sides of the aisle. It has taken an enormous 

amount of work, but this draft has earned the support of cable, 

broadcast, and satellite competitors. I especially want to thank 

Vice-Chairman Bob Latta, and my Democratic colleague from 

2 

Texas, Gene Green, on their thoughtful bipartisan work on the integration ban repeal. It is important to note that this provision still 

requires cable companies to support Cards. It just gets an outdated, expensive, energy consuming provision of little or no value 

off the FCC’s books. We believe in spurring innovation, not holding 

it back. 

The draft legislation responds to the concerns of members of both 

sides of the aisle regarding the joint service agreements and 

sweeps week provisions that seem to put a thumb on the scale. I 

have listened to those concerns, and propose eliminating sweeps 

week prohibition, which keeps cable operators, and not other pay 

TV providers, from dropping broadcast signals during sweeps 

weeks, the weeks when Nielsen runs its rating analyses. Further, 

the draft contains a provision that would limit joint retransmission 

consent negotiation by two or more independent broadcasters in a 

shared service agreement, unless the pay TV provider agrees to negotiate jointly with those broadcasters. I have no complaints with 

provisions that support fair negotiating tactics for all parties to an 

agreement. 

I am, however, very concerned by the FCC’s recently announced 

plans to dump joint sales agreements into their local media ownership calculations, especially without first completing their statutorily required quadrennial review of the marketplace. Up in Fairbanks, Alaska, all four TV stations are operated from the same 

group of Quonset huts to share costs, and create efficiencies that 

allow the stations to provide a variety of news and entertainment 

to this city of a whopping 32,000 people. Absent a JSA, it is unlikely the community could support four television stations. I would 

also draw the committee’s attention to a recent ‘‘Wall Street Journal’’ op-ed that includes the community served by the nation’s only 

African-American owned full power broadcast station, and I will introduce that into the record at the end, and by local broadcasters, 

like Bob Singer, the general manager of several local television stations in my district. There is a positive role for consumers in joint 

service agreements. 

Unfortunately, Chairman Wheeler is putting the JSA cart before 

the media ownership horse. The Federal Communications Commission is required by statute to review the entire set of media ownership laws every 4 years. It has consistently failed to follow the law. 

If a licensee of the FCC failed to follow the law, it would lose its 

license, or be subject to penalty. Chairman Wheeler is forging 

ahead to regulate JSAs, while leaving the commission’s legal obligations for another day. This is why we have included in this draft 

a clear directive from the Congress to the FCC that it should do 

its job, and finish the quadrennial media ownership review before 

it tinkers with JSAs. But in the meantime, we bring fairness to the 

marketplace when it comes to the misuse of JSAs for retransmission consent negotiations. Our draft finds the right balance. 

Our work here is set against the backdrop of our larger effort to 

update the Communications Act and bring our communications 

laws in line with the innovation and dynamism of the communications marketplace. We hope that many government, industry, and 

consumer stakeholders in this complex discussion will engage in 

the comprehensive discussion of the Comm Act update. This will be 

3 

a time consuming process, however, and as my colleague Mr. 

Shimkus explained to ‘‘Politico’’ last week, the Telecomm rewrite is 

not for sissies. 

The video marketplace is not a monolithic structure by any 

stretch of the imagination. Today’s witnesses represent diverse 

parts of that ecosystem. The broadcasting, cable, direct broadcast, 

satellite, and retail set-top box industries are all well represented 

on our panel, as well as public interest community. I thank our 

witnesses being here today, I appreciate your counsel, and I yield 

the remaining time to the vice-chair of the committee, Mr. Latta. 

[The prepared statement of Mr. Walden follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

Today the subcommittee on Communications and Technology will consider draft 

legislation to reauthorize the Satellite Television Extension and Localism Act, the 

law that governs the provision of direct broadcast satellite service to millions of 

Americans. 

Today’s hearing follows several previous hearings on the subject, multiple hearings on the communications marketplace, a bipartisan roundtable debate on the 

issue of the integration ban, and an incredible number of meetings with stakeholders by members of this committee on both sides of the aisle. It’s taken an enormous amount of work, but this draft has earned the support of cable, broadcast and 

satellite competitors. 

I especially want to thank Vice Chairman Bob Latta and my Democratic colleague 

from Texas Gene Green on their thoughtful, bipartisan work on the integration ban 

repeal. It’s important to note that this provision still requires cable companies to 

support CableCARDs, it just gets an outdated, expensive, energy consuming provision of little or no value off the FCC’s books. We believe in spurring innovation, not 

holding it back. 

The draft legislation responds to the concerns of members of both sides of the 

aisle regarding Joint Service Agreements and sweeps week provisions that seem to 

put a thumb on the scale. I have listened to those concerns and propose eliminating 

the sweeps week prohibition, which keeps cable operators from dropping broadcaster 

signals during ‘‘sweeps’’ weeks—the weeks when Nielsen runs its ratings analysis. 

Further, the draft contains a provision that would limit joint retransmission consent negotiation by two or more independent broadcasters in a shared service agreement, unless the pay-tv provider agrees to negotiate jointly with those broadcasters. 

I have no complaints with provisions that support fair negotiating tactics—for all 

parties to an agreement. I am, however, very concerned by the FCC’s recently announced plans to dump Joint Sales Agreements into their local media ownership calculations, especially without first completing their statutorily required quadrennial 

review of the marketplace. 

In Fairbanks, Alaska, all four TV stations are operated from the same group of 

Quonset huts to share costs and create efficiencies that allowed the stations to provide a variety of news and entertainment to this city of about 32,000 people. Absent 

a JSA it’s unlikely the community could support four television stations. I’d also 

draw the committee’s attention to a recent Wall Street Journal op-ed that includes 

the community served by the nation’s only African-American owned, full-power 

broadcast station. And by local broadcasters like Bob Singer, the general manager 

of several local television stations in my district. There’s a positive role for consumers in Joint Service Agreements. 

Unfortunately, Chairman Wheeler is putting the JSA cart before the media ownership horse. The FCC is required by law to review the entire set of media ownership laws every 4 years. It has consistently failed to follow the law. If a licensee 

of the FCC failed to follow the law, it would lose its license or suffer some severe 

penalty. 

Chairman Wheeler is forging ahead to regulate JSAs while leaving the commission’s legal obligations for another day. This is why we’ve included in this draft a 

clear directive to the FCC that it should do its job and finish the quadrennial media 

ownership review before it tinkers with JSAs. But in the meantime, we bring fairness to the marketplace when it comes to misuse of JSAs for retransmission negotiations. Our draft finds the right balance. 

Our work here is set against the backdrop of our larger effort to update the Communications Act and bring our communications laws in line with the innovation and 

4 

dynamism of the communications marketplace. We hope that the many government, 

industry, and consumer stakeholders in this complex discussion will engage in the 

comprehensive discussion of the #CommActUpdate. This will be a time-consuming 

process, however, and as my colleague Mr. Shimkus explained to Politico last week, 

‘‘The telecom rewrite, that’s not for sissies.’’ 

The video marketplace is not a monolithic structure by any stretch of the imagination. Today’s witnesses represent diverse parts of that ecosystem. The broadcasting, 

cable, direct broadcast satellite, and retail set-top box industries are all well represented by our panel, as well as the public interest community. I thank our witnesses for being here today and for their counsel. 

Mr. LATTA. Well, I thank the Chairman, and I also appreciate 

you holding today’s hearing, and I also thank our panel of witnesses for testifying. Thank you very much for being here. Today 

we take another opportunity to examine the video marketplace in 

the context of the Satellite Television Extension and Localism Act 

reauthorization. We can all agree that there has been a tremendous amount of innovation and technological advancement in the 

video marketplace since the Satellite Home Viewer Act, which was 

enacted in 1988. 

Since the law was last reauthorized in 2010, we have been witness to an even greater innovation in modern developments. We 

have seen a proliferation of new entrants into the video market, 

which has spurred greater investment, job creation, increased competition among video distributors and content providers, and has 

offered consumers with greater choice and enhanced experiences 

that are closely aligned with their personal preferences and interests. It is incumbent upon this Congress, and this subcommittee in 

particular, to create and support policies that allow the video marketplace to continue to flourish and innovate, and empower market 

participants to the flexibility, and efficiently meet the ever evolving 

demands of consumers. To fully realize the promise and potential 

of this industry, we must be willing to remove outdated government regulations that are no longer justifiable, and will limit and 

stifle future progress and advancement if left in place. 

I want to thank Chairman Upton and Walden for acknowledging 

the work we have done with Congressman Gene Green on H.R. 

3196, including the proposal to eliminate the integration ban on 

set-top boxes as a provision in the first draft of the STELA reauthorization. This represents a positive forward step in updating 

policies to reflect today’s competitive video marketplace, in eliminating a regulatory burden to innovation in consumer choice. I look 

forward to continuing to work with you, Mr. Chairman, Chairman 

Upton, Congressman Green, and other members of the subcommittee on moving this draft reauthorization package forward. I 

look forward to the testimony today, and I yield back. 

Mr. WALDEN. I thank the gentleman. I seek unanimous consent 

to enter into the record statements from National Association of 

Broadcasters, the National Cable and Telecommunications Associations, and a joint statement from Dish Network and DirecTV in 

support of the discussion draft, as well as letters of support for repeal of the cable card integration ban from the National Black 

Chamber of Commerce, the Latinos in Information Sciences and 

Technology Association, citing the cost of the integration ban to low 

income families. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

5 

Mr. WALDEN. I now recognize my friend and colleague from California, Ms. Eshoo. 

OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. ESHOO. Thank you, Mr. Chairman, and welcome to all of the 

witnesses. We are pleased that you are here, and we know that we 

are going to learn a great deal from you. 

Over the past year and a half, the message, I think, from industry and consumer advocates to our subcommittee has been pretty 

clear. Our video laws are outdated, and in some cases, they are 

even being abused. In 2010 there were just 12 broadcast television 

blackouts nationwide. In 2013, last year, there were 127. Similarly, 

re-trans fees are expected to more than double from $3.3 billion to 

$7 billion by 2018. I think that it is pretty clear who the losers are 

in all of this. It is consumers who will continue to see rising cable 

bills, and in most cases will not be compensated when their programming is blacked out. 

Some say that this is simply a manufactured crisis, but I would 

ask that the following questions be considered. Why is a law that 

was intended to promote localism being used to block national 

cable programming or content that is available free on the Internet? Why does the law prohibit cable operators from taking down 

a broadcast signal during a Nielsen’s sweeps week, yet there is no 

such prohibition for a broadcaster that pulls their signal during a 

re-trans dispute? And why, when a consumer simply wants HBO, 

does the law require that they also pay for re-trans stations that 

are available free over the air? 

I think that these are some of the critical questions that led me 

to introduce the Video Choice Act in December, and a chorus of 

support, I might say strange political bedfellows, came together 

from constituents, to pay TV providers, to independent programmers, to think tanks, and to consumer groups, to undertake targeted video reforms, and do so as part of the re-authorization of 

STELA. I think we have to work together in a bipartisan way, just 

as Representative Scalise and I have done over the past several 

months. 

Unfortunately, several of the provisions in the discussion draft do 

not embody the bipartisan values that have been the cornerstone 

of previous reauthorizations. We have to be forward-thinking, both 

in our approach to legislating, and when we are going to dismantle 

something, where there is a provision in the draft that does so that 

has helped to ensure that consumers can buy cable set-top boxes 

from someone other than their local cable company, we have to 

have an eye on the future. Before we dismantle, we have to establish a framework for the future. And I think that this is something 

that we all need to think long and hard about. 

I am also concerned by a provision that would effectively bar the 

FCC from modifying its rules to close a loophole that broadcasters 

have been exploiting to circumvent the FCC’s media ownership 

rules. I find it contradictory that while the draft bill appropriately 

recognizes the anti-competitive nature of joint retransmission consent negotiations, it also gives tacit approval for other forms of coVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
6 

ordination among broadcasters, so long as it is not done at the expense of the cable and satellite operators. I think we can do better 

than this. 

In closing, Mr. Chairman, you know that I have said before, and 

I will continue to say, that we work together, not only with me, but 

with all of my colleagues on this side of the aisle, to eliminate or 

re-draft the provisions I have highlighted to support consumers, 

competition, and innovation across the video marketplace. And 

with that, I would like to ask unanimous consent to place into the 

record two letters: one from CCIA, and the other from Free Press, 

Consumer Action, Public Knowledge, Writers’ Guild of America 

West, Tech Company Alliance, et cetera. It is a lot of good people. 

So, with that, I don’t think I have any time left—— 

Mr. WALDEN. Yes, you do. 

Ms. ESHOO [continuing]. Do I? 

Mr. WALDEN. Without objection, it will be entered into the 

record. 

[The information appears at the conclusion of the hearing.] 

Ms. ESHOO. All right. I do have 35 seconds, if there is anyone 

that would like to use the remainder of my time. Doris? You want 

to wait for someone else? OK. I will yield back, Mr. Chairman. 

Mr. WALDEN. Gentlelady—— 

Ms. ESHOO. Thank you. 

Mr. WALDEN [continuing]. Yields back the balance of her time. I 

thank the gentlelady for her comments. I now recognize the Chairman of the full committee, the gentleman from Michigan, Mr. 

Upton. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. I want to thank all of our 

witnesses for coming today to discuss this draft of this must pass 

legislation. More than a million and a half satellite TV subscribers 

rely on the provisions of STELA that expire at the end of the year, 

and the draft legislation that is subject of our hearing will ensure 

that these subscribers continue to receive the services that, in fact, 

they have come to rely on. 

There has been a healthy debate, yes, there has, over what this 

reauthorization should and should not do, and we welcome continued input as the process moves forward. And we want to work to 

reauthorize STELA. It is important to remember that this is not 

the venue for comprehensive reform. As you know, the committee 

has embarked on a multi-year effort to update the Communications 

Act, and this process will be driven by a thorough and thoughtful 

review of all aspects of today’s communications marketplace, with 

a goal of updating our laws to better reflect today’s realities, while 

leaving the flexibility necessary to foster continued innovation and 

growth. And we hope and expect that you all will be very active 

participants in that process, as I know that you will want to do so. 

Thanks to the hard work of this subcommittee, and input from the 

public and industry stakeholders, Chairman Walden issued a discussion draft that offers practical and narrow reforms to the current video market, while properly leaving comprehensive reform to 

the #CommActUpdate. 

7 

I strongly support this draft, and encourage others to do so as 

well. In addition to extending the expiring satellite provisions, today’s draft also makes several targeted pro-consumer reforms to 

video laws and regulations. It repeals costly FCC rules that require 

a cable card in set-top boxes leased by cable companies. It removes 

a government guarantee of sweeps week protection in retransmission disputes. And it takes action to ensure that the FCC meets 

its statutory obligation to review and deregulate media ownership 

rules before attempting to take additional regulatory actions 

against sharing agreements. The draft also helps to keep negotiations fair between broadcasters and pay TV providers for retransmission consent. So these are, I think, well considered deregulatory 

reforms, the type of intelligent reforms that the committee and this 

Congress should think about during the #CommActUpdate. 

I yield the balance of my time, 1 minute each to Mr. Scalise, Barton, and Blackburn. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

I want to thank our witnesses for coming today to discuss our draft of this must 

pass legislation. More than 1.5 million satellite television subscribers rely on the 

provisions of STELA that expire at the end of this year. The draft legislation that 

is the subject of our hearing will ensure that those subscribers continue to receive 

the service they have come to rely on. 

There has been a healthy debate over what this reauthorization should and 

should not do, and we welcome continued input as this process moves forward. As 

we work to reauthorize STELA, it is important to remember that this is not the 

venue for comprehensive reform. As you know, the committee has embarked on a 

multi-year effort to update the Communications Act. This process will be driven by 

a thorough and thoughtful review of all aspects of today’s communications marketplace with the goal of updating our laws to better reflect today’s realities while leaving the flexibility necessary to foster continued innovation and growth. We hope and 

expect you all will be active participants in that process. 

Thanks to the hard work of this subcommittee and input from the public and industry stakeholders, Chairman Walden has issued a discussion draft that offers 

practical, narrow reforms to the current video market while properly leaving comprehensive reform to the #CommActUpdate. I strongly support this draft and encourage others to do so as well. 

In addition to extending the expiring satellite provisions, today’s draft also makes 

several targeted proconsumer reforms to video laws and regulations. It repeals costly FCC rules that require CableCARDs in set-top boxes leased by cable companies. 

It removes a government guarantee of ‘‘sweeps week’’ protection in retransmission 

disputes. And it takes action to ensure that the FCC meets its statutory obligation 

to review and deregulate media ownership rules, before attempting to take additional regulatory actions against broadcast sharing agreements. The draft also helps 

to keep negotiations fair between broadcasters and pay-TV providers for retransmission consent. 

These are well-considered, deregulatory reforms—the type of intelligent reforms 

that Congress should think about during the #CommActUpdate. We hope you’ll join 

us over the next few years as we dig in to review the state of the law and the state 

of the communications industry. For now, let’s not lose sight of the important goal 

today of reauthorizing STELA by the end of this year. 

Mr. SCALISE. Thank you, Mr. Chairman. This very modest 

STELA draft we are reviewing today begins to address some of the 

outdated provisions shackling the video marketplace, but I think 

there is a lot more work to be tackled in this area before we can 

say that we got the public policy right, and that we leveled the 

playing field for our consumers back home. 

8 

I know many in this city, on all sides of these issues, are fearful 

of what a marketplace based predominantly on copyright law would 

look like. But as long as we have this government-manipulated 

market, with its compulsory licensing, carriage regulations, and 

consumer purchase mandates, it is completely reasonable to suggest, as Ranking Member Eshoo would also agree, that these outdated laws be updated over time. This is not a free market at work. 

It is a government creation. We should never stop championing the 

belief that consumers will stand to gain the most when we allow 

our nation’s innovators, entrepreneurs, and risk takers to show 

Washington the way, not the other way around. 

I look forward to continuing to embrace this unique opportunity 

that brings together members from both sides of the aisle, and 

hopefully both sides of the Capitol, as we collectively work to modernize the decades-old laws and regulations that foreclose on the 

possibility of freedom for all market participants, and greater consumer choice. I look forward to hearing from our panelists, and I 

yield back. 

Mr. BARTON. Mr. Chairman, there is nothing like renewing old 

acquaintances for members of this subcommittee than scheduling a 

legislative hearing. And as I look out in the audience, I see a number of my old friends who have called me, or made an attempt to 

touch base, and since you scheduled this hearing, we have got two 

former Congressmen of the subcommittee, Mr. Bass of New Hampshire and Ms. Myrick of North Carolina. We are glad to see them. 

I was here, Mr. Chairman, in 1988 when we passed the Satellite 

Home Viewer Act, and I have been here for all the reauthorizations. I think it is imperative that we reauthorize it again this 

year, since it expires at the end of December this year. And I think 

the discussion draft has received a lot of input, excuse me, and I 

think some of the changes that have resulted from that input are 

positive, and I look forward to the hearing with that. 

Mrs. Blackburn is not here, so I will yield back to the Chairman, 

unless the Chairman wishes to yield to one of the other members. 

Mr. WALDEN. Any other member want to use up the remaining 

34 seconds? If not, gentleman yields back the balance of this time. 

We will now turn to the ranking Democrat on the committee, the 

gentleman from California, Mr. Waxman, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. We are here 

today to discuss draft satellite television legislation released by 

Chairman Walden last week. I am not prepared to support the bill 

in its current version, but I am prepared to work with Chairman 

Walden, Chairman Upton, Ranking Member Eshoo to get a bill we 

could all stand behind. Last night the House unanimously passed 

the FCC Process Reform Act. It took work to get that bill in a 

shape that every member of the House could support. But if we 

were able to bridge differences in the FCC Process bill that were 

much bigger than we face today, I am hopeful that, with goodwill 

on both sides, we can reach the same result on this issue. 

9 

My initial preference was for a clean reauthorization of the expiring provisions of the Satellite Television Extension and Localism 

Act, or STELA. Previous authorizations may not have been clean, 

but the new provisions that had been added were part and parcel 

of the purpose of the law, giving satellite subscribers access to local 

and network broadcast programming. Today we are considering a 

different kind of bill. It would make changes to the way retransmission consent negotiations may occur by altering the bargaining 

power between programmers and distributors. It would also hamstring the FCC’s ability to address broadcaster coordination that 

could undermine the diversity of voices, and lead to job losses. And 

we would repeal set-top box regulations that don’t even apply to 

satellite companies. 

Mr. Chairman, I can understand the draft bill prohibiting broadcasters coordination in retransmission consent with limited exemptions, while condoning similar coordination of broadcasters jointly 

sell ad time, or otherwise coordinate outside the retransmission 

consent process. That is what this bill would do, and I find the two 

approaches difficult to reconcile. I believe much of the bill passes 

the public interest test, but not every provision. 

I support FCC’s tightening its attribution rules to address joint 

sales agreements between television stations. I don’t understand 

why the same standard wouldn’t apply that we are applying to 

anti-competitive behavior among broadcasters that results in consumer harm in retransmission consent negotiations to also apply to 

joint agreements that have a well-documented history of increasing 

prices, reducing competition, and otherwise undermining the public 

interest. 

The set-top box issue is also one we need to examine closely. 

Some energy experts believe the cable card requirement is preventing the design of more energy efficient set-top boxes. If that is 

a real concern, I would like to see it addressed. But at the same 

time, we need to make sure we are preserving competition and innovation in the market for set-top boxes. 

I think that the bill has been handled well, it is a bill we could 

work with, and I am hopeful that we can reach a full agreement 

on all the provisions. I want to close by thanking Chairman Walden for his efforts, and for this hearing today. I hope we can work 

together to develop a truly bipartisan Satellite Reauthorization 

Bill. And I want to yield at this time to my colleague from California, Ms. Matsui. 

Ms. MATSUI. Thank you very much, Ranking Member Waxman, 

for yielding me time. Mr. Chairman, thank you for holding today’s 

hearing, and I would like to thank the witnesses for being here 

today. 

I am pleased that we are beginning this legislative process to 

renew satellite television—and license. However, I am surprised 

that, unlike the past, our legislative starting point is not a bipartisan, narrowly tailored bill. Now that the bill has expanded, I do 

look forward to hearing more about the merits of the provisions relating to retransmission consent and set-top boxes. We know that 

technology is disrupting the video marketplace, with new and innovative ways to watch TV and stream movies and videos. As a reVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
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sult, we are seeing new players entering the marketplace, and we 

are seeing trends toward more consolidation. 

However, one thing is certain. Americans are tired of being 

caught in the middle of retransmission disputes. That is why, since 

the STELA proposal has expanded, I believe we should look at this 

bill through a filter, and that is, will it put the consumers in a better place? It is my hope that we can definitively answer that question. Moving forward, it is my hope that this subcommittee can 

work in a bipartisan manner to improve the bill and produce a bipartisan product. And I yield back the balance of my time. 

Mr. WALDEN. Gentlelady yields back the balance of her time. All 

time how now expired, and we will get on about hearing from our 

witnesses, and I want to thank them all for being here. And we are 

going to start with Mr. Mike Palkovic, did I say that right? 

Palkovic? 

Mr. PALKOVIC. Yes, you did. 

Mr. WALDEN. Executive Vice President, Services and Operations 

of DirecTV. Mr. Palkovic, thank you for being here today. We look 

forward to your testimony. 

STATEMENTS OF MIKE PALKOVIC, EXECUTIVE VICE PRESIDENT, SERVICES AND OPERATIONS, DIRECTV; MARCI BURDICK, SENIOR VICE PRESIDENT OF BROADCASTING, SCHURZ 

COMMUNICATIONS; MICHAEL POWELL, PRESIDENT AND 

CEO, NATIONAL CABLE AND TELECOMMUNICATIONS ASSOCIATION; MATT ZINN, SENIOR VICE PRESIDENT, GENERAL 

COUNSEL AND CHIEF PRIVACY OFFICER, TIVO; AND MATT 

WOOD, POLICY DIRECTOR, FREE PRESS. 

STATEMENT OF MIKE PALKOVIC 

Mr. PALKOVIC. Thank you. Good morning, Chairman Walden, 

Ranking Member Eshoo, and members of the subcommittee. My 

name is Mike Palkovic, and I am the Executive Vice President of 

Operations at DirecTV. Thank you for inviting me back to testify 

on STELA reauthorization. STELA reauthorization is critical to 

millions of your constituents who depend upon DirecTV. Without 

congressional action, key provisions expire this December. The 

committee and its staff have put many hours to produce the first 

discussion draft of legislation that would reauthorize these provisions, so my first and most important message is simple, thank 

you. DirecTV and our subscribers appreciate your hard work, and 

your willingness to address STELA reauthorization. You may have 

heard from some companies telling you what you should or should 

not have done with the discussion draft. Some may even be telling 

you to do nothing, or to simply change the expiration date in a 

‘‘clean’’ reauthorization, something Congress has never done before. 

This, however, is the Satellite Home Viewer Act. I am here on behalf of the nation’s leading satellite provider to say that we agree 

with the committee’s approach. 

Does this discussion draft contain everything DirecTV thinks it 

should? Of course not, but it does two critically important things. 

First, it preserves service for millions of distant signal subscribers. 

With all of the other issues before this committee, it is sometimes 

easy to forget the key distant signal provisions are due to expire 

11 

this December. Your constituents, however, have not forgotten 

about these provisions. More than a million and a half subscribers, 

many in the most rural areas of the country, receive at least one 

distant network signal from DirecTV or Dish. Were Congress to fail 

to reauthorize STELA, these subscribers would lose service that 

most Americans take for granted. 

Second, the draft bill addresses one particularly egregious abuse 

of the FCC’s rules that is raising prices for consumers. Reasonable 

people can differ on the broader policy questions that divide broadcasters and pay TV providers. For example, broadcasters think our 

subscribers don’t pay them enough for their programming, and we 

wish broadcasters would pay us for delivering their signals to millions of our subscribers who would never be able to get them over 

the air. Whatever one’s views, however, most people agree that you 

shouldn’t be able to evade FCC rules. Yet this is exactly what 

broadcasters are doing today, and this is exactly what the discussion draft would stop. 

Broadcasters increasingly negotiation retransmission consent 

jointly on behalf of two, three, or even four network affiliates in the 

same market. This leads to higher prices, as much as 161 percent 

higher, according to one estimate, and it leads to greater harm 

when blackouts occur. This is why the FCC appears poised to follow the advice of the Department of Justice, by restricting joint retransmission consent negotiations for non-commonly owned stations in the same market. The committee’s discussion draft takes 

the same approach. We think is sensible and long overdue reform. 

So, on behalf of DirecTV’s more than 20 million subscribers, I 

would like to thank the committee for its diligence and hard work 

on STELA reauthorization, particularly Chairman Walden, Congressman Scalise, and Congresswoman Eshoo. We look forward to 

continuing to work with Republican and Democratic members of 

this committee as we move forward. I would be happy to answer 

any questions the committee might have. Thank you. 

[The prepared statement of Mr. Palkovic follows:] 

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Mr. WALDEN. Mr. Palkovic, thank you very much for your testimony. We will now go to Marci Burdick, Senior Vice President of 

Broadcasting for Schurz Communications, Incorporated. Ms. Burdick, it is good to have you back before the subcommittee. We look 

forward to your testimony. You just need to turn that microphone 

on. 

Ms. BURDICK. You would think the broadcaster could get the 

microphone. Thank you. 

Mr. WALDEN. That is all right. 

STATEMENT OF MARCI BURDICK 

Ms. BURDICK. Good morning, Chairman Walden, Ranking Member Eshoo, and members of the subcommittee. I am Marci Burdick, 

Senior Vice President at Schurz Communications. I supervise 

radio, cable, and television stations in small and medium markets. 

I am testifying on behalf of the NAB, where I am the Television 

Board Chair, and pleased to be here this morning with the two Michaels and the two Matts. 

The STELA legislation that the committee is considering is, at 

its core, a satellite bill. Passed in 1988, this law was supposed to 

be a temporary fix to help satellite carriers better compete with 

cable by giving them permission to provide distant broadcast channels. Twenty-six years later, satellite is providing local broadcast 

channels in nearly every market, and is a thriving competitive alternative to cable. So while NAB questions the need for the bill at 

all, we can support the draft produced by Chairman Upton and 

Chairman Walden. 

Our primary interest in the legislation was to prevent the picking of marketplace winners and losers, which is why we have asked 

for a clean bill. We are happy to see that this STELA draft steers 

clear of these kind of provisions. While cable and satellite companies sought to use STELA to gain leverage over broadcasters in retransmission consent negotiations, we continue to believe that free 

market negotiations are the most appropriate place to establish 

price. As to any other broader changes to broadcasting rules, NAB 

firmly believes that those should be debated as part of the comprehensive Communications Act update recently launched by 

Chairman Upton and Walden. 

As you know, broadcasters may only operate with a license 

granted to us by the FCC, and we are by far its most regulated industry. It can be hard to flip a switch without getting permission 

from your regulator. And while our competitors are often large national companies with no ownership restrictions, we may not own, 

in most cases, more than one TV station in most markets. While 

our competitors may show provocative, cutting edge content at any 

time of the day, broadcasters live by decency rules dictating what 

we may air. Broadcasters are saddled with innumerable regulations that are by far more onerous than our cable and satellite 

competitors. 

For all of these regulations, there are some benefits that broadcasters receive because we do operate in the public interest. But if 

Congress opts to remove the benefits of being a broadcaster, then 

it should also remove the burdens. Deregulation should not be limited to one player in an industry. If your goal is regulatory parity 

24 

between the various video platforms seated at this table, a comprehensive examination in the Communications Act update is the 

only way to achieve it. 

I would like to spend the remainder of my time addressing joint 

sales agreements, known as JSAs. These are agreements among 

broadcasters in a market for the joint sale of advertising. While 

often mischaracterized, these agreements benefit the public, particularly in small and medium markets, where Schurz operates. 

They result in additional local news, improved public service, and 

enhanced transmission facilities. For example, our JSA in Wichita, 

Kansas supports the only Spanish local newscast in the State of 

Kansas. In Springfield, Missouri our JSA helped take a struggling 

station to one that is winning national award for local news coverage. 

We strongly oppose the extraordinary regulatory path the FCC 

is taking to make JSAs attributable for the purpose of the broadcast ownership rules. The FCC’s proposed rule will require broadcasters to unwind existing agreements, something unprecedented, 

and amazingly disruptive. This is yet another example of how 

broadcasters are forced to play by one set of rules, while the rest 

of the video industry plays by another. 

And the real issue here is competition for local advertising dollars. Television stations fiercely compete not just with each other, 

but with cable, Internet, and mobile. Although the FCC and DOJ 

have said that broadcasters dominate local advertising, you can see 

in this chart that we have put on the wall that we are seeing, and 

expecting, big gains from our competitors. The chart proves that today’s local advertising market is by far more than just local TV, 

but, unfortunately, we are being regulated like it is 1960. And, importantly, for all of those entities taking revenue out of a community, local broadcasters are the only ones putting it back in through 

local news and community service. 

Strangely, the FCC apparently doesn’t have the same sales concerns as it relates to cable. The same JSA-like agreements, called 

interconnects, are routine between cable, satellite, and telcos for 

the joint sale of advertising. What you have are cable companies 

selling local advertising for their direct competitors, yet they will 

continue unregulated. 

In conclusion, we strongly support the bill’s language that prevents the FCC from enforcing rules without first collecting empirical data studying the real world impact of JSAs. In reality, these 

agreements better serve the public interest. To ignore the market 

pressures facing broadcasting would doom us to the fate of newspapers, and I hope this committee will take an honest fact-based 

look at the importance of these agreements to localism. We appreciate the hard work of this committee, and I look forward to your 

questions. Thank you. 

[The prepared statement of Ms. Burdick follows:] 

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Mr. WALDEN. Ms. Burdick, pardon me, thank you for your presentation. We will now go to Mr. Michael Powell, President and 

CEO of the National Cable and Telecommunications Association. 

Mr. Powell, it is good to have you back before the committee. We 

look—— 

Mr. POWELL. Thank you—— 

Mr. WALDEN [continuing]. Forward to your testimony. 

STATEMENT OF MICHAEL POWELL 

Mr. POWELL. Thank you, Chairman Walden, and thank you, 

Ranking Member Eshoo, and other members of the subcommittee. 

It is always a distinct pleasure to have the opportunity to come and 

testify before you today. I am pleased, on behalf of the National 

Cable and Telecom Association, representing America’s cable companies, to support reauthorization of STELA, including the very 

important requirement for companies to negotiate broadcast carriage agreements in good faith. We are also specifically pleased to 

support the carefully selected video reforms that have been included in the discussion draft. All these reforms can be appreciated 

as both, one, directly benefiting consumers, and, two, restoring a 

modicum of competitive balance among companies. Both of these 

themes should always be touchstones of communications policy. 

Let me turn first to the question of the integration ban. Eliminating the integration ban, an effort led by Congressmen Latta and 

Green on a bipartisan basis, reverses an ill-conceived FCC policy, 

while clearly preserving the statute, and its commendable objective 

of promoting consumer choice, innovation in competition in set-top 

boxes, something long championed by Congresswoman Eshoo. To 

implement the law, the FCC had to overcome a simple obstacle, 

giving third party boxes access to encrypted signals. Industry 

worked together to create a separate security module, the cable 

card, so boxes could be sold unlocked at retail and work in any 

cable market by simply acquiring the card. Cable card is now a 

fully realized solution. 

The FCC, however, stepped beyond the statute and imposed 

something called the integration ban. The ban forced cable companies to pry security functions out of their leased boxes, and rely instead on cable cards, despite there being no technical need to do 

so. The theory of the rules was behavioral, not technical, the belief 

that cable companies would now have an incentive to create, deploy, and support cable cards for third parties. The FCC also, in 

a bit of industrial engineering, hoped to push consumers toward 

third party boxes by eliminating a low cost choice from the cable 

company. This ill-fated policy should be reversed simply because its 

costs now clearly outweigh its speculative benefits. 

For one, the integration ban eliminated a low cost consumer 

choice, costing consumers nearly $1 billion in unnecessary expenses. According to FCC data, the integration ban adds over $55 

of additional costs per box, while adding no additional 

functionality. Secondly, the ban is quite wasteful of energy, imposing on consumers the cost of hundreds of millions of unnecessary 

kilowatt hours per year. Third, the policy unfairly tilts the competitive playing field. As was mentioned by Chairman Waxman, the integration ban apply only to cable companies, despite them repVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
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resenting only about 50 percent of the market today, down from 

over 90 percent when the provision was passed. DirecTV and Dish, 

able competitors, are the second and third largest providers, and 

are free to innovate and develop lower cost alternatives, since they 

are not subject to the rules. The same is true of telcos, like AT&T. 

This incongruous application of the law has no defensible rationale, 

and it is impossible to believe a policy applied to barely half of a 

national market will have much impact on a national market for 

set-top boxes. 

And whatever the meritorious intentions of the integration ban 

were, the benefits are speculative at best. Today 44 million cable 

customers have chosen leased cable boxes that use cable cards. In 

stark contrast, only 600,000 cable cards have been requested for 

third party devices. The explosion of unimagined video devices and 

content sources from the likes of Roku, Apple TV, Xbox, 

Chromecast, and a wrath of Apple iOS and Android devices, is exciting, and likely explains lessening interest in cable set-top box alternative, and points squarely to a market developing solutions to 

meet consumer preferences. 

Finally, a word about joint negotiations from broadcasters. We 

support the effort to rein in abuses of local broadcast stations that 

have intensified the use of so-called sidecar agreements to jointly 

negotiate carriage of their signals. Whatever the purported efficiencies of these arrangements are, and there may be some, they 

have no place invalidating the anti-competitive practice of competitors acting collectively to negotiate prices. As the Department of 

Justice has found, these practices harm consumers in the form of 

higher cable prices. 

Thank you, Mr. Chairman, and I look forward to your questions. 

[The prepared statement of Mr. Powell follows:] 

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Mr. WALDEN. Mr. Powell, we appreciate your testimony, and we 

will now go to Mr. Matt Zinn, Senior Vice President, General Counsel, and Chief Privacy Officer for TiVo. Mr. Zinn, it is good to have 

you before the subcommittee. We look forward to your comments. 

STATEMENT OF MATT ZINN 

Mr. ZINN. Chairman Walden, Ranking Member Eshoo, members 

of the subcommittee, my name is Matthew Zinn. I am the Senior 

Vice President for TiVo. TiVo developed the first commercially 

available digital video recorder, and we have over four million subscribers worldwide, including a million retail subscribers in the 

United States. I appreciate the invitation to testify before you 

today. 

Ordinarily TiVo would not be giving its opinion on legislation—— 

Mr. WALDEN. Mr. Zinn, I wonder if you could pull your microphone up just a little closer? 

Mr. ZINN. Is this better? 

Mr. WALDEN. Much. Thank you. 

Mr. ZINN. Ordinarily TiVo would not be giving its opinion on legislation to reauthorize compulsory licenses governing the satellite 

industry. Our business has little to do with STELA. I am part of 

this panel only because of a completely unrelated provision that 

was attached to the STELA reauthorization legislation, pushed by 

a cable lobbying group to eliminate choice in how consumers watch 

cable programming. TiVo stands for consumers’ choice. It is what 

we do. I am not here to criticize cable, but certain interests within 

the cable industry, like this guy, are trying to undermine competition and choice. The provision would appeal the pro-competitive requirement that operators use the same security standard in their 

boxes as they make available for retail. 

That is what this is about, the same security standard. Common 

reliance on the same security standard is a principle the FCC has 

repeatedly found is a necessary component for a retail market for 

set-top boxes to emerge. Seeking its repeal is an aberration of cable’s generally pro-competitive policy approach. Cable originally 

provided competition to broadcast networks. Cable has provided 

competition to telephone networks, and to data networks, and cable 

did not oppose the original STELA legislation that enabled satellite 

competition to cable. This provision is also an aberration in terms 

of how all comparable industries are treated. Consumers should be 

able to use whatever device they choose to access video programming, just like they can use whatever computer, telephone, cell 

phone they want to use to utilize Internet or wireless networks. 

Video is no different. 

The Energy and Commerce Committee has been the catalyst for 

this competition no matter which party has been in control. In 

1996 this committee had the wisdom to include, in the landmark 

Telecommunications Act, a bipartisan provision to unlock devices 

through which cable subscribers can get their channels. The concept was simple, consumers should have the ability to purchase a 

set-top box at retail, and not have to rely on renting a box from 

their cable provider. This provision was intended to do for the video 

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telephone industry, and what Congress is doing right now for conVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
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sumers with wireless devices. Allowing consumer choice to be undermined stands in opposition to what this committee has stood 

for, purely because a lobbying group has asked for a provision to 

be attached for legislation. 

I am not here to defend the status quo, far from it. We share the 

cable industry’s desire to move on to a new security standard, and 

we want to work with the industry to find the next generation answer. But passing legislation eliminating cable operators’ incentive 

to support retail boxes without putting a replacement solution in 

place is the most twisted approach, given the heritage of the cable 

industry, and the heritage of this committee, in creating choice. 

My fellow witness, who is representing the industry here today, 

called TiVo God’s machine because of the choice and control it gave 

the consumer. It is ironic that he is now leading the charge to kill 

this type of consumer choice, simply because he is wearing a different hat. TiVo is in no position to advise the committee on the 

length of the satellite compulsory license, or on retransmission consent. Rather, I am here to say today that a provision that will undermine the retail market for set-top boxes and deprive consumers 

of choice has no place in a bill originally enacted to give consumers 

choice in video providers. The committee should be focused on fostering competition, rather than undermining competition and 

choice. 

This committee has always stood for competition and choice, and 

for fostering free market solutions where those can suffice. This 

committee can play a strong role on this important pro-competition 

and consumer choice issue by supporting a process that puts in 

place a more efficient market solution worked out between the industries. 

There are already companies who have indicated they have a desire to work with us to do just that, but the 629 amendment will 

kill that process by taking away the incentive for the industry to 

work out that next generation solution. Such an amendment stands 

the very heritage of this committee on its head because of the lobbying efforts of a contingent of the cable industry, an industry that 

has also traditionally stood for competition and consumer choice, 

an industry that TiVo is helping lead the way to the next generation of television, and an industry now led by a man who, when he 

was the FCC chairman, made very clear how important TiVo was 

to the future of the video marketplace. 

I respectfully urge you to support innovation and consumer 

choice, and remove the amendment to Section 629 from the STELA 

reauthorization bill. Thank you very much. 

[The prepared statement of Mr. Zinn follows:] 

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Mr. WALDEN. Thank you for your testimony, Mr. Zinn. I assume 

you are opposed to that amendment. Mr. Wood, Mr. Matt Wood, 

Policy Director at Free Press, we are delighted to have you back 

before the committee. Please go ahead with your testimony. 

STATEMENT OF MATT WOOD 

Mr. WOOD. Thank you, Chairman Walden, and Ranking Member 

Eshoo, and esteemed members of the subcommittee, and thank you 

for inviting me to testify today. My name is Matt Wood, and I am 

the policy director for Free Press, which is a non-partisan organization with more than 700,000 members across the country. 

Free Press works for policies that promote competing sources of 

news and journalism because they are so important for informing 

our Nation’s democracy and powering our economy. Unfortunately, 

the discussion draft could contribute to the ongoing loss of such 

competition. My testimony focuses on Section 4 of that draft, which 

would keep the FCC from addressing undue media concentration, 

and removing entry barriers for broadcast businesses. I will also 

talk briefly about Section 6, which would keep the agency from following Congress’s direction to increase the choices that people have 

for set-top boxes and other video devices. 

Our media should reflect the full range of experiences and ideas 

this country has to offer. It is essential to see different viewpoints 

and hear different voices on the dial, even if they disagree, or rather because they disagree, because robust debate and in-depth coverage keep our republic strong and free. This applies at the national level, and at the local level too, where broadcasting remains 

a vital source of information about our government and our culture. 

Television remains the dominant way that Americans get news. 

Seven in 10 people in the U.S. watch local TV news, almost double 

the number that watch cable news, or get news online. But the 

question is, what kind of news are they getting? The answer for too 

many Americans is they get two or more broadcasts produced by 

the same company. Sometimes this outsourced news comes from 

separate news teams, and more often stations have the same reporters air the same stories, and use the same scripts, on two or 

more channels. In either case, it is the same owner calling the 

shots. 

Some broadcasters say this type of sharing keeps multiple newscasts on the air. They claim, oddly enough, that they only way to 

have competing news is for stations to stop competing. Let us be 

clear, when you hear about synergies that make news more attractive to produce, there are just two ways to save money, cutting 

overhead, and cutting jobs, so one person’s efficiency can be another’s unemployment. And that is a hardship that affects us all 

when people losing their jobs are journalists we depend on to dig 

into the facts. 

Slashing newsroom jobs can happen slowly, as a broadcaster like 

Sinclair reduced its average number of employees per station by 

more than 20 percent. That was 55 per station in 2001, down to 

just 43 today. Or it can be tonight’s top story, in late 2010 the anchor at KMSB in Tucson took to the air to report the layoffs that 

hit him, and 50 of his colleagues. What makes it worse is this runVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
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away consolidation happened right in front of the FCC for years, 

clearly violating its ownership limits. 

Section 4 of the draft refers to the local television multiple ownership rule, which permits direct or indirect control of more than 

one station per market only under certain circumstances. Yet in 

more than 100 markets, almost half of the TV markets in the 

whole country, broadcasters use these outsourcing arrangements to 

violate the letter and the spirit of this FCC safeguard. They do this 

with joint sales agreements, or JSAs, shared services agreements, 

and a litany of others. Combined, these management agreements 

often transfer control, and the bulk of the affected station’s revenues, away from the supposed licensee. 

These outsourcing deals often prop up shell companies that take 

away opportunities for competing businesses. As a rule, the FCC 

shouldn’t stand for them. Last month the Department of Justice 

told the FCC that such covert consolidation can harm competition. 

Last week FCC Chairman Tom Wheeler called for a vote to treat 

JSAs above a certain threshold as what they are, signs of ownership by the broadcasters who really run these stations. That would 

align the FCC with the Securities and Exchange Commission, 

which doesn’t fall for the fiction that these are independent owners. 

Investors get the truth, and operating stations must treat their socalled sidecar companies as subsidiaries. Even that nickname, sidecar company, shows how much they are driven by conglomerates by 

NexStar, Raycom, Sinclair, and Tribune. Section 4 could keep the 

FCC from moving ahead with its plans to clean up this practice, 

and prevent unlawful transfers of control. 

Just a quick word on Section 6 as well, and I won’t point to this 

guy, but I agree with much of what he said. Section 6 could also 

reduce choices for viewers, and, as Mr. Zinn explained, the integration ban promotes competition for set-top boxes, which incumbents 

now charge you up to $20 a month just to rent. Cable customers, 

of course, should be free to take them up on that offer, but they 

should have other options too. And they shouldn’t believe cable 

claims that blocking innovation by others is itself a form of innovation. 

Thank you very much, and I look forward to your questions. 

[The prepared statement of Mr. Wood follows:] 

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Mr. WALDEN. Mr. Wood, thank you for your testimony. I will 

make a couple of comments, and then I have got some questions. 

I would just say, having been, no secret, in the broadcast business, 

having had a JSA, they can also be positive in the market too. We 

actually, as a result of one, in a purchase, were able to restore 

news. And I am trying to figure out how JSAs have gutted newspapers. 

There is something going on out in the marketplace out there 

with newspapers, they are not in a JSA situation, and newsroom 

after newsroom in the printed press is being gutted. And I am really frustrated with the Federal Communications Commission, and 

the fact that they don’t step up and do their job, as required by 

statute, by the law, to do their ownership review, look at crossownership so we have a strengthened voice out there of First 

Amendment writers. And so it is just really frustrating, because 

you can cite all these statistics, but on the ground, when you are 

meeting a payroll, when you are trying to make things work, there 

are a lot of other things that come into play. 

So, Mr. Powell, this draft will relieve cable and their consumers 

of a significant cost burden, the cost of making leased set-top boxes 

compliant with the integration ban. There has been a little bit of 

opposition to this voiced by your colleagues to your left, and I am 

aware of that. That was a little understatement there. I want you 

to explain again, and answer their criticisms of what they raise. 

They say it is not going to help consumers, and it is going to hurt 

innovation. How do you answer that? 

Mr. POWELL. Sure. Well, thank you. So this guy was a commissioner on the Federal Communications Commission when I said 

that TiVo was God’s machine. That same guy, in that same year, 

dissented from the FCC’s decision to impose an integration ban for 

two simple reasons. One, it was clearly not compelled by the statute in any way, and shape, or form. What was compelled by the 

statute was to make sure that third party boxes could get access 

to the signal by descrambling that signal through a separate security requirement. That I wholeheartedly endorsed then, I continue 

to wholeheartedly endorse now. 

The second part was problematic. My belief then, and my belief 

now, was it took away an innovative third option for consumers, 

which is a lower cost box with integrated security that would buy 

FCC data, costs $50 per box less, costs consumers less, and be substantially more energy efficient. Many cable companies have been 

forced to attempt to seek waivers in order to deploy new and innovative boxes, including new software-centric systems. Those waivers have often taken up to two years. 

Mr. WALDEN. Ms. Burdick, it is expensive to run a TV station or 

a newspaper in this day and age. I think it would be difficult to 

make it work, but successful companies with proven track records 

continue to do so, and do it well. Doesn’t it make sense to allow 

good companies with good resources to put their expertise to work 

in failing stations or newspapers? Talking about cross-ownership 

here. We are talking about JSAs used appropriately. Not inappropriately, but appropriately, for the management. 

Ms. BURDICK. Thank you, Mr. Chairman. You touched on a key 

point earlier, and you have echoed it again, is that the ownership 

86 

regulations have not kept up for the changing broadcast marketplace. To put it in perspective, in the small and medium markets 

in which we operate, we are governed basically under ownership 

regs that were enacted in 1970. And I don’t know about the members of this committee, but in 1970 I was starting middle school, 

and listening to Bridge Over Troubled Water on AM radio. The 

world has changed. 

In 1970, most broadcasters were being paid by their networks to 

distribute the product, and in small and medium markets, that was 

basically their profit. That has gone away. And so, as that world 

has changed, and the economics have changed, as I mentioned earlier, with people competing with us for advertising dollars, which 

supports 90 percent of our costs, 90 percent of our revenue in local 

broadcasting comes from advertising, as that pie is sliced even 

thinner, the rules have not kept up. And so, in fact, broadcasters, 

like Schurz, have entered into some of these agreements, ours approved by the FCC, by the way, to create more news, more jobs, 

and more public service in the communities that we serve. 

Mr. WALDEN. I appreciate that. And clearly, in the developing 

Internet world, you have got stations probably that have to compete against Internet, cable, everything else. And it just seems like 

these ownership rules are outdated when Jeff Bezos can pick up 

the ‘‘Washington Post’’ for 250 million, or the owner of the Red Sox 

can pick up the ‘‘Boston Globe’’. I am trying to figure out why 

somebody that is actually in the journalism business can’t engage 

in that cross-ownership too. 

Ms. BURDICK. Because the rules say we can’t. 

Mr. WALDEN. And that is why the FCC should do its job, and follow the law. With that, I will turn over to the gentlelady from California, Ms. Eshoo. 

Ms. ESHOO. Thank you, Mr. Chairman. I love hearings, and I 

love the mix that is here. Although I wouldn’t refer to former 

Chairman Powell as that guy, I would say great guy, but here it 

comes. Here it comes. I have two quick questions for you. 

The first one, Mr. Powell, I think it is a yes or no question. On 

this whole issue of the integration ban, you had written to me last 

year and said that it cost consumers roughly a billion dollars. My 

question is, would Cable companies commit to lowering the monthly cost for consumers that pay to lease the set-top box, particularly 

those with advanced functionality, and print this on your customers’ monthly bill if the integration ban is repealed? I mean, you 

know, so much of this is about money, we all know that, so you 

don’t want this anymore, you have stated your case. Are you willing to reduce the price, print it on the bill so consumers know that 

there is a savings to them? 

Mr. POWELL. I think what we are willing to do is commit that 

that money gets invested into the network in a manner that is beneficial to consumers. When we had the roundtable, which you were 

generous—— 

Ms. ESHOO. Right. 

Mr. POWELL [continuing]. Host, you will remember ACA, a representative of small cable companies, made the very compelling 

point that those additional expenses are expenses that could not be 

used by small cable companies attempting to provide faster 

87 

broadband speeds, an important, and I think significant point. So, 

no, I am not the representative of the business judgments of exactly how the savings would be returned, but I do believe it is fair 

to say—— 

Ms. ESHOO. You know what, I really do think some thought 

needs to be given to that. 

Mr. POWELL. Sure. 

Ms. ESHOO. I do. I mean, if, in fact, your stand on behalf of cable 

operators in the country is what it is. I mean, everyone is entitled 

to their view, and what they want, and what is going to work well 

for them. People that are here are obviously speaking to their interests, which is really fair. We have to protect the public interest 

in all of this, try to, anyway. So if it costs consumers, as you said 

to me in your letter last year, one billion, maybe there can be a 

reduction of one billion somehow. 

Now, you described the repeal of the FCC’s integration ban as a 

narrow fix that will not change cable operators’ requirement to provide the cable cards. But last year, in your comments before the 

FCC, NCTA, and at least one of your member companies, argued 

that because of the EchoStar case, cable operators are no longer required to provide or support cable cards to retail devices. So my 

question is, which is it? 

Mr. POWELL. I—— 

Ms. ESHOO. Because those are two distinctly different arguments. 

Mr. POWELL. I would argue our position is consistent. One of—— 

Ms. ESHOO. I know you would say that, but—— 

Mr. POWELL. I thought you might. 

Ms. ESHOO [continuing]. They are not, though. 

Mr. POWELL. I thought you might. 

Ms. ESHOO. Not. I mean, you said something else to—— 

Mr. POWELL. Well—— 

Ms. ESHOO [continuing]. The FCC, and, you know—— 

Mr. POWELL. It is important to note that what the court found 

offensive about the FCC rules was it didn’t believe it had the authority to apply them to satellite companies. Cable companies had 

actually, through an MOU, developed the rules. We were the only 

industry segment, including this guy, who—— 

Ms. ESHOO. There you go. 

Mr. POWELL [continuing]. Intervened to defend the rules in court. 

When the rules were overturned because the court said the commission didn’t have the ability to apply them fairly to both satellite 

and cable—— 

Ms. ESHOO. Yes. 

Mr. POWELL [continuing]. TiVo and other companies filed, asking 

them to be applied just to cable. 

Ms. ESHOO. Yes. Now I want to go to, thank you very much, to 

Mr. Zinn and to Mr. Wood. Thank you for being here, and for your 

testimony. 

Last month most members of this subcommittee voted for legislation that permits consumers to unlock their wireless phones so 

they can be used on any carrier’s network. My question to both of 

you is, isn’t this what Section 629, and the integration ban, is trying to do? I mean, obviously it is a softball question, but I think 

members need to do some integrating here, in terms of how they 

88 

have voted on the floor. And doesn’t this unlock the cable set-top 

box? Is there a reason to treat video devices differently from wireless devices? 

Mr. ZINN. No. I mean, that is a very astute point. I would first 

like to thank you for your unwavering support for consumer choice 

in set-top boxes, and your leadership on this issue since 1996. It 

is very important to consumers, and there are a lot of consumers 

who thank you every day because they love the choice that they 

have by having access to TiVo. 

What Congress is trying to do, in terms of unlocking cell phone, 

is to give consumers a choice of providers to use with their phone, 

and Section 629 is seeking the same result, give consumers a 

choice of both equipment and networks, rather than having to take 

the lowest common denominator set-top box that your provider 

wants to lease you. So I would say there is no difference. 

Mr. WOOD. Yes, thank you very much. Just very quickly, I would 

say they are very much the same principles, and creating choices 

for people, rather than restricting them to what their provider offers, so there are some technical and legal distinctions, of course. 

I think the important thing to note too, at the outset, is about the 

cost. I would say that was a no. Obviously, Mr. Powell is not in a 

position to promise that companies that are his members will lower 

their prices, but we heard that that would not necessarily lead to 

lower prices. 

And I think that that estimate of a billion dollars a year too, of 

the cost of a cable card, is actually based on 2008 data, if I am not 

mistaken on that. So I think the costs are also in dispute here, let 

alone whether those savings would be passed on to actual cable 

customers. 

Ms. ESHOO. Yes. 

Mr. ZINN. And keep in mind that, if the cable industry has spent 

a billion dollars on cable card, which, as Matt said, is based on 

2008 data, before the integration ban really went into effect, and 

there was mass production, I mean, it is hard to believe that this 

card, this little hunk of metal, unless it is made of gold, costs $56. 

But the bigger point is, over the past 7 years, cable operators have 

billed consumers $50 billion to lease set-top box equipment, OK? 

Seven billion dollars a year for 7 years. 

Mr. WALDEN. The gentlelady’s time has expired. 

Ms. ESHOO. Yes. Mr. Chairman, I just want to say that I will 

submit my questions to both Mr. Palkovic and Ms. Burdick in writing, and I thank you. 

Mr. WALDEN. Perfect. 

Ms. ESHOO. Thank you for testifying. Thank you to all of you. 

Mr. WALDEN. Thank the gentlelady. We will now recognize the 

gentlelady from Tennessee, the Vice Chair of the full committee, 

Ms. Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and thank you to 

all of our witnesses. 

Ms. Burdick, I want to come to you. Now, your company is called 

Schurz, right? 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. OK, great. And you own broadcast TV stations? 

89 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. And radio stations? 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. OK. Do you require compensation for the retrans of your broadcast TV stations? 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. OK. And compensation for the copyright of 

original content that you produce? 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. Yes, OK. Does Schurz compensate the copyright holders of content it uses for its broadcast TV stations? 

Ms. BURDICK. I think you are asking, as you did last time I was 

here, about radio, and the compensation of radio—— 

Mrs. BLACKBURN. I am asking for a yes or no. 

Ms. BURDICK. Yes. Ask the question again, if you wouldn’t mind? 

Mrs. BLACKBURN. Do you compensate the copyright holders of 

content it uses for broadcast—— 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN [continuing]. On your TV stations? OK. Do you 

pay a performance right for the music that you broadcast over your 

radio stations? 

Ms. BURDICK. We pay ASCAP and BMI, and SESAC. 

Mrs. BLACKBURN. That is not the question that I asked you. The 

answer is no. 

Ms. BURDICK. Yes. 

Mrs. BLACKBURN. Ms. Burdick—— 

Ms. BURDICK. That is correct. 

Mrs. BLACKBURN. That is correct, you are right. 

Ms. BURDICK. Yes, the—— 

Mrs. BLACKBURN. The answer—— 

Ms. BURDICK [continuing]. Answer is no—— 

Mrs. BLACKBURN [continuing]. Is no. 

Ms. BURDICK [continuing]. That is correct. You are right. 

Mrs. BLACKBURN. And if you can provide a Constitutional justification for that inconsistency, God bless your heart, because, I 

have to tell you, there is not one. And it is intellectually inconsistent, and I think that you are fully aware of that. 

OK. In your testimony you state that re-trans consent negotiations are free market negotiations, and that the major network 

broadcast content is the most sought after and valuable content 

today. You then go on to advocate for our nation’s 22-year-old regulatory structure dictating the terms of these negotiations. So how 

is it possible that, in fact, free market negotiations, as you say, if 

we live under a regulatory structure that dictates to one party details like where your stations must appear on the cable lineup? 

Ms. BURDICK. Yes. Thank you for the questions. I appreciate 

your passion on some of these issues. I guess I would look back, 

in researching this, and I went back into history. The first report 

and order of the FCC on what was then cable antenna television 

said one important thing that has carried through, and Congress 

has supported in every iteration of its action, and that is that 

CATV should carry local stations because it supplements, not replaces, local stations, and non-carriage is inherently contrary to the 

public interest. For all of the things that we have talked about, the 

90 

floods in your district this year, Internet didn’t make up for the 

service that local broadcaster provide. We provide an inherent and 

important public service that is not replicated anywhere. 

Mrs. BLACKBURN. Yes. Well, no one is arguing about the public 

service. What I am asking you is about free market negotiations, 

and you say you own the most valuable and sought after content. 

Then why do you need this archaic regulatory structure? Wouldn’t 

a pay TV provider negotiate to place your content on their basic 

tier if it is indeed the most sought after programming? 

Ms. BURDICK. Yes, and I guess I didn’t make my point clearly, 

but the point is that when the basic tier requirement was enacted, 

it was because Congress thought it important to preserve the values of localism, and to require that local televisions be seen by all 

consumers, and placed on that basic tier, and we believe that 

today. 

Mrs. BLACKBURN. Well, I admire that you are desiring to move 

to parity and deregulation, and work toward that, and I know you 

are going to continue along that vein. Let me ask you this. In your 

opinion, would true regulatory parity in the video marketplace 

allow you the freedom to negotiate like non-broadcast owners? 

Ms. BURDICK. You know, we have said in the context of this bill 

that we would embrace a wholesale view of the ownership and the 

regulatory versus deregulatory issues that affect the video marketplace. Unfortunately, most of the things that we have been discussing only benefit one side of the table, not the other. And so 

that is why we support a holistic review of the ownership rules, 

and the rules under which we operate today. 

Mrs. BLACKBURN. Can you envision a world in which you are 

treated like a cable company? 

Ms. BURDICK. You know, I guess I will go to Jay Carney’s line 

of the last couple of days, I am always hesitant to predict the future. 

Mrs. BLACKBURN. All right, fair enough. I yield back. 

Mr. WALDEN. Thank you very much. The gentlelady yields back, 

and the Chair now recognizes for 5 minutes the gentleman from 

Pennsylvania. 

Mr. DOYLE. Thank you, Mr. Chairman. Thank you to the witnesses for your testimony. I am glad to see the provisions included 

in this draft bill that address joint negotiations of the retransmission consent. I believe these negotiations can cause anti-competitive behavior, and can lead to increased prices paid by consumers, so I am glad to see that the issue is at least being addressed in the draft bill, and is being addressed by Chairman 

Wheeler at the FCC. 

Mr. Powell, let me ask you, do you think the exemptions in Section 3 of the draft bill, that allows for joint retransmission consent, 

are necessary, or do you think they detract from the goal of this 

provision? 

Mr. POWELL. I think our view is the practice of joint negotiations 

is of great concern. The exception attempts to exempt companies 

that are genuinely owned. The practical challenge there is if somebody literally owns both stations, hard to imagine they are not 

privy to all the same information. As a joint negotiator, though, we 

would be more than happy for those not to be permitted either. I 

91 

do think the companion efforts by Chairman Wheeler, in the context of good faith, to address undue power among top four stations 

is a valuable complement to the statute. 

Mr. DOYLE. Mr. Wood, how about you? 

Mr. WOOD. I think that is right. I think that, as Mr. Powell said, 

that you can have a situation where, even if you prohibit explicit 

joint negotiations at the table, if you have a single entity that has 

the books, and has the power to control the activities of both stations, it will have much more leverage, and much more view into 

what the two agreements say. So we certainly think that there are 

some competitive harms that aren’t necessarily addressed completely by Section 3, and that is why we are looking also to the 

FCC to look further into the practice. 

Mr. DOYLE. Mr. Wood, let me ask you, you and others point out 

in your testimony that the FCC will consider changing the way it 

attributes ownership of broadcast stations, based on general operation and service agreements. Section 4 of the draft bill would force 

the FCC to complete its quadrennial review in advance of modifying these types of rules. What do you think the effect of this provision would be on the FCC’s ability to make rules in this area? 

Mr. WOOD. Well, we think it would be harmful, and I don’t disagree with Chairman Walden’s statement that, of course, the FCC 

should complete its quadrennial review. It has that obligation, and 

we have called on it to do that in a data-driven fashion several 

times. Not only to look at the changing business models over time, 

but the harms of media consolidation, and of undue concentration 

at the local level. However, we see Section 4 as prohibiting the 

FCC from enforcing its rules today, and going after violations of its 

multiple ownership rules. 

Chairman Walden also talked about the appropriate use of these 

agreements. There can be some synergies and some savings if back 

office operations are combined for sure, but what we are most concerned about are operational control, de facto transfer of control, 

where you have one station that is not only calling all the shots 

for the other, but producing the news, has every right to buy the 

station, it really has full control over its partner and its sidecar 

company, as they are sometimes called. 

Mr. DOYLE. Thank you. I want to give Ms. Burdick a chance to 

also comment on that. I take it you might not agree. 

Ms. BURDICK. Thank you, Mr. Doyle. Two points. First of all, on 

the joint negotiation, you are talking about one side of the negotiation equation, and not the other. Cable companies also link their 

negotiation strategies through consultants, or the ACA basically 

advises its members to employ the same law firm, that has access 

to all the data. So let us be fair in our approach when we talk 

about the negotiations, number one. But number two, on the JSA/ 

SSA issue, Free Press particularly will often repeat fiction as fact. 

It doesn’t make it so. And, in fact, many of these operations extend 

local news and public service that would not exist. 

Very quickly, in 2009 Schurz had a station, the only one we own 

that is not number one in its market, that lost money for 12 years 

after launching a full complement of news. We could no longer, in 

the recession years, support it through our other operations. We 

had two choices, go out of business in news, and just become an 

92 

entertainment provider, or enter into an agreement that preserved 

and added news with another entity, which is what we did. 

Mr. DOYLE. Thank you very much. And my last question, Mr. 

Zinn, TiVo provides a competitive set-top box product that competes with set-top boxes provided by the MPVDs. From your perspective, what has been the value of competition to consumers in 

the set-top box marketplace, and how has cable card failed to deliver that experience, and what reforms do you think need to be 

made to the program? 

Mr. ZINN. There is a lot in those three questions. The value of 

competition in the set-top box marketplace is a very good question. 

Of course, you can’t quantify exactly what the value would be, but 

if you look at other markets in the United States, you look at 

phone, wireless, personal computing, you can get a sense of what 

competition brings, and that is innovation, choice, jobs, and lower 

costs for consumers. 

In the set-top box market you can just look at what TiVo, one 

little company, has been able to accomplish. We invented the DVR. 

We were the first to bring Amazon over the top services to the television. We were the first integrate Internet services with cable 

services in one user interface. We were the first to allow you to 

move content from your television to your computer and mobile devices. And we are on the cusp of an IP transition in video, and all 

the innovation that that can release. 

And, really what we are looking for here, if cable wants to move 

on from cable card, and it is not energy efficient, and it is too expensive, we say, great. Just give us another solution that we can 

use to provide competition to consumers. Obviously, if the cable industry wants to get away from cable card, they have got something 

in mind, so just share it. And so my point is, will you share the 

solution? Will you do that? 

You know, in terms of the current regime, there have been multiple failures. First of all, there was a failure of the FCC not to ensure that retail boxes out of the gate had access to all cable content. So, right at the gate, retail boxes were put at a competitive 

disadvantage. Then there was a failure by the FCC that the cable 

card standard was not competently supported by cable operators. 

And the integration ban, which is really a light regulatory touch, 

designed to just make sure if the cable industry is using the same 

security standard as retail, they are going to support it, right? Otherwise they have no incentive to support it, and we have 10 years 

of evidence on that. Mr. Powell can dispute that, but the evidence 

is in the record. And then the third failure—— 

Mr. WALDEN. I am sorry, the gentleman’s time has expired. 

Mr. DOYLE. Mr. Chairman, thanks for your indulgence. 

Mr. WALDEN. Thanks very much. Gentleman yields back. And at 

this time the Chair recognizes himself for 5 minutes. And, interestingly enough, Mr. Powell, I think I will start with you. But, again, 

thank you very much for testifying today. And, you know, one of 

the things that has been out there, if the integration ban is eliminated for loose-top boxes, is the cable industry still going to support 

cable cards? 

Mr. POWELL. Absolutely. A couple quick things to say. First of 

all, it is important to remember that, even if Congress passed this 

93 

provision eliminating the integration ban, we would have absolute 

legal obligation to continue to provide separate security and cable 

cards. Unless you believe we just completely flaunt the law, with 

no consequences at the commission, that will continue to be the 

case. 

Secondly, we have 44 million subscribers of our own who use 

cable cards. Failure to support them, and failure to support those 

consumers, will have dire competitive consequences, particularly 

since our principal competitors are collected in industries that have 

none of those requirements, and are able to offer competitive alternatives if we fail to deliver an adequate experience. 

The third thing I think is important for the committee to understand is the majority of revenue today that TiVo derives, and as 

their CEO has noted, they have deals with 10 of the top 20 cable 

companies. The majority of what they are doing is providing cable 

boxes through cable companies. Those deals with small companies, 

like Suddenlink, and others, meant that they have to continue to 

support that as their principle cable equipment. So we think the 

incentives remain strong to comply with the law that we have a 

duty to abide by. 

Mr. WALDEN. So with the language in the draft right now, is Section 629 repealed, with the language from my section dealing with 

the integration ban? 

Mr. POWELL. Absolutely not. I think, as I mentioned earlier, I 

had the privilege of sitting on the commission during implementation of Section 629. I think the thing that trouble us at the time, 

that troubles us today, is that this was not in any way a requirement of the statutory provision. An elimination of an FCC rule in 

this context does not in any way affect the other provisions of the 

statute. 

Mr. WALDEN. Thank you. Going on, how is the cell phone 

unlocking different from Section 629? 

Mr. POWELL. Well, I giggle a little bit, because the analogy is 

completely inept. The third party box—— 

Ms. BURDICK. Thanks. 

Mr. POWELL. It was from this guy. I mean, with all respect, here 

is the difference. It is not an accurate analogy because the third 

party set-top box, in essence, comes unlocked. Nothing locked about 

it. The cable card is what allows you to put it into the box and have 

it work. It is important to remember cable boxes in cable systems 

have no reason. They can’t work on any other system. A Comcast 

box does not work in a Time-Warner cable system. They are unlike 

the portability of cell phones, or the portability of other devices 

that are trying to change networks. Leased boxes never change networks. The boxes that do change networks are third party boxes, 

and they are unlocked, and that is what the cable card provides. 

Mr. WALDEN. And let me just continue on. Some have raised concerns that the elimination of the integration ban will greatly harm 

consumer choice, thwart competition, and seriously damage the retail market for set-top boxes, and remove incentive for cable to develop a new generation solution or IP standard that is compatible 

with competitive navigation devices. How would you address those 

claims? 

94 

Mr. POWELL. I think the one thing we have to take real cognizance of is there has been an explosion of video devices and new 

content sources that were hardly imagined in 1996, or 1998, when 

these provisions were implemented. The list is legion. Roku, Apple 

TV, Xbox, Vuda services, Netflix services, all the iOS devices, all 

the Android devices, all of which are platforms today for distributing video content, including cable content. That market is being 

developed by the marketplace at an extraordinarily fast clip. 

Our view is that market innovation is moving to meet demand, 

is moving to make consumer preferences, and doesn’t need an additional intervention in order to make it succeed. 

Mr. WALDEN. You know, when you talk about things moving 

quickly over the last several years, you know, if you go back just 

10 years to where we are today, what would you say, on the innovation side, has really transpired in that period of time, and where 

do you think in the next maybe 5 to 10 years we are going to be? 

Mr. POWELL. I think it is completely unimaginable. My opinion 

is, we are only in the third or fourth inning of the transformational 

power of the Internet. And I think the ability to reduce video content to bits of zeroes and ones, and distribute them over any existing data infrastructure, or any existing data capable devices means 

our old fashioned ways of looking at things, and stovepipe ways, 

are going to be eliminated. And the consumers are going to be, I 

think, the great winner, even if it is a stress for many of our companies. 

Mr. WALDEN. Well, thank you very much, and my time has expired, and I yield back. And the chair now recognizes Mr. Welch. 

Mr. WELCH. Thank you very much. I appreciate the hearing, and 

appreciate all the witnesses. You know, there are a lot of good 

things that are happening. The programming has never been better. That is what most people say, and a lot of my constituents say. 

The choices have never been wider, but the cost has never been 

higher. That is the real challenge. And that is what I am hearing 

about from a lot of folks in Vermont, and I know that is true for 

all of us here, and the consumer just doesn’t have much control, 

other than to just pull the plug, which is not what we want them 

to face. And I am wondering, just quickly, is there anything in the 

Satellite Reauthorization bill that is going to start addressing the 

cost, which, according to the FCC statistics, is going up about twice 

the rate of inflation every year? Just quickly, is there anything? 

Each of you can answer that. And briefly, because I don’t want to 

take up all my time on this. Mr. Palkovic? 

Mr. PALKOVIC. Sure. On behalf of DirecTV, there is a very important change here, and that is dealing with the joint negotiation of 

stations that are not commonly owned—— 

Mr. WELCH. OK. 

Mr. PALKOVIC [continuing]. To negotiation retransmission—— 

Mr. WELCH. Ms. Burdick? 

Mr. PALKOVIC [continuing]. Access greatly. 

Ms. BURDICK. We remain free and over the air at all times, so 

the consumers have always had the choice to get us for free. 

Mr. WELCH. Well, wait a minute, but you get involved in the retransmission too, and that adds to the cost to the consumer, right? 

95 

Ms. BURDICK. All broadcasters in a market combined don’t earn 

what ESPN alone earns. 

Mr. WELCH. Well, that isn’t exactly responsive. 

Ms. BURDICK. We—— 

Mr. WELCH. I mean, eBay makes more than some broadcasters. 

Ms. BURDICK. eBay makes more—— 

Mr. WELCH. My point is—— 

Ms. BURDICK. True, and they are not—— 

Mr. WELCH [continuing]. That your answer—— 

Ms. BURDICK [continuing]. Creating local—— 

Mr. WELCH [continuing]. Was not an answer. 

Ms. BURDICK [continuing]. Content either. Yes. 

Mr. WELCH. It was a good answer—— 

Ms. BURDICK. Thank you. 

Mr. WELCH [continuing]. But not a responsive answer. 

Ms. BURDICK. Yes. We have an opportunity to negotiate the 

value in the free marketplace with cable and satellite providers 

that are much bigger than we are. We don’t earn—— 

Mr. WELCH. OK. 

Ms. BURDICK [continuing]. What the viewership would suggest 

we share. 

Mr. WELCH. I don’t have much time, so let me go on. Mr. Powell, 

anything—— 

Mr. POWELL. I would just agree with Mr. Palkovic on the JSAs. 

I do think the Department of Justice has explicitly found that these 

practices result in higher prices for consumers. And I won’t repeat 

my comments, but my belief—— 

Mr. WELCH. OK. 

Mr. POWELL [continuing]. That the integration ban has that virtue as well. 

Mr. WELCH. Thank you. Mr. Zinn? 

Mr. ZINN. I think Mr. Powell clearly stated that consumers aren’t 

going to see any benefit, monetarily, from an integration ban repeal. 

Mr. WELCH. OK. Mr. Wood? 

Mr. WOOD. I would agree with Mr. Palkovic and Mr. Powell that 

the JSA ban, if implemented correctly, I am sorry, the joint negotiation ban could reduce—— 

Mr. WELCH. OK. 

Mr. WOOD [continuing]. Costs. I do think, though, giving people 

choice over which channels they pay for would do even more to do 

that, and that is why we supported Ms. Eshoo’s bill and Ms. 

Lofgren’s bill on that subject. 

Mr. WELCH. OK. Thank you. By the way, I understand that this 

bill is not all around that. It is really just trying to maintain a status quo and level playing field, with some modest changes. 

One of the other questions I have is this, to Mr. Powell. I understand the NCTA supports the eliminating the retransmission consent stations from the basic must-buy tier, and I know there is a 

dispute on that. And I just want you to speak to that, and then 

perhaps Ms. Burdick. 

Mr. POWELL. Just briefly, it is the position of NCTA that mustbuy has outlived its usefulness, and is a provision ripe for repeal 

96 

for the reasons that I think we have heard expressed here by the 

committee today. 

Mr. WELCH. OK. Ms. Burdick? 

Ms. BURDICK. I find it interesting that cable likes to talk about 

tiering only when it is with broadcast stations, and not other programming. 

Mr. WELCH. You, I think, quite accurately pointed out how 

things are totally different now, but most people used to get the big 

network broadcast for free. And now, Vermonters get all of their 

signals through satellite or cable, and then what they could still 

get for free with an antenna, they don’t get for free if that gets 

bundled up. I think that is the point you are making, isn’t it, Mr. 

Powell? 

Mr. POWELL. Yes. We have to be candid that this is the only 

class of program to which the government, by law, requires an 

American consumer to purchase as a predicate to anything else the 

consumer might want. That just is a difference of substantial magnitude to any other—— 

Mr. WELCH. Right. 

Mr. POWELL [continuing]. Kind of commercially negotiated—— 

Mr. WELCH. And that was actually, as I heard Ms. Blackburn’s 

question, the tone of her question. She was kind of getting to that 

situation. But I just want to say, I appreciate you all coming in. 

I mean, this is so important to the economy and to consumers, and 

we are not going to be able to deal with this now. 

The changes that you have described that have occurred are 

enormous. The programming, everyone is saying, has never been 

better, and obviously there is got to be a financing mechanism that 

is going to support the infrastructure and the creative content. But, 

bottom line, we have got to have some provisions in here that address the consumer, and their inability to be at the table, by and 

large, when these very important negotiations with very legitimate 

competing interest are taking place. 

So, going forward, I just implore all of you to remember that, 

even as you make compelling arguments for the interests that you 

represent, that are important to consumers, that the outcome here 

be something that is going slow this rate of growth that is going 

at twice the rate of inflation. And I yield back. 

Mr. WALDEN. Thank you very much. The gentleman yields back, 

and the chair now recognizes for 5 minutes the gentleman from 

Louisiana. 

Mr. SCALISE. All right. Thank you, Mr. Chairman. I want to start 

with Ms. Burdick. And let me first say I have always felt that 

broadcasters should be compensated for their content, for the programming that you provide. Where we probably disagree is I don’t 

believe every single cable subscriber should be mandated by the 

Federal Government to buy what anyone else might be selling. 

That is something that two parties should be negotiating, not the 

Federal Government coming in and say, you have to do this this 

way. Let the parties get in a room, and you all have negotiations. 

But I guess where my issue has been has that, in many cases, 

there are federal mandates that set the stage for how those negotiations even begin. 

97 

And so, with that, my question would be, do you think it is fair 

that the Federal Government mandates that cable subscribers, in 

my district the average household income is around $45,000. And 

so, should those people be required by law to buy broadcast programming, as well as the other programming that, maybe three or 

four or five other stations along with it, rather than just letting it 

be a free market negotiation between two parties? 

Ms. BURDICK. You know, I think we have always expressed a 

willingness to enter and be engaged in those discussions. But, as 

I said in my testimony, broadcasters have regulations that other 

people don’t, and some with that, and some public service obligations, came some benefits. That was one of the benefits. And in 

every—— 

Mr. SCALISE. Invaluable spectrum that goes along with it. I know 

you have mandates there—— 

Ms. BURDICK. Well, I have paid for my—— 

Mr. SCALISE [continuing]. But you have—— 

Ms. BURDICK [continuing]. Spectrum. Satellite got theirs for free 

too. So, I think you can have an intellectual argument, but you 

need to take a wholesale look, and not just pieces that are in this 

bill. 

Mr. SCALISE. Right, and I would agree. That is why I do think 

we need to take that wholesale view of this. And we are starting 

that conversation in this STELA reauth, which we will get into 

maybe later. There has never been a clean STELA bill, so clearly 

we are starting to have some of those conversations, and trying to 

start levelling that scale, but clearly we have got a long way to go 

to get to a true level negotiation. And now the broader discussion 

will occur after we are removed with this conversation. And I think 

the chairman of both the full and subcommittee agree that we have 

to have a broader discussion on that. 

I guess that brings me to you, Mr. Powell. It is one thing for both 

parties in a negotiation to arrive at a tiering plan, or channel packaging, and that is something, I sure think that should be a negotiation that you all enter into. But right now it is a different dynamic, 

where the government is mandating that is how you have to walk 

out of the room if you have that negotiation. 

And one of the things that we have been starting to highlight is, 

when you look at the ’92 Cable Act, and some of the things your 

companies have to deal with, I love this brick phone, because it underscores just the point that the law was written at a time when 

this was your smartphone. This was the main telecommunications 

device. 

And so, when we think about these laws, I think it is always important to go back and say, these laws were written when this was 

the smartphone of the day. This was the most telecommunications 

power you could put in. And now, of course, the things you could 

put into this little device, you can actually stream video, you can 

pull up programs that were on TV last night. I still have not—— 

Mr. WALDEN. Do you still use that? Is that still—— 

Mr. SCALISE. I have tried to get an arrangement where I could 

at least get some kind of a signal on this thing, and for some reason it doesn’t work, but, unfortunately, the laws don’t work either. 

They have updated this device, by the way, and you can go through 

98 

about 50 different iterations to this device, yet we don’t have any 

iterations of updating of the laws that still govern how things operate. 

So I want to ask you, Mr. Powell, how do your companies deal 

with a legal environment that was written, and still functions 

today, under laws that were based on this technology, when today 

you are competing in a world with this technology? 

Mr. POWELL. Yes. Just in short, I think it is challenging because 

the market reality, the facts of not only the products, but the market structures, who are your competitors, what are your innovative 

choices, all are things that, when layered over the statute, which 

is, at best, ambiguous, because it is not clearly applicable or appreciable compared to what is really happening. And it leads to a lot 

of delay. The one thing that I would argue that it does, quite aggressively, is create uncertainty and delay. Things that should be 

done quickly in Internet time now take years sometimes of resolution at the commission just because of a statute that doesn’t imagine the changed technical circumstances of the market. 

So it is challenging. They do their best to work around those ambiguities. And I don’t think we are even here to say that deregulation for its own sake is even the answer. But law should at least 

honestly and accurately reflect the reality of the marketplace it is 

purporting to oversee. And when that is as badly out of alignment 

as some of these rules are, I think it is certainly time to re-evaluate 

their—— 

Mr. SCALISE. Yes, I think it is pretty clear that the time for reevaluation is long past. Again, I have been through, fortunately, 

multiple different phones. I actually couldn’t afford one of these 

when I was a college student, but a lot of college students, and, in 

fact, my 6-year-old daughter has one of these, and she knows how 

to use it probably better than me. But if you look at the iterations 

of growth and innovation between these two devices, it just shows 

you how outdated the current laws are. That Congress hasn’t gone 

and revised and updated those laws since this was the device, long 

past time that we do it. 

I am glad we are at least starting that conversation, putting a 

little bit of those concepts in STELA, but knowing that, longer 

term, the bigger issues have to be confronted. And they have got 

to be confronted soon if we are going to benefit consumers, who are 

the people that we represent. It is the people that all of you service 

in your lines of business. So I look forward to that broader discussion as we get through this. And I appreciate the Chairman—— 

Mr. WALDEN. Thank you. 

Mr. SCALISE [continuing]. And Ms. Eshoo’s—— 

Ms. ESHOO. Thank you. 

Mr. SCALISE [continuing]. Efforts as well, and we will continue 

working forward to get to that goal. Yield back the balance of my 

time. 

Mr. WALDEN. We appreciate you bringing that black and white 

TV with you. 

Ms. ESHOO. Yes. 

Mr. WALDEN. We will now turn to gentlelady from Colorado, Ms. 

DeGette, for 5 minutes. 

99 

Ms. DEGETTE. Thank you, Mr. Chairman. I was going to suggest 

that, given the topic of this bill, maybe Mr. Scalise would like to 

bring in his TV from that era the next time he comes. Yes. I want 

to add my thanks to the Chairman for issuing a discussion draft, 

and trying to work in a bipartisan way on this bill. It has always 

been a bipartisan bill. And, while we have some concerns about it, 

I think we can all work together to bring it to a markup. 

There are a couple of issues that I want to talk about today. The 

first one is blackouts, because we have all been talking about how 

our consumers feel, and a lot of Americans don’t really understand 

what STELA is, or retransmission consent, but they can clearly see 

what happens when negotiations break down, and there is a blackout. And I will tell you, if the Bronco games got blacked out, I 

would hear universally from all of my constituents in Denver and 

the surrounding vicinity. 

We have heard from witnesses representing all parts of the video 

marketplace that blackouts are unfair to consumers, and on behalf 

of the consumers, I agree. I think we need to talk, as we look at 

reauthorization, and I am happy to see the diversity of opinions 

today, about what we can do, as we look at the reauthorization, to 

consider the impact on that growing problem. 

So I want to start with you, Mr. Powell, and ask you if you think 

Section 3 of the draft legislation would make blackouts more or less 

common for consumers? 

Mr. POWELL. I personally believe it is a useful step to making 

them less of a problem for consumers. 

Ms. DEGETTE. Ms. Burdick, what is your view on that? 

Ms. BURDICK. I said, when I was here last time that we have 

agreed to support the draft because I think, frankly, it is kind of 

a stocking horse. We do 100 agreements every cycle. In one time 

in 10 years has an MVPD asked for separate negotiation. And 

when asked again the next time, they said it is more efficient to 

do it together. We have said all along, if they want to do them separately, they can. 

Ms. DEGETTE. So you—— 

Ms. BURDICK. It will add cost, it will add time, particularly to 

smaller broadcasters. And that—— 

Ms. DEGETTE. But—— 

Ms. BURDICK [continuing]. Those costs will have to be passed on. 

Ms. DEGETTE [continuing]. To reiterate my question, do you 

think Section 3 would make blackouts more or less common for 

consumers? I appreciate your being part of the time, but—— 

Ms. BURDICK. I think the negotiations are still going to be tough, 

particularly when you are the small guy—— 

Ms. DEGETTE. Do you think blackouts will be more or less common, Ms. Burdick? 

Ms. BURDICK. I have no way to gauge it. 

Ms. DEGETTE. OK. Mr. Palkovic? 

Mr. PALKOVIC. They will be less, significantly less. There is no 

question about it. 

Ms. DEGETTE. OK. I think I will leave it at that. I want to talk 

for a minute about shared service agreements. I am pleased that 

the draft bill is recognizing that we should not permit broadcaster 

coordination for retransmission consent, but shared service agreeVerDate Nov 24 2008 14:13 Jun 02, 2015 Jkt 037690 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-126 CHRIS
100 

ments also have an impact on jobs and local news. And so, if we 

can all agree that broadcaster cooperation can harm competition, 

it seems inconsistent that then, in the bill, we would tie the FCC’s 

hands and prevent the agency from addressing these harms outside 

the retransmission consent product. 

So, Ms. Burdick, I want to ask you, the National Association of 

Black Journalists recently wrote the FCC, supporting Chairman 

Wheeler’s proposal on shared service agreements. They said many 

of the stations that are now part of a shared service agreement had 

working news departments with journalists who covered local 

news. Those news departments were closed for various reasons, disrupting the lives and careers of the affected journalists. How do 

you respond to that allegation by the National Association of Black 

Journalists? 

Ms. BURDICK. Yes. I think they have changed their position, because they have since sent a letter indicating that they have come 

around the bend on that issue, because they have seen the fact that 

minority ownership is ending. I can speak for our company’s experience, and I mentioned the Augusta experience, where our choice 

was only going out of the local news business, or entering into 

agreement. 

We have two others, one in Kansas, represented by people here 

today, where we began news in Spanish with a JSA with Univision. 

It is the only local newscast in Spanish, does emergency alerts and 

weather warnings, in the State of Kansas. The second is in Springfield, Missouri, where we took a number four, failing by almost any 

measure station. That DTV transition solution was a 15 watt 

transmitter, 15 watt. With a local businessman, we entered into a 

JSA. That station is now competitive for number two, and won the 

national Edward R. Murrow Award for best local newscast last 

year. 

Ms. DEGETTE. Thank you. 

Mr. Wood, how would you respond to this, so we can get your 

opinion on the record as well? 

Mr. WOOD. Well, more than one witness has used the word fiction, and I think there have been a lot of stories told in both directions. I think the problem we have had until now is that JSAs are 

just one tactic that broadcasters use to coordinate. And, as Chairman Walden said, when it is inappropriately done, when it actually 

harms competition, and that is both in terms of retransmission, 

and also in terms of the newscasts that we see, and other diversity 

of viewpoints, and competing viewpoints, that we need, that is 

when we are concerned. 

When there is a de facto transfer of control, and you actually 

have one station airing the same news on two, or three, or four 

channels in a market, we have documented several examples of 

that, and we think the Federal Communications Commission needs 

to look into that practice to see when there is actually a transfer 

of control happening, and shared news, rather than just shared advertising. 

Ms. DEGETTE. Thank you very much. Mr. Chairman, I have this 

letter from the Association of Black Journalists. It is dated March 

10—— 

Ms. BURDICK. Could I correct myself? You are right, I am wrong. 

101 

Ms. DEGETTE. OK. 

Ms. BURDICK. It was the—— 

Ms. DEGETTE. Thank you. 

Ms. BURDICK [continuing]. Black Owned Broadcasters—— 

Ms. DEGETTE. OK. 

Ms. BURDICK [continuing]. Association. 

Ms. DEGETTE. I would like unanimous consent to put the March 

10 letter into the record to—— 

Mr. WALDEN. Without objection. 

Ms. DEGETTE [continuing]. Clear up any confusion. Thank you 

very much. 

[The information appears at the conclusion of the hearing.] 

Mr. WALDEN. Gentlelady’s time has expired. We will now go to 

the gentleman from Missouri, I believe is next, Mr. Long, for 5 

minutes. 

Mr. LONG. Thank you, Mr. Chairman. Thank you all for being 

here today, and for your testimony. Ms. Burdick, you discussed earlier today the competition in the local markets for advertising. You 

had a chart you put up on the wall. I know the Department of Justice recently put together a paper for the Federal Communication 

Commission detailing the leverage that broadcasters have in local 

markets. And how does your analysis stack up against what Department of Justice recently found in their findings? 

Ms. BURDICK. Yes. And thank you for the question, Congressman 

Long. I think there are three key points in that DOJ filing. First 

of all, large sections of it were lifted from 1997, dealing with the 

radio JSAs. They were out of date, and they were inaccurate. Number two, it never mentioned cable in the document at all, as if cable 

did not compete with local broadcasting for advertising. And I 

think this committee’s own data suggests that one cable system in 

a market is the equivalent to about a number two or a number 

three television station. It didn’t even mention the word cable, 

much less Internet, or any of the new advertising sources. 

And probably most disingenuous, as far as I am concerned, is in 

its footnote the DOJ noted that it itself had reviewed several complaints of alleged anti-competitive activity, and found that not to 

be the case, and encouraged a case by case review. But then, in its 

conclusion, basically came up with a bright line, ban all JSAs. I 

thought it was sloppy, I thought it was disingenuous, and I don’t 

think it should be relied on as a document of fact. 

Mr. LONG. OK. Thank you. Also for your, Ms. Burdick, in the 

draft STELA bill, it contained a provision eliminating the sweeps 

rule. And can you explain to me exactly how that rule works, and 

what the potential impact on smaller stations and smaller markets 

would be? 

Ms. BURDICK. Well, I think you have rightly hit on a point that 

most people have not recognized, and that is the impact on smaller 

markets. Many of our members of NAB don’t like it. We have said 

we could support, and could live with, the compromise in this legislation. But the distinction is that larger markets, usually markets 

60 and above, are always in sweeps. They are metered markets. 

Diary markets, 60 and below, are rated four times a year, and basically their advertising and their economics are set three times a 

year. 

102 

And this was enacted because of documented mischief from the 

cable side in history, where they were pre-emptively taking broadcasters off the air during sweeps, so their rates and their advertising economics would be negatively impacted. But we have said 

we can live with it, and we would support that change in the bill. 

But there is a distinction of local markets, and I appreciate you 

raising it, small markets. 

Mr. LONG. OK. Thank you. And I have got to say, earlier, when 

Mr. Zinn was making reference to Mr. Powell next to him, and 

said, this guy, and then Mr. Powell reached over and picked up his 

cup, I thought we were going to have a Jerry Springer moment for 

a minute. But thankfully he was just going for a drink of water. 

I yield back, Mr. Chairman. 

Mr. WALDEN. Gentleman yields back the balance of his time. We 

turn to the gentleman from Iowa, Mr. Braley. 

Mr. BRALEY. Thank you, Mr. Chairman. I hope we don’t have a 

Jerry Springer moment here. I don’t think that the committee 

could handle that. 

Ms. Burdick, I once tried a case in the Quentin Burdick Courthouse in Fargo, North Dakota. Are you at all related to Senator 

Burdick? 

Ms. BURDICK. You know, I asked my husband that. 

Mr. BRALEY. Yes. 

Ms. BURDICK. As far as I know, although that family is from that 

North Dakota-South Dakota border, we don’t think so. 

Mr. BRALEY. Well, it is a lovely courthouse. If you ever get to—— 

Ms. BURDICK. Yes. 

Mr. BRALEY [continuing]. Fargo—— 

Ms. BURDICK. And there is a Burdick Highway. 

Mr. BRALEY. It is. I am glad that the committee is moving forward on a reauthorization of STELA, and I want to be open to all 

the stakeholders who have an interest in this reauthorization, and 

so I have a very simple question for each one of you. I know it has 

been a long hearing, but I want to ask each of you, if there was 

one thing you could change about the discussion draft to improve 

it, what would it be? And I will start with you, Mr. Wood, and we 

will just work our way down the table. 

Mr. WOOD. I would simply remove Section 4 and give the FCC 

the power to look into these agreements so that they can make the 

data driven rules that we all know they need to have in this day 

and age. 

Mr. BRALEY. Thank you. Mr. Zinn? 

Mr. ZINN. I would eliminate the 629 amendment. If you step 

back, this is STELA legislation designed to provide distant signals 

to 1.5 million unserved satellite customers, but it has been hijacked 

to disenfranchise a million people who are using retail devices. And 

this committee is not one to pick winners and losers, and I would 

take that out. 

Mr. BRALEY. Mr. Powell? 

Mr. POWELL. I think we would just continue to work with the 

committee to make sure that the JSA provisions are sufficiently 

tight, that they don’t undermine the ability for the commission to 

look at this issue in the narrow area of retransmission consent. 

Mr. BRALEY. Thank you. Ms. Burdick? 

103 

Ms. BURDICK. Yes, thank you for the question. My change would 

be, if there are going to be requirements that govern how one side 

of the table, broadcasters, can negotiate retransmission consent, 

that similar agreements on the MVPD side also be looked at. 

Mr. BRALEY. OK. Thank you. Mr. Palkovic? 

Mr. PALKOVIC. Yes, we are very happy with the way the bill is 

drafted today. If we were going to change anything, we probably 

want to be a little bit stronger on the blackout issue, so there is 

no way that people can black out channels. 

Mr. BRALEY. Well, I appreciate all of your succinct answers, and 

I will treat you with a similar courtesy, and yield back the balance 

of my time. Thank you. 

Mr. WALDEN. Thank the gentleman for yielding back. I am going 

to yield, before I go to Mrs. Ellmers, to the ranking Democrat here. 

Ms. ESHOO. Thank you. Mr. Chairman, I just want to ask for a 

unanimous consent request to place in the record the Pew Research 

Center’s Project for Excellence in Journalism, which demonstrates 

the amount of healthy revenues that are reported relative to local 

broadcast TV advertising revenue and its growth. Thank you. 

Mr. WALDEN. Thank the gentlelady. And before I yield to Mrs. 

Ellmers, I am just curious if, Ms. Burdick and Mr. Powell, on this 

issue of the sweeps, and the market size, we are not trying to do 

violence to somebody. Is that an issue, Mr. Powell, that you think 

there is common ground, maybe, between these that are metered 

and those that are di-read? 

Mr. POWELL. I think—— 

Mr. WALDEN. Or is that something—— 

Mr. POWELL [continuing]. We fully support the provision as it is 

currently drafted. 

Mr. WALDEN. Currently drafted, OK. We will go now to Mrs. 

Ellmers for 5 minutes. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel for being here today on this very important issue, as we take 

the steps forward to deal with STELA. I do have some questions 

for Mr. Palkovic that are a little more specific to North Carolina, 

my region of the country, and having to do with Inspiration Network, one of the independent networks. 

It has come to my attention, Mr. Palkovic, that there have been 

some negotiations, and that DirecTV is no longer carrying Inspiration TV. And I am coming at this approach not only as a member 

of this committee, a member of Congress, but also as a mom, and, 

actually, one of your customers. I am concerned about this, because 

there seems to be a little bit of unfair dealing with how we deal 

with the independent networks. 

And I just was wondering if you could discuss that with me, and 

then if you would be so kind as to commit to work with my office, 

this committee, and others within the independent networks as 

well. 

Mr. PALKOVIC. Sure. We are always happy to work with people 

on these kind of issues. We have, as you can imagine, a lot of programming agreements. And some of the agreements, we are paying 

for content, some of the agreement the content providers pay us to 

be carried. And—— 

Mrs. ELLMERS. Yes. 

104 

Mr. PALKOVIC [continuing]. As you can probably appreciate, we 

don’t disclose individual terms and conditions. 

Mrs. ELLMERS. Sure. 

Mr. PALKOVIC. We are not allowed to, contractually. In this particular case, we had a relationship with the Inspiration Network 

they did not want to continue along the—— 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC [continuing]. Same lines, or even similar lines, as 

their previous agreement, so they chose to take their channel down. 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC. Sometimes we are forced to take a channel down. 

We don’t like to do it. It is not in any way, shape, or form what 

we strive for. In this case, it happened to be their decision. 

Mrs. ELLMERS. Yes. And that is—— 

Mr. PALKOVIC. Our door is always open for them if they want to 

come back. 

Mrs. ELLMERS. And that is my understanding as well, and our 

purpose is not to interfere with negotiations. This, for me, again, 

is an issue of fairness, one that I believe is very important in dealing with these types of issues, especially with the appearance that 

it takes. You know, being that this particular network deals with 

family, wholesome, faith-based programming, I see them as possibly being discriminated against. 

And it is my understanding, and there again you don’t have to 

go into details, but that, actually, they were paying a significant 

amount of money to be carried by DirecTV, that cost was going to 

have to go up. And then, within the negotiations they said, look, 

we simply can’t afford that, and, by the way, we know that you actually carry other networks for free, and can’t we negotiate that 

kind of a deal? And, as you can imagine, the appearance is that 

they are being dealt with unfairly. 

Mr. PALKOVIC. Well, I can assure you, our track record as a company is just the opposite of that. We do deal with people fairly. And 

I won’t get into the details—— 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC [continuing]. Of that particular relationship, but 

obviously we had a deal with them on acceptable terms. 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC. And, as I said, there was discussions about continuing under similar conditions, different than what you characterized, through what you have been told, and they chose not to. 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC. So if, for some reason, they want to continue discussions, again—— 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC [continuing]. We talk to everybody. And, you know 

your comment on programming that is targeted at the family program, we are a huge proponent of family programming. We have 

a lot of examples of that on our platform. Just so I can get it on 

the record, we are a big proponent of—— 

Mrs. ELLMERS. Yes. 

Mr. PALKOVIC [continuing]. Family programming at DirecTV. 

105 

Mrs. ELLMERS. Well, thank you. And will you commit to me 

today that we can work together on this, and then bring others together so that we can solve this problem? 

Mr. PALKOVIC. Sure. 

Ms. ESHOO. Would the gentleman—— 

Mrs. ELLMERS. Thank you so much. 

Ms. ESHOO [continuing]. Gentlewoman yield just for—— 

Mrs. ELLMERS. Sure. 

Ms. ESHOO [continuing]. Five seconds? 

Mrs. ELLMERS. I have 37 seconds. 

Ms. ESHOO. Yes. I just want to say that I would be happy to 

work with you on this, and—— 

Mrs. ELLMERS. Wonderful. 

Ms. ESHOO [continuing]. It is not negotiations, it is suggestions, 

and we are happy that you are open to what the gentlewoman 

spoke to. So I would be happy to—— 

Mrs. ELLMERS. Thank you. 

Ms. ESHOO [continuing]. Work with you. 

Mrs. ELLMERS. Thank you to the ranking member, and I am 

looking forward to being able to work together on this. Thank you 

very much, and I yield back the remainder of my time. 

Mr. WALDEN. Gentlelady yields back. And that is obviously an 

issue a number of us have heard about, so appreciate you raising 

that. Turn now to the gentleman from Nebraska, Mr. Terry. 

Mr. TERRY. Appreciate you calling to say you wanted me to come 

back to extend this hearing by another 5 minutes. Actually, I had 

a quick meeting I had to take, so I am glad it was still going on 

when I got back. 

Mr. Powell, I am interested in learning a little bit more about 

the interconnects that Ms. Burdick referred to in her testimony, 

and how that works, but do you have any additional information 

on joint sales of local advertising between cable, satellite, and 

telcos? What is your viewand—— 

Mr. POWELL. You know, I think—— 

Mr. TERRY [continuing]. Perception? 

Mr. POWELL [continuing]. I would say, for purposes of this bill, 

the joint use of agreements for advertising has absolutely nothing 

to do with what we are here making support for. We are having 

a concern with the use of joint agreements as a basis for validating 

collective negotiation of retransmission consent, not advertising. I 

don’t have an opinion on whether their advertising models are efficient or not efficient in the sales of local advertising. 

What I do think is, beyond efficiency, and treads into the territory of anti-competitive conduct, is collusively negotiating prices for 

re-trans consent. And I don’t think that bears on at all whatever 

the virtues, or lack of them, on local advertising markets are. 

Mr. TERRY. Ms. Burdick? 

Ms. BURDICK. Thank you. The fact of the matter is that the cable 

industry itself, in an ex parte filed by NexStar in the last couple 

of days, they cite some specific examples where non-co-owned cable 

companies have linked together their negotiations with the same 

consultants. And I am not here to speak badly of cable. We own 

cable companies as well. But we have personal experience with 

ACA members in which they will tell us in a negotiation that they 

106 

will have to run this by ACA, or the ACA attorneys, before they 

can get back to us on the acceptance of a deal. 

So my only point was, if you are going to look at how those negotiations happen, look at it not just on the broadcast side, but on 

the other side as well. And I may be the only one in the room who 

finds it a little ironic that Comcast and Time-Warner can merge, 

but two little stations in August, Georgia can’t talk to them about 

their retransmission agreements, but—— 

Mr. TERRY. Fair point. 

Ms. BURDICK [continuing]. I would encourage you to look at both 

sides. 

Mr. TERRY. So in regard to JSAs, in calculating ownership, which 

I think is a creative thing, do you think that many broadcasters 

would have to unwind JSAs in order to remain compliant with local 

ownership caps? 

Ms. BURDICK. The proposal that has come out from the FCC suggests that there would have to be a hard unwind. There are rules 

yet to be written. In our particular case, our agreement was reviewed and approved by the FCC in 2008, I think it was. So if now, 

a few years later, after investing $11 million in equipment, and expanding news and public service, I have to unwind, I would suggest 

that is a harmful thing. So the rules have yet to come out, but the 

suggestion is yes, there would have to be an unwind that would 

lead to less news, less local news, and less public service. 

Mr. TERRY. OK. Mr. Wood, is there any scenario for JSAs to be 

not anti-competitive? If you can use two negatives. 

Mr. WOOD. You can. I don’t know if I can. As we have said, JSAs 

are really just the tip of the iceberg here. The FCC has a long 

record on them, and has been studying them for a while. They have 

applied this rule in the radio context for several years. 

I want to be clear again that when we talk about synergies, and 

eliminating back office expenses, that is jobs too. The same 

NexStar letter that was referred to by Ms. Burdick said that some 

of our figures were wrong. And they said of our 30 layoffs, only 

three of those were on-air personalities. So the other 27 people still 

lost jobs as well. I would say that perhaps there is some efficiency 

to be gained from combining back office operations. 

However, we are talking more about total management and control of one station by another, especially when the sidecar companies, or shell companies, are doing nothing but holding the license 

for the purpose of evading FCC rules, and not necessarily situations where you do actually have separate news teams, and separate broadcasters, but where the owner, for FCC purposes of the 

license, is doing nothing but that. Has no office, no personnel, no 

control over programming, no control over leasing, or any right to 

sell the station to anyone but the operating broadcaster. 

Mr. TERRY. Let me ask you about this scenario, then. What about 

JSAs just for, as Mr. Powell was discussing, negotiations for retransmission on either side, the cable side or the network sides? 

Mr. POWELL. Yes. We—— 

Mr. TERRY. Or the station owner sides? 

Mr. POWELL. Yes. I am sorry. We have said in our filings that 

we want the FCC to take a look at the totality of the circumstances 

here. JSAs are one indicator of common control. I wouldn’t say that 

107 

they necessarily transferred control all by themselves. And so there 

could be a role for some negotiations, and some sharing of resources. 

Another example that is commonly cited is the same two stations 

using a radar system, or sharing the same news helicopter, or 

something like that, that is a physical asset. Our hackles are raised 

when they are sharing people, and sharing news, and sharing the 

same stories on two supposedly competing stations. 

Ms. BURDICK. May I answer that one quickly? 

Mr. TERRY. Certainly. Go ahead. 

Ms. BURDICK. Mr. Chairman, Free Press starts with a false assumption, that if there wasn’t this sharing, that there would be a 

robust separate—— 

Mr. TERRY. Right. 

Ms. BURDICK [continuing]. Newsroom, and that is simply not 

true. 

Mr. WALDEN. Thank the gentlelady. Mr. Latta, I believe you 

have something for the record? 

Mr. LATTA. Thank you very much, Mr. Chairman. I would like 

to enter a letter of support from my language regarding an integration ban from the League of Rural Voters. 

Mr. WALDEN. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. WALDEN. And I have an item from the ‘‘Wall Street Journal’’ 

from Juan Williams I referenced in my testimony I would like to 

put in the record. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. WALDEN. And I want to thank the witnesses, and all of the 

participants in this hearing, our members. This is obviously an important subject, a complicated one, and we are going to continue to 

move forward. We thank you. We will probably have some questions for the record to clarify some issues going forward, but thanks 

for your participation. And with that, we stand adjourned. 

[Whereupon, at 12:34 p.m., the subcommittee was adjourned.] 

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