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85–442 2014

THE SATELLITE TELEVISION LAW: REPEAL, 

REAUTHORIZE, OR REVISE? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMUNICATIONS AND 

TECHNOLOGY 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 12, 2013 

Serial No. 113–52 

( 

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 

EDWARD J. MARKEY, Massachusetts 

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 

(III) 

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 

EDWARD J. MARKEY, Massachusetts 

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 

(V) 

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 .......................................................................................... 2 

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement .................................................................................... 4 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 5 

Hon. Steve Scalise, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 5 

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

California, opening statement ............................................................................. 6 

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

prepared statement .............................................................................................. 183 

WITNESSES

Mike Palkovic, Executive Vice President, Services and Operations, DIRECTV 8 

Prepared statement .......................................................................................... 10 

Answers to submitted questions ...................................................................... 189 

Marci Burdick, Senior Vice President of Broadcasting, Schurz Communications, Inc. .............................................................................................................. 46 

Prepared statement .......................................................................................... 48 

Answers to submitted questions ...................................................................... 194 

Ben Pyne, President, Global Distribution, Disney Media Networks ................... 60 

Prepared statement .......................................................................................... 62 

Answers to submitted questions ...................................................................... 198 

Amy Tykeson, CEO, BendBroadband .................................................................... 67 

Prepared statement .......................................................................................... 69 

Answers to submitted questions ...................................................................... 205 

Hal Singer, Managing Director, Navigant Economics .......................................... 86 

Prepared statement .......................................................................................... 88 

Answers to submitted questions ...................................................................... 209 

Geoffrey Manne, Senior Fellow, Tech Freedom .................................................... 95 

Prepared statement .......................................................................................... 97 

Answers to submitted questions ...................................................................... 215 

SUBMITTED MATERIAL

Letter of June 12, 2013, from Ken Solomon, Chairman and CEO of the 

Tennis Channel, to the Committee, submitted by Mr. Waxman ..................... 185 

(1) 

THE SATELLITE TELEVISION LAW: REPEAL, 

REAUTHORIZE, OR REVISE? 

WEDNESDAY, JUNE 12, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:35 a.m., in room 

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

(chairman of the subcommittee) presiding. 

Members present: Representatives Walden, Latta, Blackburn, 

Scalise, Gardner, Barton, Eshoo, Doyle, Welch, Lujan, Dingell, 

Matheson, and Waxman (ex officio). 

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

Policy Advisor/Director of Coalitions; Sean Bonyun, Communications Director; Andy Duberstein, Deputy Press Secretary; Neil 

Fried, Chief Counsel, Communications and Technology; Kelsey 

Guyselman, Counsel, Telecom; David Redl, Counsel, Telecom; 

Charlotte Savercool, Executive Assistant, Legislative Clerk; Shawn 

Chang, Democratic Senior Counsel; Patrick Donovan, Democratic 

FCC Detail; Margaret McCarthy, Democratic Staff; Roger Sherman, Democratic Chief Counsel; and Kara Van Stralen, Democratic 

Policy Analyst. 

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

Mr. WALDEN. Good morning to everyone. I want to call to order 

the Subcommittee on Communications and Technology for ‘‘The 

Satellite Television Law: Repeal, Reauthorize, or Revise?’’ hearing. 

This is our second hearing on this issue, and I want to welcome our 

witnesses today and thank you all for agreeing to come and share 

your knowledge and opinions with us. I want to especially welcome 

Amy Tykeson, who is the CEO of Bend Broadband, a constituent 

of mine, and to congratulate her on her award last night. She was 

inducted into the Cable Industry Hall of Fame. Congratulations, 

Amy, to you. She is a dynamic leader in the cable industry and in 

the Central Oregon community, and we are delighted she made the 

trip out here and is willing to testify. 

The hearing will examine today whether the law authorizing satellite television providers to redistribute broadcast programming 

still serves an important function, or is out of step with today’s 

video marketplace. The law is now 25 years old, and aspects of it 

sunset on December 31, 2014. So the question is, should Congress 

2 

repeal the law, reauthorize it as it is, or revise it, possibly even 

tackling non-satellite specific video issues. 

Congress passed the original law in 1988 to give the then-nascent satellite industry a leg up in providing distant broadcast signals to viewers out of range of local over-the-air signals. Today, 

however, DIRECTV and Dish control 1⁄3 of the pay-television market and are the second and third largest pay-TV providers behind 

Comcast. And by some estimates only 1 to 1.5 million of the 115.9 

million U.S. television households still receive distant signals. That 

is about 1 percent. DISH also now carries the local signals of 

broadcasters in all 210 markets and DIRECTV carries them in 197 

markets. 

On the other hand, a million viewers still represent a lot of potentially angry letters and calls reminding those of us in Congress 

about that, as I say, that clause in the Constitution that gives 

Americans the right to watch whatever they want, whenever they 

want, wherever and however they want on whatever device they 

have. 

Some stakeholders argue we should use the reauthorization to 

revisit retransmission consent. They also argue we should take another look at cable regulations, such as the must-carry, basic-tier, 

buy through, program carriage, program access, and set-top box 

rules. Those regulations date to 1992 and 1996, when cable had 98 

and 89 percent of the pay-television market. As of 2010, cable television’s share had dropped to 59.3 percent of pay-TV households 

and 51.6 percent of all TV households. 

So I am open to debate on a whole host of these issues and all 

options remain on the table. I believe in good process, and one of 

our responsibilities is to make sure we operate publicly and transparently, giving the American people and stakeholders an opportunity to see what is happening and to contribute to this dialogue. 

The video market is changing rapidly. Phone companies are in the 

video business now, both over wires and wireless. Netflix is offering 

original programming over the Internet. And Aereo, for better or 

for worse, could turn everything upside down. 

Ultimately, the question is can we better ensure viewers have access to the programming they want while respecting the investments of the networks that create it and the broadcasters and payTV companies that deliver it? Today the government intervenes in 

various ways in that relationship between viewers, broadcast affiliates, network programmers and pay-TV distributors. Sometimes it 

does so to the benefit of one; other times to the benefit of another. 

Should it be intervening at all in the current marketplace? And if 

the answer is yes in some cases but not others, what is the justification? 

[The prepared statement of Mr. Walden follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

I want to welcome all the witnesses to today’s hearing as we continue our discussion of STELA and all issues related thereto. I want to especially welcome Amy 

Tykeson, CEO of BendBroadband, and congratulate her on her award last night as 

she was inducted into the Cable Industry Hall of Fame. She is a dynamic leader 

in the cable industry and it is an honor to have her here from central Oregon in 

my district. 

3 

This hearing will examine whether the law authorizing satellite television providers to redistribute broadcast programming still serves an important function or 

is out of step with today’s video marketplace. The law is now 25 years old and aspects of it sunset in December 31, 2014. Should Congress repeal the law, reauthorize it as is, or revise it, possibly even tackling non-satellite specific video issues? 

Congress passed the original law in 1988 to give the then-nascent satellite industry a leg up in providing distant broadcast signals to viewers out of range of local 

over-the-air signals. Today, however, DirecTV and Dish control one third of the payTV market and are the second and third largest pay-TV providers behind Comcast. 

And by some estimates only 1–1.5 million of the 115.9 million U.S. television households still receive distant signals. That’s about one percent. DISH also now carries 

the local signals of broadcasters in all 210 markets and DirecTV carries them in 197 

markets. 

On the other hand, a million viewers still represent a lot of potentially angry letters and calls reminding us of that clause in the Constitution about the right of 

Americans to watch whatever they want, whenever they want, wherever and however they want. 

Some stakeholders argue we should use the reauthorization to revisit retransmission consent. They also argue that we should take another look at cable regulations, such as the must-carry, basic-tier, buythrough, program carriage, program access, and set-top box rules. Those regulations date to 1992 and 1996, when cable 

had 98 and 89 percent of the pay-TV market. As of 2010, the cable’s market share 

had dropped to 59.3 percent of pay-TV households and 51.6 percent of all TV households. 

I’m open to debate on a whole host of issues and all options remain on the table. 

I believe in good process, and one of our responsibilities is to make sure we operate 

publicly and transparently, giving the American people and stakeholders an opportunity to see what is happening and to contribute to the dialogue. The video market 

is changing rapidly. Phone companies are in the video business now, both over wires 

and wirelessly. Netflix is offering original programming over the Internet. And 

Aereo, for better or for worse, could turn everything upside down. 

Ultimately, the question is can we better ensure viewers have access to the programming they want while respecting the investments of the networks that create 

it and the broadcasters and pay-TV companies that deliver it? Today the government intervenes in various ways in the relationships between viewers, broadcast affiliates, network programmers and pay-TV distributors. Sometime it does so to the 

benefit of one. Other times to the benefit of another. Should it be intervening at 

all in the current marketplace? And if the answer is yes in some cases but not others, what is the justification? 

# # # 

Mr. WALDEN. With that, I yield the balance of my time to the 

vice chair of the subcommittee, the gentleman from Ohio, Mr. 

Latta. 

Mr. LATTA. Thank you, Mr. Chairman, and I appreciate you holding this hearing today, and I also thank all of our witnesses for 

their testimony that they are going to be giving, and the expertise 

that they have as this subcommittee considers the satellite television law. 

I am glad, Mr. Chairman, that we have started the process of examining STELA early on in this Congress. We all know that December, 2014, will be here before we know it. It is important to 

have the opportunity to have a robust discussion about the satellite 

TV marketplace and determining if the law needs to be reauthorized, revised, or repealed. 

I believe it is extremely worthwhile that Congress has the obligation every 5 years to review this law. As we all know, the communications and video marketplace has changed dramatically and is 

constantly evolving, and I hope that this hearing and others are 

the continuation of a thoughtful public debate surrounding the 

4 

video marketplace. I look forward to hearing from our witnesses 

today, Mr. Chairman, and I yield back. 

Mr. WALDEN. Gentleman yields back the balance of his time— 

balance of my time, and with that, I will yield back the balance of 

my time and recognize the ranking member from California, Ms. 

Eshoo, for 5 minutes. 

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

Ms. ESHOO. Thank you, Mr. Chairman, for holding this hearing, 

and welcome to our witnesses and many distinguished representatives from the many sectors that are in the audience this morning. 

Today begins, obviously, the second in the subcommittee’s series 

of hearings on the Satellite Television Extension and Localism Act, 

STELA, a law allowing consumers across our country who subscribe to satellite TV to receive local broadcast programming. Following today’s hearing, we will have had and heard from a total 

of 11 witnesses in the first 6 months of this Congress, plus countless others who have individually visited our offices to provide their 

perspective on STELA. These voices include representatives of the 

satellite, broadcast, cable, and motion picture industries, but I 

think that we need to now look forward to taking action. 

Mr. Chairman, I think that following today’s hearing, we should 

instruct our respective staffs to work expeditiously on drafting legislative text so we can pass a bill long before the December 31, 

2014, deadline. We have both stated publically that we want a 

clean bill. We know that Judiciary has some jurisdiction in this, so 

it will take some time for them to do their work. So I think that 

we need to get going with this. 

So much has changed since the 1992 Cable Act, the process by 

which broadcasters and pay-TV providers negotiated or how they 

negotiate retrans, the proliferation of blackouts, and now the 

emerging online video marketplace, and I think that we need to be 

examining all of these aspects. So we have a lot of work to do beyond STELA. I am struck—on the broader video market, I am 

struck by the rapid transformation underway. In particular, three 

statistics highlight how consumer behavior is changing. By 2017, 

which is not that far away, 58 billion hours of TV and video is expected to be viewed on tablets per year. That is a remarkable statistic. Online video will account for 69 percent of consumer Internet 

traffic by 2017, up from 57 percent in 2012. The number of webenabled TVs in consumers’ homes will grow from close to 180 million in 2012 to 827 million in 2017. 

So what do all of these statistics mean for our work here at the 

subcommittee? In addition to freeing up more spectrum and expanding the deployment of high speed broadband to all Americans, 

we need to recognize that a shift is occurring where the primary 

means of video distribution might be radically different than the 

options available to consumers today. Consumers, as the chairman 

said, want greater choice in programming and how they receive it, 

and I think this subcommittee should not ever be viewed as a barrier to exciting innovation. So a video marketplace with vibrant 

5 

competition among the services consumers most desire is really a 

very, very healthy one. 

So again, I welcome each one of the witnesses. Congratulations 

to you, Ms. Tykeson, for the wonderful award that you have received from the cable industry. Thank you all for being here and 

for how instructive your testimony will be to us. 

I would be happy to yield the remainder of my time to anyone. 

Anyone? Any takers on my side? No? With that, I will yield back. 

Thank you. 

Mr. WALDEN. Gentlelady yields back. Chairman now recognizes 

the vice chair of the full committee, Mrs. Blackburn. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. Welcome to all of 

our witnesses. We thank you for your time and for being here. This 

is an important opportunity for us to learn how we can continue 

to give TV consumers the best value, the very best value in terms 

of price, content, quality, and delivery. In this subcommittee last 

June, members of both parties acknowledged that the 20-year-old 

video regulations on the books are obsolete. I don’t think there is 

any disagreement on that point at all. Technology has changed dramatically, but the law hasn’t kept up. Today’s cable, satellite, 

broadcast, telecom, and online video providers offer competing delivery services and packages, and they are governed by different 

rules. 

The question before us is how can we fix a really complex web 

of regulations that is limiting consumer benefits, restricting content choices, leading to blackouts, and contributing to rising prices? 

How do we rationalize old rules for the dynamic innovation that is 

happening before us? Are disruptive technologies ones that can provide broadcast content without paying a performance right? Everybody knows that is one of my issues, a byproduct of this outdated 

video framework. 

We should have a vibrant debate and welcome input from everyone as we review STELA, but most importantly, we need to look 

at what the proper role of government is and refocus on the best 

interests of our constituents, who are the consumers of video content. They do expect a level playing field. 

Mr. Chairman, I thank you and I yield back. 

Mr. WALDEN. The chair now recognizes the gentleman from Louisiana, Mr. Scalise. 

OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. SCALISE. Thank you, Mr. Chairman. Thank you for holding 

this hearing. I want to thank our panelists. I look forward to hearing from you all as well. 

When we look at the title of the hearing today, ‘‘The Satellite 

Television Law: Repeal, Reauthorize, or Revise?’’ I would think the 

subcommittee would be wise to revise and expand the STELA debate by addressing the other intertwined video issues. Many of 

6 

these issues are government-created imbalances that have arisen 

over the past 2 decades as the marketplace underwent dramatic 

transformation. As the gentlelady from Tennessee just mentioned, 

we take for granted that as we are having this hearing today, 

many of us have handheld devices that can actually pull video and 

do so many other things that make our life very convenient, but 

when these laws were written, the device of the day was more like 

this device. And so when you think that we are currently governed 

by laws that were written based on the technology of this device, 

it shows us, I think, that when we think of the new technologies 

that we have the ability to have access to, the laws dramatically 

need revision and updating. And for anyone who seeks further evidence of the marketplace transformation, look no further than the 

ongoing Aereo court case that is moving through the courts right 

now, just to show you where the imbalance can occur. 

Instead of allowing a vast web of government regulations to influence the carriage of programming, we should trust the consumer 

demand that it is a strong enough tool to ensure that quality programming is carried by pay-TV providers at a rate that both willing buyers and willing sellers can agree upon, without the government thumbing the scale for one industry or another. That is all 

I am after in this debate, which I believe we can accomplish by reverting back to the basic tenets of property rights and consumer 

demand to guide the video marketplace forward. 

I encourage my colleagues to join me in this pursuit, and again, 

I look forward to the testimony and the questioning from our witnesses, and I thank the chairman and I yield back the balance of 

my time. 

Mr. WALDEN. Is there anyone else on the Republican side that 

wants the remaining minute? If not, we will yield back the time 

and I now recognize the former chairman of 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. 

Today’s hearing is the second time this year that this subcommittee has convened to examine issues surrounding the upcoming expiration of the Satellite Television Extension and Localism 

Act of 2010, or what we call STELA. The reauthorization of STELA 

involves interlocking communications and copyright law provisions 

that must be jointly addressed by our committee and the Judiciary 

Committee, and as I stated at our hearing in February, because of 

the complexity of this task, I start from the presumption that we 

should pursue a clean reauthorization. Congress must complete its 

work before the law expires so consumers do not inadvertently lose 

access to programming. At the same time, I believe that reauthorization provides us an opportunity for members to learn more 

about today’s video marketplace and assess whether laws and regulations are keeping pace. 

As we begin this conversation, we need to consider how we can 

continue to ensure diversity, localism, and competition, which are 

the principles that undergird our Nation’s media policy. Congress 

7 

has recognized the need to protect many of these values, especially 

when the market might not. New avenues for online video distribution are creating exciting new opportunities for consumers and content creators alike, but to realize these opportunities, competitors 

may need access to must-have content and independent creators 

may need the opportunity for their program to reach audiences far 

and wide. 

I represent many interested parties in today’s debate in my congressional district. Many of my constituents are the artists, writers, 

producers, and directors whose creativity drives consumer demand 

for video and who deserve to be compensated fairly. Many of my 

constituents work at the studios and media companies like Disney 

that make desirable content available to consumers. I also represent companies like Santa Monica-based Tennis Channel. The 

Tennis Channel is an independent cable channel that offers consumers unique tennis and tennis-related programming. Congress 

sought to protect the diversity offered by independent channels like 

the Tennis Channel in the 1992 Cable Act by adopting provisions 

to guard against discrimination by vertically integrated distributors. The CEO of the Tennis Channel, Ken Solomon, sent the committee a letter today outlining his perspective on the effectiveness 

of the FCC’s so-called program carriage rules, and Mr. Chairman, 

I ask unanimous consent that Mr. Solomon’s letter be entered into 

the record. 

Mr. WALDEN. Without objection. 

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

Mr. WAXMAN. I hope our discussion today will include consideration of whether today’s video marketplace is making diverse and 

independent content available to all Americans. I am proud that 

my congressional district also includes the headquarters of 

DIRECTV, the second largest TV—the second largest video distributor in the United States, now serving over 20 million subscribers. Not only does DIRECTV have approximately 3,000 employees based in El Segundo, California, the company operates 100 

percent California-made satellites, some of which were also produced in my congressional district. As one of the satellite providers 

that this legislation was originally designed to assist, DIRECTV 

can educate the subcommittee about why it believes the Act should 

be reauthorized, what aspects of STELA are working well, what 

parts of the law might need to be modified. And I want to extend 

a special welcome to our witness from DIRECTV, Mr. Palkovic. 

Thank you to all the panel members who are here today. We look 

forward to you testimony, your continued engagement as we move 

forward with this reauthorization. 

Mr. Chairman, since I have 35 seconds, I will be pleased to offer 

it, although there didn’t seem to be takers when other time was 

available, but anybody that wants it can have it. If not, I will yield 

it back. 

Mr. WALDEN. Gentleman yields back the balance of his time, and 

that takes care of our opening statements, and we will move on 

now to the testimony from our distinguished panel of witnesses. 

We will start first with Mr. Mike Palkovic, who is the Executive 

Vice President for Services and Operations at DIRECTV. Thank 

you for being here this morning. Again, pull those microphones up 

8 

close, turn them on, and the time is yours, sir. You have to turn 

it on. This is not a retrans issue. 

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

COMMUNICATIONS, INC.; BEN PYNE, PRESIDENT, GLOBAL 

DISTRIBUTION, DISNEY MEDIA NETWORKS; AMY TYKESON, 

CEO, BENDBROADBAND; HAL SINGER, MANAGING DIRECTOR, NAVIGANT ECONOMICS; AND GEOFFREY MANNE, SENIOR FELLOW, TECH FREEDOM 

STATEMENT OF MIKE PALKOVIC 

Mr. PALKOVIC. Sorry about that. 

Mr. WALDEN. There you go. 

Mr. PALKOVIC. OK. Chairman Walden, Ranking Member Eshoo, 

and members of the committee, thank you for inviting DIRECTV 

to discuss reauthorizing the Satellite Television Extension and Localism Act, STELA. 

As we speak, millions of Americans are leaving for vacation. 

Packing lists include grills, sunblock, and summer reading. Increasingly, they also include television. The very idea that someone 

could take TV to the beach would have been unimaginable when 

Congress passed the 1992 Cable Act. Viewers today expect the content they want, when they want it, where they want it, on the device of their choosing, and at prices they can afford. And for the 

most part, they get it, but there is one exception to this good news: 

broadcast television. 

Unlike other forms of television, broadcasting remains governed 

by antiquated laws designed to favor the broadcaster over the viewing public. We hear more complaints about broadcast-related issues 

than almost anything else. Our subscribers complain about high 

prices, lack of choice, and blackouts. Much of this results from the 

outdated retransmission consent regime created in the ’92 Cable 

Act. 

There are three major problems with this broken system. First, 

retransmission consent raises prices. Between 2010 and 2015, 

DIRECTV’s retrans costs will increase 600 percent per subscriber. 

These cash payments are on top of the enormous fees we already 

pay the broadcasters for cable channels that were tied to the 

retrans negotiations, otherwise referred to as bundling. 

Second, retransmission consent limits choice. The retrans regime 

has led to the consolidation and bundling of cable channels by 

broadcast owned media conglomerates. In 1992, the broadcasters 

owned four cable channels. Today, they own over 104 cable channels, a 2,500 percent ownership increase. For example, in 1992 

NBC owned one channel, CNBC. Today, Comcast NBC Universal 

owns 22 cable channels, plus 11 regional sports networks. These 

corporations use the retrans process to force our customers to take 

and pay for all of their channels, regardless of whether they watch 

them or not. 

The third major problem and the most frustrating for consumers 

is retrans related blackouts. Broadcasters use blackouts to drive 

price increases and deny consumers access to what was once free 

9 

programming. Last year alone, broadcasters pulled the plug in 91 

markets. 

We see two paths ahead as Congress considers STELA reauthorization. One path is to eliminate these laws entirely. Representative Scalise’s bill, the Next Generation Television Marketplace Act, 

does this. We believe this approach is better than today’s hodgepodge of aging regulation. 

The other possibility would be to make existing laws smarter. To 

do so, we strongly believe Congress should address blackouts. First, 

in light of the fact that broadcasters use the public spectrum, an 

outright ban on local blackouts should be considered. Alternatively, 

Congress could allow us to provide our customers with distant network signals during a blackout. If the broadcaster’s local content 

is as important to consumers as they claim, then distant networks 

would be a poor substitute, and then we would have every incentive to negotiate a carriage deal. Finally, Congress could allow 

broadcasters to negotiate directly with consumers. Broadcasters 

would simply set their rates, publish them, and we in turn would 

charge customers the price the broadcaster set. A consumer could, 

for example, choose ABC and NBC but opt out of CBS and FOX, 

as they do today with HBO and Showtime. This would end blackouts, allow for consumer choice, and allow the networks to charge 

as much as they think their content is worth. 

Let me also address Senator McCain’s ala carte legislation. This 

bill demonstrates the growing frustration over the rising cost of 

content and the inability of consumers to make programming 

choices. Over the years, we have tried in vain to negotiate more 

choice and packaging flexibility for our customers. The broadcast 

corporations either outright refuse or make offers that could best 

be described as hollow. The result, though, is always the same. 

Higher prices for consumers and forced bundles of channels they 

don’t want or can’t afford. We believe the marketplace is best suited to resolve this conflict. Ideally, we would like to work with the 

broadcast companies to give consumers what they want, more 

choice over their programming. However, if these media companies 

continue to reject calls for packaging flexibility, they leave us no 

option but to support government intervention. 

In closing, I cannot emphasize enough that the status quo no 

longer works for the American viewing public. We speak with over 

300,000 of our subscribers every day, and they tell us they want 

change. While DIRECTV is not wedded to any particular approach, 

we do believe congressional action is needed. We stand ready to 

work with you to explore all proposals. Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Palkovic follows:] 

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Mr. WALDEN. Appreciate your testimony, sir. Thank you for 

being here. 

Now we will turn to Marci Burdick, who is the Senior Vice President of Broadcasting for Schurz Communications, Incorporated. We 

welcome you back to the committee and we look forward to your 

testimony. 

STATEMENT OF MARCI BURDICK 

Ms. BURDICK. Thank you. Thank you, Chairman Walden, and 

good morning. Ranking Member Eshoo, good morning. Members of 

the subcommittee, hello. My name is Marci Burdick. I am Senior 

Vice President, as you heard, of Schurz Communications, where I 

oversee eight television stations, three cable companies, and thirteen radio stations. I am also the television board chair for the 

NAB, on whose behalf I testify today. 

Local broadcast television remains unique because it is free, it is 

local, and it is always on, even when other forms of communication 

fail. Television is the most watched media for high quality entertainment, sports, local news, emergency weather warnings, and 

disaster coverage. Schurz has television stations in tornado-prone 

places like Wichita, Kansas and Springfield, Missouri, and I can 

tell you from my own personal experience our viewers rely on us 

to stay informed during times of whether emergencies, not unlike 

the terrible storms we have seen this year. 

With that backdrop, thank you for the opportunity to be here 

today to discuss reauthorization of the Satellite Television Extension and Localism Act, or STELA. 

As broadcasters, we approach this debate asking a simple question: is satellite’s distant signal compulsory license still in the public interest? We know the universe of distant signals is shrinking, 

and more and more viewers are receiving their local programming 

through satellite. Today, DISH provides local into local service in 

all 210 television markets and DIRECTV in 196. To justify the extension of this law, however, we need more specific information. 

For instance, how many subscribers rely on the distant signal? 

How many subscribers are grandfathered, but also receive local 

into local service? And what is the number of subscribers that receive the distant signal only for use in an RV or a boat? Unfortunately, this information resides only in the hands of DISH and 

DIRECTV. By digging into these facts, we can have an honest debate about whether the law is still needed. 

At a minimum, NAB asks this committee to embrace a clean reauthorization that does not include unrelated and highly controversial provisions that undermine the ability of broadcasters to provide high quality and locally focused content. For example, some 

would like to use STELA’s reauthorization to make drastic changes 

in a free marketplace negotiation called retransmission consent. I 

believe such changes would harm consumers. 

I have been with Schurz Communications for 25 years, and I 

come to this hearing with a very unique perspective on the video 

marketplace. My company is a member of both NAB and ACA. We 

are a broadcaster and we are a small cable operator. I can tell you 

from our vantage point as a small company that has been on both 

sides of the negotiating table, the current system works. So I ask 

47 

the subcommittee, if the system isn’t broken, why fix it? The retransmission consent system in place today has a success rate of 

99 percent. Only in Washington, D.C., could something that works 

99 percent of the time, providing for thousands of deals every year, 

be called broken. This success rate trumps the effectiveness of the 

best medicines, the free throw percentage of the most accurate basketball player, and the approval ratings of the Dali Llama and the 

Pope, yet no one would doubt whether they are effective. 

The false fixes being suggested by my friends in the cable and 

satellite industry would not only harm consumers, but would do 

nothing to improve on the system that we have today. In fact, just 

the opposite would be true. One proposal would allow the importation of distant, out of market signals in the event of a contractual 

impasse. In the real world, that means that Congress would negate 

existing contracts between broadcast networks like ABC and their 

local affiliates like KOHD in Bend, Oregon, or KGO in the Bay 

area. If Congress were to allow distant signals to come into local 

markets, that will have gutted my affiliation contract while leaving 

viewers in Bend or in the Bay area to receive, perhaps, Los Angeles 

or Denver news and sports. Additionally, by allowing distant signal 

importation Congress would be placing its thumb on the bargaining 

scale by fundamentally skewing the negotiating leverage of the 

parties. The resulting effect would be more contractual impasses, 

not less. With fewer viewers and less advertising dollars, the localism that TV broadcasters provide would be compromised. This 

would ultimately leave your viewers with less local community programming, your local businesses with fewer places to reach local 

customers through TV advertising, and politicians with no effective 

medium to reach their constituents. None of this is good for the 

consumer. 

In conclusion, as television broadcasters, we aren’t coming to 

Congress asking for a leg up in our negotiation or for changes to 

a law to benefit one side or the other. We will fight our own fights, 

we will make our own deals, and we only ask that Congress not 

tip the scales in favor of any one industry. 

I thank you for inviting me here today, and I look forward to 

your questions. 

[The prepared statement of Ms. Burdick follows:] 

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Mr. WALDEN. Ms. Burdick, thank you very much for your testimony. We appreciate your comments. 

We will now turn to the President for Global Distribution of the 

Disney Media Networks, Mr. Ben Pyne. We are delighted to have 

you here, sir, and please go ahead. 

STATEMENT OF BEN PYNE 

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

Eshoo, and other members of this subcommittee—— 

Mr. WALDEN. I am not sure your microphone is on, maybe. There 

you go. 

Mr. PYNE. Thank you, Chairman Walden, Ranking Member 

Eshoo, and other members of this subcommittee. I had the opportunity to appear before you 6 years ago at a hearing entitled ‘‘The 

Future of Video.’’ At that hearing, I promised we, the Walt Disney 

Company, will continue to find ways to get our content to any 

screen consumers use: computers, PDAs, mobile phones, iPods, and 

of course, TV sets. You may have noticed that I did not use the 

word iPad in 2007. Of course, it was introduced 3 years after that 

hearing. 

What I am proud to tell you today is that we continue our commitment to developing and using new technology to improve the 

consumer experience. In cooperation with MVPDs, that is cable, 

satellite and telco distributors, we now make live streaming of 

many of our channels available to subscribers under tablets and 

smartphones. ESPN’s Watch ESPN app, downloaded more than 18 

million times, was the first application to provide live streaming of 

a cable channel. Likewise, our line of Watch Disney apps, 

downloaded now 15 million times since last year, offers the same 

convenience to subscribers of Disney Channel, Disney XD, and Disney Junior. In fact, just last month we were the first broadcaster 

to launch a streaming service. Our Watch ABC service allows users 

to watch their local ABC stations online and on smart devices in 

their hometowns. We hope the service will soon be available in 

markets across the country. 

In addition to our Watch services, Disney has recognized the 

value of using online video distributors to reach consumers who 

want to enjoy our content in many other ways. We are a part 

owner of Hulu, and we have negotiated agreements to distribute 

our content on a host of other online platforms, including Netflix, 

Amazon, Streampix, and even X-Box. 

While all of these new forms of distribution are critical to our future, we continue to place a very high value on distributing content 

through MVPDs. We believe that monthly video subscriptions purchased by the overwhelming majority of American households continue to be of a tremendous value. We remain committed to delivering outstanding programming to these viewers at all times. As 

evidence of that, in the last few years we have reached long-term 

deals with many of the largest MVPDs. 

The common thread that runs through our use of all these technologies, old and new, is that each allows us to provide additional 

value to consumers and customers, while achieving a return on our 

investment in quality programming. Quality content is expensive to 

produce. Last year, we spent approximately $3 billion producing 

61 

programming for ABC and our own stations. As a policy matter, 

given the significant risk and expense inherent in producing great 

content, it is critical that we continue to be permitted to negotiate 

freely for compensation of the distribution of our content. 

In this context, we believe the current regime requiring MVPDs 

to negotiate for the right to carry a broadcast signal, the process 

known as retransmission consent, is working well. Ultimately, this 

is a process that ensures that MVPDs compensate broadcasters for 

the value inherent in the carriage of that signal. Thousands of privately negotiated agreements for retransmission consent have been 

reached with few interruptions of service. 

The model of compensating local broadcasters for carriage is 

working for American consumers. The lion’s share of the most 

watched programs on television are consistently found on broadcast 

TV. Local stations are able to provide outstanding local news and 

coverage for emergency events. With the launch of our Watch ABC 

services, we will be working with our broadcast affiliates to offer 

even more value for MVPDs to make available to their customers. 

I recognize that this committee has heard pleas for changes to 

retransmission consent. We believe the current system provides the 

appropriate incentives to reach agreements. We want our local and 

network programming carried by MVPDs. They want to carry our 

programming because their customers want to watch it. These mutual incentives encourage the successful resolution of negotiations. 

Additional government action is not necessary. 

Finally, I would like to turn to satellite legislation. The original 

law adopted by Congress 25 years ago eased the way for the technology available at that time to be used to distribute distant network programming to many households, especially in rural areas, 

that would otherwise not be able to receive the network programming at all. To their great credit, the satellite companies have 

made significant investments in their technology and today, they 

are able to deliver local broadcast stations to more households than 

ever. As a result, the necessity of the satellite legislation to ensure 

the availability of network programming is simply not as great as 

it once was. In fact, we believe Congress could give serious consideration to letting the legislation sunset. We realize, however, that 

you may be concerned by uncertainty regarding what would happen to rural viewers if the legislation was not reauthorized. In the 

face of that uncertainty, we understand if you choose to extend it, 

but would ask that you do so simply by extending the current expiration date. 

Thank you very much. 

[The prepared statement of Mr. Pyne follows:] 

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Mr. WALDEN. Thank you, Mr. Pyne. We appreciate your testimony. 

I would now turn to Amy Tykeson, who is the CEO of 

BendBroadband. We appreciate your being here, as I said earlier, 

and welcome your comments. 

STATEMENT OF AMY TYKESON 

Ms. TYKESON. Thank you. Good morning, Chairman Walden and 

Congresswoman Eshoo, and members of the subcommittee. I am 

Amy Tykeson, President and CEO of BendBroadband, a familyowned independent cable operator that serves about 50,000 residential and commercial customers in Central Oregon. Thank you 

for inviting me here to testify this morning. 

My goal is to highlight the challenges facing cable operators, particularly smaller operators like BendBroadband. It is time for Congress to update the law to meet consumers’ needs and interests. 

Let me tell you a little bit more about my company. Our tag line 

says it all: ‘‘We are the local dog. We better be good.’’ We have invested about $100 million to upgrade our network and bring people 

in Bend the best services available. We employ 270 associates, and 

we are the 14th largest employer in Central Oregon. We are a first 

mover, and we are recognized as an industry leader. 

I want to discuss three examples of how the outdated video rules 

are hurting my customers and should be addressed in STELA. 

First, I can’t create the programming packages my customers 

want; second, the retransmission consent process is broken; and 

third, technology mandates for set top boxes should be repealed. 

First, let me tell you why I can’t give my customers the packages 

they want. The major programmers each control a dozen or more 

channels. When I negotiate with them, they tell me I have to take 

all of those channels and that I have to package them the way the 

programmers want, not the way my customers want. These bundling arrangements are resulting in significant fee increases for my 

customers. Program bundling is particularly harmful to smaller operators like BendBroadband, who are often presented with a take 

it or leave it offer. 

Second, my customers are being hurt by the broken retransmission consent process. I have been through a retransmission consent blackout, and my customers don’t want it to happen again. 

But I fear it will, unless the rules are updated. For example, Congress intended for retransmission consent to support local stations, 

not to subsidize the operations of big national broadcast networks. 

But the networks are demanding an increasing share of their affiliates’ retransmission consent fees. This harms localism by diverting 

revenues from the local stations. It also drives up the cost of retransmission consent and makes the negotiations more contentious. 

For the MVPDs, the cost of retransmission consent has grown from 

about $216 million to nearly $2.4 billion in just 6 years, and fees 

are estimated to top $6 billion by 2018. In my market alone, retransmission consent demands have nearly tripled over the last 3- 

year negotiating cycle. 

My final example concerns Section 629 of the Communications 

Act. That rule resulted in technology mandates for set top boxes 

that have cost the industry more than $1 billion and have not benVerDate Nov 24 2008 15:14 Feb 27, 2014 Jkt 037690 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-52 CHRIS
68 

efitted customers. Today, consumers watch programming on a 

plethora of devices, some of which we have talked about this morning. This rule should be repealed. 

These three examples illustrate how a regulated marketplace can 

be detrimental to consumers when government does not routinely 

review and update applicable laws. The time has come for a comprehensive review of the existing video framework. At a minimum, 

I would urge Congress to amend STELA to address issues like the 

ones I have identified today, to yield more choice, lower prices, and 

a healthy marketplace to benefit consumers. 

Finally, I want to acknowledge Representative Scalise and other 

members of this subcommittee who have advanced the debate on 

video reform. I look forward to working with you to examine these 

important issues and welcome your questions. Thank you. 

[The prepared statement of Ms. Tykeson follows:] 

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Mr. WALDEN. Thank you, Ms. Tykeson. We appreciate your comments and testimony. We look forward to continuing the dialog. 

We will turn now to the managing director of Navigant Economics, Mr. Hal Singer, for your comments, sir. Thank you for joining 

us, and please go ahead. 

STATEMENT OF HAL SINGER 

Mr. SINGER. Thank you for having me. I have served as an economic expert in several program carriage complaints, including as 

an expert for the NFL Network, Tennis Channel, and Masson. The 

focus of my testimony is the proper regulatory oversight of 

vertically integrated cable operators, and the role of the FCC in 

that oversight process. 

To design the proper regulatory framework, one must first understand the nature of the potential harm presented by vertical integration in the cable industry, namely a reduction in innovation 

among independent content providers. 

Why do we care about that potential harm? Because some of the 

best content has sprung and will likely continue to spring from 

independents who are free from the strictures of a clumsy conglomerate when creating artistic expressions. Without any protection 

against discrimination, independents would be forced to surrender 

equity in exchange for carriage, and thus would be less willing to 

take risks, which would result in fewer programming choices and 

less programming diversity. 

There are two schools of thought on how best to deal with this 

problem of vertical integration. The first, advocated by Professor 

Tim Wu of Columbia Law School, in his best-selling book ‘‘The 

Master Switch’’, is to ban vertical integration entirely. The second, 

which was embraced by Congress in the 1992 Cable Act, is to permit vertical integration but to police discriminatory acts on a caseby-case basis. The downside of an outright ban is that it sacrifices 

potential efficiencies related to vertical integration. The downside 

of a case-by-case approach is that if relief from discrimination does 

not come swiftly, or if the evidentiary burden imposed on an independent cannot be satisfied under any fact pattern, then after-thefact adjudication affords no protection at all. 

Assuming that case-by-case review is the best solution to the 

problem of vertical integration, the policy question turns to which 

legal framework is best suited for the task. Should the FCC adjudicate these disputes under its public interest standard, or should 

complaints of discrimination by a vertically integrated cable operator be addressed under the antitrust laws? The problem with the 

latter approach is that a reduction in innovation by independents 

may not be cognizable under the antitrust laws, which were designed primarily to prevent the exercise of pricing power. Because 

discrimination in program carriage often does not produce price effects, antitrust is the wrong framework to address discrimination 

by a vertically integrated cable operator. 

The lack of price effects in these cases is also why it makes no 

sense to interpret the non-discrimination protections of the Cable 

Act in an antitrust context, even if Congress used the word ‘‘unreasonably’’ in the statute. By seeking to identify harm to an independent programmer rather than harm to competition, Congress 

87 

meant to fill a gap in antitrust laws, namely, the preservation of 

diversity in the video-programming marketplace. How do we know 

this? At the time the Cable Act was passed, the largest cable operator in the country, TCI, controlled less than 20 percent of national 

video subscribers. If Congress meant to import antitrust concepts 

into the Cable Act, as some now argue, then Congress also intended to immunize all vertically integrated cable operators, including TCI, from the non-discrimination protections of the Act, as 

none would have sufficiently high market shares to constitute monopoly power under the antitrust laws. The absurdity of this conclusion, that Congress passed redundant antitrust regulation that 

was applicable to no one, proves that the Cable Act has nothing to 

do with antitrust enforcement. 

Finally, I would like to speak briefly about the appropriate evidentiary burden on complainants under the FCC-administered approach. The purpose of the non-discrimination protections in the 

Cable Act is to ensure that a vertically integrated cable operator 

does not consider the benefit to an upstream programming affiliate 

when deciding whether to carry a similarly situated independent 

network. There are two primary ways to establish evidence of this 

kind of ‘‘biased’’ decision-making. Complainants could show direct 

evidence that benefits to an upstream network were inappropriately considered. In the absence of such direct evidence, complainants could in theory establish that the downstream cable division 

incurred a loss by carrying the independent network narrowly. This 

finding would create a presumption that there was an offsetting 

benefit to the affiliated upstream network. However, with the exception of a handful of networks such as ESPN, most independent 

networks lack ‘‘must-have’’ status and thus would be hard-pressed 

to demonstrate any forgone benefit from broader carriage. Cable 

operators generally create value for their customers by offering a 

buffet of choices, rather than granting access to any particular network. Requiring an independent to estimate forgone benefits with 

precision would be tantamount to asking a leading columnist for 

the New York Times to estimate what fraction of subscribers would 

switch to another newspaper if the editorial page excluded that columnist. That the answer might be none, due to the costs of switching newspapers or due to customer loyalty attributable to the 

Times in general, does not imply that that columnist adds no value 

to the Times. Accordingly, complainants should not be required to 

estimate forgone benefits from broader carriage to prevail in a program-carriage complaint, as the current law now demands. 

Thank you. 

[The prepared statement of Mr. Singer follows:] 

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Mr. WALDEN. We appreciate your testimony. Thank you. 

And now we will go to our final witness, a senior fellow at Tech 

Freedom, Mr. Jeffrey Manne. Thank you for being here, and we 

look forward to your testimony. 

STATEMENT OF GEOFFREY MANNE 

Mr. MANNE. Thank you, Mr. Chairman, Ranking Member, members of the subcommittee. In addition to being senior fellow at Tech 

Freedom, I am also Executive Director of the International Center 

for Law and Economics, and a lecturer in law at Lewis and Clark 

Law School in Portland. 

If you remember three words from my testimony today, remember these: House of Cards. Netflix’s hit show encapsulates how fundamentally the video marketplace has changed since Congress enacted the special regulations that now govern that market. It represents the work of a new form of distribution, a new source of content creation. It is based on new technology. It is rapidly innovating. Those regulations are themselves a house of cards as well. 

In the face of technological change, shifting consumer preferences, and evolving policy aims, the complex fragile structure 

that shapes conduct by consumers, content owners, distribution 

networks, and regulators is bound to fall down. Its purpose is frustrated, unintended consequences its legacy. 

To start, STELA should be allowed to sunset the compulsory license limit and copyright protection for video content repealed. 

Congress should also repeal the related provisions of the Cable Act, 

retransmission consent, program access and carriage, must carry, 

among others, and Congress shouldn’t extend this regime to—regulatory regime online. This isn’t deregulation; this is smarter regulation. Because behind all of these special outdated regulations are 

laws of general application that govern the rest of the economy, 

antitrust and copyright. These are better, more resilient rules. 

They are simple rules for a complex world. They will stand up better as video technology evolves, and they don’t need to be 

sunsetted. 

The FCC’s numbers say that cable prices went up 20 percent between 2006 and 2010, but adjusting for inflation, they went up only 

10 percent. Meanwhile, the number of channels increased 42 percent. Spending on programming went up 30 percent. Americans 

spent 20 percent more time watching video, and then there is an 

endless range of quality improvements that went along with it. To 

say that the current market is in any way constrained, anti-competitive, or crabbed, seems very difficult to sustain. 

In short, consumers are getting more for their money, more content, more choices, and higher quality. 

If Netflix were regulated like a cable network, it is not likely that 

the law would allow it to offer exclusive programs like House of 

Cards. Why invest $100 million in a franchise if it doesn’t offer you 

a leg up on your rivals? Exclusive programming helps drive competition. 

The key to promoting competition in both video and broadband 

isn’t restricting programming innovation, if we are looking for rules 

to change, it is removing local regulatory impediments to competitive infrastructure, like franchise licensing and access to rights of 

96 

way. Allowing more towers to be built would mean faster 4G wireless service, making 4G wireless yet another established competitor 

to legacy cable and satellite. 

And intense competition in some markets can benefit consumers 

everywhere. I would just point out when we are looking at potential problems of the absence of localized competition, it turns out, 

of course, that these are all networks. Competition from Verizon’s 

FIOS in New York City, for example, has driven Cablevision to 

enter into a peering agreement with Netflix’s CDN. That means 

better Netflix streaming for customers outside New York as well. 

Competition need not be local to have local benefits. 

So what should Congress do? Again, let STELA sunset. A clean 

reauthorization of STELA isn’t clean at all. STELA is a mess. We 

need rules that minimize error costs but affects policy goals in a 

fashion that is least likely to outlaw by default that which we actually want to encourage, only haven’t discovered yet; that is, regulatory mistakes discovered only in retrospect, and mistakes have 

been made. Aereo exploits imprecise language in the definition of 

copyrights performance right to navigate around the overly complex effort to use compulsory licensing, must carry, et cetera, aimed 

at bolstering cable’s competitiveness and promoting localism. But 

arguably, a simple copyright rule of general applicability, full performance right protection retained and enforced by the copyright 

holder, would have avoided the problem entirely. 

While the interest of the dwindling percentage of Americans who 

view television programming only on-the-air shouldn’t be ignored, 

we really have to take seriously the possibility that serving this 

segment under the current regulatory regime carries with it enormous costs that outweigh the benefits. These cost include, most significantly, retransmission fees passed on to MVPD viewers, technological and business model constraints, and most importantly, the 

enormous opportunity costs, perhaps as much as $1 trillion of more 

efficiently deploying spectrum currently used for broadcasting. 

I want to address quickly also the program access and program 

carriage rules. These rules eschew antitrust rules to promote program diversity and competition among providers. By focusing on 

the program carriage and program access rules as they are constructed, we have shifted the terms of the analysis to a starting 

point that sort of assumes that all content should be available everywhere, but that not all content is available from all distribution 

channels is not proof of market failure. Similarly, equating diversity with independence is inappropriate. If independence means not 

affiliated with the distribution network, this amounts to a preference for ABC’s The Bachelor over NBC’s The Biggest Loser. Program carriage rules, in contrast to antitrust, problematically prescribe an undesirable effect—not an undesirable effect, but a particular business model, and it is a mistake to try to prescribe a particular business model when we don’t know in the future what the 

optimal business model will look like. 

Ending the current regulations won’t leave consumers unprotected. There is a role for the law here, but the role for the right 

law, which is antitrust and copyright. 

Thank you. 

[The prepared statement of Mr. Manne follows:] 

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Mr. WALDEN. Thank you very much for your testimony. We 

thank all the witnesses for your testimony, and will now go into 

our question phase. 

Mr. Palkovic, in deciding whether to repeal, reauthorize, or revise the current satellite law, it is important, I think, that we understand what the impact of each of these decisions really would 

be on the current satellite television subscribers. How many viewers today actually receive a distant signal, because that was one of 

the underlying reasons for this Act—how many of those viewers 

would receive a local signal from their satellite provider, and how 

many would have no way of receiving broadcast programming over 

the air, over satellite, or from any other source without distant signal? So who is in that pool today? 

Mr. PALKOVIC. I think the entire pool between us and DISH is 

roughly a million and a half customers who are receiving that. I 

do not have the breakdown of how many people are grandfathered. 

I think it is a fraction of that, maybe a couple hundred thousand, 

and I think those are largely on the DIRECTV side. So it is in that 

range. It is a small piece of the million and a half, but if we were 

to lose that right through this process, you would basically be taking broadcast programming not only away from the million and a 

half customers, but there would be absolutely no substitute for it. 

Because honestly, if they had a substitute, they wouldn’t be paying 

us to get the distant signals, they would be getting it a different 

way. 

Mr. WALDEN. OK. If we could work with you a little bit going forward just so we get an understanding what that pool looks like in 

terms of grandfathering, that would be terrific. 

Ms. Burdick and Mr. Pyne, I am interested in helping, obviously, 

constituents get the programming they consider truly local. How 

can we ensure that they are getting programming from their state, 

not out of state programming, merely because they fall in a DMA 

assigned to another State? We obviously have that situation—— 

Ms. BURDICK. I am a living example of that, Mr. Chairman. I actually live in Niles, Michigan. My front yard is in Michigan and my 

back yard is Indiana, and I am part of the South Bend DMA, but 

I vote in Chairman Upton’s district. 

Mr. WALDEN. And you are, what, in five time zones, too? That 

used to be an issue. 

Ms. BURDICK. We changed that a couple years ago, although my 

lawn mower did used to change when I go around the lawn—my 

cell phone would change when I go around the lawn. 

At any rate, I happen to receive Comcast’s Michigan signal from 

its Michigan head end, and what Comcast does in that case is they 

reserve Channel 3 for—I am a CBS affiliate in South Bend and I 

have network non-dup and syndicated exclusivity protections 

across the market, but Comcast reserves Channel 3 for the local 

broadcast of the CBS station in Grand Rapids, so its programming, 

local news, and information can be broadcast in that area. 

My point of telling you that is there are ways to resolve those 

situations and we have resolved them in the market today. 

Mr. WALDEN. I know we have that problem in Umatilla County. 

There is a certain former senator that is really aware of that, and 

anyway, it is an issue elsewhere in my district. 

162 

Ms. Tykeson, when Congress passed the ’92 Cable Act and the 

’96 Telecom Act, cable had 98 percent and 89 percent of the payTV market respectively. As of 2010, cable’s share dropped to 59.3 

percent as I mentioned in my opening statement of the pay-TV 

households, and 51.6 percent of all TV households. Is there still a 

justification for imposing on the cable industry regulations such as 

must carry, basic tier, buy through, program carriage, program access, and set top box requirements? 

Ms. TYKESON. Chairman Walden—— 

Mr. WALDEN. Go ahead and push that microphone, yes. 

Ms. TYKESON. Thank you for the question. I think when we described earlier the shift in how things have changed and unfolded 

since 1992, it is a completely different marketplace today then it 

was then. Many of the rules that you have just mentioned are outdated and they need to be repealed. So my suggestion would be to 

consider sunsetting the ’92 Act and potentially some of the other 

requirements in the ’96 Act so there is a way to go back and revisit 

some of those rules. In the STELA bill, there is an opportunity for 

reexamination because of the sunset clause. We don’t have that in 

the ’92 Act and as a result, we are stuck with a lot of outdated 

rules that are harming consumers. 

Mr. WALDEN. All right. Mr. Pyne, do you have any comment on 

that issue of these rules that are put on the cable industry? Should 

they stay or go? 

Mr. PYNE. In terms of STELA? 

Mr. WALDEN. Well no, in terms of the must carry, the basic tier, 

the buy through program, carriage program access, set top box programs from your perspective. We are just trying to get different 

perspectives here. 

Mr. PYNE. In terms of the broadcast basic buy through, I think 

the marketplace in essence has spoken in terms of the value of 

local broadcast. For instance, one of the reasons satellite has shown 

tremendous growth over the past 12 years especially is because of 

their investment in satellite space to drive local into local, and it 

is a huge investment on their part. But clearly, it is because of the 

value of the local—each local broadcast community or each community in this country that has allowed their investment. So in essence, even though they did have the option to just have national 

programming, they actually decided as a matter of course to deliver 

local programming. 

Ms. TYKESON. If I may just add one quick point, though. 

Mr. WALDEN. Sure. 

Ms. TYKESON. I think the problem now is that we have competitors in markets like Mike’s company, and say, BendBroadband, 

that have different rules, and so the playing field isn’t level. So I 

think we need to—for example, on the must buy, that has got to 

go. 

Mr. WALDEN. Yes, Marci, go ahead. 

Ms. BURDICK. Mr. Chairman, could I speak about must carry for 

just a second? I think many members of this committee have rightly been concerned about diversity. One of the values of must carry 

is that these are stations in a local community that are sprung up 

by service to that local community. Of the stations that are must 

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casting. Thirty-nine percent of them carry some directed ethnic 

program to those communities they serve, and must carry—as a result of must carry today, networks like—channels like FOX, 

Univision, and others like that began as must carry stations, got 

traction, and then developed a business model of their own, but 

they are extremely important today in localism. 

Mr. WALDEN. Thank you. I actually have gone like a minute 41 

over my time and the committee has been indulgent, so I will now 

defer to the ranking member of the subcommittee, Ms. Eshoo, for 

5 minutes. 

Ms. ESHOO. Thank you, Mr. Chairman. I never mind listening to 

you, so that is fine. Thank you. 

Well, the title of today’s hearing is ‘‘The Satellite Television Law: 

Repeal, Reauthorize, or Revise?’’ and in some way, shape, or form 

each one of you have taken up one of those words, so it really fits 

with what the title of the hearing is. I am also mindful that, you 

know, as you make your recommendations to us, that these are 

really some huge rewrites of business plans, and those are gigantic 

lobbies, most frankly, around here but we are going to do our best 

to come up with the best, and I thank you, because we really have 

a mix of views which is very healthy here today. 

The questions that I want to ask, and I am going to have to submit some for the record for you to respond to because I won’t have 

enough time to ask all of them, are a little beyond, I think, just 

STELA, but since you are here, I still want to ask them. 

Mr. Palkovic, I now understand why it is called DIRECTV, because you are very direct in your approach. In Ms. Burdick’s testimony, she stated that the retransmission consent system under 

which local broadcast stations negotiate with pay television providers for the retransmission of their signal is working just as Congress intended. Do you agree with the assertion, and if not, what 

would you propose changing? Try to be as brief as possible. 

Mr. PALKOVIC. Yes, I will make a quick distinction is working as 

intended versus working well, because I think from the broadcaster’s standpoint it is working fantastic, because they have all 

the protection and the rights of the laws that were in place in the 

’92 Cable Act. What I don’t think was intended is that they would 

go from four cable channels to 104 with regional sports networks 

and use the retrans process to leverage us into paying exorbitant 

amounts on the cable channels because we risk them blacking out 

channels as part of the renegotiation. 

So what we want to address here is the unintended part of the 

combination of those laws, OK, and what is different today than in 

1992 was we were in a situation where we were dealing directly 

with broadcasters. Now we are dealing with huge conglomerates 

that own both sides of the equation, including cable MSOs that if 

they raise the rates exorbitantly, a lot of cases they are just paying 

themselves. 

Ms. ESHOO. Great, thank you. 

Mr. Pyne, welcome. Nice to have you here. Should Aereo prevail 

in court, some network executives have been quoted as saying 

there would be a radical shift away from the free over-the-air 

broadcast signal that consumers have enjoyed for more than half 

a century. If broadcasters began offering programming on a subVerDate Nov 24 2008 15:14 Feb 27, 2014 Jkt 037690 PO 00000 Frm 00169 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-52 CHRIS
164 

scription only basis, do you think they would still be in compliance 

with the public interest terms of their FCC licenses? 

Mr. PYNE. As it relates to the Aereo case, I mean, I know there 

are other network executives who have said certain things. Our 

company’s position is that—and as I think is evident, we are in 

pending litigation with Aereo. We will always do everything we can 

to protect our content and the copyright and the illegal appropriation of our content. 

Ms. ESHOO. Very carefully crafted response. Very good. 

Mr. PYNE. Our focus is on the prevailing litigation. 

Ms. ESHOO. I understand. Thank you. 

To Mr. Singer, do you think our current law is sufficient in ensuring the availability of diverse independent programming like 

Ovation, Hallmark, and the Tennis Channel, and if not, why do you 

think the Cable Act is failing to accomplish its intended goal? 

Should we modernize the program access in the carriage laws, and 

if so, how? How many if so, how, is too—and I don’t have very 

much time, but you have 36 seconds for a big question. 

Mr. SINGER. I think that the laws as written with respect to program carriage, program access are fine. The problem is in the details of the implementation, and I actually think that the FCC has 

done a nice job here in implementing the rules, but of course, once 

they come to a decision, their decisions can be—well, the judge’s 

decision can be overturned by the FCC and then there is a period 

again where the decision by the FCC can be overturned by the district court—D.C. Court of Appeals. And I think the problem now, 

very shortly, is that they have—the court has layered on certain 

burdens that will make it all but impossible for complainants to 

prevail. And so I do fear that at the current moment, we are in a 

position where there might not be any future program carriage 

complaints brought, and that would be certainly inconsistent with 

the interests of Congress. 

Ms. ESHOO. Thank you very much. 

Mr. Chairman, I am going to submit my other questions to the 

witnesses, and I am especially interested in the whole issue of 

copyrighted material deserving competition—I mean, compensation. I think it is a very important area for us to explore, especially 

when it comes to radio fairly compensating artists for their copyrighted materials. 

So with that, I yield back. 

Mr. WALDEN. Thank the gentlelady, and we will now go to the 

vice chair of the full committee, the gentlewoman from Tennessee, 

Ms. Blackburn, for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and Ms. Eshoo and 

I, I think, have some of the same questions. I am going to go right 

to the copyright issue. 

Ms. Burdick, let me come to you. I appreciate your comments, 

and how you express for property rights and I am quoting, ‘‘recognizing local broadcaster’s property interest in their over-the-air signal, permitting them to seek compensation’’, and I agree. Content 

deserves to be paid for and incentivized, but I am curious if you 

think the position the broadcasters have taken on the radio side, 

refusing to recognize a performance right for sound recordings, if 

that undermines your position before us as we look at the video 

165 

framework and the retransmission rights, because as you know, 

radio broadcasters say that they shouldn’t have to pay performance 

royalties, because they help distribute an artist’s music. So square 

that up for me. Where is the contradiction in that? 

Ms. BURDICK. Sure. Just by way of background, our company has 

been in the radio business for 90 years, 18 months after the first 

commercial station was launched. We have been at it for a long 

time. 

Mrs. BLACKBURN. That is fine. Quickly. 

Ms. BURDICK. There has been a symbiotic relationship between 

radio and artists—I think I am on—radio and artists during that 

period of time, and the substantive difference is that when my 

radio stations play the artist’s music, the listeners are getting it for 

free. In this case, we are talking about providers who are taking 

the local television broadcast signal, repackaging it, and selling it 

to consumers, and in that case, I am saying, in the latter case, if 

you are charging for it I should be compensated, but on the radio 

side—and I recognize this is a healthy debate in the industry—we 

are providing that as broadcasters for free. 

Mrs. BLACKBURN. OK, but you know, you can look at it and say 

that they are helping to distribute your signal which helps to increase your ad revenues, and so maybe broadcasters—radio broadcasters should be distributing or should be paying that performance right for those entertainers. 

Mr. Manne, you had a little bit to say about this. Do you want 

to weigh in on this side? 

Mr. MANNE. Just briefly, I would just say I think the distinction 

is a distinction without a difference. I don’t think that you can really square the rejection of the compulsory right in one case and not 

in the other, except other than to recognize that the broadcasters 

are net beneficiaries in one regime and they are net payers in the 

other, and so it makes perfect sense that they would prefer one 

over the other, but I don’t think that squares with the public interest. 

Mrs. BLACKBURN. OK, thank you for that. 

I think that this is one of those points that we will continue to 

look at, because content does deserve to be compensated and the 

creator and the holder of that content deserves to be compensated. 

Ms. Tykeson, given how government granted retransmission consent fees have grown from $216 million in ’06 to what will be over 

$3 billion this year, who is benefitting and what is driving that 

growth? 

Ms. TYKESON. Congresswoman, thank you for the question. There 

are two groups that are benefitting from the retransmission consent fees. Originally those fees were designed to allow—to help 

level the playing field between the local broadcaster and the cable 

company, and of course, back in 1992 it was a very different circumstance than it is today. What is happening now is the national 

broadcasters are requiring fees be paid through the local affiliates, 

and that is increasing the fees at huge rates, as you mentioned. So 

that all those fees are going to—they are accruing to the large conglomerate broadcast companies that control 60 percent of the top 

50 networks on the backs of my customers. 

166 

Mrs. BLACKBURN. OK. You also stated in your testimony that 

there exist barriers to creating programming packages that are responsive to consumer need, so what has led to your business’s 

hands being tied in meeting the needs of your consumers? 

Ms. TYKESON. Congresswoman, there are three things that are 

happening that affect my customers in Bend, Oregon. The first is 

the size of the increases that we are asked to pay by all of these 

programming channels on an annual basis, which range between 8 

and 10 percent, roughly, for every channel. In addition, with these 

large bundles of programming there is always a must-have channel 

in there, but there are a lot of other channels that maybe my customers wouldn’t want, and what is happening is the large programming companies are forcing those channels into certain packages. 

I used to be able to have a special sports package that could meet 

the needs of customers that wanted sports, but now in many cases 

those expensive channels are being pushed down into the more 

popular packages that is increasing the prices for my customers. 

Mrs. BLACKBURN. OK, my time is expired. Mr. Chairman, I have 

got a question I will submit to all witnesses and ask for their response in writing, and I yield back. 

Mr. WALDEN. Thank the gentlelady from Tennessee, the vice 

chair of the committee. We will now go to the former chairman of 

the committee, the gentleman from Michigan, Mr. Dingell, for 5 

minutes. 

Mr. DINGELL. Thank you, Mr. Chairman, and I commend you for 

this hearing. I appreciate your kindness and courtesy to me. 

To the surprise of all, I probably won’t be asking questions today, 

but I have got some brief cautionary remarks. 

I am somewhat alarmed by the prevalence of comments in the 

testimony of our witnesses today that are extraneous to the basic 

issue that we seek to address. Successive iterations of the 1988 

Satellite Home Viewer Act, SHVA, were enacted by Congress in 

order to extend the principle of localism to the greatest degree possible to unserved viewers. I note that thanks to SHVA and with 

subsequent reauthorization, DIRECTV and DISH are now the second and third largest pay television providers in the country and 

are able to compete on a more level footing with the traditionally 

dominant cable companies. These facts tell me that SHVA and its 

successor legislation have well nigh fulfilled their intended effect. 

Now the committee last considered the satellite television reauthorization legislation in October of 2009. That bill was comprised 

of nine titles, but it had only 30 pages or thereabouts. Its main provisions extended Section 325(b) of the Communications Act with respect to distant signal carriage and good faith negotiations, as well 

as addressed problems related to significantly viewed stations, and 

the after effects of the transition to digital television. Now to put 

this in simple terms, the committee’s work on satellite television 

legislation has been predicated on the simple principle of localism, 

and it should continue to do so. 

In closing, I recognize the landscape for video has changed significantly in the past 25 years. If the Cable Act or other laws related to the video marketplace are to be amended, they should be 

amended on the sound basis of a thorough record established by 

the committee’s diligent record—diligent efforts to achieve such 

167 

record. At present, the committee has not established such record, 

and I have to confess that I don’t think that most of my colleagues, 

including me, understand full well what the situation is or what it 

is we should do about these matters. And so without those kinds 

of things and without a record to define what are efforts should be, 

I think we would be well served to confine our efforts here to a 

clean reauthorization of the Satellite Television Extension and Localism Act. I would observe that to fail to do this is probably going 

to project the committee into one of the doggonest donnybrooks in 

recent history and I would hope that for the benefit of all of us and 

for the need to do other things that we would keep that thought 

in mind. 

With that, Mr. Chairman, I return with my thanks and gratitude 

a minute and 44 seconds, and I appreciate your courtesy toward 

me. Thank you. 

Ms. ESHOO. Would the gentleman yield? 

Mr. DINGELL. If I have some time, of course. 

Mr. WALDEN. Gentleman yields. 

Ms. ESHOO. Thank you, Mr. Dingell. 

I can’t help but jump in here, given what the gentleman from 

Michigan has said. I think everyone here knows, and if you don’t, 

you are going to be reading about it, that Mr. Dingell is now the 

single longest serving member of the United States Congress in the 

history of our Nation, and he has spoken again very, very wisely 

and prudently today. So we not only congratulate him and celebrate the work that he has done at this committee. Every major 

law that we can point to has his imprimatur on it. So thank you, 

Mr. Dingell, and thank you for what you said today, and bravo. 

Mr. DINGELL. Mr. Chairman, I want to express my respect for 

the gentlewoman from California, and my thanks to her for those 

kind words. My old daddy used to say to me, son, he would say, 

it ain’t how long you took, but how well you did and how hard you 

tried. I have tried to concentrate on the second part of that comment. Thank you very much, Ms. Eshoo, and Mr. Chairman, I 

thank you for your courtesy again. 

Mr. LATTA [presiding]. The chairman emeritus yields back, and 

at this time, the chairman recognizes himself for 5 minutes. Again, 

I want to thank all of the panelists for appearing before us today, 

and it is a very important hearing and where we are going to be 

going in the next year and a half with the reauthorization. 

If I could start with Ms. Tykeson, and ask you a couple questions. First, again, congratulations on your award. I represent a 

very interesting area, one that is south of Mr. Dingell’s area in 

Ohio, and it goes from an urban area to a very rural area. And so 

it is served by very many smaller operators like BendBroadband. 

I want to ask you about set top boxes, if I could. You have called 

on Congress to repeal the band on integrated security on these set 

top boxes, but you note in your written testimony that your company was granted a waiver of that rule. Why is this rule relevant 

in today’s role, given all the devices that folks out there are able 

to get video programming from? And do we still need the 629 rule 

as a follow up? 

Ms. TYKESON. Thank you for your question, Congressman. 

168 

We were successful in receiving a waiver from the separable security ban back in 2008, so we were able to go all digital. We were 

the first company in a traditional cable company to go all digital 

and reclaim all of our analog spectrum. What has changed even 

since then is the plethora of devices that are available and so determining how people receive their signals using hardware in today’s world where applications or software can do the job is a much 

more efficient way to do that. A lot of companies can’t do—put together a waiver because they are too small, and having this rule 

on the books that is outdated and no longer relevant is costing billions of dollars and preventing technology from moving forward. 

Thank you. 

Mr. LATTA. Let me just follow up. You just said some of the companies out there can’t do it because they are too small. How small 

is too small? 

Ms. TYKESON. Well, I am a member of the ACA, which represents 

small operators, and there are companies out there with a couple 

of hundred cable customers. 

Mr. LATTA. OK. Let me follow up with you on that. I understand 

that the FCC has admitted that their cable card rules have not 

been successful at ensuring a retail market for set top boxes as 

Section 629 of the ’96 Act intended. However, the FCC has been 

encouraged to adopt all vid rules that apply to all pay-TV providers 

to remedy this situation. What is your position on that? 

Ms. TYKESON. Well, I think the problem with the rules that— 

with regards to the—excuse me, I am a little bit nervous. 

Mr. LATTA. Go right ahead. 

Ms. TYKESON. Some of these rules are only applying to cable 

companies, and they are only applying in the United States. And 

so we are artificially impacting the cost of hardware, and I am not 

in favor of trying to regulate who should be doing what with technology that is changing fast and rules like we have in the ’92 Act 

become outdated and they are impacting the marketplace and how 

it unfolds. 

Mr. LATTA. Thank you very much. 

Mr. Pyne, if I could ask you just a couple questions. I find it kind 

of interesting in your testimony you stated that in cooperation with 

our MVPDs, for example, cable, satellite, and telco distributors, you 

now have—you make live streaming of many of our channels available to subscribers on their tablets and smartphones, and having 

heard, you know, through the testimony today and we hear all the 

time is how things are really changing out there, how people from, 

you know, across the country are getting their information. 

I am just kind of curious, when you talk about, you know, making that live streaming available, you know, on all these different 

channels of subscribers, do you have any breakdown of like the 

ages of individuals or the regions? Is it particular or is this across 

the Nation on the age groups, just out of curiosity, for one? 

Mr. PYNE. On the specific—with our Watch services, I don’t have 

the breakdown. We can certainly look into that. Just to be clear, 

part of the reason we call this TV Everywhere, the industry calls 

it TV Everywhere, and it is really—it is part of the industry’s effort 

to continue to find ways to provide an incredible value package to 

consumers. Just quickly, this week, Michael Powell, who is the 

169 

head of the NCTA, said on stage, you know, the average cost per 

hour of viewing entertainment content is 23 cents. So 23 cents is 

the average cost of viewing, which in terms of entertainment options, he was saying is a very great bargain. I mean, I commend 

companies like Bend, DIRECTV, and others for the great job that 

they have done in creating that value. 

I will tell you that ABC.com, in 2004 when we had such great 

hits as Lost, Desperate Housewives, and Grey’s Anatomy, we found 

that 15 minutes they were off the air, they were pirated around the 

world, so we created a service called ABC.com, which is live 

streaming at that point, and the statistics we found in that is that 

the average age of a linear television was in the earlier 40s, but 

the average age of someone who watched ABC.com was in his or 

her early 30s. So I think that that may give you some indication. 

Mr. LATTA. Well thank you very much, and my time has expired. 

At this time, I recognize the gentleman from Pennsylvania, Mr. 

Doyle, for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman. 

Ms. Burdick and Ms. Tykeson, both of your companies deal with 

retransmission consent as small cable providers, yet you seem to 

have a disagreement on the effectiveness of the regime. Why do 

you think that is? 

Ms. BURDICK. Well as I said, I am the small broadcaster, small 

cable company at either side of the table. There have been some 

remarks today about consolidation of broadcasters. We are small 

fries compared to the consolidation of the video provider world. The 

top four video providers control 62 percent of the market. The top 

10 control 91 percent, so in my negotiations as a broadcaster, I will 

start with a major MVPD with millions of subscribers that says 

you cover in your six markets 1.8 percent of the country. I can afford that churn. So it is a tough business negotiation either way. 

If I spoke as a cable operator, which I am not today, I am speaking 

on behalf of NAB, but the negotiation is equally as tough on that 

side of the table and I think what it proves is that the marketplace 

works. There are thousands—— 

Mr. DOYLE. So as a small cable operator, though, you think it 

works? 

Ms. BURDICK. Yes, we made it work. 

Mr. DOYLE. Ms. Tykeson, you have a different view? 

Ms. TYKESON. I don’t think it works because it is not a free market, so I have a choice of one affiliate in my market, you know, and 

in some cases it is a great affiliate because they provide local news. 

But if we have an impasse, for example, I am given a price I have 

to pay, I don’t have any recourse. I can maybe negotiate a little bit, 

but at the end of the day, that broadcaster can take the channel 

off of my system. So my customers either have to pay the price or 

we go—have to go black with the channel. We can’t bring in another signal during that interim period. 

The other point I wanted to make, in some markets, about 48 

markets around the country, there are broadcasters working together to negotiate with the MVPD or the local operator, and that 

collusion is driving up prices by about 20 percent and making it 

very challenging to negotiate. I don’t think there is any other industry where competitors could work together to collude to come up 

170 

with a solution. I know Ms. Burdick in her testimony said that in 

her market she is not doing that, but my smaller cable constituents 

around the country have had those circumstances that are very disruptive to their customers. 

Mr. DOYLE. Thank you. 

Mr. Pyne, has Disney ever commissioned the purchase of your 

most popular channels on the purchase of your least popular channels? 

Mr. PYNE. No, we have not. In fact, I have signed three affidavits 

attesting to that fact that we do not employ what is commonly 

known as tying. 

Mr. DOYLE. So has anyone ever requested price quotes from you 

for just your most popular channels only? 

Mr. PYNE. Excuse me? 

Mr. DOYLE. Has anyone ever requested price quotes from you for 

just your most popular channels? 

Mr. PYNE. Yes, they have, and in fact, ESPN and ESPN–2, which 

are two of our most popular channels, 15 percent of our cable systems out there only carry ESPN and ESPN–2. 

Mr. DOYLE. Very good, thank you. 

Ms. Tykeson and Mr. Palkovic, how does channel bundling affect 

the types of packages that your companies can offer, and how does 

it affect the prices you charge your consumers? 

Mr. PALKOVIC. Well, with DIRECTV, it is simple. We are offered 

a price for all of the channels with a particular program, including 

retrans. Any offers that would break that down into individual 

pieces are just economic. I think that is intended, so that usually 

doesn’t go anywhere, and you know, you end up with situations 

where even if we could create a package for consumers that was 

affordable that only had in that package enough programming to 

support a price point that they would want, it will run afoul of penetration obligations in those agreements. So you can do it, but you 

end up either having to stop selling that package or you have to 

pay through the nose to the programmers for violating those terms. 

So it is not just a tie-in involving channels, there are penetration 

obligations on the more popular channels that accrue to the rest of 

the suite of services. So it is a tough situation today to deal with. 

Mr. DOYLE. Thank you. Ms. Tykeson? 

Ms. TYKESON. So what that means is if we wanted to have a 

channel down in a lower level—well, usually we don’t, but if say, 

for example, with the basic cable, limited cable, we would be prevented from moving those channels to a higher tier if they are too 

expensive. So we are forcing our customers through—unfortunately, the programmers are—to put these channels in tiers where 

customers don’t want them, and if we pierce the floor, and I think 

that is what Mike is saying, now we are in breach of contract. So 

I have to put these channels in these wide penetrated tiers and 

customers don’t want them. My packages are becoming way too expensive, and it is just not fair for my customers. 

Mr. DOYLE. Thank you, Mr. Chairman. I see my time is up so 

I will submit the rest of my questions for the record. 

Mr. LATTA. Thank you very much. The gentleman yields back, 

and the chair now recognizes the chairman emeritus, Mr. Barton 

from Texas, for 5 minutes. 

171 

Mr. BARTON. Thank you, Mr. Chairman. 

Before I go into my questions, I have a commercial. Tomorrow 

night at I think 7 o’clock, Mr. Doyle’s behemoth of a team, the Ragtag Republicans, and I am scrounging a team together this afternoon to make sure that we can get nine folks to show up, but the 

game is at 7 o’clock and there are a lot of Energy and Commerce 

Members. Mr. Doyle is the manager on the Democrats and I am 

the manager on the Republicans. Mr. Scalise he is our second baseman, so we are hoping—— 

Mr. DOYLE. We will be gentle, Mr. Chairman. 

Mr. BARTON. You what? 

Mr. DOYLE. I said we will be gentle. 

Mr. BARTON. Yes, well we want you to be very gentle. Now if you 

will start the clock I will get into my comments. 

I have three homes, which is unusual: two in Texas and one up 

here. One of them is covered by DIRECTV, one is covered by 

Comcast, and one is covered by Charter Communications. The two 

that are covered by cable, you know, also includes an internet 

package. DIRECTV is just TV. All of those I am paying in the 

neighborhood of $200 a month each. I am really looking at going 

back to the old free TV. I mean, I think it is illustrative when you 

are having commercials show up on cable television that you can 

get an antenna and the government requires free over-the-air 

broadcast. You know, we have got a whole generation of Americans 

who don’t realize that they can get free over-the-air TV. It is like 

it is a new product, and I am about to rejoin going back to the future, because of the cost. 

Now, the last time we did a major cable bill, there was a Republican Congressman named Nathan Deal, and he was hot to trot on 

ala carte pricing. And I discouraged him and—but anyway, we got 

him—we let him have a vote on his amendment. I think he got two 

or three votes. Well he is now Governor of Georgia, but if he were 

still a member of this committee, I think he would get a lot more 

votes. I am not real happy—I understand that I can get 1,000 

channels, but I only watch two or three, and my friends at 

DIRECTV—I know it is not fair to pick on you, but one of the channels that I really, really like to watch is FOX Southwest. It is the 

regional sports channel in Texas. In order to get it, I had to pay 

about 70 bucks for a package, a tiered package of which out of all 

of those the really only one I want to watch is FOX Southwest. 

So I am not sure—I haven’t talked to Mr. Walden or Mr. Upton. 

I don’t know what their personal views are on reauthorization, 

whether they want to reopen it or they just want a so-called clean 

bill. But if they want to go beyond a clean reauthorization, I am 

very willing to look at the basic tenets and revisit it, because to the 

average American family, 200 bucks a month is a significant 

amount of money and it is—that is about—in three locations. Now 

that does, in two of the three, includes an internet package. It 

doesn’t in the TV package for DIRECTV. So that is just something 

as an observation. 

My question I am going to go to Mr. Singer here, because he 

seems to be the economist neutral man here. Retransmission consent was meant to be a level playing negotiation between a local 

broadcaster and a local cable operator. And in many cases, the local 

172 

cable operator was a national cable operator. It wasn’t somebody 

like Mrs. Tykeson, who has a local system. But apparently now, retransmission is becoming a national negotiation between a broadcast network where the local affiliate yields to the national network, who then gets a fair amount of the retransmission package 

if there is compensation. That was not the intent of the Congress, 

at least, that is not my recollection. So I would like Mr. Singer’s 

comments on this, how retransmission has evolved and if he has 

a solution, if he thinks it needs to be changed, what would he go 

to? 

Mr. SINGER. Sure. Thanks for putting that to me, and I will try 

to be fairer than them all. But the point is that economics or the 

way that economists think about things, is there a market problem? Is there, say, vertical integration that can distort incentives 

relative to an independent in this situation? When I look at this 

problem, I see two behemoths on both sides of the bargaining table. 

And in this situation, you will get some failures in a sense that 

deals won’t be struck. But there isn’t a very solid basis, at least in 

economics, for regulatory intervention in those circumstances. It 

seems to me that—and this is an important caveat—so long as the 

copyright is protected on the broadcaster’s side, we should just let 

those guys basically beat each other over the heads until they come 

to the right price. 

Mr. BARTON. So you don’t see a problem with the current law? 

Mr. SINGER. I think that there is—again, what I have seen put 

on the table, I think, in Mr. Manne’s testimony is that if we fix the 

copyright issue we can repeal the law and let market forces dictate 

the outcomes. 

I do see problems, I just want to say, in terms of the size of the 

package that you mentioned before and I am sympathetic to that, 

but on this issue of whether or not government should lean in and 

put their hand on the scale of a negotiation between two large 

players on both sides of the equation, that doesn’t have a very 

strong basis in economics. 

Mr. BARTON. OK. Thank you, Mr. Chairman. 

Mr. LATTA. Thank you very much. The gentleman yields back, 

and at this time the chair recognizes the gentleman from New 

Mexico, Mr. Lujan, for 5 minutes. 

Mr. LUJAN. Thank you very much, Mr. Chairman. 

Mr. Barton, I almost want to yield you more time to get to some 

of those questions as well, sharing some of those concerns, especially with the rural district that I represent. 

I guess a question to Mr. Palkovic, Mr. Pyne, and Ms. Tykeson, 

along the same lines, last year the FCC released its annual survey 

of cable industry rates and found that prices from 1995 to 2011 

time period increased by an annual rate of 6.1 percent, compared 

to only 2.4 percent increases in the overall consumer price index. 

To what factors do you attribute those causes, especially as we talk 

about the impact of programming to many of our consumers? 

Mr. PALKOVIC. Sure. I think DIRECTV in recent years has been 

going up annually about 4 percent with our customers all in, and 

just to kind of put it in some context, over 40 percent of our costs 

are costs paid directly to the programmers, to the content holders, 

and their prices have gone up double digits, so you know, when 40 

173 

percent of your costs are going up 10 percent and we can only get 

4 percent from our consumers, because we still have to operate in 

a competitive environment, we are not making any money on this. 

So all the other operating costs we have for satellite and broadcast 

centers and overhead and customer service—and we are a huge believer in providing, you know, the best customer experience, we are 

eating those costs because all the money that we are getting annually is going directly to the content holders. So if people think that 

we are, you know, out there making money on these increases, we 

are not. 

Mr. PYNE. I think—— 

Ms. TYKESON. So in our case, programming is the number one 

cost for my company. Our expenses for programming are going up 

twice as fast as our revenue from video product. I wanted to also 

just comment on Congressman Barton’s point, because what we 

have now is this shifting in the power. We are negotiating— 

MVPDs like Mike’s company and my company are negotiating with 

a single broadcaster in a market, so this is the only example I can 

think of where you have more competition and higher prices, and 

it is because I don’t have any place to go besides to those broadcasters or programmers to get that particular content. 

Mr. LUJAN. Mr. Pyne? 

Mr. PYNE. If I may just say something on programming costs. 

First of all, I want to make one point clear is that at the Walt Disney Company, we only own eight television stations so when we negotiate retransmission consent, we only negotiate for those eight 

stations. It sounds like there is a belief that all the local broadcasters are puppets in some way. Believe me, there is a great exchange of dialog between local broadcasters who are affiliates and 

us in terms of whatever the appropriate exchange of value, but you 

know, they are the ones that drive that local decision and that local 

negotiation. 

You know, we at the Walt Disney Company spend billions of dollars every year in creating great content. I said earlier that, you 

know, for ABC alone it is $3 billion a year, but we always—whatever the service, we always are looking to make our networks 

must-have. I wish it were as easy to call down to the local store 

and say here, I would like to order two hits, but the investment 

and the risk in developing that content is huge for us, and ultimately, we are looking, in terms of our negotiations, to find, you 

know, a fair way of reaching terms with whomever our distributor 

is. 

You know, one of the advantages that small rural cable systems 

have is something called the National Cable Television Cooperative, or NCTC, and in that case for all of our cable networks, 

ESPN, Disney Channel, ABC Family, we negotiate—and 

BendBroadband is a member, you may be a member, too—we negotiate as if they are the fifth—eight million subs, they represent 

eight million subscribers, and we negotiate as if they are the fifth 

largest MVPD. 

Mr. LUJAN. Mr. Pyne, I am sorry, I am going to have to just jump 

in here because I am going to lose all my time here. 

Mr. PYNE. Sorry. 

174 

Mr. LUJAN. But I would love to get that maybe in a written way 

and we will get that resubmitted. 

Ms. Burdick, I am sympathetic to a comment that you made in 

your prepared testimony that you are concerned that local communities could lose access to local programming. I think that we 

would both agree that access to local news, local programming is 

critically important. But I want to talk to you about something that 

is broken. I represent a district where many of my constituents 

can’t receive local programming because of the DMA that they are 

in, and I would like your opinion on what we can do to make sure 

that we are including orphan counties to get this done, because if 

not, I want to work with my colleagues to find a way to fix this. 

Since I have been in Congress I have been asking for help in this 

area and I have not found anyone willing to help me out to get this 

fixed. 

Ms. BURDICK. Well, I can tell you the head of the NAB, former 

Senator Smith, was successful on the Senate side in finding some 

fixes there, and we will be glad to work with you. Broadcasters 

want local citizens to have local programming, and we would be 

glad to work with you. 

May I take just a minute to address a couple of the comments 

here? I think you raised something that was really important 

where you quoted cable rates from 1995 on. The fact of the matter 

is broadcast retransmission consent has only existed since 1992, 

and from a practical basis, it was really not until the late ’90s or 

2000 that most broadcasters began successfully negotiating for pennies of every programming dollar to support local news and information. The cable rates have been going up in a larger percentage 

long before broadcasters were being paid for the most popular content on cable systems. 

Mr. LUJAN. Mr. Chairman, I know my time is right now, but as 

I look for some assistance to get this done, some of my savvy consumers, all they do is they go and get a post office box out of a metropolitan area in the middle part of the State, the largest city of 

Albuquerque and then once they send that bill to their satellite 

provider, then I will be darned, they get local programming. You 

know, if it is not against the law, we need to make this work somehow. This is just ridiculous. These are farmers and ranchers that 

are in isolated areas that want local programming, want to know 

what is happening in the State that they are proud to belong to, 

and we’ve got to get this thing fixed. 

Thank you very much, Mr. Chairman. 

Mr. LATTA. The gentleman yields back his time, and at this time 

the chair recognizes the gentleman from Louisiana, Mr. Scalise, for 

5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate that and 

enjoy the testimony. 

I want to start with Mr. Palkovic. In your testimony you had 

stated that competition normally drives down prices, but here the 

Congressional Research Service recently put it that ‘‘Ironically the 

market consequence of greater competition in the distribution of 

video programming appears to be greater negotiating leverage for 

the programmers with popular and especially must-have programming, resulting in higher programming prices that MVPDs tend to 

175 

pass through at least partially to subscribers.’’ How do you believe 

government regulation has contributed, if at all, to the findings 

that we saw from the Congressional Research Service? 

Mr. PALKOVIC. Well, I think it gets back to the tying and bundling of the retransmission consent rights that broadcasters have 

that are tied to the 1992 Cable Act, coupled with the consolidation 

of programming that has taken place since that time. Right now, 

there are six major companies that control the majority of programming. They are not all broadcasters, but four of them are broadcasters, and they behave somewhat differently depending on who 

they are. But when they bundle all of their content together, even 

the content that is less desirable that people should be allowed to 

choose in more niche packages, in exchange for a very much high 

in demand programming, they really just point the gun at your 

head and say you got to take it or leave it. What makes it even 

worse is when they throw blackouts on top of that, so it sounds like 

it is a free market situation, but underlying that are all the protections they have for the local broadcast channels. And it may not 

be the smaller mom and pops, that may be a more direct kind of 

traditionally fair discussion, but these large conglomerates are basically using all the rights they have with the Cable Act and 

leveraging that against distributors and driving the prices up. 

Mr. SCALISE. Let me ask Mr. Pyne, I know when you talk about 

the different services that your company provides, you know, my 

kids would probably have a revolt if the Disney Channel or Disney 

Junior went off the air. I would probably have a revolt if ESPN 

went off the air. If there was a repeal of retransmission consent, 

but also tied in with the repeal of compulsory copyright license, 

which I know legislation I brought forward would do—and usually 

the compulsory copyright components are often left out of the conversation. Wouldn’t you just revert back to a normal, as Mr. Manne 

described it, a normal copyright negotiation where you would have 

two parties that would still be sitting at a table negotiating, but 

in this case the consumer demand would be driving a negotiation 

that would still be based on a mutually agreed upon price? 

Mr. PYNE. We don’t support the repeal of both the retrans and 

compulsory copyright. Clearly in that discussion there are some 

things of interest to us in terms of the economic discussion, but we 

don’t support the repeal of retransmission consent for the reasons 

I cited. I think in full candor, one of the reasons is the potential 

uncertainty we view that could take place in the marketplace. You 

know, from our perspective and certainly from other broadcast perspective, we believe the system is working in terms of the negotiations. Yes, there are disruptions. There are not officially blackouts 

because broadcasters are still broadcasting their signal, and as in 

any negotiation in the current system—I have personally been involved in two. One is when Time Warner dropped ABC in 2000, 

and then in 2010 when we dropped Cablevision. In the first case 

it was resolved in 36 hours, in the latter—and that was just ABC, 

by the way, it was not other networks—and the latter resulted in 

20 hours of ABC being off the air and we reached a resolution. 

Mr. SCALISE. Thanks. One of the earlier—when I did my opening, 

the reason I held up the brick phone, you can find these on the 

Internet still, which we were able to do—it doesn’t work. I can’t get 

176 

it to work. But the laws that were written during the time when 

this was the technology—and I brought up the Aereo case earlier 

and I appreciate that there is ongoing litigation, you can’t talk 

about it here. But if you look just a few weeks ago, the head of CBS 

actually did chime in on his and indicated that they are right now 

in talks with pulling CBS down and going to a cable format. Now, 

probably unlikely that it gets to that, but the fact that CBS, one 

of the major broadcasters, is right now talking about the possibility 

that if this court case goes a different way, that they could pull 

down their local broadcast signals and just go to a pure cable format tells you the marketplace has changed dramatically because of 

technology, and yet the laws don’t cover that. So I want to finish 

with a question to Mr. Manne, how do you view this marketplace 

as it is evolving in the context of laws that were written in 1992 

that really haven’t been updated, though the technology has 

changed dramatically? 

Mr. MANNE. We had amazing progress in this market, despite 

the fact, as I pointed out in my testimony, but clearly suboptimal 

rules here. I think in particular when I hear all this discussion 

about high prices for must-have content and all the talk about bundles, I think Hal and I seem to substantially disagree about this. 

What I hear is that there are pieces of the existing regime—we 

have talked about them, starting as you and I both agree with the 

compulsory license, but going through all of the many we have 

mentioned today, that do dramatically, I think, impair the free contracting among the various parties here and probably do affect 

price, but it is also really important that at the end of the day, you 

do have to pay a price for things like things that you must have. 

If you really want something, you usually have to pay more for it, 

and especially when it comes to the availability of content, and that 

means both the production of the content and the distribution of 

it, you know, I see this incredibly vibrant market with more content than we have ever had, more avenues of distribution than are 

imaginable, and the fact that the particular business model by 

which they are distributed, in some cases, for example, bundled, 

that doesn’t foreclose access to all of this wonderful content. That 

is not how it works. And because it doesn’t work that way, I see 

it as a valid business decision that these content owners and the 

distributors that they negotiate with have made to actually maximize the production of that content. That may cost a little bit 

more—seem like it costs more, because you have to pay more, for 

example, the bundle, but that has generated such a proliferation of 

content and again, distribution mechanisms for it that we have this 

really remarkable market that could be even better, because there 

are such easily identifiable problems with the regulation of it that 

we could dispense with it. 

Mr. SCALISE. Thank you. Appreciate it, Mr. Chairman, and I 

yield back the balance of my time. 

Mr. LATTA. Thank you very much. The gentleman yields back. At 

this time now, the chair recognizes the gentleman from Utah, Mr. 

Matheson, for 5 minutes. 

Mr. MATHESON. Thanks, Mr. Chairman, and I do appreciate the 

panel today. I find this to be a rather thoughtful and informative 

177 

hearing, which I wish that was always the case, but this is a really 

good one today. So I appreciate all of your input. 

I had a couple of questions. There are so many issues out there, 

but Ms. Burdick, I wanted to ask you, there is a suggestion that 

has been put out by some folks that there is a situation where outof-market programming could be allowed during retransmission 

consent disputes. If that happened, could you tell me what the impact would be on your company if that happened during a retransmission dispute? 

Ms. BURDICK. Sure. I will give you one line and then I will elaborate. Imagine what it would have been like in Moore, Oklahoma, 

had distant signals been broadcast the day of the tornadoes. Imagine what it would have been like. 

We as local broadcasters are providing local news, weather, and 

sports services that are not duplicated by anyone else, and the fact 

of the matter, as the panelists have alluded to us is must-have programming because it is watched more on their cable systems or 

satellite systems than any of the channels that they provide. You 

have to go to a CW, a My Network station, over-the-air that even 

gets close to the top-rated cable network, so we are providing important content. If a local signal—if a distant signal was allowed 

to be imported, a couple things would happen. There will be more 

disputes, not less, that will last longer because there is no incentive 

for the cable or satellite operator to solve that dispute. They are 

bringing in a signal they are not paying for, so why would you 

reach a resolution with a local content provider to pay for that content, number one. At the second time, they would be shrinking my 

market area. I would be losing eyeballs. When I lose eyeballs, I lose 

advertisers. When I lose advertisers, I lose dollars. The only place, 

as Ms. Tykeson rightly refers to, cable’s highest programming 

cost—cable’s highest cost is programming. Mine, as a local broadcaster, is people doing news and local information. When I lose revenue, that is the only place I have to go to control my cost, and 

that would be the impact. Less news, less local information. 

Mr. MATHESON. Thank you. 

Ms. Tykeson, you talked about in your testimony how your costs 

for your consent fees have gone up over the last few years. Roughly 

how much of your—what is your breakdown of how much your programming dollar breaks down between what is broadcast and what 

is not? 

Ms. TYKESON. So the—I would say—— 

Mr. MATHESON. Sorry, could you turn your mike on? 

Ms. TYKESON. Sorry. 

Mr. MATHESON. Thank you. 

Ms. TYKESON. The prices for retransmission consent are growing 

at a faster rate than the costs for my other kinds of programming, 

but both are going up by significant amounts. I would say with 

these recent rounds of retransmission consent negotiation, probably 

doubling and tripling each cycle. And then in addition, with the 

large bundles of programming that I am required to offer because 

there is not a system that allows me to offer smaller packages to 

my customers, each time those negotiations come around, my costs 

are going up, in some cases, by 20 to 30 or even more, depending 

on what is being required of me in terms of moving some of those 

178 

channels down, offering more channels, and then also taking double or triple the cost of inflation increases on each one of those 

channels that we provide to our customers, and we have to, in accordance with those agreements. 

Mr. PYNE. Can I make one clarification, please, and I have heard 

this several times. I think I stated earlier that we don’t employ 

tying. Like other businesses, we do offer packages of programming, 

but I guess I will say three things. Number one, clearly we spend 

an inordinate amount of time, energy and money in developing 

must-have programming, and that is from the very top of our company, creative excellence. Two is, you know, when a channel 

doesn’t do very well, we, in fact, change it, so recently Soapnet, 

great channel in the 2000s, its popularity has waned, so we could 

have just tacked on another channel and added more, but in fact, 

we are switching out Soapnet and launching Disney Junior, which 

has incredible programming, and third, if I may finish, you know, 

we would love all of our channels to be 100 percent penetrated. We 

have a portfolio. We love them. But in fact, even on 

BendBroadband, our ESPN news channel is only penetrated 18 

percent, Disney Junior 49 percent, and on DIRECTV, ESPN 

deportes is only penetrated 6 percent. And finally, we have—and 

we understand that. That was a negotiated deal through fair market terms. And finally, you know, we have done as a company over 

the last little over 2 1⁄2 years seven of the top ten deals with major 

companies, with smaller companies, ranging from Cox Communications to Cablevision, to AT&T, and certainly Comcast. We have 

done deals that after 30 years of negotiating in the marketplace— 

and I have been doing this for 21 years—I think we have established standard rates and standard terms. 

Ms. TYKESON. If I may just add, because my neighbor here mentioned the National Co-op, which is an opportunity for companies 

like BendBroadband to participate, but some of the problems with 

the rules that we currently are operating under is the co-op is not 

really treated truly like a large distributor, so the prices that are 

offered to the co-op members, and terms in particular, are different 

and in most cases, it costs more or there is more stipulations and 

terms that are not attractive or as attractive as a large distributor 

might be able to get. Thank you. 

Mr. MATHESON. Thank you. I appreciate everyone’s comments. 

Mr. Chairman, I yield back. 

Mr. LATTA. Thank you very much. The gentleman yields back, 

and the chair now recognizes the gentleman from Vermont, Mr. 

Welch, for 5 minutes. 

Mr. WELCH. Thank you very much, Mr. Chairman. This is a 

great hearing. I was on the committee two Congresses ago and 

then I was off last committee, and I am back. And things are pretty 

confusing for consumers, anyway. You know, I find this to be a 

very excellent hearing and really appreciated your testimony, and 

Mr. Chairman and ranking member, it is fabulous to be here. 

But you know, the work that everyone is doing is so important, 

and how you do it and what the market requirements are in order 

to have the revenue stream in order to do it obviously is essential, 

and we are talking about this in the context of satellite reauthorization, which Congress has successfully done. But the kind of eleVerDate Nov 24 2008 15:14 Feb 27, 2014 Jkt 037690 PO 00000 Frm 00184 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-52 CHRIS
179 

phant in the room that has been alluded to, but not directly addressed, is the Cable Act of 1992. I mean, the world is totally different. The revenue models are totally different. The consumer 

needs and opportunities are completely different, and it is raising 

the question in my mind as to whether or not, in fact, there needs 

to be a serious revisit of the Cable Act of 1992. 

In my office, I have had many of you or people in your sectors 

of the very challenging industry come in and talk about what they 

perceive as problems with the status quo, some people saying the 

status quo is the right way to go, but that is very much in contention, and we are even hearing that amongst you. And the bottom 

line—and I don’t have any answers—is that somehow, some way 

we have to figure this out and do it in a coherent approach where 

there is an acknowledgment that there are new tensions. I mean, 

just think about the things we have heard tonight—this afternoon. 

Mr. Lujan talking about the orphan counties and not being able to 

make any progress. What I hear about a lot is from my consumers 

and the cost of this, and Mr. Latta, I really appreciate your leadership. We started a rural caucus to try to figure out how we can 

help folks in rural America basically get a fair shake on this. The 

dilemma here from my perspective is that the consumers just don’t 

have any power to affect the outcome, but they are feeling the pressure of these high bills. They need the services you provide. They 

benefit from the content that you create. They certainly benefit 

from local broadcasting. We had Tropical Storm Irene, and the lifeline for us was local radio and local television. But on the other 

hand, they have no control over what that bill is. They get all these 

channels that they never watch, you know. They kind of wonder 

why these baseball players are getting $230 million contracts and 

they can’t swing a bat anymore. And you have got a revenue model 

where basically there is no liability for the general manager who 

makes the deal, because they can just pass it on to the cable subscribers. People are getting kind of fed up with that, right? 

So you know, Mr. Chairman and ranking member, I just wonder 

whether it is time for us to not only look at the satellite STELA, 

but to look at the Cable Act of 1992 and understand that it has 

got to come out in a way where the competing interests and needs 

require a solid and stable revenue stream in order to provide the 

benefits to consumers, but the consumer has to be part of the equation. 

So I am just going to go down the line and ask whether a revisit 

of the Cable Act, in your view, makes some sense, aside from the 

fact that everyone always fears that whatever can go wrong will go 

wrong if Congress starts trying to change anything. So I get that 

part, all right, but let’s start with you, Mr. Palkovic. 

Mr. PALKOVIC. Sure. Obviously we came here to address, you 

know, the topic of STELA, but I think it is safe to say that the 

common theme here is that the rules are old, they need to be revisited. It can be a little bit overwhelming to think about how difficult 

that would be. We tried to come up with solutions that were anywhere from, you know, the total deregulation approach where everybody gives up all their rights, and quite honestly, including us, 

we put the good and bad on the table and start over. Two more targeted approaches to take care of the things you pointed out that 

180 

are directly evasive to the consumer, because that is really the 

problem we have is when you use the consumer with blackouts and 

other tactics like that to deal with your free marketplace negotiations, that is where we think they have kind of gone over the line. 

But yes, I don’t think there is any question of revisiting—— 

Mr. WELCH. My time is about up, but I just would be interested 

in a short reaction to whether revisiting the Cable Act makes some 

sense. Go ahead. 

Mr. PALKOVIC. Pardon me? 

Ms. BURDICK. Do you want us to continue or respond later? 

Mr. WELCH. Well you can respond later, but a yes or no might 

be helpful now, because I am out of time. We have got a very generous chairman here, but I don’t want to wear out his patience and 

good will. 

Mr. LATTA. Well, if you just want to go down the line and answer 

a yes or no question, go right ahead. 

Mr. WELCH. Just yes or no. 

Ms. BURDICK. I can’t answer it yes or no. 

Mr. PYNE. Me as well. 

Ms. TYKESON. I would say yes, and also provide a written response, but that will take time, so I would go for some additional 

fixes now, some of which I have mentioned. Thank you. 

Mr. SINGER. I think that there is still a valid need for the program access and program carriage protections in the Cable Act, but 

aside from those, I think it would be worthwhile revisiting the larger picture. 

Mr. MANNE. I think absolutely. In fact, I don’t think you can 

really address STELA without addressing those other parts. I 

would just say that when you do, the most important thing is—I 

disagree, of course, with Hal about program access and program 

carriage, but the most important thing is to understand how your 

regulations can avoid enshrining, you know, the particular contractual arrangements we may have today as though those are the only 

possible revenue models or anything else. I think that is what has 

happened and really fundamentally—— 

Mr. WELCH. OK, thank you very much, and Mr. Chairman, 

thank you. 

Mr. LATTA. Thank you very much. The gentleman yields back 

and the chair now recognizes the gentleman from Colorado, Mr. 

Gardner, for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and thank you to the 

witnesses for your testimony today. Listening to the opening comments, listening to the questions, I think there is no doubt from the 

members here, the witnesses here today that the rules governing 

today’s video marketplace were crafted 21 years ago, a very long 

time ago. In fact, none of the rules currently apply to some of the 

latest Internet competitors in the video space. So with these dramatic changes that have occurred in the video marketplace, I think 

we have got a great opportunity before us to examine what has 

changed and how current laws can help or hinder advancement of 

the free market and market innovation. I know the broadcast industry believes the system is working, and many others disagree. 

The rise in programming costs and retransmission consent disputes 

indicates that there are issues that we need to look at. 

181 

So to DIRECTV, I would ask this question. Mr. Palkovic, is that 

right? 

Mr. PALKOVIC. Palkovic, yes. 

Mr. GARDNER. Palkovic. Why do you think STELA is the right 

vehicle to move forward with the discussion of how to change regulations in the video industry? 

Mr. PALKOVIC. Well, I think STELA has proven to be a very, very 

important and appropriate piece of legislation for us. We obviously 

have a number of things that benefit consumers in that Act. We 

certainly wouldn’t want any of that to change, particularly taking 

away programming from a million and a half customers without 

really—I don’t see any benefit to the broadcasters of doing that, 

other than potentially hurting the satellite industry, but it will disenfranchise those customers. So since we are in the process of reauthorizing that to the extent we can have any even minor changes 

like the blackout issue addressed, and we thought it was appropriate. 

Mr. GARDNER. Ms. Burdick or Mr. Pyne, why do you think 

STELA is not the right vehicle to move forward with the discussion 

of how to change regulations in the video industry, and could you 

address Ms. Burdick’s question—testimony that notes that TV stations are underpaid in terms of retransmission consent dollars? 

Ms. BURDICK. Well, I think that was evidenced again today when 

Representative Matheson asked the question specifically how much 

of a cable programming dollar goes to local stations? It wasn’t answered. We continually get this percentage on retransmission consent, and math was never my strong suit, but when you start from 

zero—— 

Mr. GARDNER. Don’t work for the IRS. 

Ms. BURDICK [continuing]. It always looked pretty big. The fact 

is that broadcast programming is the single highest viewed programming on any satellite or cable system, yet the compensation 

we receive for producing that program is miniscule compared to 

some of the other providers. 

I haven’t said anything as the term blackout has continued to be 

used today, and I would just like to underscore one issue. These 

are contractual negotiations and relationships, and when we reach 

an impasse, we are still on television. We never go away. I hope 

Representative Barton does take a look at what is available now 

free over-the-air since he last looked. It may be 20 or 30 stations, 

free over-the-air, different kinds. Cable is not asking you today 

with STELA that if they reach an impasse with HBO or AMC to 

be able to import that from another cable system, so why should 

it—why should they be allowed to import a broadcaster? 

Mr. GARDNER. Mr. Pyne, do you have anything to add to that? 

Mr. PYNE. The only thing I would add is in terms of why we are 

comfortable with sunsetting STELA is that we believe the fraction 

of affected Americans—and we are trying to understand the exact 

number—but it is small enough that through private contract or 

private negotiations we could actually find a solution with the satellite companies. 

Mr. GARDNER. Thank you. Broadcasters referred to retransmission consent negotiations as a free market and asked the government to refrain from intervening, yet many on the panel have 

182 

argued today in some questions that there are a number of government mandates that prevent the market from being free, such as 

retransmission consent, compulsory copyright, basic tier placement, 

required tier buy through for cable, network non-duplication, and 

syndicated exclusivity. They further argue that broadcasters can 

decide which MVPDs carry their content, but MVPDs can’t choose 

which market to get their programming from. And so if I could just 

start down the panel at the end—and I am going to run out of time 

quickly and I have some other questions here, but please explain 

why you think the regime is or is not a free market. 

Mr. PALKOVIC. Well, I think to be concise here, I think the broadcasters are combining their rights to carriage in a local market and 

they are leveraging those rights with all the other cable content 

that they have acquired over time, and they know that at the end 

of the day, using tactics like blackouts, bring the consumer into 

play and put the onus on the distributors to deal with the consumers, because they don’t deal with the consumers, we do. 

Ms. BURDICK. I will let Mr. Pyne answer one of the other issues. 

I will take a small chunk of that, and that is in all of the regulation, whether it was copyright or the Cable Act, what Congress 

wisely recognized is the value of localism and protecting local markets in a marketplace that supports local news and information. 

That still has to be recognized, because if local broadcasters aren’t 

providing those lifeline services and local news, weather, and 

sports, who else will do it? 

Mr. PYNE. In terms of retransmission consent, we view that as 

a mechanism of actually entering into negotiation, and I think one 

of the tenets of our business is we spend a lot of money in creating 

content, and we want to be able to, you know, get an appropriate 

return on that content. Remember, when you do retransmission 

consent you only—you enter into negotiation and you can either 

reach an agreement or not. 

And just to be clear—and I have said this before—and I know we 

are—ABC is one of the big four broadcasters, but when we negotiate retransmission consent, we are not negotiating for the country, we are negotiating for our eight owned stations and those local 

markets only. I just wanted to be clear about that. 

Ms. TYKESON. Although those markets represent a huge percentage of the United States. 

Mr. PYNE. It is actually—to be clear, it is only 23 percent of the 

United States, which is smaller than any of the other broadcast 

groups. 

Ms. TYKESON. So I would—to answer your question, I would say 

that it is not a free market. In Bend, Oregon, I have one broadcaster to negotiate with. That is it. If we can’t come to an agreement on the price—and by the way, we have paid in other ways 

over the years in terms of launching additional channels and meeting other demands. So while it is true that retransmission consent 

fees have started recently, there were lots of other demands before 

that. So we don’t have a free market. I don’t consider $6 billion to 

be miniscule in terms of what consumers are paying for this programming. If we come to an impasse, really I have two choices. 

One is to take—to pay the price and pass that along to my customers, or the channel is blacked out. 

183 

Mr. PYNE. Can I just address very quickly—— 

Mr. GARDNER. If I could interrupt. Mr. Chairman, I don’t know— 

I am out of time so I don’t know. It is up to you if you want the—— 

Mr. LATTA. If you can finish up in about 30 seconds. 

Mr. GARDNER. Yes, so if I could just ask quickly to run through 

the rest of the panel members, and Mr. Pyne, we can catch up after 

this, but let’s finish with the rest, Mr. Singer and Mr. Manne, if 

you don’t mind quickly? Thank you. 

Mr. SINGER. Sure. I don’t think allowing broadcasters to be compensated for the signals is what is driving higher prices of the 

cable packages. I think it is bundling, and you put your finger on 

that. One of the things that you really haven’t put your finger on 

yet that I just want to draw your attention to is vertical integration. I just released a study on the review of network economics 

showing that when a regional sports network, an RSN, is owned 

by a cable operator it charges more than independents, and the 

premium increases with the downstream market share of the 

vertically affiliated cable operator. So I just think it is important 

to focus everyone’s attention on what is driving the prices higher, 

and the fact that broadcasters are allowed to seek compensation for 

their signals is not one of them. 

Mr. GARDNER. Mr. Manne? 

Mr. MANNE. It is not vertical integration, either. Vertical integration has been decreasing over the relevant time period, and with 

all due respect to Hal, we have a pretty substantial disagreement 

over how much vertical integration can really impact the prices like 

that. And I don’t think it is nearly as substantial as he thinks. I 

think if there were really a free market, all of these supposed—and 

very real, actually, benefits from local broadcasters wouldn’t need 

to be mandated by law. The customers and distributors would willingly purchase them, but that may not happen without a particular 

mandate suggests that it is not, indeed, a free market. 

Mr. GARDNER. Mr. Chairman, thank you for your indulgence. 

Mr. LATTA. Thank you very much. The gentleman’s time has expired, and I just want to thank on behalf of Chairman Walden and 

also Ranking Member Eshoo and myself for all of your testimony 

today, and your answers. We really appreciate it. It is very, very 

informative, and on behalf of the committee, I just again say thank 

you. Seeing no other questions to come before the committee, this 

committee stands adjourned. 

[Whereupon, at 12:48 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Today the Subcommittee on Communications and Technology continues its examination of the law authorizing satellite operators to retransmit broadcast television 

signals. Portions of the law, first passed a quarter of a century ago, expire at the 

end of next year. 

I think it is an important exercise to be required to periodically examine that law. 

A lot has changed in the video marketplace since it was first passed in 1988. Satellite television providers are no longer new kids on the block. And cable operators, 

once the commanding presence in the pay-TV sector, now face competition not just 

from satellite providers, but phone companies and the Internet as well. 

We have a year and a half before we must decide what action to take. Let’s use 

that time to make sure we hear from viewers and stakeholders about the actions 

we should consider, those we should not, and the implications of both. Today is our 

184 

second of what will be a thoughtful series of hearings as we pursue the appropriate 

policies. 

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