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THE FUTURE OF VIDEO 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMUNICATIONS AND 

TECHNOLOGY 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 27, 2012 

Serial No. 112–155 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

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 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

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 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

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 

SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

GREG WALDEN, Oregon 

Chairman 

LEE TERRY, Nebraska 

Vice Chairman 

CLIFF STEARNS, Florida 

JOHN SHIMKUS, Illinois 

MARY BONO MACK, California 

MIKE ROGERS, Michigan 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

BRETT GUTHRIE, Kentucky 

ADAM KINZINGER, Illinois 

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 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan (ex officio) 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

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

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

Prepared statement .......................................................................................... 4 

Hon. Lee Terry, a Representative in Congress from the State of Nebraska, 

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

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement .................................................................................... 9 

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

opening statement ................................................................................................ 13 

Prepared statement .......................................................................................... 15 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 16 

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

Tennessee, opening statement ............................................................................ 16 

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

California, opening statement ............................................................................. 16 

WITNESSES

Robert W. Johnson, Chief Executive Officer, Sky Angel U.S., LLC .................... 18 

Prepared statement .......................................................................................... 21 

Gigi B. Sohn, President, Public Knowledge ........................................................... 33 

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

Answers to submitted questions ...................................................................... 155 

David Hyman, General Counsel, Netflix, Inc. ....................................................... 53 

Prepared statement .......................................................................................... 56 

Answers to submitted questions ...................................................................... 157 

Jim Funk, Vice President, Product Management, Roku, Inc. .............................. 61 

Prepared statement .......................................................................................... 63 

Michael K. Powell, President and Chief Executive Officer, National Cable 

and Telecommunications Association ................................................................. 66 

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

Answers to submitted questions ...................................................................... 160 

David Barrett, President and Chief Executive Officer, Hearst Television, Inc. . 83 

Prepared statement .......................................................................................... 86 

Answers to submitted questions ...................................................................... 169 

Charlie Ergen, Chairman, DISH Network, and Chairman, EchoStar ................ 111 

Prepared statement .......................................................................................... 113 

Answers to submitted questions ...................................................................... 174 

Michael P. O’Leary, Senior Executive Vice President, Global Policy and External Affairs, Motion Picture Association of America, Inc. .................................. 117 

Prepared statement .......................................................................................... 120 

Answers to submitted questions ...................................................................... 175 

SUBMITTED MATERIAL

Letter, dated June 26, 2012, from Gary Shapiro, President and Chief Executive Officer, Consumer Electronics Association, to Mr. Walden and Ms. 

Eshoo, submitted by Mr. Terry ........................................................................... 6 

Report, dated June 13, 2012, ‘‘Broadcaster Retrans Blackouts 2010–-2012,’’ 

provided by American Television Alliance, submitted by Ms. Eshoo .............. 10 

Letter, dated June 25, 2012, from Paul Porter, Co-Founder, Industry Ears, 

et al., to Julius Genachowski, Chairman, Federal Communications Commission, submitted by Mr. Rush ............................................................................... 149 

Page

IV 

Report, dated March 3, 2011, ‘‘Section 257 Triennial Report to Congress 

Identifying and Eliminating Market Entry Barriers For Entrepreneurs and 

Other Small Businesses,’’ Federal Communications Commission, submitted 

by Mr. Rush 1

1 Internet link to the report is on page 152. 

(1) 

THE FUTURE OF VIDEO 

WEDNESDAY, JUNE 27, 2012 

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

The subcommittee met, pursuant to call, at 10:06 a.m., in room 

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

(chairman of the subcommittee) presiding. 

Members present: Representatives Walden, Terry, Stearns, 

Shimkus, Bono Mack, Blackburn, Bilbray, Bass, Scalise, Guthrie, 

Kinzinger, Barton, Upton (ex officio), Eshoo, Markey, Doyle, Matsui, Barrow, Christensen, Rush, DeGette, Dingell (ex officio), 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; Debbee 

Keller, Press Secretary; Peter Kielty, Associate Counsel; Nika 

Nour, NewMedia Specialist; Katie Novaria, Legislative Clerk; 

David Redl, Counsel, Communications and Technology; Charlotte 

Savercool, Executive Assistant; Tim Torres, Deputy IT Director; 

Lyn Walker, Coordinator, Admin/Human Services; Jean Woodrow, 

Director, Information Technology; Phil Barnett, Democratic Staff 

Director; Shawn Chang, Democratic Senior Counsel; Margaret 

McCarthy, Democratic Professional Staff; Roger Sherman, Democratic Chief Counsel; David Strickland, Democratic Counsel and 

FCC Detailee; and Kara van Stralen, Democratic Special Assistant. 

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

Mr. WALDEN. I call to order the Subcommittee on Communications and Technology, and certainly welcome our panelists, witnesses who are here today. We very much appreciate your willingness to come and share your thoughts on the future of video. This 

is one of a series of hearings that we have organized, the first 

being future of audio and now future of video, and I imagine we 

will do future of data as well, and later in July we will have all 

five FCC commissioners here now that it is up to full functioning 

status, and so we look forward to that hearing as well as we look 

at these various rules and laws that have been on the books for a 

long time, and in an era when the marketplace continues to evolve 

and change dynamically and in a very rapid way. 

2 

The FCC regulates traditional video providers based on a bygone 

era. When Congress passed the 1992 Cable Act, for example, cable 

operators controlled 98 percent of the pay TV distribution market 

and were affiliated with 53 percent of the national program networks. 

That law was meant to spur competition. It worked. Nationwide 

satellite TV providers DISH and DirecTV now control approximately one-third of the market and are the second- and third-largest providers. Only 15 percent of national program networks are 

vertically integrated with a cable operator. Broadcast stations are 

going mobile and wireless carriers are streaming video. Programmers and pay-TV providers are filling smartphone and tablet 

screens with their content and services as fast as viewers are clamoring for them. 

At the same time, new entities are flocking to the market. Within 

the last 10 years, YouTube, iTunes, Netflix, Amazon, Hulu, Roku, 

Sky Angel and many others have leapt to provide video over the 

Internet. Currently, the Communications Act does not apply to 

these players. 

We therefore have some decisions to make. One option is to recognize the competitive landscape and start deregulating cable, satellite, and broadcast companies. The other is to expand the Communications Act to apply to the new technologies and services. I, 

for one, do not believe we should be expanding video regulation. 

Internet-distributed video is growing at a remarkable pace in the 

absence of regulation. Video represented more than half of global 

Internet traffic by 2011, according to Cisco. Video delivered over 

the Internet specifically to televisions doubled in 2011 and will increase six-fold by 2016, representing 11 percent of consumer Internet video traffic. By 2016, 1.2 million minutes of video will cross 

the network every second and it would take more than 6 million 

years to watch the amount of video that will cross global IP networks each month. 

Existing cable, satellite, and broadcast providers and programmers are experimenting with Internet distribution. Internet-only 

providers and programmers are also springing up. Regulation is 

not only unnecessary in such a vibrant environment, it can harm 

this nascent competition. The creative chaos in the marketplace 

frankly is healthy as parties fight to out-innovate each other and 

win viewers. A vibrant marketplace benefits consumers and it generates new jobs. The last thing we want is to shackle everyone’s entrepreneurial spirit with one-size fits all rules designed for another 

time. 

And if we are not going to apply the old regime to the new participants, we must recognize the inequity of continuing to apply it 

to the traditional players. The rules were premised on a lack of 

video competition that just isn’t the reality anymore. To impose the 

regulations in a disparate fashion is neither technologically nor 

competitively neutral. This is not only unfair to the parties, it does 

viewers a disservice. Cable operators, satellite providers and broadcasters should be allowed just as much flexibility to respond to 

competition from the Internet players as we would like the Internet 

players to have to respond to competition from the traditional players. This is how we will spur innovation. 

3 

[The prepared statement of Mr. Walden follows:] 

4 


82325.001

Opening Statement of the Honorable Greg Walden 

Subcommittee on Communications and Technology 

Hearing on "The Future of Video" 

June 27, 2012 

(As Prepared for Delivery) 

The FCC regulates traditional video providers based on a by-gone era. When Congress 

passed the 1992 Cable Act, for example, cable operators controlled 98 percent of the payTV distribution market and were affiliated with 53 percent of the national program networks. 

That law was meant to spur competition. It worked. Nationwide satellite TV providers DISH 

and DirecTV now control approximately one-third of the market and are the second and 

third largest providers. Only 15 percent of national program networks are vertically 

integrated with a cable operator. Broadcast stations are going mobile and Wireless carriers 

are streaming video. Programmers and pay-TV providers are filling smartphone and tablet 

screens with their content and services as fast as viewers are clamoring for them. 

At the same time, new entities are flocking to the market. Within the last ten years, 

YouTube, iTunes, Netflix, Amazon, Hulu, Roku, Sky Angel and many others have leapt to 

provide video over the Internet. Currently, the Communications Act does not apply to these 

players. 

We therefore have some decisions to make. One option is to recognize the competitive 

landscape and start deregulating cable, satellite, and broadcast companies. The other is to 

expand the Communications Act to apply to the new technologies and services. 

I, for one, do not believe we should be expanding video regulation. Internet-distributed 

video is growing at a remarkable pace in the absence of regulation. Video represented more 

than half of global Internet traffic by 2011, according to Cisco. Video delivered over the 

Internet specifically to televisions doubled in 2011 and will increase Six-fold by 2016, 

representing 11 percent of consumer Internet video traffic. By 2016, 1.2 million minutes of 

video will cross the network every second and it would take more than 6 million years to 

watch the amount of video that will cross global IP networks each month. 

Existing cable, satellite, and broadcast providers and programmers are experimenting with 

Internet distribution. Internet-only providers and programmers are also springing up. 

Regulation is not only unnecessary in such a vibrant environment, it can harm this nascent 

competition. The creative chaos in the marketplace is healthy as parties fight to outinnovate each other and win viewers. A vibrant marketplace benefits consumers and 

generates new jobs. The last thing we want is to shackle everyone's entrepreneurial spirit 

with one-size fits all rules designed for another time. 

And if we're not going to apply the old regime to the new participants, we must recognize 

the inequity of continuing to apply it to the traditional players. The rules were premised on a 

lack of video competition that just isn't the reality anymore. To impose the regulations in a 

disparate fashion is neither technologically nor competitively neutral. This is not only unfair 

to the parties, it does viewers a disservice. Cable operators, satellite prOViders, and 

broadcasters should be allowed just as much flexibility to respond to competition from the 

Internet players as we would like the Internet players to have to respond to competition 

from the traditional players. This is how we spur innovation. 

### 
5 

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

vice chair of the committee, Mr. Terry. 

OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA 

Mr. TERRY. Thank you, Mr. Chairman. 

A lot has changed in the video marketplace over the last 20 

years. Content, distribution and consumers’ preferences have all 

evolved. We are a society that wants what we want, when we want 

it, wherever we want it, and because of this, the communication 

sector has spent billions over the last two decades in order to meet 

that consumer appetite. 

As we engage in discussions about the current stage of the video 

marketplace and get bogged down in the granule details of disputes 

and issues, it is imperative that we always keep one thing in mind: 

the consumer is and will always remain the most important component of the discussion. 

It is appropriate to ask questions about whether the regulations 

of decades past are in fact still appropriate today. Do they inhibit 

competition or spur it? Do they create regulatory parity or uneven 

playing fields? And most importantly, do we still work to the betterment of the consumer or are consumers now caught in the middle? Consumers need to benefit from the great expansion in technologies and mobility of technology. 

With that, I would like to submit for the record a CEA letter 

written to us in regards to the technology. 

Mr. WALDEN. Without objection. 

[The information follows:] 

6 


82325.002

ClCEA. 

June 26, 2012 

The Honorable Greg Walden 

Chainnan 

Subconunittee on Communications and 

Technology 

Conunittee on Energy & Conunerce 

2123 Rayburn House Office Building 

Washington, DC 20515 

CD" ......... flectronlcs Assod_ 

1919 South Eads Street 

Arlington, VA 

22202 USA 

86S-SS8-1 SSS toU free 

103·907·7600 "'"'' 

703-901·760\ 'ax 

CE,Of9 

The Honorable Anna Eshoo 

Ranking Member 

Subconunittee on Conununications and 

Technology 

Committee on Energy & Conunerce 

2123 Rayburn House Office Building 

Washington, DC 20515 

Dear Chainnan Walden and Ranking Member Eshoo: 

On behalf of the Consumer Electronics Association (CEA), thank you for holding a hearing 

on the future of video. We appreciate the opportunity to provide this letter summarizing 

CEA's views of the evolving video marketplace. 

CEA's more than 2,000 member companies include the world's leading consumer electronics 

manufacturers. CEA members design, manufacture, distribute, and sell a wide range of 

consumer products including television receivers and monitors, computers, computer 

television tuner cards, digital video recorders ("DVRs"), game devices, navigation devices, 

music players, telephones, radios, and products that combine a variety of these features and 

pair them with services. CEA and its members have a vital interest in open and competitive 

markets for programming as well as for devices, software, interfilces, and applications. 

In examining the future of video, we must first look at what devices consumers are using to 

view video content now and in the future. According to a recent CEA Market Research 

Report, "The Evolving Video Landscape (April 2012)," high definition televisions remains 

king, but consumers are moving to many other devices. HDTV s are used by two-thirds of 

consumers (66%), almost twice the share that views video from a basic (non-HDTV) 

television set (37%). Computers and portable devices are also widely used by consumers to 

watch video. In fact, computers are now used by more people for viewing video than a basic, 

non-HDTV. 

A shift away from viewing on TVs is occurring among younger consumers. Viewers under 

age 45 arc more likely than older consumers to watch video from portable computers and 

smartphones. However, the HDTV is still the most widely used device for video viewing by 

all groups except for 18-24 year oIds (82% of these consumers use a portable computer, 

while 71 % use a HDTV). 

While we believe that the home television will always be the prime source offamily viewing, 

access to video content is evolving. Consumers are now accessing video content through a 
7 


82325.003

range of specialized devices. The more common devices include a DVD player (63%), a 

video game console (45%), and a DVR (43%). Almost a third (30%) relies on a Blu-ray 

Disc player, and the same share relies on an HD receiver that allows the consumer to access 

high definition signalsi

. 

Innovation in display technology such as 3-D and OLED are providing consumers with 

better video quality and optimal viewing experience. Internet-enabled televisions are not 

only allowing consumers to access content from various sources, it allows consumers to surf 

the Internet, stream music and Skype with family members. 

Due the increase availability of broadband, new Internet video distributors are emerging. 

Netflix, Hulu, and YouTube are leading the charge with over 55% of consumers streaming 

online video and 23% downloading online video. However, even with these new choices, 

the vast majority of consumers' source of content is through cable and satellite. 

Multichannel video programming distributors' (MVPDs) market dominance of video 

distribution must continue to be examined to ensure that consumers have multiple sources of 

online video content. Further, as MVPDs also dominate home broadband service providers, 

policymakers must work to prevent discrimination of a competitor's online video, including 

blocking or downgrading consumers' access to competing content. 

The availability of competitive new innovative devices to access subscription video services 

is a key element in ensuring a robust marketplace. In Section 629 ofthe 

Telecommunications Act of 1996, Congress directed the FCC to adopt technical standards 

and promote a competitive marketplace in compatible, third-party devices that can access the 

full range of MVPD services. Sadly, after a decade and a half of negotiations, rules, and 

waivers, we are still nowhere close to having a competitive marketplace for navigation 

devices. 

We continue to urge the FCC to implement and enforce Section 629 by establishing a 

universal IP-based interface allowing a competitive retail device to connect to any video 

distribution service. Such an approach will ensure that the video programs and services 

offered by a MVPD can be accessed by consumer-owned devices that connect to and interact 

with the Internet. A universal interface will allow innovation to flourish across the range of 

home viewing devices and continue to protect the integrity and content provide by the 

MVPD. 

As noted earlier, one positive development for video consumers has been the emergence of 

new Internet-based video platforms that compete with traditional media companies. These 

services are driven by consumer demand, and often showcase consumer-created and 

distributed content. One obvious example is YouTube, which today sees 48 hours of video 

uploaded every minute. The result has been an explosion in the amount of video content 

available to consumers. We suggest that Congress view this "disruptive innovation" as a 

positive and pro-consumer development. 
8 


82325.004

This innovation is enabled by the broadband Internet, which is increasingly accessed 

wirelessly. We appreciate Congress' decision earlier this year to increase the amount of 

licensed and unlicensed wireless spectrum via voluntary incentive auctions. We ask that 

Congress encourage these auctions to go forward as quickly as possible. 

As an intellectual property (IP) industry, we support smart IP policies that protect creators 

while maintaining the dynamism of the Internet economy. While we had disagreed with 

some in the content industry over the approach taken in the Stop Online Piracy Act (SOPA), 

we continue to believe that we can reach a consensus on strategic and targeted ways to cut 

off funding to overseas "rogue" web sites. We also encourage content owners to 

aggressively offer licenses to legitimate video services that will compete effectively with 

unauthorized purveyors. 

Finally, our industry is committed to ensuring that all consumers have access to new video 

devices and services. CEA is actively participating in the Federal Communication 

Commission's proceedings and advisory committees working to implement the 21 st Century 

Communications and Video Act of 2010 (CCVA). We are striving to strike the right balance 

between ensuring accessibility while not stifling innovation. We urge this Committee to 

monitor the FCC implement of the CCV A to ensure that is consistent with Congressional 

intent and to examine the impact of compliance. 

In conclusion, the video marketplace is forever evolving with new display technologies and 

an increasing array of content distributors. Policymakers must ensure that innovation is 

allowed to flourish by balancing the free market philosophy of "not picking winners and 

losers" while ensuring that marketplace dominance does not cut off consumer access to new 

exciting video devices and distribution services. 

ji)d~~ Gary Shapiro 

President & CEO 

Consumer Electronics Association 

cc: Members, Subcommittee on Communications and Technology 

• The Evolving Video Landscape, CEA Market Research Report, April 2012 
9 

Mr. TERRY. I thank my friend from Oregon and yield back. 

Mr. WALDEN. The gentleman yields back the balance of his time. 

The chair now recognizes the ranking member of the subcommittee, my friend from California, Ms. Eshoo. 

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

Ms. ESHOO. Thank you, Mr. Chairman, and good morning to the 

witnesses, and thank you for being here, and thank you, Mr. Chairman, for having this hearing. I think it is a very important one, 

and certainly, when we look at the line outside, there is a great 

deal of interest. 

Over the past 20 years, the video market has undergone a remarkable transformation. Today, consumers have access to more 

programming choices than ever before and have increasing control 

over where and when they watch these programs thanks to the 

DVR, to the Internet and to mobile devices like smartphones and 

tablets. While we have advanced in so many ways, there are also 

several key barriers that I am concerned have or could in the future curtail the exciting innovation that defines the next generation of video. 

First, when Congress passed the 1996 Act, we required the FCC 

to establish rules to increase consumer choice and competition in 

the set box market. While we may never have imagined the benefits of Internet-connected devices like Roku and Boxee, consumers 

continue to have limited options when it comes to finding devices 

with features equivalent to the cable company-issued set-top box. 

Second, consumers should not be held hostage when retransmission disputes break down. Since 2010, 10 different multichannel 

video programming distributors have experienced at least 34 blackouts in at least 76 media markets. Among the most high-profile 

disputes, which I think all of us recall, was a blackout that prevented millions of households from watching the first two games of 

the 2010 World Series. 

And I would like to ask for unanimous consent to submit for the 

record, Mr. Chairman, the Broadcaster Retrans Blackouts 2010– 

2012. 

Mr. WALDEN. Without objection. 

[The information follows:] 

10 


82325.005

BROADCASTER RETRANS BLACKOUTS 2010·2012 

as provided by the American Television Alliance (ATVA) 

DATE STATION OWNER MVPD STATIONS CITIES 

March 6, 2010 Disney Cablevision ABC New York, York New 

Jersey, Philadelphia, 

Connecticut 

September 2 Citadel Time ABC Lincoln, NE 

September 16, 2011 Communications Warner 

Cable ~.------.-

October 15 -October 30 Newscorp Cablevision FOX New York, New Jersey, 

2010 Philadelphia, 

Connecticut 

Dec 15 - January 7, 2011 Smith Media LLC Time NBC and CW- Burlington/Plattsburg 

Warner 11 h and Utica, VT and NY 

Dec 16 2010- Dec 30 Chambers DISH ABC Oregon 

2010 

Jan 1 2011- Jan, 7 2011 KOMU Mediacom NBC&CW Columbia, MO 

Jan 1 - February 2, 2011 Northwest DIRECTV Fox Yakima and SpoKane 

WA, Medford, OR & 

Binghamton, NY 

Jan 1 - Jan, 15 2011 Frontier Radio DISH i Fox & ABC Central Georgia 

(Macon) -- March 7- March 14, LIN Media DISH CBS, FOX, NBC, 17 markets: 

2011 CWand Albuquerque, N.M.; 

MyNetwork Austin, Texas; Buffalo, 

affiliates N.Y.; Columbus, Ohio; 

Dayton, Ohio; Fort 

Wayne, Ind.; Grand 

Rapids, Mich.; Green 

Bay, Wis.; 

Indianapolis; 

Lafayette, Ind.; 

Mobile, Ala.; New 

Haven, Conn.; Norfolk, 

Va.; Providence, R.t; 

Springfield, Mass.; 

Terre Haute, Ind.; and 

Toledo, Ohio 

~:'May201l WUNI-TV Full Channel Univision Rhode Island viewers 

of Worcester, MA 

station 

May 2 - June 21, 2011 WCOV Fox20 I DISH Fox Montgomery - Selma, 

I AL 

July 1 - October 14, 2011 Com Corp DISH Fox Evansville, IN 

August 31- October 15, LIN Media Mediacom ABC, CBS, Fox, Mobile-Pensacola; 

2011 NBC,CW Grand Rapidsaffiliates Kalamazoo - Battle 

Creek; Green Bay -

Appleton; Ft. Wayne; 

Lafayette; Terre 
11 


82325.006

November 2, 2011 - Sarkes Tazian DISH NBC, CBS Chattanooga; Reno 

settled 

Dec 12, 2011 - May 25, I Cordillera Time NBC, Corpus Christi 

2012 Communications Warner Telemundo, 

Cable CW South 

Texas 

Dec 15 - Dec 21,2011 Heritage DISH CBS,Fox Traverse City, MI 

Broadcasting 

January 1, 2012 (Settled) Jackson/Lingard/ DISH ABC, Fox, NBC Columbus-Tupelo, 

Southern Mississippi 

January 1, 2012 - May 1, Wyomedia/Silver DISH Fox, ABC, and Casper, WY 

2012 ton/Mark III CBS 

January 1, 2012 - May 1, Wyomedia/Silver DISH Fox, ABC Cheyenne, WY 

2012 ton/Mark III 

January 1, 2012- KNBN DISH NBC Rapid City, SO 

January 1, 2012- Allbritton Shentel ABC Suburban 

Washington, DC 

Jan 5 - Feb 17, 2012 Hoak Media Golden ABC Sioux Falls, SD 

West 

Jan 13 - January 26, Sunbeam DirecTV Fox, NBC Miami; Boston 

2012 Television Corp -- Jan 13 - Jan 15, 2012 Newport Verizon FiOS CBS,CW Harrisburg, Pa; 

Television Television, My Syracuse, NY; Albany, 

Network, ABC, NY 

'-:---::::-- Fox .-- Jan. 27, 2012- Turner DISH Independent Atlanta 

Broadcasting 

System - Jan. 31- Feb 21, 2012 Louisiana Media DISH Fox New Orleans 

February 29 - March 9, Bayou City DISH Fox Abilene, TX 

~.12 Broadcasting and San Angelo, TX 

March 16 - March 17, Murphy Media DISH CBS, ABC, My Yakima - Spokane, 

2012 Network WA; laCrosse - Eau 

Claire, WI; Madison, 

WI 

March 31- April 5, 2012 Tribune DirecTV independent 19 Markets: 

stations, Fox, Los AngelesABC and The Sacramento - San 

CWaffiliates Diego, CA; Denver; 

Hartford, CT; MiamiFort lauderdale, FL; 

Chicago; Indianapolis; 

New Orleans: Grand 

Rapids, MI: St. Louis, 

MO; New York, NY; 

, Harrisburg- I Philadelphia, PA; 

Portland, OR; Dallas- ! Houston, TX: Seattle, 

i WA; Washington D.C. 

, April 1 - April 13, 201~pas DirecTV Fox, ABC, CW, Lincoln, NE; Omaha, 

I Telecasting Azteca NE; Des Moines, IA; 
12 


82325.007

~-

April 9, 2012 - May 16, 

2012 

May 31, 2011- June 6, 

2012 

June 5, 2012 

June 7,2012 

- .. 

Yuma, AZ 

Prime Cities Midcontinen Fox Bismarck, NO 

Broadcasting, Inc. t 

Communicat 

I Ions 

Block I Time Fox, Louisville, KY 

Communications 'Warner MyNetworkTV 

Cable 

Diversified DirecTV CBS,CW,ABC Bangor ME; 

Communications Gainesville, Fl 

HoakMedia DISH ABC, CBS, Fox, Grand Junction, CO; 

NBC Fargo, NO; Panama 

City, Fl; North Platte, 

NE; lincoln, NE; Sioux 

Falls, SO; Monroe, LA; 

Alexandria, LA --. Total Markets .n 2012: 53 

Total Markets since FCC NPRM (March 2011): 82 

Updated June 13, 2011 

I 
13 

Ms. ESHOO. Thank you. 

Third, I am concerned about the potential impact of data caps on 

the growth of the streaming video market. Just 2 weeks ago, it was 

widely reported that the Department of Justice had begun looking 

into whether data caps unfairly limit online video competition. 

While we don’t know the extent of this inquiry, it falls on this subcommittee to thoroughly examine the issue and ensure future innovation is not curtailed. 

Finally, there are joint agreements involving Verizon and several 

of the Nation’s largest cable companies that are an example of the 

changing video landscape. Last week, I once again called for the 

subcommittee to have a hearing to review the proposed transaction, 

and I hope Chairmen Upton and Walden will agree to this request. 

I haven’t taken a position on these proposed changes or what’s in 

the works but I do think that we would all benefit from an examination of them. 

I want to welcome again all of our witnesses that are here this 

morning, and most especially to the two that have traveled probably the farthest that are Silicon Valley constituent companies, 

Netflix of Los Gatos and Roku of Saratoga. 

So thank you again, Mr. Chairman, and I yield back the balance 

of my time. 

Mr. WALDEN. The gentlelady yields back the balance of her time. 

The chair recognizes the full committee chairman, the gentleman 

from Michigan, Mr. Upton. 

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

Mr. UPTON. Thank you, Mr. Chairman. 

The beauty of the free market is that it harnesses the laws of 

economics to spur competition. Especially in the communications 

sector, if you are not using technology to offer new services or 

cheaper prices, you are not going to last very long. 

Unlike the laws of Congress, the laws of economics are exceedingly nimble. If new technologies or new competitors arise, the 

marketplace begins to adjust almost immediately. Legislators and 

regulators, by contrast, operate at a glacial pace relative to the 

speed of technology. Even the FCC’s data on video competition is 

6 years out of date, let alone the regulations. 

The laws of economics also encourage diversity. Companies that 

can’t provide the same services or content at cheaper prices strive 

to offer different services or content. That is what we call innovation. 

Many regs, by contrast, drive everything to the lowest common 

denominator. If everyone is entitled to whatever content is popular 

at the moment, why would anyone risk investing in something 

brand new? And if everyone is entitled to the fruits of your labor, 

whether that is your distribution platform or your content, you are 

less likely to invest as much. Indeed, differentiation is often a leading driver of competition. So for example, many attribute the exclusive availability of the Football Sunday Ticket on DirecTV as a 

prime source of that satellite TV provider’s growth. This in turn 

forces other players to invest in different content, develop better 

services, or lower prices. 

14 

Regulations in that space will only decrease economic activity. If 

particular behavior were economic, there would be no need to compel it. While such mandates might be warranted in a world of only 

three broadcast networks or where cable operators serve close to 

100 percent of the pay-TV market, that is not the world that we 

live in anymore. Cable share of the subscription TV market has 

dropped from 98 percent at the time Congress passed the 1992 

Cable Act to 68 percent in 2006, and it is probably about 55 percent today. That means almost one out of every home gets their 

programming from some other source, like a satellite operator or 

a phone company. The number of national program networks grew 

from 106 in 1994 to 565 in 2006, and the percentage of networks 

affiliated with a cable operator has shrunk from 53 percent when 

the Cable Act passed to 15 percent in 2006. 

So if we want to spur investment, innovation and jobs, the time 

may have come to pull back on the laws of Congress and let the 

laws of economics do more of the work. Viewers across the country, 

not to mention our economy, would be better for it. 

I yield to Mr. Stearns. 

[The prepared statement of Mr. Upton follows:] 

15 


82325.008

Opening Statement of the Honorable Fred Upton 

Subcommittee on Communications and Technology 

Hearing on "The Future of Video" 

June 27, 2012 

(As Prepared for Delivery) 

The beauty of the free market is that it harnesses the laws of economics to spur 

competition. Especially in the communications sector, if you are not using technology to 

offer new services or cheaper prices, you won't last long. 

Unlike the laws of Congress, the laws of economics are exceedingly nimble. If new 

technologies or new competitors arise, the marketplace begins to adjust almost 

immediately. Legislators and regulators, by contrast, operate at a glacial pace relative to 

the speed of technology. Even the FCC's data on video competition is six years out of date, 

let alone its regulations. 

The laws of economics also encourage diversity. Companies that can't provide the same 

services or content at cheaper prices strive to offer different services or content. This is 

what we call innovation. 

Many regulations, by contrast, drive everything to the lowest common denominator. If 

everyone is entitled to whatever content is popular at the moment, why would anyone risk 

investing in something new? And if everyone is entitled to the fruits of your labor, whether 

that's your distribution platform or your content, you are less likely to invest as much. 

Indeed, differentiation is often a leading driver of competition. For example, many attribute 

the exclusive availability of the Football Sunday Ticket on DirecTV as a prime source of that 

satellite television provider's growth. This, in turn, forces other players to invest in different 

content, develop better services, or lower prices. 

Regulations in this space will only decrease economic activity. If particular behavior were 

economic, there would be no need to compel it. While such mandates might be warranted in 

a world of only three broadcast networks or where cable operators serve close to 100 

percent of the pay-TV market, that's not the world we live in anymore. Cable share of 

subscription television has dropped from 98 percent at the time Congress passed the 1992 

Cable Act to 68 percent in 2006. By some estimates, it is now 57 percent. That means close 

to one out of every two homes get their programming from some other source, like a 

satellite operator or a phone company. The number of national program networks grew 

from 106 in 1994 to 565 in 2006, and the percentage of networks affiliated with a cable 

operator has shrunk from 53 percent when the Cable Act passed to 15 percent in 2006. 

If we want to spur investment, innovation and jobs, the time may have come to pull back 

on the laws of Congress and let the laws of economics do more of the work. Viewers across 

the country-not to mention our economy-would be better for it. 

### 
16 

Mr. WALDEN. Yes, we have three on our side I think would like 

time. Mr. Stearns. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Thank you, Mr. Chairman, and I think, as Ms. 

Eshoo pointed out, a little nudge from this committee with legislation will create a nudge of billions of dollars out there in the audience. 

I think, as you pointed out, the 1992 Cable Act, Mr. Chairman, 

when it was passed, everything has changed dramatically since 

then. I hope today is the first step towards all of us coming together with a process to modernize the 1992 Cable Act, and as you 

pointed out, Cisco recently released a study revealing that in 2016, 

over two-thirds, 68 percent of the U.S. mobile data traffic will be 

video. The current rollout of mobile DTV by broadcasters and dish 

push to enter into the wireless market are important examples of 

industry that are simply responding to consumer demand. 

As many of our witnesses know who will testify today, consumers 

have access to more content, higher quality programming and a 

greater variety of devices than perhaps ever before. So I look forward to learning what is working and what the government can do 

to advance the future of video even further. 

Mr. WALDEN. I now recognize the gentlelady from Tennessee, Ms. 

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 today. I think that from the 

opening statements, you can see we can agree that the constant in 

the video arena is change, change in innovation, and I was thinking through my nearly 20 years of work in both the private and 

public sector on this issue and going from big box TVs to home theaters and then watching the analog to digital. Now you can carry 

pretty much whatever you want on an iPad and plug it into a 

screen and there you go. 

Going forward, I hope we are going to focus on end use. I think 

consumers are the best at deciding what they want in content and 

also in their delivery mechanisms, so I look forward to the discussion we are going to have about how we insert free-market principles into the good work and innovation you do. Yield back. 

Mr. WALDEN. The gentlelady yields back. 

I recognize the ranking member of the full committee, 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, Chairman Walden, for holding this 

hearing to examine the future of video, and I want to thank you 

for working with us to assemble an interesting and diverse panel 

of witnesses. 

17 

Digital technology and broadband Internet access are dramatically altering how video content is produced, delivered and consumed, promising more choices and greater value for consumers 

and new avenues for the creative community to distribute its work. 

Our challenge is to ensure a diversity of voices, robust competition, 

and greater access to these new platforms. 

The panel of witnesses before us illustrates the many ways 

Americans can access video programming today: free over-the-air 

broadcasting, pay-television service from cable, satellite, and even 

traditional telephone companies, or video delivered through a 

broadband connection. Video programming is no longer the exclusive province of the television set. Consumers can now use tablets 

and smartphones to watch their preferred content. Innovative products and services are increasingly putting viewers in control of 

what, when, where and how they watch video. 

Even as we marvel at the incredible advances in technology, we 

must be mindful that policy choices we make today will impact the 

video landscape we see tomorrow. We should examine whether the 

legal framework created 20 years ago still works for a video market 

filled with choices that did not exist even 2 or 3 years ago. And we 

should remember that old challenges can persist in the face of new 

opportunities. Competitors need a fair shot at gaining access to 

content, and independent creators need rules that prevent discrimination against carriage of their programming. 

Two decades ago, the actions of this committee and others in 

Congress helped once-nascent industries like cable and satellite to 

offer new choices to consumers. Today, we must continue to ensure 

innovation in the video marketplace can continue to flourish. As 

consumers increasingly watch video through broadband, an open 

Internet that is accessible to all becomes even more important. We 

need to carefully examine whether practices like broadband data 

usage caps are restricting consumer choice or being employed in an 

anti-competitive manner. 

Also deserving of our scrutiny is whether major providers of 

video and broadband services will continue to have the incentives 

to compete in light of joint agreements and consolidation in the 

marketplace, and I join Ranking Member Eshoo in requesting hearings to examine the proposed transactions between Verizon and 

four of the Nation’s largest cable companies, including an examination of the joint marketing agreements that would allow the companies to cross-market each others’ services. I hope the committee 

will convene a hearing so that members can consider the impact of 

these deals not only on the video and broadband markets, but also 

on wireless competition. 

I appreciate all the witnesses for participating in today’s hearing. 

I look forward to your testimony, and I want to yield time to Ms. 

DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Waxman. 

I just want to add my greetings to my constituent, Charlie Ergen 

from DISH Network, who came almost as far as Ms. Eshoo’s constituents to be with us today. Thank you for coming. 

I yield back. 

18 

Mr. WAXMAN. I join you in welcoming Mr. Ergen and all of our 

panelists, whether they came all the way from California or down 

the street from K Street. Welcome to you all. 

I yield back my time. 

Mr. WALDEN. The gentleman yields back the balance of his time. 

We will get on with our witnesses now, and again, thank you all 

for being here. We are going to start with Mr. Robert Johnson, the 

CEO of Sky Angel U.S. LLC. Mr. Johnson, thank you for being 

here. We appreciate reading through your testimony and look forward to your comments. 

Just for all the panelists, if you haven’t used these microphones, 

you really need to get pretty close to them, and make sure the light 

is on. 

STATEMENTS OF ROBERT W. JOHNSON, CHIEF EXECUTIVE OFFICER, SKY ANGEL U.S., LLC; GIGI B. SOHN, PRESIDENT, 

PUBLIC KNOWLEDGE; DAVID HYMAN, GENERAL COUNSEL, 

NETFLIX, INC.; JIM FUNK, VICE PRESIDENT, PRODUCT MANAGEMENT, ROKU; MICHAEL K. POWELL, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, NATIONAL CABLE AND TELECOMMUNICATIONS ASSOCIATION; DAVID BARRETT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HEARST TELEVISION, INC.; CHARLIE ERGEN, CHAIRMAN, DISH NETWORK, 

AND CHAIRMAN, ECHOSTAR; AND MICHAEL P. O’LEARY, SENIOR EXECUTIVE VICE PRESIDENT, GLOBAL POLICY AND EXTERNAL AFFAIRS, MOTION PICTURE ASSOCIATION OF 

AMERICA, INC. 

STATEMENT OF ROBERT W. JOHNSON 

Mr. JOHNSON. Chairman Walden, Ranking Member Eshoo and 

members of the Subcommittee on Communications and Technology, 

it is my pleasure to have this opportunity to testify at your hearing 

today on the Future of Video, and thank you for inviting me to participate. My name is Rob Johnson. I am one of the founders of Sky 

Angel and its Chief Executive Officer. 

Sky Angel was founded for the purpose of providing American 

families with a high-quality and affordable video distribution service in their homes that would offer exclusively family-friendly programming. Today it offers more than 80 channels that are live, linear programming networks, many of which are familiar in American households such as the Hallmark Channel, Fox News, the 

NFL Channel, Bloomberg and the Weather Channel, to name a 

few. Also, we will be adding a new African American family channel started by Magic Johnson. 

Sky Angel was the first American video-programming distributor 

to provide a service which uses Internet Protocol Television technology, or IPTV, and a set-top box. Subscribers cannot access Sky 

Angel’s encrypted programming without a set-top box, which has 

broadband Internet inputs including home wireless router access 

and video outputs that connect directly to their television sets. Sky 

Angel is not a web-based service and no external computer is needed to subscribe to or receive Sky Angel programming. All any 

American family needs for Sky Angel is a television set and a 

broadband Internet service of modest capability. Our set-top boxes 

19 

look and act just like the ones that consumers ordinarily use at 

home. Here is one of them. A Sky Angel subscriber selects programming with the use of a typical remote control. A subscriber 

simply uses our remote to scroll up and down the screens of live 

channel choices and then clicks on the selection he or she wants 

to watch. 

From the consumer’s perspective, the Sky Angel service is functionally identical to typical cable or satellite video distribution. Sky 

Angel offers consumers a competitive alternative to other MVPD 

systems at affordable rates. Currently, our complete package of 

more than 80 live video and audio programming channels costs 

$32.99 a month and includes unlimited access to a large VOD library of movies, which are also family friendly. We have recently 

rebranded the package as FAVE TV. We have a less expensive inspirational package of programming, which is also available to the 

iPad. 

Our goal is to offer a safe haven for families and children to 

enjoy as large a selection as possible of live video and audio programming and recorded video programming without fear of exposure to graphic sexual or other highly objectionable content. We are 

the proud recipient of the seal of approval from the Parents Television Council. 

American families can have Sky Angel in their homes as an exclusive source of wholesome video entertainment, or they can subscribe and have Sky Angel in addition to another MVPD. The 

choice is theirs. 

Our business model is not complicated. We enter into written 

agreements with programmers for distribution of programming to 

Sky Angel subscribers via our IPTV system. We pay the programmers monthly fees for a Sky Angel subscriber, who receives a programmer’s channel. Sky Angel enters into subscription relationships with consumers for multiple live, linear channels of programming. We downlink our channels at our state-of-the-art facility located outside of Chattanooga. We provide our subscribers with settop boxes which are necessary to receive the programming from 

Sky Angel, and we directly and remotely control the programming 

to the set-top box at all times. 

Unfortunately, we have been faced with significant problems in 

obtaining access to family-friendly programming channels. One 

shocking example is C–SPAN, which is supposed to be a public 

service but C–SPAN refuses to deal with us. About 3 years ago, C– 

SPAN entered into an agreement with us for distribution of C– 

SPAN channels on the Sky Angel system. However, C–SPAN cut 

its service off only 3 days after we started carrying it, and we had 

a signed contract. C–SPAN officials told us that they ‘‘made a mistake’’ in permitting Sky Angel to carry its channels without any 

other explanation. As everyone knows, C–SPAN is offered on the 

Internet as a free public service to all, but as perhaps fewer people 

know, C–SPAN is controlled by the cable television industry. 

In addition to the shocking decision of C–SPAN to cut us off, a 

number of large programmers have refused to deal with Sky Angel 

for the distribution of must-have family-oriented programming saying or implying that they want to avoid conflicts with the big players in the video distribution industry, and unlike C–SPAN, which 

20 

is supposed to be a public service, commercial programmers that 

refuse to deal with us are passing up the higher subscriber rates 

Sky Angel typically pays because we are too small to have any real 

bargaining power. 

Discovery Communications is the most obvious example of a 

large programmer that refuses a lucrative distribution agreement 

with Sky Angel in order to stifle competition. My written statement 

describes our problems with Discovery in some detail, but basically, 

Discovery cut us off from receiving their channels 2 years into a 7- 

year distribution agreement. Discovery has never offered a coherent explanation for its actions, which did not make economic sense. 

We are positive that it was anti-competitive in nature trying to 

deter a new startup company using IPTV technology. 

Trying to right a wrong, we filed a program access complaint 

with the FCC against Discovery in March of 2010. To date, the 

FCC has never made a substantive ruling on that case even though 

the FCC’s own decisions say that they will decide program access 

complaints within 5 months, and the DC Circuit Court of Appeals 

is scrutinizing the FCC’s delay in acting on our program access 

complaint. Nonetheless, 27 months have passed without substantive action by the FCC, so tiny Sky Angel remains injured by 

the unfair programming decisions of multibillion-dollar Discovery 

Communication and its affiliated program distribution interest. 

We believe that our experience with starting and operating an 

innovative new family-oriented video distribution shows that there 

is anti-competitive conduct in the industry and significant problems 

with the manner in which the FCC is failing to enforce program 

access laws and regulations so that a valuable new competitive interest is facing unfair discrimination. The program access requirements under the 1992 Cable Act require fair treatment of competitors such as Sky Angel but those requirements are not being enforced. 

The will of Congress is being ignored and competition by Sky 

Angel and likely others is being stifled. We believe that the public 

interest in supporting competition in video distribution, expanded 

use of the Internet, diversity in programming sources and affordable choices for American families requires the attention of the 

Congress to ensure that the existing legal framework is fairly and 

properly enforced. 

Thank you again for the opportunity to testify, and I would be 

pleased to answer any questions that you may have or provide you 

with any additional information. 

[The prepared statement of Mr. Johnson follows:] 

21 


82325.009

SUMMARY OF STATEMENT OF ROBERT W. JOHNSON. SKY ANGEL U.S" LLC 

Sky Angel provides an exclusively family-friendly, affordable service of about eighty 

linear channels of programming. The encrypted programming can only be accessed via a set-top 

box connected to a subscriber's broadband Internet connection. Because the set-top box 

connects directly to a TV set and subscribers select a desired channel through an on-screen 

guide, the service is functionally identical to traditional MVPDs. Like any new-entrant, Sky 

Angel's ability to compete rests in large part on being able offer a variety of popular 

programming options. Recognizing this fact in 1992, Congress enacted the program access 

requirements, which prohibit a programmer affiliated with a cable operator from unreasonably 

refusing to deal with, or otherwise discriminating against, rival MVPDs. Unfortunately, the 

video distribution marketplace remains willing to engage in anti-competitive tactics in order to 

harm emerging competitors, as Sky Angel's ongoing experience clearly demonstrates. 

Although Sky Angel had timely paid all fees to Discovery Communications for two 

years, Discovery suddenly informed Sky Angel that it planned to terminate their contract. 

Because Discovery refused to explain or retract its threat, Sky Angel filed a program access 

complaint with the FCC. In response, Discovery argued that Sky Angel fails to qualify as an 

MVPD. Sky Angel fits squarely within the express terms of the MVPD definition, is 

fimctionally identical to traditional MVPDs from a consumer perspective, and provides the exact 

competition Congress sought to encourage, but the FCC still has not ruled on the complaint 

twenty-seven months later, during which time Sky Angel has lost subscribers, and failed to gain 

new subscribers, due to the absence of Discovery programming. Anti-competitive conduct, and 

the FCC's failure to enforce the program access rules, continue to prevent the full realization of 

the public interest benefits Congress sought to achieve - increased competition, Internet use and 

consumer choice, affordable rates, innovation, and expanded programming diversity. Congress 

should act to ensure a level playing field for new entrants in the video distribution marketplace. 
22 


82325.010

STATEMENT OF ROBERT W. JOHNSON, CEO OF SKY ANGEL U.S. LLC 

June 25, 2012 

Chairman Walden, Ranking Member Eshoo, and members of the Subcommittee on 

Communications and Technology, it is my pleasure to have this opportunity to testify at your 

hearing today on The Future of Video and thank you for inviting me to participate. We think 

our experience with starting and operating an innovative new family-oriented video distribution 

service demonstrates significant problems with the manner in which the FCC is failing to enforce 

program access laws and regulations, so that a valuable new competitive entrant, such as Sky 

Angel, faces anti competitive conduct from incumbent operators in the industry. We believe that 

the public interest in supporting competition in video distribution, expanded use of the Internet, 

diversity in programming sources, and affordable choices for American families requires the 

attention of the Congress. 

Introduction: The Goal of Sky Angel 

Sky Angel was founded for the purpose of providing American families with a highquality and affordable video distribution service in their homes that would offer family-friendly 

programming exclusively. I am one of the founders of Sky Angel. Our deep Christian roots 

guide the company. Sky Angel separately offers packages of Christian and secular video 

programming, as well as a combination package of all programming. Sky Angel is not a 

religious or proselytizing organization. Its goal is to offer a safe haven for families, and children, 

to enjoy as large a selection as possible of live video and audio programming, and recorded 

video programming, without fear of exposure to graphic sexual or similar content. Now 

operating under thc brand FA VE TV, Sky Angel carefully selects all of its programming to 
23 


82325.011

ensure high-quality and strong family values. Our service is a proud recipient of the Seal of 

Approval from the Parents Television Council. 

Starting in 2008, Sky Angel began distribution of exclusively family-friendly video 

programming, on a nationwide basis, at affordable subscriber rates. Today, it offers more than 

80 channels that are live, linear programming networks, many of which are familiar in American 

households, such a~ The Hallmark Channel, Fox News, the NFL Channel, Bloomberg and the 

Weather Channel, to name a few. Sky Angel was the first American video programming 

distributor to provide a service which uses Internet Protocol Television ("IPTV") technology and 

a set-top box. Subscribers cannot access Sky Angel's encrypted programming without the settop box, which has broadband Internet inputs and video outputs that connect directly to their 

television sets. No external computer or software is necessary to subscribe to, or receive, Sky 

Angel programming. 

What Sky Angel Does and How It works 

Sky Angel offers consumers a competitive alternative to other MVPD systems at 

affordable rates. Currently, the complete package of more than 80 live video and audio 

programming channels, as well as access to a large VOD library of exclusively family-friendly 

movies, costs $32.99 a month. American families can have Sky Angel in their homes as an 

exclusive source of wholesome video entertainment or they can subscribe and have Sky Angel in 

addition to another MVPD. The choice is theirs. All any American family needs for Sky Angel 

is a television set and a broadband Internet service of modest capability. 

Although distribution of video programming through the use of IPTV technology is fairly 

well known in Europe, and other parts of the world, Sky Angel was the first to offer a true IPTV 

video programming distribution system throughout the United States using this technology. Sky 

2 
24 


82325.012

Angel's IPTV system does not distribute programming on the World Wide Web, but rather relies 

on a combination of its own facilities, and in part, on subscribers' broadband Internet 

connections as a partial path in its distribution system. In summary, this is how Sky Angel 

provides its video service: 

Sky Angel enters into definitive written agreements with program providers/rights 

holders for distribution of programming to Sky Angel subscribers via its IPTV system 

under which Sky Angel pays the programmers monthly fees per Sky Angel subscriber 

who receives its channel. 

Sky Angel enters into subscription relationships with consumers for multiple, live 

linear channels of programming, who are sent Sky Angel set-top boxes, which are 

necessary to receive programming from Sky Angel and which Sky Angel directly and 

remotely controls at all times. 

Sky Angel receives content from programmers' satellite locations, and then processes 

and encrypts it. 

Sky Angel transmits the encrypted programming to its two headends via fiber optic 

cable which it controls. 

The encrypted programming then is distributed to Sky Angel subscribers, in part 

through Internet connections which those subscribers have contracted for from ISPs. 

The programming is received by the Sky Angel set-top boxes, decrypted, and then 

transmitted to subscribers' television sets with industry-standard copy protections. 

At no time is the World Wide Web, or home computers, part of the Sky Angel 

service. 

Sky Angel exclusively controls the origination, distribution, and reception of all 

programming, and at no time may anyone receive the programming except authorized 

subscribers via their authenticated set-top boxes. 

To a consumer, Sky Angel is functionally identical to traditional cable and satellite video 

distribution services. All programming is available via a typical set-top box, which is controlled 

by the consumer using a standard remote control. The consumer simply scrolls across a menu of 

channel choices, and "clicks" the one he or she wants to watch. Sky Angel provides closed 

captioning, high definition and similar services on much the same basis as MVPDs do generally. 

3 
25 


82325.013

Sky Angel Should Benefit from Statutory Program Access Protections 

Congress enacted a broad definition of MVPD in the 1992 Cable Act, which the FCC 

implemented. That definition provides: 

... the term "multichannel video programming distributor" means a person such as, but 

not limited to, a cable operator, a multichannel multipoint distribution service, a direct 

broadcast satellite service, or a television receive-only satellite program distributor, who 

makes available for purchase, by subscribers or customers, multiple channels of video 

programming ... (47 U.S.C. §S22(13) (Section 602» (emphasis added). 

Of cour~e, in 1992 Congress did not envision video distribution partially using the 

Internet, because it did not exist, which is a perfect example of why Congress wisely did not 

limit the MVPD definition to existing 1992 technology. To qualify as an MVPD, and have 

statutory program access protections, an entity simply must offer multiple programming 

channels, for purchase, to subscribers or customers. By implication, there would be some 

similarity to traditional cable or satellite offerings, but this broad definition clearly is not specific 

to any particular technology or requires ownership or operation of specific kinds of facilities. 

Even a cursory look at how Sky Angel provides its service shows that it falls squarely under this 

definition ofMVPD. And just as clearly, web-based, video-on-demand or non-subscription 

video offerings do nol fall under the definition. 

Sky Angel Faces Anti-Competitive Obstacles 

Unfortunately, Sky Angel has encountered serious difficulties in the marketplace, 

primarily in its ability to acquire programming for its subscribers and to make the Sky Angel 

system more attractive and competitive. To be sure, Sky Angel does not attempt to attract 

viewers who insist upon access to salacious programming sources. But among the providers of 

must-have family-friendly programming, there is considerable resistance to entering into 

distribution contracts with Sky Angel. Sky Angel adds programming channels to its system only 

4 
26 


82325.014

through negotiated written agreements with programming owners. Under those programming 

distribution contracts, Sky Angel pays the programmers fees per subscriber which, in all 

likelihood, are considerably higher than the fees that large MVPDs pay, because a tiny start-up 

like Sky Angel has no market power or other ability to bargain for discounted fees. A number of 

programmers simply will not deal with Sky Angel, essentially denying Sky Angel access to 

important programming sources, even though Sky Angel ends up paying premium fees. 

The ongoing dispute between Sky Angel and Discovery Communications is a perfect 

example of the problem that Sky Angel faces in attempting to acquire, and pay for, must-have 

family programming. This dispute also shows that Congress needs to ensure that the regulatory 

processes it has put into place are being appropriately and fairly administered. 

In 2007, Sky Angcl and Discovery entered into an Affiliation Agreement for the 

distribution of five channels of Discovery programming, including "The Discovery Channel" and 

"Animal Planet." Some Discovery channels are "must-have" programming for Sky Angel's 

service, and two of Discovery's channels quickly became among the top-five most-watched 

channels offered by Sky Angel. At all times, Sky Angel paid Discovery the monthly subscriber 

fees that Discovery wanted under the Affiliation Agreement. 

The Affiliation Agreement, the term of which extends through December 31, 2014, 

expressly permits Sky Angel's use ofIPTV technology, and provides a detailed definition of an 

IP System that is identical to Sky Angel's service. In September 2009, Discovery proposed that 

the parties expand their relationship, asking Sky Angel to carry, and pay for, additional 

Discovery-owned networks. However, in December 2009, Discovery unexpectedly informed 

Sky Angel that it planned to terminate the Affiliation Agreement four years early, and thus 

withhold its programming from Sky Angel's subscribers and potential subscribers. Although 

5 
27 


82325.015

Sky Angel repeatedly sought additional information from Discovery, and offered to cooperate 

fully to address Discovery's alleged "concerns," Discovery refused to provide any justification, 

reasonable or otherwise, for its termination. Instead, Discovery simply repeated that it was 

"uncomfortable" with Sky Angel's "distribution methodology," which had not changed since 

Discovery carefully examined the system and the parties executed the Affiliation Agreement. 

The definitions in the Affiliation Agreement provided in detail for the carriage of the 

programming over IPTV. 

Discovery was achieving its business goals under its Affiliation Agreement with Sky 

Angel - new distribution of its programming channels with payment of lucrative subscriber fees 

in return. Certainly, Discovery's sales persOImel wcre pleased with the Sky Angel agreement 

because they sought to expand the arrangement, for additional fees, of course. However, for 

reasons that could not have been economic, Discovery terminated the agreement. 

The FCC Program Access Process Is an Ongoing Failure 

Because of Discovery's threats and refusal to explain or relent, on March 24, 20 I 0, Sky 

Angel filed a Program Access Complaint and Emergency Petition for Temporary Standstill with 

the FCC in an attempt to prevent Discovery's unjustified and unlawful withholding. The 

Complaint relied on the 1992 Cable Act and the FCC's implementing rules. On April 21, 20 10, 

before Sky Angel timely responded to Discovery'S claimed defenses, including that Sky Angel 

fails to "qualifY" as an MVPD under the statute, the FCC's Media Bureau declined to issue a 

standstill, based only on the incomplete record before it. Discovery severed its programming 

connection with Sky Angel the next day. The FCC has taken no other substantive action in the 

more than two years since April 2010, and so Sky Angel and its subscribers remain deprived of 

the Discovery programming or a decision on the merits by the FCC. Sky Angel has suffered 

6 
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hann, in the fonn of lost revenue, subscribers, and marketing opportunities, because of 

Discovery's action and the FCC's refusal to protect it. 

Although the Bureau declined to grant a standstill at that time, it expressly did not rule on 

any of the merits of Sky Angel's program access complaint, including whether Sky Angel 

qualifies as an MVPD entitled to the program access protections Congress intended to apply to 

new, innovative competitors in the video distribution marketplace. Rather, the Bureau simply 

found that, because of "the limited record before" it and "the lack of Commission precedent" 

regarding a service such as Sky Angel, it was "unable to conclude that Sky Angel has met its 

burden of demonstrating that the extraordinary relief of a standstill order is warranted." The 

pleading cycle did not conclude until after the Bureau declined to grant a standstill, so Sky Angel 

had no opportunity to address Discovery's unexpected, and strained, legal and factual 

contentions made in opposition to Sky Angel's complaint and standstill petition. 

The record of evidence before the FCC is that: 

Sky Angel qualifies as an MVPD entitled to relief under the program access rules. Sky 

Angel clearly falls within the broad statutory and regulatory definitions of an MVPD, and 

its innovative service, while not known to Congress twenty years ago, is exactly the type 

of new entrant Congress intended to promote in order to increase competition in the video 

distribution marketplace. 

Discovery continues to engage in unfair acts and unlawful discrimination by withholding 

its programming from Sky Angel while permitting far larger video programming 

distributors, including its affiliates, to offer their subscribers multiple linear channels of 

Discovery programming via broadband Internet connections. 

As has been demonstrated to the FCC, and is known to anyone who cares to look, DISH 

currently offers its 14 million subscribers unlimited Internet access to all of the live 

channels they subscribe to, including numerous Discovery channels, via Internet access 

from any U.S. location, at no extra cost. Discovery permits that Internet-based 

distribution of its channels by DISH. The "True TV Everywhere" offering by DISH 

proves that Discovery does not suffer harm from Internet distribution of its channels of a 

vastly greater scope than Sky Angel provides to its 20,000, or so, subscribers. 

7 
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82325.017

Sky Angel has suffered, and will continue to suffer, irreparable harm due to Discovery's 

withholding of its programming. Sky Angel subscribers no longer can access Discovery 

programming, and consumers considering subscribing to Sky Angel have had less 

incentive to do so for more than two years. Further, Sky Angel's "first to market" 

advantage in offering this innovative and affordable service continues to deteriorate, and 

several large programming providers continue to hesitate to enter into distribution 

agreements with Sky Angel expressly because of Discovery's unlawful withholding. 

Discovery would suffer no harm because it would simply be providing programming to a 

distributor which uses the same distribution technology as other distributors of its 

programming, and Discovery would receive additional revenue on a per-subscriber basis 

at rates it required and contractually agreed to. Other large MVPDs also offer versions of 

"TV Everywhere" which include Discovery channels provided via some form ofIntemet 

distribution. 

The D.C. Circuit Had to Scrutinize the FCC Process 

Under its program access procedures, the FCC has committed to resolving program 

access complaints within five months of submission. However, because of almost two years of 

inactivity by the FCC, Sky Angel felt compelled to ask the United States Court of Appeals for 

the D.C. Circuit to order the FCC to act in the case by tiling a Petition for Writ of Mandamus. 

To Sky Angel's great satisfaction, in a matter of only a few days after filing its Petition, the 

Court ordered the FCC to respond to Sky Angel's Petition within 30 days. 

Before the 30 days had expired, the FCC assigned the Sky Angel Complaint a file 

number, which the agency had failed to do for the previous two years. It also accepted a form of 

protective order between the parties, which also had been languishing at the FCC for most of two 

years. Then, the FCC "launched" a proceeding, asking for public comment regarding the 

meaning of the MVPD definition and asking many other questions, the vast majority of which 

were unnecessary to act upon Sky Angel's program access Complaint. The pleading cycle 

closed for those comments, and reply comments, on June 13,2012. 

To date, the FCC still has not acted substantively on Sky Angel's Complaint. Nor has it 

acted on Sky Angel's motion seeking information from Discovery (pending without action for 

8 
30 


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more than two years), Sky Angel's renewed request for a standstill (pending without action for 

more than 13 months), or Sky Angel's request to sanction Discovery for lack of candor and to 

investigate if Discovery had misrepresented its claims of "harm" (also pending for more than 13 

months). 

Congress Should Ensure That There is a Level Playing Field for Video Competition 

So far, the regulatory process that Congress enacted in the 1992 Act has been an utter 

failure for Sky Angel, its subscribers, and the public interest which would benefit from the 

improved choice and pricing of its service. The fundamental purpose of Sky Angel's complaint 

is to evoke the program access rights under the 1992 Act so that Discovery would deal fairly 

with Sky Angel in its programming decisions, and not disadvantage Sky Angel, while providing 

exactly the same programming to large MVPDs. Sky Angel believes that the program access 

framework would be beneficial to it and the public interest ifi! were fairly and promptly 

enforced. Sadly, the small competitive entrant is being given short shrift by the FCC, and 

therefore, advancing the interests of multi-billion dollar incumbent MVPDs. 

In fact, the recent record before the FCC demonstrates that a majority of interested 

parties, representing various segments of the video distribution marketplace, agree that Congress 

intended a broad definition ofMVPD so that competitors, such as Sky Angel, would receive fair 

treatment in access to programming. In contrast, opponents are primarily incumbent MVPDs, 

who argue for a narrow definition of MVPD, taking exactly the opposite position they promoted 

in 1992 when the Act was passed and implemented. 

Sky Angel, itself, is not a competitive threat to incumbent MVPDs because of its small 

size and family-friendly commitment. However, it represents a technology and system that 

could be very effective in competing against (he established providers because of its far lower 

9 
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cost of entry into the market and ability to offer service nationwide, wherever broadband Internet 

connectivity is available. 

In addition to the dispute with Discovery, Sky Angel has faced refusal to deal from other 

programmers. For example, and quite shocking, C-SPAN refuses to permit Sky Angel to 

distribute its channels. Although C-SP AN entered into an agreement with Sky Angel and began 

to provide its programming, C-SPAN cut its service off three days later, saying that it had "made 

a mistake," without any other explanation. Interestingly, C-SPAN is offered on the Internet as a 

"free" public service to all. Perhaps telling is that C-SP AN is controlled by the cable television 

industry, which claims that it does not need to be regulated in this area because it can be trusted 

to do the right thing. No doubt, the fox was quoted as saying much the same on the way to the 

chicken coop. In addition, a number of larger programmers, which are not distributors, have 

refused to deal with Sky Angel, saying (or implying) that they want to avoid conflicts within the 

industry. 

Sky Angel believes that if Congress and the FCC made it clear that the law requires that 

it, and other new entrants, be treated fairly, then these failures to deal would be removed, or at 

least mitigated. Therefore, Sky Angel urges Congress to make sure that the existing provisions 

of the 1992 Cable Act are fairly and promptly enforced. 

Sky Angel relies upon a set-top box as an essential component of its distribution system. 

Sky Angel supports fairness in set-top box technology and distribution. It would be delighted if 

set-top boxes generally supported the distribution of its service, so long as the integrity of its 

system, especially including encryption, is preserved. 

Sky Angel is not an ISP. It does not provide Internet service. It relies upon the Internet 

connections of its subscribers for "last mile" access to the set-top boxes in their homes. Sky 

10 
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82325.020

Angel has no arrangements with ISPs, and its service is subject to any data eaps imposed upon 

subscribers by ISPs. 

In conclusion, Sky Angel believes that it represents an important part of the future of 

video on the Internet. It offers a service that is cost-effective and consumer-friendly, permitting 

American families to have an alternative to the established, incumbent MVPDs, in a form that is 

functionally identical. It would improve use of, and access to, the Internet by consumers. The 

Sky Angel service is not web-based, or even connected to a home computer, and its 

characteristics fall clearly and squarely under the MVPD definition passed by Congress in the 

1992 Cable Act. As such, on the one hand it should be protected under the program access rights 

that Congress included in the 1992 Act, and on the other hand, Sky Angel is entirely different 

from all web-based, video-on-demand and/or non-subscription video services, such as Netflix, 

Hulu, and YouTube. None of those services fall under the MVPD definition. 

Sky Angel urges Congress to ensure that there is a level playing field so that it, and other 

new entrants, may have the opportunity to compete fairly for video subscribers and thus enhance 

the public interest, and consumer choice, by providing new opportunities and uses for the 

Internet, now and in the future. 

Thank you again for the opportunity to testify and I would be pleased to answer any 

questions that you may have or provide additional information. 

11 
33 

Mr. WALDEN. Mr. Johnson, thank you for your testimony. We 

look forward to following up with some questions. 

We will now turn to Gigi Sohn, the President and CEO of Public 

Knowledge. Gigi, we are delighted to have you here today. We look 

forward to your comments as well. 

STATEMENT OF GIGI B. SOHN 

Ms. SOHN. Chairman Walden, Ranking Member Eshoo, members 

of the subcommittee, thank you for inviting me to talk about the 

future of video. 

There is widespread agreement that we are currently living in 

the golden age of television, but despite all the great programming 

and groundbreaking devices, Americans are still locked into a TV 

business model that limits competition and choice, keeps prices 

high for video, and limits technology and online video from achieving their full potential. This business model was made possible 

largely by an outdated regulatory structure created by incumbents 

to gain competitive advantage. It is time for policymakers to revamp this regulatory structure so that new video competition can 

thrive, giving consumers greater options and the ability to watch 

video whenever they want and on the device of their choosing. This 

will result in lower prices, better services and more flexibility and 

control for consumers. 

The Internet is changing the video marketplace just as it 

changed the market for music, books and other forms of media. 

Consumers are attempting to drive this change by demanding that 

more content be provided to them through the Internet. One grassroots campaign by consumers called ‘‘Take My Money HBO’’ advocates for HBO content, which is only available if you subscribe to 

cable or satellite TV service, to be available for purchase on the 

Internet. More than 60,000 visited the petition Web site within 12 

hours of its launch, leading many of them to express over Twitter 

their willingness to pay money directly to HBO only if it were 

available on the Internet. 

Despite this level of excitement for Internet video distribution, it 

is not a foregone conclusion that the Internet will disrupt the video 

marketplace. Dominant players in the market today control both 

the content their online competitors need for their service and the 

pipes they must use to reach consumers. As a result, much highvalue programming is not available to online video providers. They 

also have to contend with artificially and arbitrarily low data caps 

and other discriminatory practices that keep them from reaching 

their full potential. 

So while it is inevitable that IP technologies and the Internet 

will play an ever-larger part of video delivery, it is not inevitable 

that the market will reach its full competitive potential. That is 

why policymakers should extend policies that ensure that new competitors like Sky Angel can access high-value content at reasonable 

prices. If they do this while at the same time protecting Internet 

openness, they can ensure that the video marketplace normalizes 

and becomes truly competitive. 

There are other regulations that permeate the video marketplace 

that should be repealed today. The network non-duplication, syndicated exclusivity and sports blackout rules do little more than 

34 

preserve old business models. If these protectionist rules ever made 

any sense in the pre-Internet era, they certainly don’t today. 

Representative Scalise and Senator DeMint are on the right 

track with their bill that would clear away much of the regulatory 

underbrush that holds back the evolution of the video marketplace 

although the bill does go too far by eliminating media ownership 

restrictions. Other rules like retransmission consent, the compulsory copyright license and must-carry are also outdated but they 

are part of an interwoven fabric of regulatory and business expectations. They should be reformed but cautiously and eventually 

eliminated. And copyright law is also regulation that is often misused to hold back innovation. Witness the lawsuits against Aereo 

and DISH’s AutoHop service. 

By taking these simple steps, policymakers will be able to facilitate the development of competitive online video and subsequently 

disengage from regulations that were designed to counter the effects of bottleneck control. If they fail to do this, it is likely that 

incumbents will continue to shape the development of the video 

market and extend their current dominance indefinitely. 

While the Internet provides grounds for hope that the future of 

video will be much better for consumers, a lot of work remains for 

this hope to become reality. 

Thank you. I look forward to your questions. 

[The prepared statement of Ms. Sohn follows:] 

35 


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ublic 

Testimony of Gigi B. Sohn, 

President, Public Knowledge 

Before the 

U.S. House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Communications and Technology 

Hearing On: 

"The Future of Video" 

Washington, DC 

June 27, 2012 
36 


82325.022

Chairman Walden. Ranking Member Eshoo. members of the Subcommittee. 

thank you for inviting me to talk about the future of video. My name is Gigi Sohn. 

and I am President of Public Knowledge. a non-profit public interest organization 

that seeks to ensure that the public benefits from a communications system that is 

open, competitive and affordable. 

INTRomicTION 

There is widespread agreement that we are currently living in the golden age of 

television. Programs like Mad Men, Breaking Bad, Game o/Thrones, Modern Family, 

The Daily Show and The Colbert Report have become part of our cultural landscape, 

and even in this era of 500 channels, still inspire discussions around the water 

cooler. There are numerous new ways to watch TV - be it on a flat screen LED 

television, on a tablet or on a smartphone. And the Internet and DVRs have the 

ability to allow a viewer to watch what they want to watch when they want to watch 

it. 

Despite all of the great programming and ground breaking devices, Americans 

are locked into a television business model that limits competition and choice; keeps 

prices for video high and limits technology and online video from achieving their full 

potential. This business model is made possible largely by an outdated regulatory 

structure created by incumbents to gain competitive advantage. It is time for 

Congress and the FCC to revamp this regulatory structure so that new video 

competition can thrive - giving consumers greater options and the ability to watch 

video whenever they want and on the device of their choosing. 

1 
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82325.023

Congress and the FCC can achieve this goal in three ways. First, they can clear 

away some of the outdated rules that slow down the evolution of the video 

marketplace. Second, they can extend the successful policies that allow competitors 

to access high-value content to certain online providers. Third, they can protect 

Internet openness and prevent discriminatory billing practices that hold back online 

video. By doing this they will increase competition, which will mean lower prices, 

better services, and more flexibility and control for consumers. 

BACKGROUND 

For nearly a century the federal government has shaped the development of 

electronic media. In the 1920s the Federal Radio Commission brought order to the 

chaotic and experimental landscape that characterized early broadcasting. In doing 

so it set the conditions that allowed radio and then television broadcasting to 

develop into what it was in its heyday, and what it is today. In the 1960s and 1970s 

the FCC took steps to protect broadcasting from the disorganized and innovative 

early cable industry.1 By doing this it made sure that cable became an adjunct to 

rather than a replacement for established broadcasting.2 

1 See United States v. Southwestern Cable Co., 392 US 157 (1968). This case, in 

addition to being an important case setting out the bounds of FCC authority, 

contains a summary of the FCC's early efforts at cable regulation. See also OFFICE OF 

TELECOMMUNICATIONS POLICY, CABLE: REPORT TO THE PRESIDENT (1974), which contains 

an early history of the cable industry and attempts at cable regulation, as well as 

policy recommendations. 

2 The 1974 OSTP Report said that "cable is not merely an extension or improvement 

of broadcast television. It has the potential to become an important and entirely new 

communications medium, open while and available to all." OSTP Report at 13. But 

cable did succeed in providing viewers with more content it fell short of this early 

promise, and the regulatory system that developed ensured that cable extending the 

reach of broadcasting instead of developing into a competitor to it. 

2 
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82325.024

After Congress passed the Cable Act of 1984, the tables turned and cable became 

the monopoly. Cable operators controlled who did and didn't get on the new 

medium, using their power to require cable programmers, such as the fledgling CNN 

and Discovery, to provide "pay for play" equity interests to cable operators, or sign 

exclusive agreements prohibiting programmers like MTV from appearing on 

potential competitors such as Direct Broadcast Satellite (DBS). At the same time, 

cable operators received access to needed inputs such as poll attachment rights and 

broadcast programming. The lack of competition led to high prices and poor service, 

but the cable incumbents' control over "must have" programming made it 

impossible for any competing services to emerge. 

It was not until the 1992 Cable Act3 that Congress embarked on an express 

policy of increasing competition in the television market. It realized that potential 

competitors needed access to the same content as large cable systems with market 

power. New laws such as program access rules that gave competitors access to 

programming owned by the cable operators, and program carriage rules that 

prevented cable operators from demanding an equity share as a condition of 

carriage ("pay for play"), helped make it possible for new "multi-channel video 

programming" providers (MVPDs) to compete with cable operators, as did changes 

to the law to make it easier for competitors to get access to broadcast 

programming.4 These policies of increasing competition were somewhat successful 

3 Cable Television Consumer Protection and Competition Act of 1992, PL 102-385, 

106 Stat. 1460 (1992). 

4 E.g., The Satellite Home Viewer Improvement Act of 1999, Pub.L. No. 106-113,113 

Stat. 1501, 1501A-526 to 1501A-545 (Nov. 29, 1999). 

3 
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but their promise was not entirely fulfilled.s They enabled some new competitors to 

operate but these new competitors did not change the fundamental shape of the 

market. They did not slow the increasing power of cable generally and a few large 

cable companies in particular.6 And they did little or nothing to keep the market 

from consolidating in ways detrimental to consumers and independent content 

producers alike. 

The Internet is changing the video marketplace just as it changed the market for 

music, news, books, and other forms of media. But it's not a foregone conclusion that 

the Internet will disrupt the video marketplace. Dominant players in the market 

today have control both over the content their nascent online competitors need for 

their service, and over the pipes they must use to reach consumers. As a result much 

high-value programming is not available online, and online video providers have to 

contend with artificially low bandwidth caps and other discriminatory practices that 

keep them from reaching their full potential. 

Thus while it's inevitable that IP technologies and the Internet will play an everlarger part of video delivery, it remains an open question whether consumers or 

5 See Annual Assessment of the Status of Competition in the Market for Video 

Programming, Thirteenth Annual Report, MB Docket No. 06-189 (reI. Jan 16,2009), 

available at http://hraunfoss.fcc.gov /edocs_public/attachmatch/FCC-07-206A1.pdf. 

See also Comments of Public Knowledge in Annual Assessment of the Status of 

Competition in the Market for the Delivery of Video Programming, MB Docket No. 

07-269 (June 8, 2011), available at 

http://www.publicknowledge.org/fi!es/docs/PK_Comments_MVPD-CompetitionReport.pdf. 

6 For example, Adelphia'S cable assets were sold to Time Warner Cable and Comcast. 

See Adelphia Sold to Time Warner, Comcast, BUFFALO BUSINESS FIRST, April 21, 2005, 

http://www.bizjournals.com/buffalo/stories/2005/04/18/daily37.html?page=aI1. 

Com cast's cable assets and NBC Universal have been combined in a joint venture 

that is controlled by, and 51 % owned by Comcast. See General Electric, New NBCU, 

http://www.ge.com/newnbcu. 

4 
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82325.026

incumbents with market power will enjoy the lion's share of the benefits. 

Consumers will still suffer from a lack of choice and independent content producers 

will still struggle to reach viewers if existing incumbents in the content and the 

MVPD industry continue to thwart disruptive change and manage the transition for 

their own benefit. Congress should once again take the necessary steps to ensure 

that incumbents cannot throttle (literally as well as figuratively) the legions of 

potential competitors trying to reach willing consumers. 

At the same time, Congress should prune away the needless overgrowth of older 

rules, like syndicated exclusivity, the sports blackout rule and the network nonduplication rule, that exist only to protect the business model oflocal broadcasting. 

Senator DeMint and Representative Scalise are on the right track with their bill that 

would clear away much of the regulatory underbrush that holds back the evolution 

of the video marketplace,? although the bill goes too far by eliminating ownership 

restrictions still needed to maintain diversity in traditional media. Some other rules, 

like retransmission consent and the compulsory copyright license, are outdated, but 

part of an interwoven fabric of regulatory and business expectations. They should 

be reformed, but cautiously. 

At the same time, measures that are designed to mitigate the market power of 

certain large video providers should not be repealed until true competition develops. 

In some respects they should be extended. For example, online video providers that 

wish to voluntarily operate as "multichannel video programming distributors" 

7 Next Generation Television Marketplace Act, H.R. 3675 and S. 2008. 

5 
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82325.027

(MVPDs) under Title VI of the Communications Act8 should be able to do so, as this 

would enable them to access certain valuable content and protect them against 

anti competitive actions by incumbents. 9 This would ensure that consumers had 

more choices for high-value content than they do today and would eliminate the 

incentives that keep certain content from being licensed widely. 

Finally, the fact that the largest residential broadband ISPs, such as Com cast, are 

also MVPDs invested in the existing video distribution models raises concerns. 

These ISP /MVPDs can impose a variety of policies that prevent genuinely disruptive 

competition. For example, the ability to control how much data subscribers may 

access through data caps, the ability to privilege some content over others through 

prioritization or exemption from data caps, and the ability to control what devices 

can connect to the network, give cable operators (and other broadband providers 

like FIGS) the ability to pick winners and losers just as cable operators did from 

1984 to 1992. 

DETAILED ANALYSIS AND RECOMMENDATIONS 

The video marketplace is unique, not only because of its complicated business 

and regulatory structures, but because video incumbents are better placed to 

counter the threat the Internet poses to their business models. They do this in 

varied and creative ways. 

847 USC §602 (13) 

9 See Comments of Public Knowledge in Interpretation of the Terms "Multichannel 

Video Programming Distributor" and "Channel" as Raised in Pending Program 

Access Proceeding, MB Docket No. 12-83 (filed May 14, 2012) (Sky Angel 

Comments), available at http://www.publicknowledge.org/interpretation-mvpd. 

6 
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82325.028

Threats to Internet Openness 

For a long time it looked as though ISPs would continue doing what Com cast did 

when it started degrading BitTorrent traffic-picking and choosing which Internet 

protocols and services got preferential or discriminatory treatment. But recently 

ISPs have found that it is more effective to discriminate via billing practices. Some 

ISPs have set their bandwidth caps so low as to make it financially unattractive to 

switch over entirely to online video, as this would put viewers over their caps and 

perhaps subject them to overage charges. 10 At the same time, at least one ISP 

exempts its own video services that are delivered over the same infrastructure from 

the caps.ll These practices disadvantage services like Netflix and Amazon Instant 

Video and relegate most online video to the role of a supplement to, rather than 

replacement for, traditional MVPD services. 

10 ANDREW ODLYZKO, BILL ST. ARNAUD, ERIK STALLMAN, & MICHAEL WEINBERG, KNOW YOUR 

LIMITS: CONSIDERING THE ROLE OF DATA CAPS AND USAGE BASED BILLING IN INTERNET ACCESS 

SERVICE 48 (Public Knowledge 2012) ("Comcast's own estimate for the amount of 

data required to replace its pay-television offering with an over the top competitor 

is 288 GB per month. In light of thiS, it may come as no surprise that Comcast's data 

cap is set at 250 GB per month."). Comcast has since raised its cap, but it is worth 

observing that the 288 GB per month figure is based on an unknown mix of standard 

and high-definition content; presumably, a higher percentage of high-definition 

video would lead to a higher figure. See Mark Israel and Michael L. Katz, The 

ComcastjNBCU Transaction and Online Video Distribution, Submitted by Comcast 

Corporation, MB Docket No. 10-56 (May 4 2010) at 33, available at 

http;//apps.fcc.gov/ecfs/document/view?id=7020448237. 

11 Michael Weinberg, Comcast Exempts Itself From Its Data Cap, Violates (at least the) 

Spirit of Net Neutrality, PUBLIC KNOWLEDGE (March 26, 2012), 

http://www.publicknowledge.org/blog/comcast-exempts-itself-its-data-capviolates-. 

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To counter this, Congress needs to stand behind the FCC's attempts to protect 

Internet openness.12 At the same time these protections need to be strengthened, 

their loopholes need to be closed, and they need to take into account the fact that 

that discrimination can happen through billing, as well as through Internet "fast 

lanes" and other forms of technological discrimination. 

Restrictions on the Availability of Content 

The current regulatory system makes it so that incumbent MVPDs but not online 

providers can carry broadcast content,13 and it makes it easy for incumbents to 

share content with each other while keeping it out of the hands of potential new 

competitors.14 And while it's unlawful for incumbent providers to behave anticompetitively towards each other, they are free to keep their content away from 

online services, and to use exclusionary contracts and "most favored nation" clauses 

to limit the online distribution of independent programming. IS 

As a result, while a lot of very good video programming is available online, the 

most popular programming is not. 16 Popular broadcast and cable channels are not 

available online. Many popular shows are not available online at all or are only made 

available after a "windowing" period. Some programs are put online reasonably 

12 Preserving the Open Internet, Report & Order, GN Docket No. 09-191, FCC 10-201, 

available at http://fjallfoss.fcc.gov /edocs_public/attachmatch/FCC-10-201Al.pdf. 

13 47 U.S.c. § 325; 47 C.F.R. § 76.64. 

1447 U.s.c. § 548. See Revision of the Commission's Program Access Rules, Notice of 

Proposed Rulemaking, MB Docket No. 12-68, FCC 12-30 (reJ. Mar. 20, 2012) for an 

overview of the program access rules. 

IS Jon Brodkin, DO} probing Big Cable Over Online Video Competition, ARS TECHNICA, 

June 13,2012 (noting that "[t]he DOJ is also investigating contracts programmers 

sign to be distributed on cable systems, which include 'most-favored nation clauses' 

that may favor cable companies over online video distributors.") 

16 See Carlos Kirjner, Internet TV (or Why It Is So Hard to Go Over the Top), 

Bernstein Research (June 15, 2012). 

8 
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promptly, but are only viewable in inconvenient ways. Some of the best online 

content is only available to viewers who also have cable subscriptions, through TV 

Everywhere and similar efforts. Live sports, and especially live local sports, are 

generally not available online at all. Thus, while online services make it easy to 

watch great documentaries, classic movies, and old sitcoms, the kinds of culturallycurrent programming that people talk about at the office and online are usually not 

available without a cable or satellite subscription. 

This problem would be largely abated if online providers like Sky Angel were 

permitted to operate as MVPDs, like they want toP The rules that ensure that all 

MVPDs can access certain content would then protect them as well as incumbents. 

At the same time, the FCC should find that the current rules that prohibit 

incumbents from behaving anti-competitively toward each other also prohibit them 

from taking anti-competitive acts against even those online video providers that 

choose not to operate as MVPDs.18 But even short of that, if more content were 

17 See Sky Angel Comments. 

18 As Public Knowledge has argued, 

The [FCC] should use its authority over the video programming distribution 

market to protect online video distribution generally, by prohibiting MVPDs 

from behaving anticompetitively in ways that harm any video distributor, 

whether or not it is an MVPD. Section 628 of the Communications Act 

provides authority for this. This Section bans any actions "the purpose or 

effect of which is to hinder significantly or to prevent any multichannel video 

programming distributor from providing ... programming to subscribers or 

consumers." The close connection between the markets for MVPD and nonMVPD video distribution mean that anticompetitive actions taken against an 

non-MVPD would likely have a deleterious effect on the ability of a 

competitive MVPD to offer programming-for example, by increasing its 

costs, or inhibiting the ability of an MVPD to offer programming on demand 

or online. 

9 
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available from online services that might choose to operate as MVPDs, the incentive 

to keep content offline would evaporate to the benefit of the entire video 

marketplace. 

The current pay TV MVPD model is very lucrative for some because it forces 

viewers to pay for programming they don't want. Even some popular programmers 

like Time Warner, who have no direct stake in the cable business, find it more 

profitable to give exclusives to MVPDs than to make their programming available to 

willing buyers online. 19 This is because people pay for large bundles of cable 

channels, some of which are very expensive, even if they only want to watch a few. 2o 

Every cable subscriber has to pay for broadcast channels, even though they are 

available over the air for free. This leads to high prices that just keep getting higher. 

The result of all of this is a loss for consumers. 

One quick way to fix this would be to scrap the rules that require that cable 

systems carry broadcast stations as part of their basic tier-customers should be 

able to choose what they pay for. And while video providers should be free to 

bundle content and should not be required to offer everything a la carte, it seems 

logical that increased competition from online providers would force today's 

providers to begin offering their customers more flexibility. 

Sky Angel Comments at 24-25. 

19 Brian Stelter, HBO Says No, for Now, to Fans Who Want a Web-Only Option, NY 

TIMES MEDIA DECODER, June 6, 2012, 

http://mediadecoder.blogs.nytimes.com/2012/06/06/hbo-says-no-for-now-tofans-who-want-a-web-only-option. 

20 Peter Kafka, Hate Paying for Cable? Here's Why, ALLTHINGsD, March 10, 2010, 

http://allthingsd.com/20100308/hate-paying-for-cable-heres-the-reason-why. 

10 
46 


82325.032

Marketplace Consolidation 

The merger between Comcast and NBC Universal brought a large amount of 

programming under the control of a cable system that has an incentive to limit its 

distribution online. 21 While it is true that both the Department of Justice and the FCC 

conditioned their transaction on Comcast's commitment to make certain 

programming available to online distributors,22 as Public Knowledge has argued, 

behavioral remedies are, in general, insufficient to overcome all the anti-competitive 

effects of mergers, joint ventures, and other structural changes that create 

incentives to limit distribution and innovation. 23 Unfortunately, yet another such 

change has been proposed, whereby Verizon and several large cable companies plan 

to create various joint entities to develop new video technologies and to market 

each other's products rather than compete.24 In addition to limiting competition in 

existing markets, these arrangements could mean that much video in the future will 

be locked up in proprietary platforms, and could mean that anticompetitive 

"authentication" schemes like TV Everywhere become even more widespread. If 

21 Competitive Impact Statement of the Department of Justice at 4, United States v. 

Comcast Corp., 1:11-cv-00106, (D.D.C. Jan. 18,2011), available at 

http://www.justice.gov /atr /cases/f266100 /266158.pdf 

22 Applications of Com cast Corporation, General Electric Company and NBC 

Universal, Inc., for Consent to Assign Licenses and Transfer Control of Licenses, 

Memorandum Opinion & Order, 26 FCC Rcd. 4238 (2011); Final Judgment in United 

States v. Comcast, United States District Court for the District of Columbia, Case No. 

1:II-cv-OOJ06 (Sept. 1,2011). 

23 Petition to Deny of Public Knowledge and Future of Music Coalition in WT Docket 

No. 11-65 (filed May 31,2011), at 62-70, available at 

http://www.publicknowledge.org/files/docs/pkJmc-atctmo-petition_to_deny.pdf. 

24 See Petition to Deny of Public Knowledge et al. in WT Docket No. 12-4 (filed Feb. 

21, 2012), available at 

http://www.publicknowledge.org/files/pk_verizon_spectrumco_petition.pdf. 

11 
47 


82325.033

policymakers truly wish to safeguard the future of video, they should prevent these 

sorts of anti competitive agreements from taking place. 

Outdated Rules That Protect Incumbent Business Models 

Protectionist Measures 

Finally, there are some rules on the books today that seem designed to prop up 

legacy business models and have long outlived any functions they may once have 

served. Many of them can and should be repealed today. Examples of these include 

sports blackout rules, network nonduplication, and syndicated exclusivity 

provisions,25 and the previously-mentioned rule that requires that all MVPD viewers 

pay for free over-the-air television.26 Some of these rules were passed to protect 

aspects of the video distribution system from disruption before Internet video was a 

possibility, and when it seemed that iflocal broadcasters lost revenue nothing could 

replace them. Exclusivity rules not only keep cable systems from carrying signals 

from "distant" markets but they prevent networks from distributing content on a 

non-exclusive basis. The world these rules were written for is gone now and they 

have outlived their purpose. Some local broadcasters never provided unique local 

programming, and the various public goals that they provide can be achieved more 

effectively through other means. Traditional models of video distribution are still 

valuable, and local broadcasters who serve their communities will continue to thrive 

after any regulatory reform. But the broadcasting industry no longer needs 

25 47 C.F.R. §§ 76.92(f), 76.106(a), 76.111, 76.120, and 76.127-130. 26 47 C.F.R. § 76.901(a) (''The basic service tier shall, at a minimum, include all 

signals of domestic television broadcast stations provided to any subscriber"); 47 

C.F.R. § 76.920 ("Every subscriber of a cable system must subscribe to the basic tier 

in order to subscribe to any other tier of video programming or to purchase any 

other video programming."). 

12 
48 


82325.034

extraordinary protection against changes in technology, business models, and 

viewer behavior. 

Outdated, but Complex Rules 

Some other rules are outdated, but so interconnected with other rules and 

marketplace expectations that they need to be approached carefully. Among these 

are the compulsory copyright license,27 retransmission consent,28 and must-carry.29 

The compulsory license cannot be reformed unless video providers are given 

assurance that they never have to stop carrying programming just because they 

don't know whom to contact for a license, and to make sure that they can cope with 

any potential holdout problems. And it would make no sense to embark on a 

comprehensive reform of the laws governing video carriage in a way that replicated 

the problems that afflict the retransmission consent process today, while 

introducing new ones. Short of dealing with the compulsory license and 

retransmission consent together, several reforms could improve the current 

retransmission consent process. Many of the rules that have already been 

mentioned give an unfair advantage to broadcasters and drive up the rates they can 

charge. And some broadcasters have engaged in brinksmanship tactics that harm 

viewers, where they pull their signals from MVPDs right before high-profile 

events. 30 These problems can at least be alleviated with meaningful "good faith" 

standards that discourage unfair negotiation tactics, and interim carriage 

27 17 U.S.c. § 11I. 

28 47 U.S.c. § 325; 47 C.F.R. § 76.64. 

29 47 USc. § 534; 47 C.F.R. § 76.55. 

30 Amendment of the Commission's Rules Related to Retransmission Consent, Notice 

a/Proposed Ru/emaking, 26 FCC Red. 2718, ~15 (2011). 

13 
49 


82325.035

requirements that minimize disruption to viewers.31 Finally, while the must-carry 

system is used by many low-value broadcasters in ways that Congress never 

intended, public and non-commercial stations continue to serve a valuable role and 

policymakers should find ways to protect the good that they do. 

Policies That Are Still Needed 

Still other rules serve a function and should be maintained, at least until 

competition develops. These include the program access, program carriage rules, as 

well as set-top box competition rules. The program access rules and related 

protections prevent anyone MVPD from having exclusive rights to content. 

Although the video market is not as competitive as it can be in the Internet age, the 

fact remains that the American video distribution market is more competitive than 

that of many other countries. The program access rules are to thank for that, and 

they should be extended to all services that wish to operate as MVPDs, even ones 

that are exclusively online. Similarly, the program carriage system, which protects 

independent programmers from the negative effects of bottleneck control by some 

MVPDs, still serves a role in ensuring that viewers can enjoy content from diverse 

sources. Lastly, the directive expressed by Congress under Section 629 to have true 

set-top box competition has remained largely unfulfilled. Until Internet-delivered 

video becomes a true substitution, preserving the FCC's authority to promote settop box competition will remain necessary. 

31 See Comments of Public Knowledge and New America Foundation in MB Docket 

No. 10-71 (filed May 27, 2011), available at 

http://www.publicknowledge.org/files/docs/11-0S-27PKNAF Jetrans_comments.pdf. 

14 
50 


82325.036

Copyright and Spectrum Policy 

There are two other kinds of regulations that can hold back the development of 

online video. Policymakers don't always see them as "regulations" in the same 

sense as things like syndicated exclusivity. But copyright and spectrum laws are 

regulations nonetheless, and they have profound effects on the shape of the market. 

Copyright law shouldn't be misused to hold back the evolution of the video 

marketplace. Dish is being sued for making a DVR that's too sophisticated for the 

taste of some networks. But it's not illegal to skip commercials or for users to take 

full advantage of their home recording rights. 32 And Aereo's remote antenna is legal 

just as Cablevision's remote DVR is. 33 Copyrights are limited monopolies granted by 

the government, and they come with a series of limitations and exceptions designed 

to protect users as well as creators. They should not be a weapon used to limit 

experimentation with bUSiness models and services. 

Nor should misplaced fears of piracy keep content offline. Some content industry 

executives have a view of technology and the Internet that can only be described as 

superstitious, and they think that if they give people access to content they'll lose 

control of it. But recent history shows that most people only turn to piracy when 

content is not available online though other means. From the perspective of limiting 

copyright infringement, limiting online distribution is simply counterproductive. 

32 See John Bergmayer, Networks Pull the Trigger on Dish, but They're Only Hurting 

Themselves, PUBLIC KNOWLEDGE (May 25,2012), 

http://www.publicknowledge.org/blog/networks-pull-trigger-against-dish-theyreon!. 

33 See Brief of Amici Curiae Electronic Frontier Foundation and Public Knowledge in 

WNET v. Aereo, United States District Court for the Southern District of New York, 

Case No.1 :12-cv-01543-AJN, available at 

http://www.publicknowledge.org/files/aereo_amici_brief.pdf. 

15 
51 


82325.037

This is why it is particularly distressing that recent trade agreements contain 

language that could be interpreted as limiting the possibilities of online video 

distribution.34 

To whom the government assigns spectrum and for what purpose it allocates it 

also has an impact on the video marketplace. As long as broadcasters use the public 

airwaves they will have public responsibilities. For example, they must operate 

transparently,35 they must serve the needs of their communities,36 and they cannot 

behave unreasonably in retransmission negotiations,37 While it is true that fewer 

people rely on over-the-air television today than they did in its peak, due to the 

increasing costs of cable, a new generation of viewers is getting familiar with rabbit 

ears.38 Thus, to say that broadcasting is no longer relevant is just as wrong as to say 

that it should remain at the center of the video marketplace. In a more competitive 

34 Many free trade agreements appear to state that online retransmission may not 

occur without the permission both of the owner of the copyright in the 

programming, and of the broadcaster. This is at odds with the current system of a 

compulsory license plus retransmission consent, which requires MVPDs to obtain 

the permission only of the signal owner, not of the content owners. Some current 

reform proposals involve requiring an MVPD to obtain the permission of the 

copyright holders instead of the permission of the broadcaster, but not of both. See 

John Bergmayer, The US-Colombia Free Trade Agreement: Policy Laundering in Action, 

PUBLIC KNOWLEDGE (April 20, 2012), http://www.publicknowledge.org/blog/uscolombia-laundering. But see Comments of ABC, CBS, and NBC Television Affiliates 

in MB Docket No. 12-83 (filed June 13, 2012), available at 

http://apps.fcc.gov /ecfs/document/view?id=7021922660 (arguing that it would be 

consistent with the agreements if online systems were categorized as MVPDs and 

subsequently followed standard retransmission consent procedures). 

35 See 47 C.F.R. § 73.3526 (public file requirement). 

36 47 c.F.R. § 73.3526(e)(11)(i). 37 47 U.S.c. §§ 325(b)(3)(C)(ii), (iii). 

38 Christopher S. Stewart, Over-the-Air TV Catches Second Wind, Aided by the Web, 

WALL STREET JOURNAL (Feb. 21, 2012), 

http://online.wsj.com/article/SB100014240529702040598045772294513645930 

94.html ("It's cool to have rabbit ears again."). 

16 
52 


82325.038

video marketplace there will no doubt be room for many different kinds of services. 

The solution is not to enshrine or attack broadcasting but to incentivize them to 

create great content, and to adopt policies that allow spectrum to be put to other 

uses. Not only would this be beneficial to communications policy generally but the 

impact on the video marketplace would be profound, as distribution channels adapt 

to fit a more decentralized and dynamic marketplace. 

CONCLUSION 

As they have in the past policymakers are starting to consider the implications of 

increasing change in the market for Video distribution. History provides examples 

both of protectionist regulations that should be avoided today, and of procompetitive measures that serve as more positive precedents. But today is different 

in one way: Finally, the technology exists that could eliminate the physical, 

bottleneck control of video distribution that has existed in various forms for 

decades. lfpolicymakers take some simple steps to facilitate the development of 

competitive online video they can begin to disengage from regulations that were 

designed to counter the effects of this bottleneck control. However, if they fail to do 

this, it is likely that incumbents will be able to continue to shape the development of 

the video market and extend their current dominance indefinitely. While the 

Internet provides grounds for hoping that the future of video will be better for 

consumers, policymakers have a lot of work to do to help make that happen. 

17 
53 

Mr. WALDEN. Ms. Sohn, thank you for being here. We appreciate 

your testimony on this very important set of issues. 

Now we will welcome David Hyman, the General Counsel for 

Netflix. Mr. Hyman, thank you for being here. We look forward to 

your testimony. 

STATEMENT OF DAVID HYMAN 

Mr. HYMAN. Good morning. Netflix helped pioneer streaming 

movies and TV shows over the Internet. In 2008, we began to deliver instant streaming video to televisions through the use of a 

handful of Internet-connected devices. Today, over 23 million consumers in the United States use the Netflix streaming service on 

more than 900 different types of devices including game consoles, 

mobile phones and tablets. In fact, Netflix delivers close to a billion 

hours of streaming movies and TV shows to its members every 

month. 

The Internet delivery of video provides consumers with unprecedented freedom and control over what video programming they can 

watch as well as when and where they can watch it. This is the 

future of video. Increased demand for Internet video is driving consumer adoption of broadband. It is spurring a wave of innovation 

in the consumer electronics industry with virtually all new devices 

being Internet connected. Innovation leaders like Netflix are developing new methods for delivering the petabytes of video data traversing the Internet. Just a few weeks ago, we announced the rollout of our open connect network, a single-purpose content-delivery 

network focused on the efficient distribution of large media files. 

Our goal here is to help make a faster and less expensive Internet 

for all, and to this end, we are connecting to ISPs free of charge 

and making our hardware design and open-source software components publicly available. 

User interfaces, or UIs, through which consumers discover and 

engage with video, are likely evolving. The typical linear channel 

selection grid that uses the up-down left-right remote to access content will likely be replaced with intuitive and visually stimulating 

UIs that use motion, touch and voice as means of control. Over the 

next few years, UIs will evolve in amazing ways. A decade from 

now, choosing a linear feed from a broadcast grid of 200 channels 

will feel as odd as using a television dial to change channels does 

today. 

The Internet is helping to reconceptualize how content is made 

and consumed. Last year, for example, Netflix announced it would 

be offering several original television series to its members. This is 

really the first time that such high-quality productions will be 

debuted through the Internet. Our first show will be House of 

Cards, a political thriller set right here in Washington, DC. The series stars Kevin Spacey and Robin Wright and is directed by David 

Fincher. We will be experimenting with how our programs are released, likely offering multiple episodes or perhaps even whole seasons at one time. In doing so, Netflix is giving arts like Mr. Fincher 

greater latitude to create compelling stories while giving our members the freedom to watch world-class content in a way that suits 

their individual preferences. 

54 

Video services like Netflix are leveraging the power of the Internet to help consumers discover content they will love. Using recommendation and merchandising technology, Netflix is helping to 

expand the reach and popularity of video content. For example, the 

availability on Netflix of all four prior seasons of the series Mad 

Men helped drive a 20 percent increase in those watching this season’s opening episode. By combining technology with consumer 

choice, we were able to find an untapped audience of more than a 

million viewers for a show in its fifth season. This is just one example of how traditional and emerging video distribution platforms 

can complement one another. 

All this change, however, has led to speculation about the demise 

of traditional video distribution platforms and networks. It is our 

belief that these platforms and networks will also adapt to today’s 

shifting video landscape. We see the beginnings of this with various 

authenticated Internet video offerings commonly referred to as ‘‘TV 

Everywhere.’’ These offers provide cable subscribers on-demand access to a variety of content through Internet-connected devices like 

the iPod, the iPad and the Xbox. In this way, cable subscribers are 

afforded many of the benefits of Internet video within the bundled 

offering of their cable service. 

To get a good feel for this implementation, I would recommend 

that you take a look at Comcast Streampix, HBO GO or 

Showtime’s TV Everywhere offering. These implementations will 

likely grow in popularity, and consumers will increasingly view traditional cable networks on devices connected to the Internet. 

At Netflix, especially as we focus on streaming and begin to offer 

original content, we are often asked if we are not becoming more 

like a traditional network such as HBO. The fact, however, is that 

these networks are becoming more like Netflix. As traditional platforms and networks move to distribute their programming in an 

on-demand fashion over the Internet, they are beginning to compete more directly with pure play or over-the-top Internet video 

providers like Netflix. As this trend continues, issues such as discriminatory data caps and IP interconnection must be examined 

with a much more discerning eye. When you couple limited 

broadband competition with a strong desire to protect legacy video 

businesses, you have both the means and the motivation to engage 

in anticompetitive behavior. Add to this mix a regulatory and legislative framework largely crafted before the modern Internet era 

and you have the makings for confusion and gamesmanship. 

Competition certainly leads to innovation and growing consumer 

choice. In large part because of innovation from Internet players 

like Netflix, traditional platforms and networks are changing their 

longstanding ways of doing business. In adapting to this changing 

landscape, these platforms and networks should not be permitted 

to unfairly leverage their data delivery networks or content distribution relationships to stifle unaffiliated video providers. 

I encourage this committee to examine closely the evolving competitive environment for Internet-delivered video. Netflix stands 

ready to work with you and others in the industry to explore various regulatory modifications or other changes that will help assure 

a competitive and innovative video marketplace for years to come. 

55 

Thank you for the opportunity to appear before you today, and 

I look forward to your questions. 

[The prepared statement of Mr. Hyman follows:] 

56 


82325.039

TESTIMONY 

OF 

DAVID HYMAN 

GENERAL COUNSEL OF 

NETFLIX, INC. 

BEFORE A HEARING OF 

THE ENERGY AND COMMERCE COMMITTEE 

SUBCOMMTlTEE ON COMMUNICATIONS AND TECHNOLOGY 

UNITED STATES HOUSE OF REPRESENATATIVES 

ON 

THE FUTURE OF VIDEO 

Wednesday, June 27, 2012 

Good morning Chairman Walden, Ranking Member Eshoo, and distinguished 

members of the Subcommittee. My name is David Hyman and I have served as the 

General Counsel ofNetflix since 2002. 

Netflix helped pioneer streaming movies and TV shows over the Internet. In 

2008, we began to deliver instant streaming video to televisions through the use of a 

handful of Internet-connected devices. Today, over 23 million consumers in the United 

States use the Netflix streaming service on more than 900 different types of Internetconnected devices, including game consoles, mobile phones, and tablets. In fact, Netflix 

delivers close to a billion hours of streaming movies and TV shows to its consumers 

every month. 
57 


82325.040

The Internet delivery of video provides consumers with unprecedented freedom 

and control over what video programming they can watch as well as when and where 

they can watch it. This is the future of video. 

Increased demand for Internet video is driving consumer adoption of broadband. 

It is spurring a wave of innovation in the consumer electronics industry with virtually all 

new devices being Internet-connected or "smart." Innovation leaders, like Netflix, are 

developing new methods for delivering the petabytes of video data traversing the 

Internet. Just a few weeks ago, we announced the rollout of our Open Connect Network, 

a single-purpose content delivery network focused on the efficient distribution of large 

media files. Our goal here is to help make a faster and less expensive Internet for all and 

to this end we are connecting to ISPs free of charge and making our hardware design and 

open source software components publicly available. 

User interfaces, or Uls, through which consumers discover and engage with video 

are likewise cvolving. The typicallinear-channcl selection grid that uses an updown/left-right remote to access content will likely be replaccd by intuitive and visually 

stimulating Uls that use motion, touch, and voice as means of control. Over the next few 

years, Uls will evolve in astounding ways. A decade from now, choosing a linear feed 

from a broadcast grid of200 channels will feel as odd as would using a television dial to 

change channels today. 

2 
58 


82325.041

The Internet is helping to re-conceptualize how content is made and consumed. 

Last year, for example, Netflix announced it would be offering several original television 

series to its members. This is really the first time that such high-quality productions will 

debut through the Internet. One of our tirst shows will be House of Cards, a political 

thriller set right here in Washington DC. The series stars Kevin Spacey and Robin 

Wright and is executive produced and directed by David Fincher. We will be 

experimenting with how our programs arc released, likely offering multiple episodes or 

perhaps even whole seasons at one time. In so doing, Netflix is giving artists like Mr. 

Fincher greater latitude to create compelling stories while giving our members the 

freedom to watch world class content in a way that suits their individual preferences. 

Video services like Netflix are also leveraging the power of the Internet to help 

consumers discover eontent they will love. Using recommendation and merchandising 

technology, Netflix is helping to expand the reach and popularity of video content. For 

example, the availability on Netflix of all four prior seasons ofthc series Mad Men 

helped drive a 20 percent increase in those watching this season's opening episode. By 

combining technology with consumer choice, we were able to find an untapped audience 

of more than one million viewers for a show in its fifth season. This is just one example 

of how traditional and emerging video distribution platforms can complement one 

another. 

All this change, however, has led to speCUlation about the demise of traditional 

video distribution platforms and networks. But it is our belief that these platforms and 

3 
59 


82325.042

networks will also adapt to today's shifting video landscape. We see the beginnings of 

this with various authenticated Internet video offerings. Commonly referred to as "TV 

Everywhere," these offerings provide cable subscribers on-demand access to a variety of 

content through Internet-connected devices like the iPad and Xbox. In this way, cable 

subscribers are afforded many of the benefits of Internet video within the bundled 

offering of their cable service. To get a good feel for this implementation, I would 

recommend you take a look at Comcast's Streampix, HBO GO, or Showtime's TV 

Everywhere offering. These implementations will likely grow in popularity and 

consumers will increasingly view traditional cable networks on devices connected to the 

Internet. At Nettlix, especially as we focus on streaming and begin to ofTeroriginal 

content, we are often asked if we are not becoming more like a traditional network such 

as HBO. The fact, however, is that these networks are becoming more like Netflix. 

As traditional platforms and networks move to distribute their programming in an 

on-demand fashion over the Internet, they are beginning to compete more directly with 

pure-play or "over-the-top" Internet video providers like Netflix. As this trend continues, 

issLles sLlch as discriminatory data usage caps and IP interconnection must be examined 

with a much more discerning eye. 

When you couple limited broadband competition with a strong desire to protect a 

legacy video distribution business, you have both the means and motivation to engage in 

anticompetitive behavior. Add to this mix a regulatory and legislative framework largely 

4 
60 


82325.043

crafted before the modern Internet era and you have the makings for confusion and 

gamesmanship. 

Competition leads to innovation and growing consumer choice. In large part 

because of innovation from Internet players like Netflix, traditional platforms and 

networks are changing their long-standing ways of doing business. In adapting to this 

changing landscape, these platforms and networks should not be permitted to unfairly 

leverage their data delivery networks or content distribution relationships to stifle 

unaffiliated video providers. 

I encourage this Committee to examine closely the evolving competitive 

environment for Internet-delivered video. Netflix stands ready to work with you and 

others in the industry to explore various regulatory modifications or other changes that 

will help assure a competitive and innovative video marketplace for years to come. 

Thank you for the opportunity to appear before you today, and I look forward to 

your questions. 

5 
61 

Mr. WALDEN. Mr. Hyman, thank you for your testimony and your 

participation. 

We will now go to Mr. Jim Funk. He is the Senior Vice President 

of Product Management for Roku. Mr. Funk, thank you for being 

here. We look forward to your testimony. 

STATEMENT OF JIM FUNK 

Mr. FUNK. Good morning, Chairman Walden, Ranking Member 

Eshoo and members of the subcommittee. Thank you for inviting 

me here to testify today about the future of video. My name is Jim 

Funk and I am the Senior Vice President of Product Management 

at Roku. 

Roku was founded 10 years in Silicon Valley. We are a rapidly 

growing company with less than 200 employees, still small by comparison with other companies represented at this hearing. The 

company’s founder, Anthony Wood, is a serial entrepreneur who, 

among many accomplishments, started ReplayTV and is considered 

the inventor of the DVR. While the DVR is now among the most 

popular entertainment devices, Roku is betting on the Internet as 

the future of television. 

Four years ago, Roku introduced a small Internet connected settop box that allowed consumers to stream movies from Netflix over 

the Internet and watch them in high quality on their TVs without 

needing a computer. The combination of a $99 Roku player and 

Netflix streaming was a revolutionary offering. Now, 4 years later, 

there are hundreds of models of TVs, Blu-Ray players, game consoles and set-top boxes offering this streaming video capability. 

These products can be found today at Best Buy, Walmart, Target 

and Amazon.com marketed by well-known brands such as Apple, 

Microsoft, Sony and Samsung. 

Since the launch of the Roku player, we have sold more than 3 

million boxes in the United States and now offer a range of very 

affordable products from $49 to $99. Roku has grown beyond a settop box and has become an open streaming platform that allows 

content providers to create applications, which we call channels. 

Roku now features more than 500 channels that are available to 

the millions of households which have purchased our streaming 

players. Most Roku users have a cable or satellite subscription 

service in addition to their Roku player, and Roku provides both 

new entertainment choices, as well as ways to get more value out 

of a cable or satellite television service. 

In addition to Netflix, Roku users can now enjoy tens of thousands of TV episodes and movies on demand from services such as 

Hulu Plus, Amazon Instant Video, Crackle, HBO and EPIX. We 

offer sports packages from Major League Baseball, the NBA, the 

NHL and Major League Soccer, and there is news from NBC, Fox 

News, the Wall Street Journal and CNBC. 

Beyond video, Roku users can enjoy streaming music services 

like Pandora, Internet radio from around the world, photo sharing, 

and popular games like Angry Birds. 

Roku is becoming an alternative way to reach consumers for existing video distributors too. We recently announced a partnership 

with DISH Network to stream their international programming to 

consumers who may not be able to install a satellite dish. CusVerDate Aug 31 2005 09:46 Mar 14, 2014 Jkt 037690 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 F:\112-15~4\122-15~1 WAYNE
62 

tomers of Time Warner Cable, Verizon, Dish and other MVPDs can 

now enjoy on-demand movies and shows from HBO and EPIX on 

Roku. 

Local broadcasters have even begun to experiment with reaching 

their audiences on Roku. Today you can watch local news on demand from broadcast stations located in Madison, Wisconsin, Las 

Vegas, and Indianapolis. 

Roku is also a means for content producers who do not have traditional cable or satellite distribution to reach the living room TV 

via the Internet. For example, we have over 75 faith-based channels, representing everything from individual congregations to 

Catholic and Mormon Church broadcasts. We even have a channel 

created by the House Oversight and Government Reform committee where video of hearings like this are available on demand. 

We believe that devices like Roku are part of the future of television because of what we already see. The average Roku user 

streams over 10 hours of video per week, which is almost one-third 

the number of hours that the average American watches traditional 

TV. Consumers like the new technology of Internet streaming because it combines all the new content choices with convenience and 

value. With the widespread adoption of DVRs, consumers now expect on-demand viewing, and the Internet provides virtually unlimited capacity for delivery of on-demand content. In addition, the 

combination of inexpensive Internet-connected devices and the expanding selection of Internet video services offer an excellent entertainment value for cost-conscious consumers. 

I did not come here today to advocate for specific legislation. Our 

point of view is that devices such as Roku represent an area of exciting innovation in entertainment and information delivery that 

are finding a home in the living rooms of millions of consumers. 

These devices are being embraced by all segments of the entertainment industry as a means to expand the business opportunities for 

legitimate content distribution. They are also driving the adoption 

of high-speed broadband connections, to the benefit of ISPs. 

Our interest here, and we believe this is also the consumer’s interest, is that there continue to be an open marketplace for competition in this space. That includes not only open competition between device manufacturers, but also open competition between 

video services, both traditional and new, as well as competition between Internet service providers. The widespread availability of affordable high-speed Internet open to all video sources is essential 

to continued growth and innovation in this market. 

Thank you for your time today. I look forward to your questions. 

[The prepared statement of Mr. Funk follows:] 

63 


82325.044

Statement of 

Jim Funk 

Senior Vice President, Product Management 

Roku, Inc. 

before the 

Subcommittee on Communications and the Internet 

Committee on Energy and Commerce 

U.S. House of Representatives 

on 

"The Future of Video" 

June 27, 2012 

Good Morning Chairman Walden, Ranking Member Eshoo and members of the Subcommittee. 

Thank you for inviting me to testify today about the "Future of Video." My name is Jim Funk 

and I am the senior vice president of product management at Roku. 

Roku was founded ten years ago in Silicon Valley. We are a rapidly growing company with less 

than 200 employees, still small by comparison with other companies represented at this 

hearing. The company's founder, Anthony Wood, is a serial entrepreneur who, among many 

accomplishments, started ReplayTV and is considered the inventor of the DVR. While the DVR 

is now among the most popular entertainment devices, Roku is betting on the Internet as the 

future of television. 

Four years ago, Roku introduced a small Internet connected set-top box that allowed 

consumers to stream movies from Netflix over the Internet and watch them in high quality on 

their TVs without needing a computer. The combination of a $99 Roku player and Netflix 

streaming was a revolutionary offering. Now, four years later, there are hundreds of models of 

TVs, Blu-Ray players, game consoles, and set-top boxes offering this streaming video capability. 

These products can be found today at Best Buy, Wal-Mart, Target, and Amazon.com marketed 

by well-known brands such as Apple, Microsoft, Sony, and Samsung. 

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Since the launch of the Roku player, we have sold more than three million boxes in the u.s. and 

now offer a range of very affordable products from $49 to $99. Roku has grown beyond a settop box and has become an open streaming platform that allows content providers to create 

applications, which we call channels. Roku now features more than 500 channels that are 

available to the millions of households which have purchased our streaming players. 

Most Roku users have a cable or satellite subscription service in addition to their Roku player, 

and Roku provides both new entertainment choices, as well as ways to get more value out of a 

cable or satellite television service. 

In addition to Netflix, Roku users can now enjoy tens of thousands of TV episodes and movies 

on demand from services such as Hulu Plus, Amazon Instant Video, Crackle, HBO, and EPIX. We 

offer sports packages from Major League Baseball, the NBA, the NHL, and Major league Soccer, 

and there is news from NBC, Fox News, the Wall St. Journal and CNBC. 

Beyond video, Roku users can enjoy streaming music services like Pandora, Internet radio from 

around the world, photo sharing, and popular games like Angry Birds. 

Roku is becoming an alternative way to reach consumers for existing video distributors too. We 

recently announced a partnership with Dish Network to stream their international 

programming to consumers who may not be able to install a satellite dish. Customers of Time 

Warner Cable, Verizon, Dish, and other MVPDs can now enjoy on-demand movies and shows 

from HBO and EPIX on Roku. 

Local broadcasters have even begun to experiment with reaching their audiences on Roku. 

Today you can watch local news on demand from broadcast stations located in Madison, 

Wisconsin, Las Vegas, and Indianapolis. 

Roku is also a means for content producers who do not have traditional cable or satellite 

distribution to reach the living room TV via the Internet. For example, we have over 75 faith 

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based channels, representing everything from individual congregations to Catholic and Mormon 

Church broadcasts. We even have a channel created by the House Oversight and Government 

Reform committee where video of hearings like this are available on demand. 

We believe that devices like Roku are part of the future of television because of what we 

already see. The average Roku user streams over 10 hours of video per week, which is almost 

one-third the number of hours that the average American watches traditional TV. Consumers 

like the new technology of Internet streaming because it combines all the new content choices 

with convenience and value. With the widespread adoption of DVRs, consumers now expect 

on-demand viewing, and the Internet provides virtually unlimited capacity for delivery of ondemand content. In addition the combination of inexpensive Internet connected devices and 

the expanding selection of Internet video services offer an excellent entertainment value for 

cost-conscious consumers. 

I did not come here today to advocate for specific legislation. Our point of view is that devices 

such as Roku represent an area of exciting innovation in entertainment and information 

delivery that are finding a home in the living rooms of millions of consumers. These devices are 

being embraced by all segments of the entertainment industry as a means to expand the 

business opportunities for legitimate content distribution. They are also driving the adoption of 

high speed broadband connections, to the benefit of ISPs. 

Our interest here, and we believe this is also the consumer's interest, is that there continue to 

be an open marketplace for competition in this space. That includes not only open competition 

between device manufacturers, but also open competition between video services, both 

traditional and new, as well as competition between Internet service providers. The 

widespread availability of affordable high speed Internet, open to all video sources is essential 

to continued growth and innovation in this market. 

Thank you for your time today. I look forward to your questions. 

3 
66 

Mr. WALDEN. Mr. Funk, thank you for your testimony. It is most 

helpful. 

We will now go to Mr. Michael Powell, President and CEO of the 

National Cable and Telecommunications Association. Mr. Powell, 

we are delighted to have you here. Please go ahead with your testimony. 

STATEMENT OF MICHAEL K. POWELL 

Mr. POWELL. Thank you, Mr. Chairman and Ranking Member 

Eshoo. It is always a great honor and privilege to appear before 

this committee. I have done it many times and I am proud to be 

here again. 

I am also proud to be here as a representative of America’s great 

success story, the cable operators and cable programmers of the 

United States, to talk about the future of video for one reason only. 

This is an industry through its own investment, technological innovation has contributed to the glimmering present that we are currently enjoying and has every intention of contributing to a more 

glorious future in the area of video. 

It is important as a quick reminder to remember that cable industry when it was first pioneered was all about making TV better. 

We brought television to rural America and urban areas that 

couldn’t be reached by traditional broadcast programming. We ultimately developed original programming that led to the iconic brand 

that most Americans associate with television today: CNN, ESPN, 

C–SPAN, Discovery, the History Channel. These were all creations 

of the artists and creators of the cable industry working in cooperation with the production community. 

We were the first to bring about anytime, anyplace shifting 

through video on demand and through DVR, and in 1996 when 

Congress called on the communications space to introduce telephone competition, it was the cable industry that most significantly 

made an impact representing almost 25 percent of all telephone 

service today. And then there is broadband. Truly the cable industry stepped up and led to the mass deployment of cable broadband 

in the United States, now reaching 93 percent of all homes in 

America. 

So we are experiencing, in my judgment, a truly golden age of 

television. By almost any metric used, particularly those used by 

the government and FCC, we are experiencing the best we ever 

have. First and foremost, there is simply more content. We have 

gone from a 1950s world of three channels to one in which there 

were 100 channels back in 1992 to over 900 programming channel 

sources today, and that continues to expand and explode at a rapid 

rate. And is it any good? I would submit that TV is producing the 

finest content that it has in its entire history. The critically acclaimed programs of The Sopranos or Mad Men or Homeland or 

comedies like Modern Family are truly capturing the imagination 

of the American public, and I think the industry and content producers and distributors have a great deal to be proud of in terms 

of the quality. 

When I was at the FCC, I remember one of our central goals, and 

I heard it mentioned earlier in the opening statement, is the diversity of content. We don’t want all the same stuff, and we are expeVerDate Aug 31 2005 09:46 Mar 14, 2014 Jkt 037690 PO 00000 Frm 00070 Fmt 6633 Sfmt 6633 F:\112-15~4\122-15~1 WAYNE
67 

riencing a period in which we hit on a model that allows true diversity of niche programming to smaller audiences by definition but 

ones that are passionate about the things they believe in. Put simply, if you fish, love music, crave sports, gorge on politics, want 

your native language or reflect your community on television or if 

you oddly have a fetish for Jersey Shore, it is all out there and 

available to you. We should be proud of what we have achieved in 

diversity. 

We also have more competitive sources for content than ever before. I would fully admit that 20 years ago in 1992 when the Cable 

Act was passed, the cable industry was a monopoly. It had 98 percent of multichannel video distribution in this country. Today, it 

enjoys 57 percent. And since the mid to late 1990s, its share has 

remained flat or declined in the face of competitive threat. Today 

Americans can choose between cable companies, the satellite companies that rank second and third in subscribership, telecos, you 

can go buy DVDs at Best Buy, or why not walk down to your corner store and pay $1.20 for a DVD at a Redbox distribution machine. It is an exciting opportunity for the American citizen. 

But then we haven’t seen enough. Then the Internet finally 

began to produce the realization of its promise. We now are looking 

at extraordinary amounts of Internet content and video by a whole 

host of companies, some represented today. There has been an 80 

percent increase in video streaming since 2008, and by some estimates, 62 percent of traffic at prime time on the Internet is video 

content, and as we have heard, they are producing original content 

and more and more on every conceivable device that can be 

dreamed up in Apple’s magic factory or anyone else. That is an exciting place. 

But this golden age is set against a regulatory environment that 

is tarnished. I am a big believer that law is premised on certain 

factual predicates about markets, economics and technology. Simply put, today’s regulatory regime is built on a foundation that 

crumbled long ago. I will submit my full testimony for then-andnow analysis, but you can quickly see cable once owned 98 percent 

of the market, owns 57 percent today. Cable once owned 54 percent 

of the cable channels that you see today. Today they only own 14 

percent. Back in 1992, a majority of Americans would watch television over the air. Today that is down to 14 percent. This is not 

to suggest that one industry is better than the other, but the predicates on which the law are built long ago crumbled into the sand 

and it is high time that they be reevaluated. 

Finally, I would like to conclude by simply taking head on the 

conjecture and speculation and active suggestion that somehow the 

cable industry is actively involved in an effort to destroy or eliminate over-the-top emerging competition. It is just flatly wrong and 

belied by the facts. 

First and foremost, we have seen a breathtaking explosion of 

video streaming content, as I said, an 80 percent growth. Netflix, 

who sits next to me, is the largest provider of subscription video 

in the country, not cable and not satellite. That growth has occurred in the current marketplace. Our policies, caps and pricing 

have in no way thwarted a consumer’s ability to watch video 

streamed content by any measure, and we are expanding to meet 

68 

demand consistently, having increased broadband speeds 900 percent in the last decade, and recently announced plans for startling 

speeds by the end of the decade. 

And finally, I would say, Mr. Chairman, remember, we sell 

broadband, and as the testimonies of the CEO of Roku and the 

General Counsel at Netflix made clear, their services help stimulate demand for services we sell. I assure you, many members of 

our board are very proud and appreciative of some of those services 

and what they have done for our business. 

Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Powell follows:] 

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TESTIMONY OF MICHAEL K. POWELL 

PRESIDE:-.IT AND CEO 

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION 

on 

THE FUTURE OF VIDEO 

before the 

Subcommittee on Communications and Technology 

Committee on Energy and Commerce 

UNITED STATES HOUSE OF REPRESENTATIVES 

WASHINGTOK, D.C. 

June 27, 2012 
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82325.048

Good morning Mr. Chairman and Members of the Subcommittee. My name is Michael 

Powell and I am the President and Chief Executive Officer of the National Cable & 

Telecommunications Association. Thank you for inviting me today to testify on the future of 

video. We welcome this important hearing. 

Cable Always Has Been an Innovative Force in Video 

from its beginning, cable has driven innovation and transformation in the video business. 

Cable was founded to make broadcasting better - bringing it to suburban and rural areas outside 

the reach of over-the-air reception. We made programming better breaking the lock of the 

three channel universe by investing billions in original contcnt that appeals to specialized 

audiences as well as the mass market, and buildll1g award-winning iconic brands like CNN, 

ESPN, HBO, CNBC, C-SPAN, History and Discovery. We were first to unshackle consumers 

from "appointment TV" with video on demand and the wide deployment of DVRs. 

When we turned to areas other than video, the results were similar. In 1996 Congress 

wanted telephone competition and cable delivered it. Today, 1 in 3 households that have 

wireline phone service receive it ii'om a cable operator. 

And then there is broadband. Where high-speed data service was once the purview only 

of businesses, cable operators brought broadband Internet service to residential subscribers. This 

was not serendipity. The industry borrowed heavily and took enormous risk by ripping out its 

one-way analog network and replacing it with a higher capacity, two-way digital platfonn that 

made broadband possible. Cable broadband now reaches over 93 percent of homes-rich, poor, 

urban and rural. We have increased broadband speeds over 900 percent in a decade, (with even 

faster speeds corning this year) and we have extended the reach of our broadband service through 
71 


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extensive Wi-Fi networks. All of that in turn has enabled consumers to receive high-quality 

video over the Internet and on mobile devices. 

The Golden Age of Video is Today 

Television of the past was the rusty Iron Age compared to today. By any measure, the 

video experience has never been better than now. There is (1) more content, (2) higher quality 

programs, (3) more variety and diversity, (4) more sources for content - and video is available on 

a wider range of devices. There arc hundreds of video programming networks, presented in 

brilliant HD quality and some in 3D. This is an enormous expansion from just twenty years ago. 

Artists and creators arc producing some of the most compelling programs ever and cable is their 

preferred palette. In the most recent award seasons, cable programming won 73 percent of TV 

Golden Globes and 50 percent of Primetime Emmys. Acclaimed series such as "Game of 

Thrones," "Mad Men," and "Homeland" are some of the most accomplished dramas ever. 

Public policy has always been concerned about diversity of viewpoints and niche 

programs for smaller yet passionate audiences. The cable model brought that ambition to 

fruition. The cable dial runs the gambit - from compelling scripted dramas, educational content, 

kids programming, sports, cooking shows, and news and public affairs. Simply put, if you fish, 

cook, workout, love music, crave sports, gorge on politics, admire dance, have a fetish for Jersey 

youth, or want programming in your native language or reflective of your community you will 

find it on cable. With all respect to former FCC Chairman Newt Minow, television today is no 

vast wasteland. 

If you are itching to watch video, the number of sources you can turn to have grown 

exponentially as different providers compete for your business. You may subscribe to cable 

television and get up to 150 HD channels, the latest premium content and live events, video on 

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demand and the ability to record and watch at your convenience on a DVR. You can get a very 

similar experience from Direct TV and Dish. Or, in many markets, you can also choose service 

from a telephone company. AT&T U-verse and Verizon FiOS have been popular new sources of 

video. Besides these subscription TV services, you can buy DVDs at Best Buy or better yet walk 

to the corner store and rem them for $1.20 from one of 30,000 plus Redbox kiosks. 

If that were not exciting enough, Internet-delivered video has ushered in an even greater 

explosion of choice. Use of the Internet to watch video has increased 79.5 percent between the 

3rd quarter of 2008 and the 3rd quarter of 2011. 11 By one estimate, real-time video streaming 

represents 62.5 percent of downstream Internet traffic in North America during prime time 

evening hours.21 By the end 0[2011, more than 100 million Americans watched online video 

content on an average day. That's a 43 percent increase [rom just a year ago3i Revenue from 

video content delivered over the Internet to televisions "is expected to grow from $2 billion in 

2009 to over $17 billion in 2014.,,41 The largest subscription video provider in the country today 

is Netflix - not Comeast, Time Warner Cable, DirecTV or any other multichannel video 

programming distributor (MVPD). 

Companies that stream content are proliferating: Netflix, Vudu, Hulu, Amazon, iTunes, 

CinemaNow, Network websites, HBOGo, and user-generated or special interest sites like 

YouTube, Vimeo, and TED. com are a few. Many more offerings are anticipated from the likes 

of Google, Apple, Intel and Sony. 

The Cross-Platform Report- Quarter 3,201 J US, Nielsen. 

21 Global Internet Phenomena Spotlight IH 2012 North lime rica, Fixed Access, Sandvine 

Tncorporated, May 16, 2012. 

31 US Digital Future in Focus, COM SCORE, Feb. 2012. 

41 U.S. Dep't of Justice, Competitive Impact Statement, United States v. Comcasl Corp., No. 1:11-

cv-00106 (D. D.C. Jan. 18,2011), available at http://www.justice.gov/atr/cnses/f266100/266158.htm. 

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And web video is not limited to a PC screen any more. Computers can connect to big 

screen televisions; content can be beamed to sets using functions like Apple Airplay; box 

companies like Roku, Tivo and Boxee can deliver web video to the TV set; and manufacturers 

like Samsung are making the Flat Panel TV web enabled, with apps incorporated for accessing 

video content. One study estimates that at least 38 percent of U.S. households have a television 

set connected to the Internet, through either an Internet-ready TV, game console. standalone Bluray player or smart set-top box connected to their home network."sl Smartphones and iPads 

have proliferated as compelling devices for consuming video content and enjoying second screen 

experiences. 

Cable, too, is working to bring better video experiences to consumers wherever and 

whenever they want, offering, for example, applications that allow subscribers to view VOD and 

subscription linear channels on their iPads. Cable's "TV Everywhere" initiative makes it 

possible for our customers to watch video content they have already paid for on their laptops, 

tablets, smartphones and other portable devices - no matter where they are. 

Even while offering this extraordinary array of new services, features and capabilities, 

cable has remained a solid value for American consumers. The fact that so many Americans 

stuck with cable during the recession is a testament to the value Americans get for their 

entertainment dollar. The price per viewing hour of entertainment for cable television is lower 

than for Netfiix, a trip to the movie theatre, a sporting event, or even a DVD rental. Generally, 

the price for broadband service from most cable providers remained unchanged for 10-12 years 

;/ 38 percent OF US. HOUSEHOLDS NOW HAVE A TV CONNECTED TO THE INTERNET, 

Leichtman Research Group, Inc. (April 9, 2012), available at 

http://www.leichtmanresearch.com/press/040912release.html. 

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following the introduction of services, even as broadband speeds increased nearly ten-fold over 

the same period of time. 

Creators have never had so many ways to reach viewers. Broadband networks and the 

proliferation of devices capable of displaying video have dismantled the old barriers that 

separated content creators from their potential audience. A growing array of video content is 

being conceived and developed primarily for Web distribution. For example, Netflix has begun 

developing its own exclusive television series offerings to compete with video networks and 

services. Google is hosting original programs of all niches by independent producers. Of 

particular note, this popular new platform for accessing video content has emerged and thrived 

without any government-guaranteed access to programming or restrictions on licensing imposed 

upon content providers. 

While not a complete substitute for a cable subscription, online video offerings are good 

enough fur some consumers - currently a small minority - to cut or shave the cord. According 

to one report, in the three years between 2008 and 2011, "more than 2.65 million subscribers ... 

dropped their pay-TV service entirely in favor of streaming video options.,,61 Yet during that 

same three-year period of time, 2.1 million net, new multichannel video customers were added in 

the U.S. While cord-cutting and cord-shaving are a business reality facing cable operators, it is 

also the case thaI there are millions of new customers subscribing to our service for the first time 

Of returning to us - because of the HD, on-demand, multi-screen and other advanced video 

offerings we make available. 

61 Mike Snider and Roger Yu, Flood of Video Streaming Options Could Confound IV Watchers, 

USA Today (April 10,2012), available at hltp:llwww.usatoday.comltech/newslstory/2012-04-

09/streaming-video-options/54136024fl. See also, Daniel Frankel, Nielsen: 1.5M Us. households cut the 

cord in 201/, PAllJ CONTENT, May 4, 2012, at http://paidcontcllLonrf201 7/05/01/11ie1sen-J -5-m-u-shouseholds-cut--tbe-cord-in ·20111. 

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As always, the cable industry is responding to changes in technology and in the 

marketplace in order to stay ahead of the curve and provide leading-edge services to its 

subscribers, The opportunities presented by broadband are great, as are the challenges, There 

are capacity constraints arising from the growing demands on the network imposed by services 

and offerings that require more throughput. High-quality video depends upon continuous bit 

streams, but the Internet is largely a packet-switched network that sends traffic in bursts, Any 

network that is shared by many users-as all residential broadband networks are-must cope 

with congestion and ensure all users get quality service, And as we continue to invest billions 

annually in fixed cost networks, we must continue to explore fairer and more efficient ways to 

price service, including potential models that require heavier users to pay more for the additional 

network resources they use, rather than have lighter users subsidize the power users, 

The Internet is vastly more flexible than traditional voice or video networks because it 

transmits information in packets and reassembles them at the subscriber device - but the 

"network of networks" that comprise the Internet does not yet offer the throughput and reliability 

to deliver video programming with the consistency of plant that is specifically built to deliver 

cable and satellite television services, By some estimates if you tried to put all cable content on 

the Internet, the Internet would be 100 times too small to handle it. While that circumstance will 

change, it will require investment and innovation to make that happen. 

Cable's business incentives in today's marketplace are, contrary to suggestions from 

some quarters, fully aligned with the interests of consumers, The path to continued growth for 

cable is lO enhance and expand its customers' use and enjoyment of the broadband platform we 

offer. 

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If consumers want to access video content via their laptop, their Xbox, their iPad, or their 

mobile device, it's our job to make that possible for them. If they want to obtain video content 

from Netflix, Amazon, Rulu. YouTube, Apple or any other online provider, it's our business to 

make that possible as well and we are. As our new tag line says, "Cable: It's more than TV. It's 

how we connec!." Cable has a profitable broadband business and benefits from greater Internet 

consumption generated by streaming video services. To make the point, cable companies 

frequently promote web services like N'etflix, Skype and Facebook in their ads7 / So while it is 

natural that cable operators are themselves developing new services and features that enable their 

subscribers to access video online and on-the-go, such offerings do not in any way displace or 

hinder any other provider of content, service or devices in the online video market. 

Claims and concerns that cable operators will use their control over broadband networks 

to stifle online video are simply not borne out by the facts. The exploding growth of online 

video usage undercuts any argument that cable is standing in the way of this business. To the 

contrary, cable's broadband networks are the engines that have enabled online video service to 

emerge and flourish. Indeed, there is simply no way to reconcile such claims wilh the wealth of 

content, services and devices that are available for accessing and enjoying online video. 

The Future 

As vibrant as today's video marketplace is, the landscape of tomorrow that is taking 

shape is even more exciting. Content will be produced and distributed not just for television, but 

for any device with a screen capable of displaying video. Consumers will enjoy more variety 

and choice in how to access and interface with the video and on-demand offerings available to 

71 See http://www.voutube.com/watch?v=zEhULSD3MAI. 

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them from both their television and the Web, using, for example, their iPad or other portable 

device for navigation, instead of a remote control. 

We can envision a world free of set-top boxes. The marketplace of the future is apt to 

move from being hardware-centric to software-centric, which will accelerate the pace of 

innovation and adaptation to new features and capabilities. Today, set-top box-based services 

cannot be deployed until the boxes are tested and glitch-free; by contrast, software-based 

services can be released in Beta and then improved. Beta versions of new products are common 

among the Googles and Apples of the world and consumers benefit from the more rapid 

innovation under this model. 

A vast array of cloud-based services and applications will make available a new 

generation of imeracti ve and multimedia offerings, and dissolve the lines between video, data, 

graphics, voice. and text. Comcast is offering consumers a more personalized and interactive 

viewing experience with the launch of its Xl cloud-based DVR user interface. With the Xl. all 

the processing is done in the network. which gives Comcast the flexibility to quickly test and 

create new apps for customers without wonying about whether the customer's set-top box is 

outdated or not. It will also provide more personalized features, for example, allowing 

customers to see which shows their Facebook friends are watching. The Xl can also be used 

with mobile phone apps that turn handsets into remote controls, 

Cable's investment in interoperable Wi-Fi networks will provide consumers with 

unprecedented levels of portability and flexibility for consuming video and other broadband 

service offerings. Cable Wi-Fi also enhances the efficiency of mobile broadband networks by 

enabling providers to offload traffic where Wi-Fi is available. Smartphones can use Wi-Fi to 

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surf the web and even make calls, providing consumers with the opportunity to save money on 

their wireless service bills, 

Importantly, all of the innovation that is taking place to bring both today' s - and 

tomorrow's - advanced services is occurring without technology mandates not because of them 

and sometimes even in the face of existing regulatory impediments, 

Strengthening Incentives to Invest and Innovate by Updating the Regulatory Framework 

The future looks bright, but it will require a business and regulatory framework that 

preserves and strengthens incentives to invest and innovate, The last 20 years have shown that 

cable operators and programmers are willing to invest aggressively to bring new services, 

features and capabilities to consumers. But legacy rules rooted in outdated assumptions 

concerning the state of competition in this marketplace will only frustrate our ability to obtain 

the capital for those investments. Investments are deterred by policies that seek to turn our 

networks into commodities. I doubt anyone here would want to revive the almost non-existent 

pace of innovation that residential telephone consumers experienced in the 50 years between 

1940 and 1990, but that is the risk attendant to proposals that would turn network capacity into a 

commodity. The way forward to the future is not to revive regulatory anachronisms, but to cast 

off that baggage, 

That means doing away with rules predicated upon marketplace conditions that no longer 

exist. Twenty years ago, cable was effectively the sole provider of multichannel video 

programming service in the country, serving 98 percent of all multichannel households. Today, 

incumbent cable's share of the multichannel marketplace stands at 56 percent and 4 of the 8 

largest MVPDs in the country are non-cable. 

9 
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Twenty years ago, there were no DBS companies providing multichannel video 

programming. Today, DirecTV and Dish Network are, respectively, the second and third largest 

MVPDs in the nation. Their multichannel video services are available to virtually every 

household in the country and together they serve 34 million households. 

Twenty years ago, there were no telephone companies providing video service to cable 

subscribers. Today, AT&T and Verizon, the first and second largest communications companies 

in the world, make available multichannel video programming to more than 45 million 

households combined. Verizon and AT&T are respectively the sixth and eighth largest MVPDs 

in the country, and telephone companies are offering competing video service in rural as well as 

urban markets around the country. 

Twenty years ago, the average cable system featured 36-54 channels and there were no 

more than 100 programming channels available for distribution to subscribers. Today, most 

conSllmers receive service from providers offering hundreds of channels, and there are now 

approximately 900 non-broadcast channels available for distribution to multichannel households. 

Twenty years ago, vertical integration between cable systems and cable programming 

channels was widespread. Cable operators owned most national cable channels carned on a 

cable system. Today, vertical integration is the exception rather than the norm, falling from 53 

percent of networks available for distribution in 1992 to only 14 percent today. 

Twenty years ago, most American hOllseholds relied primarily on over-the-air broadcast 

stations for their video entertainment. In fact, 41 percent of households exclusively relied upon 

broadcast television, a number that has fallen today to 14 percent. On average, broadcast stations 

accounted for 68 percent of television viewership in 1992. So, on a typical day, just over 2 out 

of 3 TV viewers were tuned into broadcast stations. Twenty years later, that number has flipped 

10 
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with more than 2 out of 3 television viewers tuning into non-broadcast channels during a given 

day. 

While the premises for cable regulation have been shattered by competition and 

technological change, old rules based on aging snapshots of the video marketplace remain in 

effect. There are rate regulation rules designed to serve as a proxy for market-based pricing, 

even though most American households have a choice of at least three MVPDs and millions may 

opt to forego multichannel subscriptions altogether in favor of Internet-delivered video. 

There are program access rules designed to nurture facilities-based competition to cable. 

But cable's main MVPD competitors - DirecTV, DISH Network, AT&T and Verizon - are all 

some of the largest communications services providers in the nation. These companies hardly 

need the government's help to remain viable competitors to cable. And, in contrast to 20 years 

ago, the vast majority of programming networks are not owned or controlled by cable operators, 

mitigating concerns that bottleneck control of programming could somehow stiDe the emergence 

of competitors to cable. 

There are also content carriage obligations, such as leased access, whose usefulness has 

been obviated by the Internet; and program carriage rules designed to protect programmers 

unarriliated with cable, even though the vast majority of progralmning carried on cable systems 

and available to consumers already is unaffiliated with cable and it has never been easier for new 

video content to reach consumers. It is also time to re-examine those rules that affect the cable 

carriage of broadcast signals, such as must carry, retransmission consent, and non-duplication 

rights, that were adopted in a world in which technology and competitive market forces were 

vastly different than they are today. 

11 
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In light of the fundamental changes that have occurred in the marketplace over the last 20 

years, Congress should reassess the continued need for these restrictions. A new dialogue is 

essential because the continued application of outdated rules creates uncertainty and marketplace 

distortions, encourages unproductive attempts at regulatory arbitrage, and dampens incentives to 

invest. 

* " * 

Thank you again for the opportunity to appear today. I look forward to your questions -

and to the continued opportunity to consider these critical policy issues. 

12 
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,1992 

[ Cable % of all MVPD homes 

98% 57% 

% of national cable nets that are part owned by cable op 

53% 14% 

Total cable channels 

101 900+ 

Top 10 MVPDs that are NOT cable companies 

None 

Analog Video 35-~O channels 

No Broadband 

No Voice 

Direct TV (#2) 

DISH (#3) 

Verizpn FiOS (#6) 

AT&T llNerse (#8) 

Digital Video 

1 OO's of cnannBis 

Broadband 

up W 100+ Mbps 

Digital Voice 

25 million ctJstomers 

Average daily TV viewing 

7hr,5min 8hr,30min 

% of all TV Households that are Pay TV HHs 

61% 86% 

I % of TVHHs exclusively Over-The-Air 

39% 14% 

% of day viewership share held by broadcast TV 

68% 32% 

cable 

National Cable & T,fecommul\h:at)ons AssociatIon 
83 

Mr. WALDEN. Mr. Powell, thank you, and we will look forward 

to asking a few questions of you and the other panelists. 

We will now go to the President and CEO of Hearst Television 

Inc., Mr. David Barrett. Mr. Barrett, thank you for being here. We 

look forward to your testimony. 

STATEMENT OF DAVID BARRETT 

Mr. BARRETT. Good morning, Chairman Walden, Ranking Member Eshoo and members of the subcommittee. My name is David 

Barrett. I am the President and CEO of Hearst Television. Our 

company owns 29 TV stations across the country, a number of 

which are in your home markets. I have traveled here today from 

New York City on behalf of the National Association of Broadcasters. 

You can tell from the makeup of this panel that the future of 

video is very bright, very diverse and more inclusive than ever before. Each of us here today plays an important role in the video 

ecosystem but what differentiates television broadcasters from 

every other entity at this table is our unique commitment to serve 

our local communities and to operate in the public interest. Localism is our mandate, and we breathe it every day, and we supplement our logical programming with the most popular national entertainment, news, sports programs to provide viewers with a variety and quality of content that is unmatched by any other media. 

Certainly, we cannot discuss the future of video without talking 

about spectrum, the oxygen of our delivery for over-the-air signals. 

With concerns over spectrum use intensifying, it is broadcast television that uniquely offers the most efficient use of spectrum to 

transmit video. The genius of television broadcasting is its one-tomany architecture. For high-demand programming like the Super 

Bowl and the upcoming Olympics, there is no limit to how many 

viewers can tune into these games and events. With wireless oneto-one architecture, there is simply not enough spectrum on the 

planet to allow every viewer to watch the events simultaneously on 

smartphones or tablet devices. There should be no doubt that we 

need to focus on the most efficient ways to deliver video to our consumers today and into the future in order to optimize the video experience. 

To meet the demands for mobility, our industry is today launching broadcast mobile television. New mobile DTV devices and 

adapters will enable reception of full-motion digital broadcast without the need for additional spectrum, and because broadcast mobile 

TV relies on our existing over-the-air transmission, we can offer 

high-quality video without running up expensive consumer costs or 

exhausting data caps Internet providers impose on their customers. 

Other innovations on the horizon such as 3D, 4K and ultra-high 

definition are down the road and around the corner. These innovations will highlight how creatively broadcasters are using their digital spectrum now and will be doing so in the future. As incentive 

auctions and broadcast repacking is initiated, it is imperative that 

the FCC policy determinations not jeopardize the opportunity to 

bring these new and exciting services to life. Our industry recognizes that consumers expect to view our programming on a variety 

of devices large and small. In order to make that a reality and preVerDate Aug 31 2005 09:46 Mar 14, 2014 Jkt 037690 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 F:\112-15~4\122-15~1 WAYNE
84 

serve our business viability, content producers will need assurance 

that programming will only be transmitted with prior consent and 

agreed-upon compensation. 

In the current television context, retransmission consent allows 

broadcasters and cable and settlement companies to negotiate in 

the free market for the value of the broadcast signal. These negotiations are successful because both sides of the deal have skin in 

the game. We have a mutuality of interest. Broadcasters benefit 

from the exposure that cable and satellite provides, and likewise 

these video operators benefit from reselling our incredibly popular 

content. 

It has been suggested by some in the cable industry that cable 

bills are rising because of the costs of broadcast programming. 

There is a chart on the screen that would indicate that the data 

does not support that assertion. As you can see, cable price increases have consistently outpaced inflation for 11 of the last 12 

years. In actuality, it is the cable networks that have been collecting the vast majority of carriage fees. 

This next chart from Kagen shows the differential and the disparity in fees paid to basic cable networks compared to the total 

fees paid to broadcasters both on a trailing basis and as projected 

into the future. In 2012, it is estimated that cable will pay broadcasters approximately $2 billion in retrans fees while paying basiccable networks almost $29 billion. This does not give effect to the 

value of the inventory exchange that goes on from cable networks 

to the cable MSOs but that amount of money in no way equalizes 

a $27 million disparity. 

This is even more confounding when you consider broadcast ratings are many times higher than cable in so many cases. In fact, 

approximately 95 of the top 100 shows in the recently concluded 

television season aired on broadcast television both in the demographic of 18–49 and in the demographic of 25–54 as measured by 

Nielson. In truth, retrans payments are not the driver of increasing 

cable bills, and the money is not following the audience in terms 

of what is actually viewed on television in this country. 

So how do we ensure that our broadcast content is successful beyond these traditional platforms to the new video technologies 

evolving at a breakneck speed? I will observe that I think Congress 

got it right in 1992 when it noted that broadcasters must be allowed to control the use of their signals by anyone engaged in retransmission by whatever means. New companies like Sky Angel 

are now part of the video marketplace but it appears to be unclear 

as to how the law will apply to them and other new entrants. The 

FCC is currently considering the question of what is a multichannel video program distributor. These seemingly simple questions have far-reaching implications. Who has program access? 

Who pays retransmission consent fees? We believe it only makes 

good sense for the existing retrans consent and exclusivity rules to 

be applied to all new entrants. 

As an industry that creates content or acquires the right to content, it is imperative that we have the right to negotiate over how 

our content is distributed. Congress should reject any erosion of the 

bedrock principles of retransmission consent and market exclusivity because they are essential to our uniquely local system of 

85 

broadcasting. Broadcast television is an indispensably important 

part of today and tomorrow’s video ecosystem. As evidenced by our 

recent multibillion-dollar investment throughout the digital transition, American broadcasters are prepared to play a major role in 

the advancement of video services as we look down the road. 

I look forward to answering your questions when the remarks 

have been concluded. 

[The prepared statement of Mr. Barrett follows:] 

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82325.061

NAB 

NATIONAL ASSOCIATION OF BROADCASTERS 

Hearing on "The Future of Video" . 

United States House of Representatives 

Committee on Energy and Commerce 

Subcommittee on 

Communications and Technology 

June 27, 2012 

Statement of David Barrett 

President and CEO 

Hearst TeleviSion, Inc. 

On behalf of the 

National Association of Broadcasters 
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Good morning, Chairman Walden, Ranking Member Eshoo, and members of the 

Subcommittee, and thank you for inviting me to testify today. My name is David Barrett, 

and I am President and CEO of Hearst Television, Incorporated, which operates 29 

television stations across the U.S. I am testifying today on behalf of the free, local, overthe-air television members of the National Association of Broadcasters. 

I. Introduction 

In my view, the future of broadcast video services is bright. Recent data show 

that the number of viewers accessing television over the air (OTA) has increased 

dramatically in recent years. Results of a survey released last week by GfK 

Media/Knowledge Networks show that about 21 million households, representing 54 

million viewers, now access digital broadcast television exclusively through an 

antenna.' That is a sharp increase - nearly 20 percent - over just a few years ago. And 

nearly a quarter (24 percent) of homes headed by younger adults, those with a head of 

household aged 18-34, rely on over-the-air reception for their broadcast television 

viewing. fd. 

Who are these viewers? In addition to young people, many are low-income 

families or minorities. Id. The GfK Media report shows that the effects of the economic 

downturn, increasing subscriber fees for cable and satellite TV, and the plethora of new 

broadcast options in the digital age have led many consumers to embrace broadcast TV 

again. This is exciting news for broadcasters and should inform Congress as it oversees 

1 See John Eggerton, "Study: Most Cord-Cutters May Be OTA 'Opt-Ins,''' Broadcasting & Cable, June 18, 

2012; See also blog post of David Tice, GfK Media Researcher, explaining that what is commonly thought 

of as "cord-cutting" because of online video options may be better thought of as "cost-cutting," as 

consumers cancel expensive pay TV subscriptions and use free OTA television instead, available at 

http://www.gfkinsights4u.com/insights4u.cfm?articleID=511. 
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the Federal Communication Commission's (FCC) management of spectrum allocated to 

free, over-the-air television. 

Some of this resurgence can also be attributed to technological advances in 

broadcast TV. The television industry recently passed the three-year anniversary of the 

transition to all-digital distribution. By almost any measure, the transition and 

broadcasters' embrace of digital technology have been a tremendous success and a 

boon for viewers. Nearly every major television broadcaster now provides its content to 

viewers in crystal-clear high definition over the air for free. Most stations also offer 

anywhere from one to up to three additional "multicast channels" - extra channels 

containing new and diverse program content, and all of which operate in the same 

6 MHz of spectrum that previously held just one analog channel. This new, free, digital 

over-the-air service doubles, and, in some cases, more than triples, the number of 

channels available. Indeed, broadcasters' ability to multicast has led to the rise of 

multiple new national networks, including many networks, such as Bounce TV, Estrella, 

Live Well, and MeTV, that serve more specialized, diverse, and ethnic audiences. This 

trend will continue as new networks grow their audiences with increasingly diverse and 

compelling programming. 

With these developments in mind, this testimony first addresses spectrum and 

broadcasting's role in the communications ecosystem. It then focuses on important 

issues regarding the "rules of the road" for video services. 

With regard to spectrum, NAB urges Congress to remain vigilant in its oversight 

of the process of broadcast incentive auctions. Incentive auctions themselves are 

unprecedented, and the television spectrum auction specifically will have a direct impact 

2 
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on millions of viewers, potentially exceeding that of the digital TV transition. It is critical 

that this Committee ensure the FCC implements incentive auctions consistent with 

statutory requirements and Congressional intent. 

Beyond these auctions, we should also be focused on the future of broadcasting 

and how it can, and should, playa vital role in our nation's communications system 

moving forward. Beyond continuing to serve viewing audiences and local communities 

as we always have, the broadcast industry's evolving technology will be a critical 

complement to wireless broadband. Just as wireless companies are upgrading their 

technology, from 3G to L TE and beyond, broadcasters will also be upgrading, and the 

results could have an extraordinary impact on spectral efficiency. 

My testimony today also responds to continuing calls by pay television services 

to revise the legal framework of video programming distribution. These companies 

would have Congress change the laws and regulations that have successfully governed 

the video marketplace for decades. They would turn back the clock to days when 

broadcasters were essentially forced to subsidize their pay TV competitors. As 

explained below, such efforts are contrary to the public interest and should be rejected. 

II. Congress Should Ensure That Incentive Auctions Are Implemented As 

Intended 

A. Transparency Is Critical to Incentive Auction Success 

Earlier this year, as part of the Middle Class Tax Relief and Job Creation Act of 

2012 (Public Law 112-96) ("Incentive Auction Act"), Congress gave the FCC the 

authority, for the first time, to conduct incentive auctions, including auctions of broadcast 

spectrum. While we dispute some of the underlying orthodoxy behind the push for 

incentive auctions - namely, that repurposing large amounts of broadcast spectrum is 

3 
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necessary to solve a looming spectrum "crisis" - we nonetheless supported the 

legislation after this Committee and Congress included several appropriate viewer 

safeguards in the legislation. These provisions ensure that the auctions are completely 

voluntary and that the Commission must make every effort, after the television auction 

and the repacking of stations into a smaller band, to replicate the service areas of the 

many stations that will remain on the air serving their local communities. With digital 

broadcasting, even a seemingly slight reduction in television stations' service areas 

could result in a loss of service for millions of viewers. And this could have a particularly 

big impact on rural viewers. I encourage this Committee to ensure that the FCC follows 

the intent of Congress in this important respect. 

The success of incentive auctions ultimately will be defined by their results for the 

American people. The Commission must maintain a robust broadcasting system that 

continues to provide free and local television service to millions of viewers, while moving 

to provide a strong and fast wireless broadband system. To achieve this result, the 

Commission must fully engage all the affected industries. For broadcasters, that 

includes not just those stations that may choose to participate in the auction, but also 

those stations that do not - yet will nonetheless be moved, or "repacked," to a new 

channel. 

Broadcasters are understandably apprehensive about this process. Their 

concerns include how many stations will be moved and whether there will be enough 

remaining channels to accommodate those stations that wish to continue to serve the 

public. To ease that apprehension, the Commission should be as transparent as 

possible about how it plans to conduct incentive auctions and how it plans to repack 

4 
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stations. NAB is concerned that some well-intended language in the Incentive Auction 

Act ensuring confidentiality for broadcasters that submit offers to sell in the reverse 

auction could be interpreted in a way that would undermine this goal. 2 Careful 

implementation of this provision is important. 

While in some respects confidentiality is a good idea, that confidentiality should 

not extend to the operational mechanisms of the incentive auction and the repacking 

process. Broadcasters should know, for example, what modeling and service area 

assumptions the Commission makes as it lays out a repacking plan, how the 

Commission will coordinate with Canada and Mexico (which potentially affects hundreds 

of stations near the borders), and what impact the repacking process will have on 

existing station coverage areas. Transparency benefits broadcasters, potential bidders 

in the auction, and the FCC. Broadcasters are more likely to submit an offer to sell in 

the reverse auction or to consider the channel-sharing option if they understand fully 

how the process will work before the incentive auction begins. Limiting the release of 

information about the mechanics of the incentive auction process will increase the 

likelihood that the incentive auction will not be successful. 

B. The One-to-Many Broadcasting Model Is a Necessary Complement to 

the One-to-One Broadband Model, Now and in the Future 

One of the most important, but least understood, reasons for maintaining a 

robust broadcasting system is the critical role that broadcasters play in the wider 

communications ecosystem. Broadcasting's one-to-many video and data service, 

plainly, is the most spectrally efficient wireless delivery system for high demand content. 

2 Middle Class Tax Relief and Job Creation Act of 2012, Public Law 112-96, § 6403(a)(3). 

5 
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As consumers rely on handheld devices - including mobile phones and tablets - to 

access content like video, the one-to-many broadcasting model will become 

increasingly more important, not less important. For example, mobile digital TV, which is 

currently being rolled out by broadcast stations around the country, can alleviate 

pressure on wireless networks when viewers using mobile devices access popular 

television programming, such as sporting events, because consumers will not have to 

access that content through the cellular network. More importantly, as evidenced by the 

lifesaving role the technology played in the Japanese earthquake last year, mobile 

digital TV is the best way to reach on-the-go viewers with critical information. Future 

broadcast distribution standards being developed now will be able to deliver not just 

high-demand video, but also high-demand data of all types, in the most spectrally 

efficient manner, greatly reducing the burden on over-taxed cellular networks. 

In considering what our nation's communications system should look like in 10 or 

20 years, it is critical that we avoid any policy relying too heavily on a one-to-one 

architecture to the detriment of the diverse broadcast model. The point-to-point 

architecture of wireless broadband networks essentially means that each user has his 

or her own path in the cellular network. This type of design allows two people standing 

next to each other using the same type of device and operating on the same wireless 

network to access totally different types of information. The first person can be watching 

a video and the second person can be looking up directions to the closest restaurant. 

But, if those two people and hundreds or thousands of other people near them are 

trying to access the same information at the same time - which occurs during 

emergencies - the wireless network will quickly be overwhelmed. 

6 
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In contrast, television and radio broadcasting creates one or just a few data 

streams and transmits that data over a specific geographic area using a high-powered 

transmitter. This data can be received by anyone who has a receiver located within the 

transmission range of that broadcaster. Adding more users to the broadcast distribution 

network has no impact on its ability to deliver information. For high demand information, 

this is the ideal distribution method. As broadcast technology continues to evolve, we 

expect that the broadcasting model will work cooperatively and seamlessly with cellular 

networks to deliver information to wireless devices, delivering, as broadcasters do 

today, the content that consumers seek the most. In addition, broadcast licenses are 

held by many diverse licensees. The broadcast model permits a diversity of ownership 

and control that does not exist in wireless services. 

This basic broadcast-broadband wireless model will clearly benefit consumers, 

who will face higher wireless bills and caps on data usage in the next few years. 

Already, most major wireless companies are eliminating their unlimited data plans. And 

as the transition to 4G wireless technology has shown, consumers quickly exceed their 

data limits, and pay exorbitant overage fees, when accessing video through cellular 

networks. 3 Coupling a high-powered one-to-many broadcast transmission with those 

cellular networks would eliminate this concem for consumers accessing popular video 

content. 

3 See Anton Troianovski, "Video Speed Traps Lurks in New iPad, Users Find the Superfast 4G Link 

Carries a Big Cost: Churning Through Data Limits in Mere Hours," The Wall Street Jouma/, March 22, 

2012 (available at 

http://online.wsj.com/article/SB10001424052702303812904577293882009811556.html?mod=WSJ_ Tech 

_LEADTop). 

7 
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C. There Is Still a Need for a Comprehensive Spectrum Inventory 

I would also like to thank Chairman Walden and this Committee for initiating a 

new spectrum task force, focused on finding ways to analyze and optimize use of the 

vast quantities of spectrum under federal government control. To that end, it is critical 

for the task force to have a complete picture of how all spectrum, both federally 

controlled and commercial, is being used, including a clear understanding of who 

currently holds spectrum, how they are using it, and the intensity and effectiveness of 

their use. Such an inventory of spectrum deployment should not delay the incentive 

auction process, but an inventory is prudent and necessary for Congress, the National 

Telecommunications and Information Administration (NTIA), and the FCC to make 

informed decisions on U.S. spectrum policy. 

The wireless industry claims there is a looming spectrum crisis, yet the industry 

appears to be warehousing vast quantities of unused spectrum4 If the wireless industry 

were truly running out of bandwidth, it already would have developed more of the 

spectrum that it currently controls. There have been a number of industry analysts who 

have cast doubt on the claims of a spectrum crisis. Martin Cooper, the father of the cell 

phone, was recently quoted in a New York Times article claiming that available 

4 See, e.g., Deborah D. McAdams, McAdams On: Tangentially, Spectrum Policy Reform, TVTechnology 

(June 8,2012) available at htlp:llwww.tv1echnology.comlmcadams-onI0117Imcadams-on-tangentiallyspectrum-policy-reformI213823 (discussing cable, satellite and telephone companies' "hedging" of prime 

spectrum, and quoting FCC Commissioner Robert McDowell as stating that the federal government 

occupies about 60 percent of the best spectrum and has no incentive to move off that space or to provide 

accurate information about the costs associated with moving); See also Randall Stephenson, Spectrum 

and the Wireless Revolution, Wall SI. J., (June 10, 2012) available at http://online.wsj.com/article/ 

SB10001424052702303665904577450222319683932.html (stating that much spectrum is held by 

"speculators" interested in making a profitable investment rather than building mobile networks, and 

arguing that such speculation should be discouraged and that regulations should be put in place to 

ensure that spectrum be used within a "reasonable" timeframe). 

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technologies, which could greatly increase spectrum efficiency, are not being 

implemented by the wireless industry.5 

In short, NAB supports Congress' decision to grant the FCC authority to conduct 

voluntary incentive auctions of broadcast spectrum as long as the Commission fully 

implements the Incentive Auction Act's viewer safeguards and protects the millions of 

Americans who rely on free, over-the-air local broadcast stations. 

III. The Current Legal Framework Governing Broadcaster-Pay TV 

Relationships Serves the Public Interest 

Turning to the challenges faCing broadcast video services, television 

broadcasters offer a high quality, free, over-the-air, locally-oriented service that 

competes head-to-head with nationally-oriented pay TV platforms, hundreds of 

non-broadcast subscription networks, and other numerous programming sources. 

Congress already has in place laws that successfully govern the relationship between 

pay TV providers and broadcasters. These laws have a single purpose. They are 

designed to assure fair competition in a highly competitive media market and maximize 

the diversity, quality, and affordability of television service to the American people. This 

legal framework works because it serves the needs of television viewers and reflects 

the actual business relationships between broadcasters and pay TV providers. 

Two bills currently before Congress, H.R.3675 and S.2008, both known as "The 

Next Generation Television Marketplace Act of 2011," will harm local stations and 

television viewers in at least three ways. First, they would turn back the clock to a time 

5 Brian X. Chen, Q.&A: Martin Cooper, Father ofthe Cell Phone, on Spectrum Sharing, New York Times 

Blog (May 31,2012), available at http://bits.blogs.nytimes.com!2012!05!31!qa-marty-cooper-spectrumsharing!. 

9 
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when cable and satellite providers confiscated and resold broadcast signals to their 

subscribers without obtaining broadcasters' consent - a time when broadcasters were 

forced to subsidize their pay TV competitors. Aside from being fundamentally unfair, a 

return to this system would seriously threaten broadcasters' ability to invest in high 

quality informational and entertainment programming to serve viewers and to compete 

effectively for audiences and advertisers. Second, the bills would eliminate the ability of 

the FCC to enforce privately negotiated contracts between program distributors and 

stations for the distribution of network and syndicated programming on an exclusive 

basis. Finally, these bills would further compound the harm to consumers by eliminating 

statutory provisions that promote fair competition between pay TV providers and the 

free, over-the-air broadcast service. And they would impair the ability of any regulatory 

body to protect consumers from escalating pay TV bills. 

A. Congress Should Not Change Its Well-Functioning System of 

Retransmission Consent by Tilting the Marketplace in Pay TV Providers' 

Favor 

One point that is sometimes lost in discussions of retransmission consent is why 

Congress granted broadcasters retransmission rights in the first instance. In short, 

Congress adopted retransmission consent in 1992 to ensure that broadcasters had the 

opportunity to negotiate at arm's length in the marketplace for compensation in 

exchange for the right of cable and other multichannel video programming distributors to 

resell their broadcast signals. This law promotes fair competition in the video 

marketplace, is pro-consumer, and enhances the vibrancy of the nation's free, over-theair broadcast service, as Congress intended. It also benefits television viewers - your 

constituents - in markets across the country by assuring free access to vital news, 

emergency and weather information, public service programming, and a variety of 

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entertainment and sports programming. This service is of special significance and 

importance to your constituents who cannot afford an expensive pay TV subscription 

service. These policy goals remain just as important today as when they were enacted. 

Prior to the Cable Television Consumer Protection and Competition Act of 1992 

(the "1992 Act"), cable operators were not required to seek the permission of a station 

before retransmitting and reselling its signal, nor were they required to negotiate with 

the station for that privilege. At a time when cable systems had few channels and were 

limited to an antenna function of improving the reception of certain local broadcast 

signals, this lack of recognition for the rights broadcasters possess in their signals had 

limited practical significance. However, the video marketplace changed dramatically in 

the 1970s and 1980s. Cable systems began to include not only local signals, but also 

distant, duplicating broadcast signals and the programming of vertically-integrated cable 

networks and premium services. Cable systems began to compete head-to-head with 

broadcasters for viewers and for naiional and local advertising revenues', but they were 

still allowed to resell local broadcast signals to their paying subscribers without the 

permission or consent of the station. 

By the early 1990s, Congress concluded that this failure to recognize 

broadcasters' rights in their signals had "created a distortion in the video marketplace" 

that "threaten[ed] the future of over-the-air broadcasting." S. Rep. No. 92, 102d Cong., 

1st Sess. at 35 (1991) (Senate Report). Using the revenues they obtained from reselling 

broadcast signals, cable systems had supported the creation of cable programming 

(including program networks vertically integrated with cable system operators) and were 

able to sell advertising on these cable channels in direct competition with broadcasters. 

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Given this dramatic change in the nature of cable systems, program services and 

advertising practices, Congress determined that the then-existing law was not only 

unfair to local broadcast stations, it was anticompetitive. 

Specifically. Congress concluded that public policy should not support "a system 

under which broadcasters in effect subsidize the establishment of their chief 

competitors." Id. Noting the continued popularity of broadcast programming. Congress 

also found that a very substantial portion of the fees that consumers pay to cable 

systems is attributable to the value they receive from watching broadcast signals. Id. 

To remedy this "distortion," Congress in the 1992 Act gave broadcasters control over 

the use of their signals and permitted broadcasters to seek compensation from cable 

operators and other multichannel video programming distributors (MVPDs) for carriage 

of their signals. See 47 U.S.C. § 325(b). Congress specifically noted that cable 

operators pay for the cable programming they offer to customers and that programming 

services originating on broadcast channels and resold by MVPDs should be treated no 

differently. Senate Report at 35. 

In establishing retransmission consent, Congress intended to create a 

"marketplace for the disposition of the rights to retransmit broadcast signals." Id. at 36. 

Congress emphasized that it did not intend "to dictate the outcome of the ensuing 

marketplace negotiations" between broadcasters and MVPDs. Id. Retransmission 

consent does not guarantee that a broadcaster will receive fair compensation from an 

MVPD for retransmission of its signal; it only provides a broadcaster with an opportunity 

to negotiate for compensation of various types. 

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The reasons for establishing this retransmission marketplace remain as valid and 

important today as they were in 1992. Congress enacted retransmission consent 

because it recognized the value of broadcasters' signals, which continue to be highly 

valued by viewers and advertisers today.6 It is still the case today that pay TV providers 

would like to confiscate the signals of local broadcasters - their competitors for viewers 

and advertisers - and resell those signals to paying subscribers. But it would be as 

unfair and anticompetitive today to allow pay TV operators to do this without the consent 

of local stations as when the retransmission consent statute was enacted. Moreover, 

from the inception of the Radio Act of 1927, one broadcast station has been unable to 

take the signal of another broadcast station without the originating station's consent. 

Similarly, a broadcast station cannot intercept a cable system's transmission or a 

satellite carrier's signal and then rebroadcast it without consent. It would be the height 

of unfairness to single out broadcast stations for such disparate and anticompetitive 

treatment by allowing MVPDs - their competitors - to confiscate their signals without 

authorization. 

It is still true today that cable and satellite operators pay for all of the other, 

non-broadcast programming they offer to attract subscribers (and, in fact, pay more for 

that programming on a per viewer basis). And there is still no reason that broadcasters 

should be uniquely disfavored and not be allowed to negotiate for others' use of their 

signals. In sum, Congress's original goals of correcting distortions in the video 

marketplace, promoting competition, and "ensur[ing] that our system of free 

6 During the 2010-2011 television season, broadcast programming dominated the primetime program 

rankings, accounting for 95 of the top 100 programs. Source: The Nielsen Company, 9/20/10-5/25/11; 

Programming under 25 min. excluded; Ranked by AA% (ratings); in the event of a tie, impressions (OOO's) 

are used as a tiebreaker. 

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broadcasting remains vibrant," continue to be served today by the retransmission 

consent system. Senate Report at 36. 

While pay TV providers contend that changes in the marketplace since 1992 

have somehow undermined the rationale for retransmission consent, they focus 

exclusively on the advent of limited competition in the MVPD market and disregard 

other changes that benefit MVPDs in retransmission negotiations. For example, a much 

larger percentage of television viewers subscribe to pay TV services today than in 1992. 

Because broadcasters rely very heavily on advertising revenue, and, therefore, seek to 

reach the largest viewing audience possible, broadcasters today have a stronger 

incentive than ever to conclude retransmission negotiations successfully and avoid 

carriage disputes, which result in the immediate loss of both retransmission consent 

compensation and advertising revenues for local stations. Moreover, the MVPD market 

also has grown increasingly consolidated over time, with just ten MVPDs serving 90% of 

pay TV subscribers nationally, and with a majority of cable subscribers served by 

systems that are part of regional cable system "clusters." As a result, local 

broadcasters (including small to medium-sized stations and groups) often must deal 

with powerful, consolidated, and highly-concentrated and vertically-integrated MVPDs in 

retransmission consent negotiations. These consolidated MVPDs increasingly compete 

with broadcasters for viewers and for national and local advertising revenues, thereby 

additionally fragmenting local stations' audiences and advertising revenues. Congress 

should refrain from intervening in the retransmission consent process at the behest of 

these pay TV providers. 

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Beyond tilting the retransmission consent marketplace more in the favor of pay 

TV providers, changes to the retransmission consent system are entirely unnecessary 

and would be contrary to the interests of consumers. 

Pay TV providers sometimes assert that they are paying retransmission consent 

fees that represent dramatic increases from one year to the next. Such percentage 

descriptions of increases may seem significant until you consider that the increase may 

be from little or no compensation to a small amount of compensation (e.g., an increase 

from one cent per subscriber per month to two cents per subscriber per month is a 

100% increase, but is a very small amount). Retransmission consent compensation to 

broadcasters represents but a tiny fraction of what MVPDs spend on other programming 

and what they earn in revenues. For example, in 2010, retransmission consent fees 

were only about six-tenths of one percent of cable industry revenues. 7 Data recently 

published by SNL Kagan show that, in 2011, retransmission consent fees represented a 

total of 1.46 billion dollars, compared to 26.66 billion dollars paid for basic cable 

networks8 Most of these networks have considerably lower ratings than broadcast 

television stations 9 

In addition, the vast majority of retransmission consent agreements are 

successfully negotiated without disruption of any kind to customers of pay TV providers. 

7 See Declaration of Jeffrey A. Eisenach and Kevin W. Caves at 22 (May 27, 2011), attached to NAB 

Comments in MB Docket No. 10-71 (filed May 27, 2011). 

8 See Dave Seyler. Broadcast Is Not Busting the MVPD Bank, TV BUSINESS REPORT (June 8. 2012). 

available at: http://rbr.com/broadcast-is-not-busting-the-mpvd-bank/. 

9 As one party observed in comments filed with the FCC. "[c]able operators pay more than 10 times the 

per-subscriber fee for cable networks that are less than half as popular as the network-affiliated broadcast 

channels." Comments of the CBS Television Network Affiliates Association. MB Docket No. 10-71 at 14 

(filed May 27. 2011). 

15 
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NAB has repeatedly commissioned studies of negotiating impasses and their impact on 

television viewers. These studies have shown that consumers are over 20 times more 

likely to be deprived of television viewing by an electricity outage than by a bargaining 

impasse between broadcasters and MVPDs. From 2006 - 2011, aggregate service 

interruptions from retransmission consent negotiating impasses represented 

approximately one one-hundredth of one percent of annual U.S. television viewing 

hours.1o Moreover, no broadcaster - not a single one - has ever been found by the 

FCC to have breached its obligation to negotiate retransmission consent in good faith. 

The same, however, cannot be said of pay TV companies. 11 Especially in light of pay 

TV providers' continual increases in the rates they charge consumers - increases 

consistently above the rate of inflation - policymakers should disregard these providers' 

factually unsupportable attempts to characterize their attacks on retransmission consent 

as protecting the interests of consumers. 

Economic studies have shown that curtailing local stations' ability to obtain 

retransmission consent revenues would significantly reduce investment returns in the 

broadcast industry and reduce the amount of local news, public service, and public 

safety programming produced by stations. 12 In light of the economic challenges facing 

all providers of local journalism, Congress should refrain from undermining the 

10 See Declaration of Jeffrey A. Eisenach and Kevin W. Caves at 30 (May 27, 2011), attached to NAB 

Comments in MB Docket No. 10-71 (filed May 27.2011). 

11 See,e.g., Letter from Steven Broeckaert, Media Bureau, to Jorge L. Bauermeister, Counsel for Choice 

Cable TV., 22 FCC Rd 4933 (2007) (cable operator failed to meet good faith standard); EchoStar 

Satellite Corp. v. Young Broadcasting, Inc., Memorandum Opinion and Order, 16 FCC Rcd 15070 (2001) 

(broadcaster met good faith standard while complaining MVPD was admonished for abuse of FCC 

processes and lack of candor). 

12 J. Eisenach and K. Caves, The Effects of Regulation on Economies of Scale and Scope in TV 

Broadcasting, at 3-4. attached to NAB Reply Comments in MB Docket No. 10-71 (filed June 27,2011). 

16 
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retransmission consent system that increasingly supports local broadcast journalism 

important to viewers who subscribe to pay TV services, as well as to the growing 

numbers who receive all television over the air. 

B. The Program Exclusivity Rules Work in Tandem with Retransmission 

Consent to Protect Localism, Diversity, and Private Contract Rights 

Through arms'-Iength free market negotiations with program providers (including 

networks and syndicators), local broadcast stations purchase and pay for the exclusive 

rights to carry certain programming within a limited geographic area. The FCC's 

network non-duplication and syndicated exclusivity rules do not impose program 

exclusivity - they simply allow the FCC to enforce privately negotiated program 

exclusivity agreements between program suppliers and broadcast stations. In fact, the 

FCC's rules actually limit and restrict the geographic area of exclusivity to assure fair 

competition between stations and between cable systems. Both H.R.3675 and S.2008 

would require the FCC to eliminate its program exclusivity rulesn While cable and 

satellite interests have sought to paint these rules as regulatory "protections," it is useful 

to take a closer look at what these rules really entail, why they exist, why they are 

important, and how they, like retransmission consent, promote competition in the 

creation and distribution of television programming. 

A fact often missed in debate over the network non-duplication and syndicated 

exclusivity rules is that the rules themselves do not provide program exclusivity. In fact, 

the rules actually limit and restrict program exclusivity by limiting the geographic area in 

which television stations may enter into program exclusivity agreements with network 

13 The program exclusivity rules include the network nonduplication rules, see 47 C.F.R. §§ 76.92-76.95, 

76.120-76.122, and the syndicated program exclusivity rules, see 47 C.FR §§ 76.101-76.110, 76.120, 

76.123-76.125. 

17 
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and syndicated program suppliers. 14 The actual program exclusivity terms for network 

non-duplication and syndicated program exclusivity are a matter of private contractual 

agreement between the program supplier and the local television station. Neither the 

FCC nor its rules provide or enforce program exclusivity provisions or arrangements not 

agreed to by the program supplier and the local station. The reality is that, subject only 

to antitrust law, in the absence of the FCC's network non-duplication and syndicated 

exclusivity rules, program suppliers and local television stations could enter into 

exclusivity arrangements covering geographic areas of hundreds of miles. 

In attacking the FCC's rules, what cable and satellite operators actually want is 

the adoption of mandatory "broadcast signal access" rules in abrogation of marketbased, freely-negotiated program contracts - all for the single purpose of securing an 

unfair, government-granted competitive advantage over local television stations. For 

example, MVPDs complain that they are limited by program exclusivity contracts in 

obtaining duplicative broadcast programming from other sources outside the local 

market. In fact, that is the whole point of exclusivity contracts - exclusivity is valued in 

the marketplace and ultimately induces the provision of greater programming choice 

and quality for consumers, as further explained below. MVPDs also complain that the 

program exclusivity rules somehow confer an unfair advantage on broadcast stations, 

conveniently ignoring the advantage that MVPDs would otherwise have in exercising 

their own freedom to enter into exclusive programming contracts (a notable example 

being DIRECTV's NFL Sunday Ticket). 

14 The FCC's rules only (i) provide a forum for adjudication of program exclusivity disputes; (ii) limit and 

restrict the geographic scope of a program exclusivity arrangement between a program supplier and a 

local television station; and (iii) impose certain formal notice requirements on local television stations as a 

condition to enforcement. 

18 
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Exclusivity - as Congress and the FCC have consistently recognized -

constitutes an essential component of America's unique system of free, over-the-air 

television stations licensed to serve local communities. 15 Local affiliates always have 

negotiated with networks and syndicated programming sources for exclusive 

programming within their markets. Advertisers on local broadcast stations expect and, 

indeed, pay for that exclusivity; these advertising revenues support stations' local 

programming, including news, and their ability to serve their communities. Exclusivity, 

which is limited by FCC rules to narrowly defined geographic zones near stations' home 

communities, enhances competition by strengthening local stations' ability to compete 

against the hundreds of non-broadcast and non-local programming networks offered by 

cable and satellite. As noted above, the FCC's rules do not mandate exclusivity, but 

merely enable broadcasters to protect the contractual arrangements they have entered 

into for the very purpose of securing programming content that meets the needs and 

interests of their communities. 

Program exclusivity, and the system of local service it permits, thus is not a 

weakness of our broadcast system, as MVPDs often claim. It is a unique and highly 

valued strength. As with retransmission consent, there is no warrant for additional 

government intrusion into this realm of purely private contractual negotiations. As the 

FCC concluded when it examined its exclusivity rules in detail, interference into the 

contractual relations between broadcasters, networks and syndicated programming 

15 See. e.g., Implementation of the Cable Television Consumer Protection and Competition Act of 1992, 

Memorandum Opinion and Order, 9 FCC Red 6723 (1994), at 1\114; S. Rep. No. 102-92 (1991). at 38. 

19 
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suppliers would "contradict our own requirements of broadcast licensees and would 

hinder our policy goals.,,16 

C. Eliminating Mandatory Carriage Would Further Harm Viewers 

As part of the 1992 Act, Congress found that cable operators had the incentive 

and ability to favor their own programming over the programming of competitors, 

including local television broadcast stationsH The must carry provisions of the 1992 

Act were based on a finding that action was necessary to avoid "a reduction in the 

number of media voices available to consumers.,,18 Congress identified a specific 

interest in "ensuring [the] continuation" of "the local origination of [broadcast] 

programming,,,19 and found must carry necessary to serve certain broader aims of the 

Communications Act. 2o To promote localism and diversity in available programming, 

and to prevent cable operators from using gateway control over their distribution 

platform to exclude certain broadcast signals, Congress adopted the mandatory 

carriage provisions of the 1992 Act and later adopted somewhat different must carry 

requirements for satellite carriers. Since that time, the FCC has acknowledged the 

16 Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section 208 of/he 

Satellite Home Viewer Extension and Reauthorization Act of 2004 (Sept. 2005), at 1150 (FCC Report). 

17 See 47 U.S.C. § 521 note (1992 Act § 2(a)(15)) (finding cable operators have an "economic incentive" 

to "refuse to carry new signals" from broadcasters, and that absent a must-carry requirement, "additional 

local broadcast signals will be deleted, repositioned, or not carried"). 

18 1d. at 1992 Act §2(a)(4). 

19 1d. at 1992 Act §2(a)(10). 

20 ld. at 1992 Act §2(a)(9) (must carry is necessary to meet goal of "providing a fair, efficient, and 

equitable distribution of broadcast services") . 

20 
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continuing importance of these rules and the growing incentive and ability of cable 

operators to use their powerful platforms to disfavor unaffiliated content. 21 

These requirements remain important to the nation's highly competitive system of 

free, over-the-air broadcasting today. Must carry stations tend to be stations that offer 

niche programming, such as foreign language, religious, or ethnic programming. These 

stations often target audiences whose needs are not being met by other programming 

sources. Because these stations serve narrower audiences, the ability to elect 

mandatory carriage is important to their continued survival. Carriage of these unique 

stations' signals is important to the diversity of both free over-the-air broadcasting and 

to the diversity of programming available via MVPD service22 I urge you to retain the 

current must carry requirements, rather than eliminating them as proposed in H.R.3675 

and S.2008. 

IV. Policies That Support Program Development, Innovation, and Localism 

Must Apply in the Same Manner to All Those Retransmitting Broadcast 

Signals 

Some have raised questions about the role of Internet video providers in this 

regulatory landscape. Television broadcasters generally support the deployment of new 

and innovative Internet services, including broadband video services. Such services 

have the potential to enhance competition in the MVPD marketplace. Increased 

21 See Carriage of Digital Television Broadcast Signals, Third Report and Order, 22 FCC Red 21064 

(2007), at ~m 49-52 (finding that because of increasing cable subscribership, rising audience shares for 

cable networks, cable's increasing share of the advertising market, and other factors, the cable industry 

was even stronger vis-a-vis broadcasters than in 1992 and that "cable operators have even greater 

incentives today to withhold carriage of broadcast stations. "). 

22 See George S. Ford & John D. Jackson, Preserving Free Television? Some Empirical Evidence on the 

Efficacy of Must-Carry. JOURNAL OF MEDIA ECONOMICS, 13(1),1-14 (2000) (must carry helps preserve free 

over-the-air television, especially stations not affiliated with the four largest networks). 

21 
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competition is a long-standing public policy goal, one that can be a positive 

development for consumers, broadcasters, and other program providers. 

Greater platform choice, developed in a manner that respects the rights of 

content and signal providers, will provide benefits for consumers. For example, it is 

easy to see that consumers would benefit from the development and deployment of 

new, competitive distribution platforms capable of customizing programming or bundling 

different varieties of services, including voice, Internet access, and video services. 

Such customization may result in cost savings or increased access to programming of 

particular interest to the viewer. 

Video programming providers, including broadcasters, may also benefit from the 

deployment of new video distribution platforms. The emergence of such additional 

platforms could provide programmers with additional outlets for reaching viewers and 

enhance video competition in the marketplace23 

Local television broadcasters, specifically, may also benefit from the emergence 

of new competitive MVPD services. New video distribution platforms represent other 

outlets for broadcast programming, including local news and information. These 

platforms could provide new opportunities for local broadcast stations to reach more 

local viewers and augment and enhance their program services to their communities. 

The advertising and retransmission consent revenues from these retransmissions 

WOUld, in turn, be used to enhance news, entertainment, and public service 

23 In economic terms, the emergence of new outlets and distribution platforms will allow broadcasters, by 

disseminating programming to a wider audience, to take advantage of economies of scale and reduce 

their average cost per viewer. J. Eisenach and K. Caves, The Effects of Regulation on Economies of 

Scale and Scope in TV Broadcasting, at 6, attached to NAB Reply Comments in MB Docket No. 10-71 

(filed June 27, 2011). 

22 
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programming - furthering the objective of localism. The emergence of another video 

distribution platform for carrying broadcast programming could also encourage greater 

innovation in digital television programming, including multicast and high definition 

("HO") programming. 

To achieve these public policy objectives, it is important that new services not be 

permitted to expropriate broadcast signals at will. Broadcasters must continue to have 

the right to control the distribution of their signals over the Internet and to obtain 

compensation from broadband video service providers seeking to retransmit such 

signals. If new technologies are allowed to evade retransmission consent and erode 

local viewership by overriding program exclusivity rights of local stations and offering 

the same programs on stations imported from distant markets, the viability of local TV 

stations - and their ability to serve their local communities with high quality 

programming - will be lost. For emerging video platforms that offer services 

comparable to those of MVPOs, the preservation of a fair, balanced, and symmetrical 

regulatory scheme would promote competition rather than impair it. No distribution 

platfrom - new or old - can under existing law (nor should it be permitted under any 

change in law) retransmit a station's broadcast signal without its consent. As Congress 

stated when it adopted the 1992 Cable Act, "broadcasters [must be allowed] to control 

the use of their signals by anyone engaged in retransmission by whatev,?r means."Z4 

V. Conclusion 

It is an exciting time for consumers of video services. Viewers have more options 

for accessing content today than ever before. And the road ahead promises even better 

24 S Rep No. 92-102,1992 U.S.C.C.A.N. 1133, 1167 (1991) (emphasis added). 

23 
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82325.085

options as online video and other services bring innovation and competition to the 

marketplace. America's broadcasters are prepared to playa major role in the 

advancement of video services. Our historic transition to digital has vastly increased the 

amount and diversity of free, over-the-air television programming content available to 

nearly every home throughout the country and helped free up more than 100 MHz of 

spectrum that can be used for advanced wireless broadband services. 

Yet, there are many challenges ahead. The FCC's planned incentive auction of 

broadcast spectrum could, if done correctly, ensure that local TV broadcasting remains 

the bedrock of our communication system. If done incorrectly, however, it could prove a 

disservice for millions of viewers that rely on over-the-air television as their primary 

information lifeline to the world. We respectfully encourage the Committee to keep a 

watchful eye on this process and act, if necessary, to ensure the FCC conducts the 

incentive auctions as Congress intended. 

We also encourage Congress to ignore the threadbare, self-serving arguments 

from a handful of pay TV companies for changes in the law for the sole purpose of 

securing a government-granted advantage in a highly competitive marketplace. 

As the broadcast industry continues to develop new and exciting ways to deliver 

more diverse and high quality programming to the American people, my colleagues in 

the industry and I look forward to working cooperatively with the Members of this 

Committee. 

Thank you for this opportunity to share our views with you. 

24 
111 

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

Our next witness is the Chairman of DISH Network, Mr. Charlie 

Ergen. Mr. Ergen, thank you for being here before the subcommittee. We look forward to your testimony. 

STATEMENT OF CHARLIE ERGEN 

Mr. ERGEN. Chairman Walden, Ranking Member Eshoo and 

members of the subcommittee, thank you for the opportunity to testify about the future of video. My name is Charlie Ergen and I am 

Cofounder and Chairman of DISH Network, the third-largest payTV provider in the United States. We serve approximately 14 million subscribers and employ over 27,000 people. 

I believe that understanding the future of video goes hand in 

hand with two simple rules: first, always try to understand what 

the customer wants, and second, change is inevitable; embrace it. 

What do customers want? They want to be able to watch programming on their TV sets, on their phones and on their tablets, 

no matter where they are. They also want to be able to surf the 

web or make a phone call, again, no matter where they are. DISH 

plans to offer consumers the chance to get all of these services from 

one company. 

At DISH today, we do a good job of efficiently providing fixed 

video to the home. But customers increasingly want more than just 

home video. They want mobile video. They want mobile voice and 

they want mobile data. So when we look at the future of video, we 

need to be able to provide all of those communications services to 

every one of our customers, anywhere and anytime. 

Our company is moving in that direction. With innovations like 

Sling, our customers can use a wireless smartphone or tablet from 

any location to enjoy the video content that they have already paid 

for. We recently purchased Blockbuster and are integrating their 

video content holdings to enhance our on-demand offerings. We are 

a leading distributor of DVR technology and continue to innovate 

so our customers can watch the programming they have paid for 

whenever, wherever and however they want. 

Our new Prime Time Any Time and AutoHop technology takes 

the DVR to a new level, giving consumers the choice to more easily 

view their preferred programming when they want, while skipping 

what they do not want to see. This means that allowing your kids 

to watch TV doesn’t have to mean they have no choice but to see 

commercials for junk food and alcohol. Through AutoHop, DISH did 

nothing more than improve upon existing, legally accepted, and 

widely available technologies that give consumers the ability to 

record their television shows for playback at home a more convenient time, when they are able to fast-forward through or skip over 

commercials. These are some of the ways we have responded to our 

customers’ changing needs but we have to go further. 

In the past, we haven’t shrunk from betting the company, so to 

speak, in order to stay competitive. We went from selling big dishes 

to launching our own small dish, DBS business. To give customers 

what they want, including mobile video, voice and data, we will 

have to take a significant risk once again. 

112 

Last year, we invested billions of dollars to acquire two bankrupt 

satellite companies with the aim of transforming those assets into 

a next-generation mobile broadband service. We want to provide 

consumers with the choice in services and providers that they seek. 

If we are successful, we will fuel billions of dollars in investment 

and create tens of thousands of new jobs in the United States. 

And this brings me to my second point: foster change; don’t ignore it or be afraid of it. 

We are prepared to leverage our experience and financial 

strength to drive communications and entertainment forward and 

make them more mobile and dynamic than ever before. We can’t 

get started, however, until the FCC releases updated rules governing how our satellite licenses can be used for terrestrial mobile 

broadband. Given the overwhelming support of the comments received to date, we hope that the FCC will act, and finalize the new 

rules by the end of the summer. We want to build the most advanced wireless network in the United States to compete against 

the well-established incumbents, but we need to begin as soon as 

possible to have a chance. 

And just as wireless rules must be modernized to keep up with 

consumers and technology, the rules governing how broadcasters 

and pay-TV providers reach retransmission agreements are outdated and in need of change. Twenty years ago, when Congress 

first adopted the retransmission consent process in the 1992 Cable 

Act, there was typically only one cable operator in any given market negotiating with one broadcaster. Today, there are multiple 

pay-TV providers in each market, including satellite, telco, small 

local cable and large regional cable providers. Then, of course, 

there are also the new over-the-top video providers like Netflix, 

Aereo, and others. The broadcaster still maintains a governmentsanctioned monopoly on the network programming in his market, 

while pay-TV providers face stiff competition from one another. The 

result is almost always bad for consumers and the free market. 

Broadcasters play the pay-TV providers against one another. 

They cut off the most popular sports and entertainment programming if their demands for drastically higher rate increases are not 

met. Consumers lose because they cannot see the programming 

they paid for, they end up paying higher rates, or both. And the 

problem is only getting worse with more blackouts and more broadcaster abuses. From where we sit, the broadcasters cling to the status quo instead of meeting consumer demand and embracing new 

technologies and business models. 

The retransmission consent regime is a prime example of an outdated government policy in need of an overhaul by Congress and/ 

or the FCC. It is incredible to see how much has changed since 

1992. Likely, there are a few of us who used the Internet back 

then, or had a cell phone. The idea of streaming movies or TV 

shows to a smartphone was science fiction. 

Just as businesses must foster change in a rapidly evolving video 

marketplace to keep pace with what the consumer wants, government should work to ensure its regulations mirror today’s competitive realities, consumer expectations, and advances in technology. 

Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Ergen follows:] 

113 


82325.086

TESTIMONY OF CHARLIE ERGEN, CHAIRMAN AND CO-FOUNDER 

OF DISH NETWORK AND ECHOSTAR 

Before the U.S. House Subcommittee on Communications and Technology 

June 27, 2012 - "Future of Video" Hearing 

Chairman Walden, Ranking Member Eshoo, Members of the Subcommittee: 

Thank you for the opportunity to testify about the future of video. 

My name is Charlie Ergen and I am a Co-Founder and the Chairman of DISH 

Network, the third-largest pay-TV provider in the U.S. I also co-founded and am 

Chairman of Echo Star, a worldwide leader in satellite services and the design and 

manufacture of set-top-boxes. We serve approximately 14 million DISH 

subscribers and employ over 27,000 people throughout the U.S. 

I believe that understanding the future of video goes hand in hand with two simple 

rules: 

First, always try to understand what the customer wants. 

Second, change is inevitable ... embrace it. 

What do customers want? They want to be able to watch programming on their 

TV sets, on their phones and on their tablets -- no matter where they are. They also 

want to be able to surf the web or make a phone call-- again, no matter where they 

are. DISH plans to offer consumers the chance to get all of these services from one 

company. 

At DISH today, we do a good job of efficiently providing fixed video to the home. 

But customers increasingly want more than just home video. They want mobile 

video. They want mobile voice. They want mobile data. So, when we look at the 

future of video, we need to be able to provide all of those communications services 

to every one of our customers, anywhere and anytime. 

1 
114 


82325.087

Our company is moving in that direction. With innovations like Sling, our 

customers can use a wireless smartphone or tablet from any location to enjoy the 

video content that they've already paid for. We recently purchased Blockbuster 

and are integrating their video content holdings to enhance our on-demand 

offerings. We are a leading distributor ofDVR technology and continue to 

innovate so that our customers can watch the programming they've paid for 

whenever, wherever and however they want. 

OUf new "Prime Time Any Time" and "AutoHop" technology takes the DVR to a 

new level, giving consumers the choice to more easily view their preferred 

programming when they want, while skipping what they don't want to see. This 

means that allowing your kids to watch TV doesn't have to mean they have no 

choice but to see commercials for junk food and alcohol. Through AutoHop, 

DISH has done nothing more than improve upon existing, legally-accepted, and 

widely available technologies that give consumers the ability to record their 

television shows for playback at a more convenient time, when they are able to 

fast-forward through or skip over commercials. 

These are some ofthe ways we have responded to our customers' changing needs. 

But we have further to go. 

In the past, we haven't shrunk from "betting the company," so to speak, in order to 

stay competitive. We went from selling big dishes to launching our own smalldish, DBS business. To give customers what they want, including mobile video, 

voice, and data, we will have to take a significant risk once again. 

Last year, we invested billions of dollars to acquire two bankrupt satellite 

companies, with the aim of transforming those assets into a next-generation mobile 

broadband service. We want to provide consumers with the choice in services and 

providers that they seek. Ifwe're successful, we'll fuel billions of dollars in 

investment and create tens of thousands of new jobs throughout the United States. 

2 
115 


82325.088

And this brings me to my second rule: foster change; don't ignore it or be afraid of 

it. 

We're prepared to leverage our experience and financial strength to drive 

communications and entertainment forward and make them more mobile and 

dynamic than ever before. We can't get started, however, until the FCC releases 

updated rules governing how our satellite licenses can be used for terrestrial 

mobile broadband. Given the overwhelming support of the comments received to 

date, we hope that the FCC will act, and finalize the new rules by the end of the 

summer. We want to build the most advanced wireless network in the U.S. to 

compete against the well-established incumbents, but we need to begin as soon as 

possible to have a chance. 

Just as wireless rules must be modernized to keep up with consumers and 

technology, the rules governing how broadcasters and pay-TV providers reach 

retransmission agreements are outdated and in need of change. 

Twenty years ago, when Congress first adopted the retransmission consent process 

in the 1992 Cable Act, there was typically only one cable operator in any given 

market, negotiating with only one broadcaster. Today, there are multiple pay-TV 

providers in each market, including satellite, telco, small local cable, and large 

regional cable providers. Then, of course, there are also the new over-the-top 

video providers like Netflix, Aereo, and others. The broadcaster still maintains a 

government sanctioned monopoly on network programming in his market, while 

pay-TV providers face stiff competition from one another. The result is almost 

always bad for consumers and the free market. 

Broadcasters play the pay-TV providers against one another. They cut off the most 

popular sports and entertainment programming iftheir demands for drastically 

higher rate increases are not met. Consumers lose because they cannot see the 

programming they paid for, they end up paying higher rates, or both. And, the 

3 
116 


82325.089

problem is only getting worse -- with more blackouts and more broadcaster 

abuses. From where we sit, the broadcasters cling to the status quo instead of 

meeting consumer demand and embracing new technologies and business models. 

The retransmission consent regime is a prime example of an outdated government 

policy in need of an overhaul by Congress and the FCC. It is incredible to see 

how much has changed since 1992. Likely, there are few here who used the 

Internet back then, or had a cell phone. The idea of streaming movies or TV shows 

to a "smartphone" was science fiction. 

Just as businesses must foster change in a rapidly evolving video marketplace to 

keep pace with what the consumer wants, government should work to ensure its 

regulations mirror today's competitive realities, consumer expectations, and 

advances in technology. 

Thank you, and I look forward to answering your questions. 

4 
117 

Mr. WALDEN. Mr. Ergen, thank you for your testimony. 

And now our final witness, Michael O’Leary, who is the Senior 

Executive Vice President for Global Policy and External Affairs of 

the Motion Picture Association of America. Mr. O’Leary, thank you 

for being here today. We look forward to your comments. 

STATEMENT OF MICHAEL P. O’LEARY 

Mr. O’LEARY. Thank you, Chairman Walden, Ranking Member 

Eshoo and members of the committee. I want to thank you all for 

the opportunity to testify on behalf of the Motion Picture Association and its member companies today. I also want to acknowledge 

and thank my colleagues on the panel. I am honored to be with 

such distinguished group here this morning. 

Whether you are at a theater, at home, on the road or choose to 

download and view when you want, content creators, consumer 

electronics companies and content distributors are working together to provide new, innovative options for audiences to easily access high-quality content. We welcome this opportunity to testify 

and work with this subcommittee as you consider appropriate policies for the future of video. This is an important discussion, and we 

are pleased to be a part of it. 

Like all successful business, we are driven by the desire to create 

and meet consumer demand for the products that we produce. We 

are listening to our audiences. We are attuned to their desires, and 

every day we are developing innovative new ways to give viewers 

the experiences that they want. Audiences today want to enjoy 

movies on multiple platforms from the big screen to televisions of 

all sizes to computers and tablets and even on their phones. We are 

partnering with companies of all stripes from around the globe including YouTube, Facebook, Netflix and Roku and soon with others 

that are no doubt some other new platform which exists only in the 

mind of some inventive young person out there. All of these exciting innovations and distribution benefit both the consumers who 

receive the high-quality viewing experiences that they want and 

the creators, who take the risk and invest in these productions in 

the first instance. 

For many people all around the world, there is no substitute for 

the theater-going experience. The big screen is the foundation of 

the American movie industry. Creating wonderful movies that people can watch in movie theaters is an important part of America’s 

rich history but is equally part of the present and the future of 

video. In addition to utilizing cutting edge and sophisticated visual 

and special effects in our productions, our companies have embraced 3D, IMAX and brilliant sound that has enhanced and transformed the movie theater experience. The theater will continue to 

play a significant role in the future of how people around the globe 

are entertained. 

But our member companies are not just making movies available 

for the big screen. For decades now, people have watched movies 

on television, but that experience is changing and improving too 

with each passing today. Today our programs are being delivered 

to television screens by over-the-air digital broadcasts and through 

an astonishing range of channel choices enabled by our distribution 

partners in the cable and satellite business. Audiences are able to 

118 

watch these programs at the time of the original airing or at the 

time of their choosing, either through the DVR or through an increasing array of video demand options. 

In addition, with the advent of interactive television, Blu-Ray 

players, Roku boxes, Microsoft’s Xbox 360, the Sony PlayStation, 

Nintendo’s Wii and Apple TV, just to name a few, consumers can 

watch HD movies and TV shows streamed across the Internet in 

their home through services like Netflix, VUDU, Hulu or other 

services too many to list. 

Audiences now find entertainment on their mobile devices as 

well. All of the major motion picture studios distribute full-length 

films and television shows directly to consumer mobile devices 

through major mobile operators such as AT&T, Sprint and Verizon. 

The ability to access high-quality content is also, as you have heard 

this morning, thriving online where competitors for consumers’ attention are providing new offerings every week. 

In just a few short years, the quality of video delivery has improved tremendously, and with it, literally hundreds of licensed online services have sprung up around the world. Among them is 

HBO GO, which adds significant value to existing subscribers by 

providing online access to HBO programming, and that is not simply the programming that is available on TV today, that is basically all of their catalog in the past as well. Netflix, as you heard, 

is not only delivering a staggering number of movies online but is 

also moving into the production of online content—original content, 

rather. YouTube and Facebook are entering into agreements to distribute movies as well. 

Online services today cater to every matter of consumer viewing 

model including rental, download to own, subscriptions and ad-supported viewing. They are provided by every conceivable type of 

commercial entity including technology companies like Apple’s 

iTunes, broadcast television networks like ABC, CBS, Fox and 

NBC, cable networks like the Comedy Channel, TBS and USA, 

pay-television channels like HBO and EPIX, telecommunications, 

cable and satellite providers like AT&T, DISH and Comcast, retailers and rentailers like Amazon, Best Buy, Blockbuster, Netflix and 

Walmart, and gaming systems as I mentioned like PlayStation and 

Xbox, and new ventures devoted entirely to delivering great content seamlessly such as Crackle and Hulu. 

Finally, Mr. Chairman, a word about portability. Simply put, 

today audiences want the convenience to access the content they 

purchased on a variety of devices without having to buy the same 

thing twice, and we are delivering to that promise. This began a 

few years ago as our companies started to include with many DVD 

and Blu-Ray disc titles a transferable or downloadable digital copy 

for consumers to use on their computers or their portable devices. 

Now there are a variety of ways to buy once and play everywhere. 

One exciting innovation comes from the Digital Entertainment 

Content Ecosystem, which is a consortium of more than 60 studios, 

retail stores and technology firms that has created UltraViolet, 

which is a cloud-based digital storage locker for consumer content. 

It works like this. When a consumer purchases UltraViolet media 

such as a Blu-Ray or DVD or Internet download, the consumer receives the enduring right to access that content on any UltraViolet 

119 

device registered to their household and to enjoy that content via 

streaming through the devices at home or on the go. Presently, 

over 5,000 titles are available through UltraViolet and over 3 million consumers have set up accounts in less than one year. This 

spring, Walmart began offering consumers the ability to convert 

their current DVD and Blu-Ray collections to digital UltraViolet 

copies that can both download and stream. Walmart estimates that 

the average user of this service brings about seven discs to the 

store, and each conversion takes approximately a minute. Other 

complementary digital initiatives are also being developed such as 

Disney Studio All Access, which will provide consumers with easy 

access to Disney content across multiple digital and video services 

and devices. 

In closing, Mr. Chairman, we are relentlessly innovating to keep 

pace with the evolving demands of our audience and to give them 

more choices on how they view our content. We are committed to 

that. As this committee considers the appropriate policies for the 

future of video, we hope that you will continue to recognize that as 

promising as these new forms of distribution are, they all need content to reach their full potential. A video streaming site, satellite 

television company, a broadcaster, they are all terrific technologies, 

but without the content that consumers want, they simply don’t 

reach their full potential. Make no mistake, we will always have 

an incentive to seek our new ways for our content to be distributed 

but we must be allowed to be compensated for it and we must be 

a part of the discussions on how it is distributed. The topic today 

is an important one, and we are pleased to be a part of this dialog 

and we look forward to working with you in the weeks and months 

ago. 

Again, Chairman Walden, Ranking Member Eshoo, I want to 

thank you for your time this morning. 

[The prepared statement of Mr. O’Leary follows:] 

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MOTION PICTURE ASSOCIATION OF AMERICA 

STATEMENT OF MICHAEL P. O'LEARY, 

SENIOR EXECUTIVE VICE PRESIDENT, 

GLOBAL POLICY AND EXTERNAL AFFAIRS, 

ON BEHALF OF 

THE MOTION PICTURE ASSOCIATION OF AMERICA, INC. 

BEFORE THE HOUSE ENERGY AND COMMERCE 

SUBCOMMITTEE ON COMMUNICATIONS AND 

TECHNOLOGY 

"THE FUTURE OF VIDEO" 

RA YBURN HOUSE OFFICE BUILDING, ROOM 2123 

WASHINGTON, D.C. 

WEDNESDAY, JUNE 27, 2012 

10 A.M. 

The Film and Television Industry 

Chairman Walden, Ranking Member Eshoo and members of the subcommittee 

I want to thank the Committee for the opportunity to testify on behalf of the 

Motion Picture Association of America, Inc.; and its member companies. As the 

primary voice and advocate for the American motion picture, home video and 

television industries in the U.S. and around the world, we are committed to 

providing audiences with a wealth of delivery options to experience the high 

quality entertainment that our companies produce. Whether you are at the theater, 

at home, on the road, or choose to download and view when you want, content 

creators, consumer electronics companies, and content distributors are working 

together to provide these new, innovative options for audiences to easily access 

licensed content. We welcome this opportunity to testify and work with the 

subcommittee as you consider appropriate policies. We hope you will recognize 

that as wondrous as these new forms of distribution are, they still need high quality 

content to deliver. 
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Enhanced Offerings to Our Audience 

We have listened to consumers, we are attuned to their desires, and are at the 

forefront of developing innovative ways to meet and anticipate those desires. 

For some, there is not, and may never be, a better way to truly appreciate the magic 

of movies than in the theater setting. Creating wonderful movies that people can 

watch in movie theaters is an important part of America's rich history, but is 

equally part of the present and the future of video. In addition to utilizing cuttingedge and sophisticated visual and special effects in our productions, our companies 

have embraced 3-D, IMAX, and brilliant sound that has enhanced and even 

transformed the movie theater experience. 

However, our member companies are not just about making movies for the big 

screen. We know that our audience enjoys watching our movies and television 

shows on every type of screen, from the television set in your living room, to your 

computer, iPad, Kindle, other tablet, or smartphone. We are partnering with 

companies of every stripe across the globe, including YouTube, Facebook, Netflix, 

Vudu, Roku - and soon, no doubt with some new platform being conceived by an 

unknown start-up company. All of these exciting innovations in distribution 

benefit both the audience who receive a high-quality viewing experience, and the 

creators who are able to monetize their enormous investment and success, and have 

the resources to reinvest in those dollars into creating even more high-quality 

programming. 

Viewers Choose Screen Size 

For many people, watching great entertainment on their television with their family 

is a cherished part of the day. And today, our programs are being delivered to 

television screens by over-the-air digital broadcasts and through an astonishing 

range of channel choices enabled by our distribution partners in the cable and 

satellite business. Viewers are able to watch these programs at the time of original 

airing, or at a time of their choosing, either through DVR, or through the increasing 

array of video on demand options. 

But a viewer's options do not end there. In addition, with the advent of interactive 

televisions, Blu-ray players, Roku boxes, Microsoft's X-box 360, Sony's 

Playstation, Nintendo's Wii, and Apple TV, viewers can watch HD movies and TV 

shows streamed across the Internet into their home through services like Netflix, 

VUDU, Hulu, HBO GO, or other services too numerous to be listed: And as 
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Internet-enabled televisions continue to gain in popularity, the variety of options 

will expand even more. 

More and more, people want the option to view programs not only at the theater or 

on TV, but also on their computers, tablets, and mobile phones. And we are 

responding to this call. Almost all the great ways you can watch your favorites 

programs on television are also available on-line or through your mobile phone. 

Hulu has been a great success, allowing people to use the Internet to catch up on 

their favorite TV shows or to explore new ones. YouTube and Facebook have 

entered into arrangements to distribute some of our companies' titles and Nettlix 

is, for the first time, providing its customers with original content with shows like 

"Arrested Development". HBO GO is just one of the many services that allow 

cable and satellite subscribers to access the same content that they could on 

television and sometimes even more. 

And in our enthusiasm over the distribution mechanisms, let's not forget Blu-ray 

disc, and the DVD, which much of our audience still consider the most enjoyable 

and convenient way to experience entertainment. 

Our Audience Wants High Quality Content Online 

It's amazing to think that in only a few short years the picture quality of online 

video has come to match traditional video distribution mechanisms. More than 

350 unique licensed online services around the world now provide high-quality, on 

demand film and television shows online to viewers, including more than 60 such 

services in the United States. These services cater to every manner of consumer 

viewing model including rental viewing, download-to-own, subscription viewing, 

and ad-suppOlied viewing. They are provided by every conceivable type of 

commercial entity, including technology companies like Apple's i-Tunes; 

broadcast television networks like ABC, CBS, Fox and NBC; cable networks like 

Comedy Central, TBS and USA; pay television channels like HBO and Epix; 

telecommunications/cable/satellite providers like AT&T, Dish and Comcast; 

retailers and "rentailers" like Amazon, Best Buy, Blockbuster, Nettlix, and 

Walmart (Vudu); gaming systems like PlayStation and Xbox; and new ventures 

devoted entirely to delivering great content seamlessly like Crackle, Hulu and 

MUBI. 
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Our Audience Wants Content Available on Their Mobile Devices 

All of the major motion picture studios distribute full-length films and television 

shows directly to viewers' mobile devices through the major mobile operators. 

AT&T's MobileTV service contains full length episodes of hit television shows; 

television channels; and PIX, a film service for mobile phones launched by Sony. 

Sprint TV includes television channels and on demand television shows and 

movies from studios including Disney (Watch Disney Channel, Watch Disney XD, 

and Watch ESPN apps), Paramount, Sony, and Warner Bros. Verizon offers V 

Cast Mobile TV with channels and on demand full episodes of hit shows. Other 

wireless networks have similar licensed offerings. Apart from streaming to mobile 

devices, studios have made content available to load onto those devices through 

media such as SD flash memory cards, like those used in digital camera card. 

Offering Portability and Flexibility to Our Viewers 

More of our audiences want the convenience to access the content they purchased 

on a variety of devices without having to buy the same thing twice. And we're 

delivering. This began a few years ago, as our companies started to include with 

many DVD and Blu-ray disc titles a transferable or downloadable digital copy for 

viewers to use on computers or portable devices. Now there are a variety of ways 

to "buy once, and play everywhere". The Digital Entertainment Content 

Ecosystem (DECE) consortium of more than 60 studios, retail stores and 

technology firms has created "UltraViolet," a digital storage locker for your 

content. It works like this. When a consumer purchases UltraViolet media - such 

as a Blu-ray, DVD or Internet download the viewer also receives the enduring 

right to access the content on any UltraViolet device registered to their household, 

and to enjoy the content via streaming through devices at home or on the go. 

The first UltraViolet content rolled out late last year, through services like 

Walmart's Vudu, Flixster, and studio offerings. Presently, over 5,000 titles are 

available through UltraViolet and over three million consumers have set up 

accounts. This past spring, Walmart began offering the ability to convert current 

DVD and Blu-ray collections to digital UltraViolet copies that can both download 

and stream. Walmart estimates that the average user of this service is bringing 

about seven discs to the store and each conversion takes about a minute. Other [s] 

complementary digital initiatives are also being developed, such as Disney Studio 

All Access, which will provide viewers with easy access to Disney content across 

multiple digital video services and devices. 
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A Unique American Manufacturer 

The U.S. motion picture and television industry is a creative community of many 

thousands of creators and makers, one that serves as a global cultural ambassador 

and one that plays a unique role in the American economy. Our members: 

• Provide high-paying jobs to workers in all 50 states; 

• Fuel small business growth, injecting capital into local, state, and national 

revenue pools and consistently generating a positive balance of trade; 

• Help provide jobs for 2.2 million American workers who depend on the 

entertainment industry for their jobs, 12 percent of whom are directly 

employed in motion picture and television production and distribution 

from behind-the-scenes production technicians to make-up artists and setbuilders - across all 50 states; 

• Provide quality jobs paying an average salary of nearly $79,000,73 percent 

higher than the average salary nationwide; 

• Support a nationwide network of nearly 95,000 small businesses-83 

percent of whom employ fewer than 10 people-involved in the production 

and distribution of movies and television. 

• Generate more than $15 billion in public revenue nationwide; and 

• Return a positive balance of trade, making us critical to the U.S. export 

economy. 

Over the last year our studios have filmed in Tennessee, Georgia, Illinois, Texas, 

New York, California, Michigan, Louisiana, Ohio and Massachusetts. Today there 

are ongoing productions in most of those states but we are also in Florida, Oregon 

and recently wrapped a film in Pennsylvania. "The Lone Ranger" is currently on 

location in Colorado and moves onto Utah next week. On average, a major motion 

picture shooting on location contributes $225,000 every single day to the local 

economy, impacting the hundreds of thousands of other businesses that provide 

services to productions, like the local drycleaner that served the cast and crew on 

location or the local hardware store that supplied paint and lumber. 

* * * 

Audiences haven't been shy about their desire for seamless access to their favorite 

movies and television shows, at the time and on the device or platform that works 

best for them. We are relentlessly innovating to keep meeting that demand, and the 

choices avai Iable to audiences keep getting better. Our creative community - the 

studios and many thousands of creators and makers who create and make great 
125 


82325.095

movies and television shows is committed to continuing that innovation. As 

noted in this testimony, we welcome and embrace the plethora of new forms of 

distribution, because they provide us new ways of offering our content to our 

audience in the manner they want to view our product. As this committee 

considers the appropriate policies for the future of video, we hope that it will 

recognize that as wondrous as these new forms of distribution are, they still need 

content to deliver. A video streaming site, a satellite television company, a 

broadcaster - they are all great technologies, but virtually meaningless to 

consumers if they don't have content to distribute. As the creators of that content, 

we are the entities that are taking financial risks in investing in product with no 

guarantee it will be profitable. As the party that takes the financial risk, we are 

entitled to control the distribution of our product. Make no mistake - we will 

always have an incentive to seek out new ways for our content to be distributed, 

but we must be allowed to be compensated for it and we must be allowed to make 

decisions about the proper context for its distribution. Mr. Chairman, Ranking 

Member Eshoo, again I thank you and this Committee on behalf of our member 

companies for the opportunity to testify today. 

, 1 The Motion Picture Association of America and its international counterpart, the Motion Picture Association 

(MPA) serve as the voice and advocate of the American motion picture, home video and television industries, 

domestically through the MPAA and internationally through the MPA, MPAA members are Paramount Pictures 

Corporation, Sony Pictures Entertainment Inc., Twentieth Century Fox Film Corporation, Universal City Studios LLC, 

Walt Disney Studios Motion Pictures, and Warner Bros, Entertainment Inc, 
126 

Mr. WALDEN. Mr. O’Leary, thank you for your testimony and 

thanks to all of our witnesses for enlightening us on your views on 

these very important issues related to the world of video. 

I am going to start my questioning with Mr. Johnson. I appreciate your comments and the situation you face, and I want to just 

kind of get above your company per se but raise the issues that 

come up in this new world we are in. I understand why you would 

want the protections of the Communications Act that afford multichannel video program distributors, but are you prepared for the 

responsibilities? And so this probably goes to others as well. For example, are you willing to live under the must-carry rules, the rules 

requiring the competitive availability of set-top boxes, the network 

non-duplication and syndicated exclusivity rules and the closedcaptioning emergency information requirements? So that is all the 

other cars attached to the Communications Act. Tell me what that 

means to your world. 

Mr. JOHNSON. Chairman Walden, we are currently already offering closed captioning. We currently offer the EAS service. As far as 

must-carry retransmission consent, we are not going to be carrying 

any type of local broadcasting. We have done a marketing agreement with a company called Antennas Direct, which sells over-theair digital antennas, so that our subscribers that want to receive 

over-the-air programming can do that through them. So we will not 

be entering into any retransmission consent issues. 

Mr. WALDEN. But what if you were required to? 

Mr. JOHNSON. Well, we would have to look at that when it happens. 

Mr. WALDEN. I am going to ask the same of Mr. Hyman and Mr. 

Funk, given the world you are operating in now. Do you want everything that is in the Communications Act good and some might 

argue burdensome? 

Mr. FUNK. I think our position is the current situation where 

there is a competitive environment to innovate is probably the 

right approach. There are some parts of the requirements that I 

think will naturally come to the markets such as closed captioning 

and other things that are a benefit to consumers but a lot of the 

regulations that have been written were really written for a different environment than exists today. 

Mr. WALDEN. Mr. Hyman? 

Mr. HYMAN. I agree with Mr. Funk in the sense that I think this 

highlights some of the antiquated notions of the Cable Act with the 

definition of MVPD, and I also think that it is something that in 

connection with determining MVPD should be done on a broader 

scale than in a single regulatory filing. 

Mr. WALDEN. All right. Mr. Johnson, Mr. Hyman, Mr. Powell and 

Mr. Ergen, isn’t it a little strange that a child could be watching 

the Sprout Channel’s Caillou on the same television in the same 

living room but the way that programming got there may have 

been subject to different rules depending on whether it was provided by Sky Angel, Netflix, a cable company or DISH? Shouldn’t 

the regulatory or non-regulatory treatment be the same? Mr. Johnson, I will start with you. 

Mr. JOHNSON. Well, we are asking for a level playing field that, 

you know, we have the same access to the programming that our 

127 

competitors do, and because the definition of MVPD is up in question, we have not been able to have the access to that programming. 

Mr. WALDEN. Mr. Ergen? 

Mr. ERGEN. Well, in general, I would say yes, the rules should 

be the same. To your earlier point, to the chairman’s earlier point, 

if you are going to be an MVPD provider, you have all the rules 

or eliminate the rules for the current incumbents. Having said 

that, there are cases where things are a little bit different between 

the technologies and I think you have to look at it on a case-bycase basis. Cable is more of a local service. Satellite, for example, 

is a national service. It remains to be seen how the IP networks 

that Mr. Johnson and others are doing, whether it is going to be 

national or it is going to be local. So, you know, it depends on— 

there may be some differences because of that. 

Mr. WALDEN. Mr. Powell? 

Mr. POWELL. Yes, Mr. Chairman. I largely agree with Mr. Ergen. 

I think what you are having is, this is just a continued evolution 

of the challenge of convergence in which technologies increasingly 

bring sameness to the way things are provided and distributed. But 

that said, I wouldn’t make the hallmark of suggesting that things 

are insimilarly situated just because they can produce the same 

content, the same show. There are different business models, different terms, different technologies underlying it. The cable industry spends $186 billion over a decade to build an infrastructure 

that is optimized for premium, high-quality, low-latency content. 

That is very different than the same content being sold on iTunes 

for $2.99 in a model largely designed to sell iPods more than it is 

designed to sell content. So as long as we are cognizant these different business models are often pursuing different central objectives, just because they have the same content doesn’t necessarily 

make them identical. But as we look at a new statute, I do think 

there should be more sameness than there is today. 

Mr. WALDEN. My time is expired, but, really trying to get to the 

heart of the issue here. Everybody wants a little different deal, the 

other guy’s deal, and so we are trying to sit here and figure out 

what is the right regulatory regime to really spur innovation and 

competition in a marketplace that functions, so your input is most 

valuable. 

With that, I will turn to my colleague from California, the 

woman who is proud to represent innovation and technology, Ms. 

Eshoo. 

Ms. ESHOO. Thank you, Mr. Chairman. I think you have hit the 

nail on the head because I think that we all want to see an acceleration of innovation, that it not only be—you know, that we motivate things through, whatever it might be, a change of the law, 

whatever rules at the FCC, because this is really one of the more 

exciting areas relative to our national economy that holds so much 

promise, and there is an insatiable appetite on the part of consumers, and so I think this morning’s hearing is really highly instructive but right below the surface there are all these different 

cases. 

I have four questions that I want to ask starting with Mr. Funk, 

Mr. Hyman and Ms. Sohn. We are very well aware of the consumer 

128 

demand for innovative data-intensive video applications like 

Netflix, Amazon video and Hulu, they all continue to grow, while 

at the same time the wireless carriers are moving away from the 

unlimited data plans. There was a piece in the New York Times 

yesterday that talked about broadband moving to meters. 

First of all, do you think that this curtails innovation? And if so, 

how would you address it? 

Mr. FUNK. Well, first of all, there have been speed-based tiers in 

Internet service for some time, so the idea of some different classes 

of service for Internet consumers is not new. I think the important 

thing is that as long as there is competition among Internet service 

providers, providers who give good value to consumers will get the 

business, and if the tiers become restrictive in a way that they disadvantage some services or restrict choice in a competitive market, 

companies that provide those services will not succeed. So I think 

the key here is really competition in order to ensure that we get 

the right outcome. 

Ms. ESHOO. Thank you. Let us go quickly. 

Mr. HYMAN. There has been a lot of talk about the competition 

in the video marketplace. 

Ms. ESHOO. You traveled across the country and you have got 30 

seconds. 

Mr. HYMAN. Thousands of video channels and it is the golden age 

of video. I think that is true. I think the one thing that we have 

to be mindful of and that I would suggest this committee to be 

mindful of is that Internet video, there is only one way to get Internet video and that is over an Internet pipe, and there are very few 

carriers that provide Internet video. In some places, there is only 

one carrier that people can access that, and the ability to have 

competition in that marketplace is something that you guys should 

be mindful as you go on and think about Internet video. 

And with respect to our issues out there, you know, the issue 

that we have been raised and been very public about, is the application of discriminatory data caps and the way in which the same 

content that is delivered over the—— 

Ms. ESHOO. When are they discriminatory, and when are they 

not? 

Mr. HYMAN. When are they, and when are they not? 

Ms. ESHOO. Right. 

Mr. HYMAN. So the same content from Netflix or the same content from, for instance, Comcast over Streampix, one counts 

against a data cap and the other one doesn’t. So from our standpoint, well, if you are going to implement data caps, there are innovation issues associated with data caps but they should be applied 

equally or not applied at all. 

Ms. SOHN. Let me give you an example. I agree with my colleagues to the left. So a perfect example of discriminatory data caps 

that we are concerned about is what Comcast is doing with the 

Xbox 360. So it is exempting its own Xfinity app from the data cap 

but Netflix and others are subject to the data cap. So while we 

don’t think the data caps are inherently bad, when they are arbitrary, they can be abused, they can be anticompetitive. Remember, 

ISPs also own video services so there is an incentive and an ability 

to discriminate against online video competitors. 

129 

And if I could just say one more thing. One of the things that 

really galls us is that we have been asking, Public Knowledge has 

been asking the FCC now for almost 2 years to look at data caps, 

not to regulate them, look at them, find out how they are evaluated, how they are raised or lowered so people can have an idea 

of what these caps are intended to do, and they have just refused. 

Ms. ESHOO. Thank you. 

Mr. Funk, it is my understanding that 20 percent of your customers have dropped their cable or satellite service. What factors 

do you think would leave more of your customers to consider Roku 

as an alternative rather than a traditional, you know, rather than 

a complement to traditional cable or satellite service? 

Mr. FUNK. We do see a percentage of our users who have cut the 

cord, as it is called, and dropped their cable or satellite package. 

It is the minority, as you said. I think there is a variety of reasons 

for this. In some cases, it is cost, and in some cases it might be 

a living situation or just individual preferences on programming. I 

think what is interesting is that there are now choices that allow 

consumers that opportunity so things like Netflix and Hulu Plus 

give people who want potentially a different selection of video at 

a lower price the ability to get that. So I think increased choice of 

offerings is really the key to providing the right service for all consumers. I think we provide one method for doing that. I think you 

will see a lot more innovation in the coming months and years as 

to how to do that better. So we are optimistic that cord-cutting will 

lead to continued video consumption but just in different fashions. 

Ms. ESHOO. Thank you. I had four questions. I will submit the 

other two in writing. I want to thank all the witnesses because together you have made this not only an important but an instructive 

hearing on the future of video. 

Thank you. 

Mr. TERRY [presiding]. Thank you. 

The chair recognizes Chairman Emeritus Mr. Barton. 

Mr. BARTON. Thank you, Mr. Terry. 

I first want to take a little victory lap this morning. The college 

presidents announced yesterday we are going to have a non-BCS 

football playoff in college football, and I can take a little bit of credit because back when I was chairman of this committee, we had 

some hearings on that and we got the ball rolling and they announced a 2014 playoff, so I want to commend them but also take 

credit for this committee highlighting that issue several years ago. 

I don’t think the 2014 playoff is the ultimate but it is a start in 

the right direction. When they get to eight or 16, I think they will 

have it. 

My first question is to the audience. I want somebody in the audience to tell me the original analog televisions, how many channels were on them. Anybody that is my age ought to know. I see 

one hand out there. How many? Somebody? No, not how many you 

got but how many were on the dial. There were 13. There were 2 

to 13 but there was no number 1. I never understood why there 

was no number 1. But you could go up to 13. As Mr. Powell just 

pointed out in his testimony, there is, like, 900 programs available 

now. We have gone from—my first TV, we got one channel on a 

good day, and now we have got thousands literally. 

130 

I think it is time to review the telecommunication video market. 

I think Mr. Walden and Ms. Eshoo and Mr. Upton and Mr. Waxman are to be commended for agreeing to do this hearing. I think 

there are some principles that we need to remember as we look at 

this, and this is just my scratches so I don’t claim this is the universe. But obviously in order to have a program, you have to have 

a creator. In this country, we have never regulated the creator of 

the programming. Then you have to have a producer, and to my 

knowledge, we have never regulated the producers. Now, there 

have been efforts at censorship but in terms of creativity and production, we basically let that be a free market operation. 

Once you have a program, you have to have somebody to package 

it and market it. You have to have somebody to transmit it and 

then obviously you have to have somebody to buy it, somebody to 

view it, somebody to consume it. When you get into the packaging 

and the transmission is where we had a role for government. I 

think it is a truism that form follows function, and our original regulatory format was based on the fact that where there was radio 

or television, there was a potential for a natural monopoly, and 

government either tries to prevent monopoly or regulate monopoly, 

and a lot of the rules that we are talking about here originated 

when the radio market and the early TV market was getting started. As Mr. Powell pointed out, the advent of the cable industry 

brought video to more people but it also brought additional regulation. 

I was the only member of the committee back in the 1980s that 

voted against the re-regulation of cable, the only one on either side 

of the aisle when the first President Bush was President, and I was 

at the White House when we deregulated cable. When we passed 

the telecommunications Act in 1996, there were at least four and 

maybe five or six witnesses at this table that their industry or 

their company did not exist, did not exist. I couldn’t tell you today 

what Roku is, and I listened to the president of Roku try to explain 

what it is. 

So I think, Mr. Chairman, I know it is too late to do a major bill 

in this Congress but I hope in the next Congress we take this up 

and use original principles to review the market, and in general, 

I think we are better off having less regulation than more and 

more enterprise and more market competition than less. The role 

of government is to provide a level playing field to prevent a monopoly if possible, if we can’t prevent a monopoly to try to prevent 

undue market share and be fair to all. 

So I think this is an excellent hearing, and I look forward to big 

things happening on this committee in the next Congress. 

The last thing I will say: If we are going to do big things, it has 

to be done no a bipartisan basis. This is not a partisan issue. It 

will go nowhere if it becomes R versus D. It has to be done in a 

bipartisan basis, and the good news is, with the leadership on both 

sides of this committee, that is a very doable deal. 

With that, I yield back, Mr. Chairman. 

Mr. TERRY. I would agree. 

The gentlelady from California, you are now recognized for your 

5 minutes. 

Ms. MATSUI. Thank you very much, Mr. Chairman. 

131 

First of all, I would like to welcome all the witnesses before us 

today, and I would just like to acknowledge the great work that a 

Hearst-owned station, KCRA, is doing for my constituents in Sacramento. 

You know, local news and weather as well as other local programming is important to all Americans, not just to my constituents, and I like to get a better understanding from our witnesses 

about the role of retransmission consent and preserving our shared 

commitment to localism. 

Mr. Ergen, I understand that retransmission consent payments 

are used by broadcasters to support local news and local weather. 

How would you respond to concerns that changes in the retransmission consent regime could undermine quality local programming? 

Mr. ERGEN. Thank you for the question. 

First of all, retransmission consents—and maybe Mr. Barrett can 

give us a little bit more information on this—in my understanding 

generally goes some to the network. If it is changed where the network themselves, the major network may take some of that and a 

large part of retrans consents does not actually flow to the local 

broadcasters anymore. That is the way it started but now the national network will take a large portion of that. And then second, 

of course, the broadcast model is a two-prong model, the retransmission consent fees and also advertising fees so they get ad revenue from two sources. 

The troubling thing is that despite the fact that retransmission 

fees have gone up probably 200, 300, 400 percent since I started 

in this business, the actual localism and local level has actually 

gone down from a local news perspective in the sense that to cut 

costs and operate more efficiently, many broadcasters are sharing 

local news networks and so forth. In many cities today you will see 

that a network show, a news show will be on multiple networks or 

there will be sharing of resources, so very similar to what the 

newspaper industry did as well. 

Ms. MATSUI. Sure. Mr. Barrett, would you like to comment on 

that? 

Mr. BARRETT. Well, I disagree. The 21st century media company 

needs a dual revenue stream, and for years, the television industry 

operated with an advertising-only model. The cable industry was 

launched and helped us get our signal into rural areas but then 

built a significant business on the back of the most popular programming available to Americans in every community in this country, and that was local television. I would say to you that we are 

using as an industry the retransmission consent fees to invest in 

our local businesses. It helps support the investment we made in 

digital technology, which was multiple billions of dollars over the 

last decade. I think you have seen most local stations, many local 

stations go from producing 20 hours a week of programming to 40 

hours of week of programming exclusively in the local news genre. 

We have added multi-cast channels on our signals now which are 

trying to get clearance on settlement and cable, so I would disagree 

with Mr. Ergen that that money is not being used in a constructive 

way to advance the business interest of local television. 

132 

Ms. MATSUI. Well, Mr. Barrett, how would you respond to concerns some parties have raised about the impact of broadcast stations’ coordination and consolidation on retransmission consent negotiations? 

Mr. BARRETT. Well, I think speaking for our company, we negotiate only on behalf of the owned stations of the Hearst Company. 

Other companies have pooled some of their retransmission consent 

negotiations, have created bundles, but I believe in most cases, in 

all cases, people have been smart enough to acknowledge that they 

have to break up a bundle. Mr. Ergen wants to buy a station where 

we have a duopoly separately from KCRA. If you would like to buy 

KQCA, I will sell him KQCA separately, I will sell him KCRA separately. 

Ms. MATSUI. Mr. Ergen, your thoughts quickly. 

Mr. ERGEN. Yes, I think the problem is, is that in retransmission 

consent, the local broadcaster is in fact a government-sponsored 

monopoly. In other words, nobody else can bring that signal into 

that marketplace today, so it is a little bit of an unfair fight, and 

what has happened is, I will give you one example. In Wyoming 

where one individual got the rights to negotiate for all three broadcast networks in Cheyenne, Wyoming, so there was either no local 

networks in Cheyenne or you had to pay whatever rate—— 

Ms. MATSUI. But would you say—— 

Mr. ERGEN. And so the signal actually had to come down and so 

consumers lost because of unfair bargaining between—it is one 

thing to be an unregulated monopoly, it is another thing then to 

band together and negotiate on behalf of multiple stations in the 

same market. 

Ms. MATSUI. Would you say, though, this is not the same 

throughout the country? I mean, it appears that what Mr. Barrett 

in certain areas like where Sacramento may not be the same way 

as what you are talking about in Wyoming and other areas. 

Mr. ERGEN. I would agree with Mr. Barrett that each broadcaster 

handles it differently so Mr. Barrett’s company handles it in a very 

professional manner with just their networks. Other people utilize 

their market power and that mischief can happen, now, of course, 

legally sanctioned. 

Ms. MATSUI. Well, I have run out of my time. I would like to submit some written questions. 

Mr. TERRY. Absolutely. Thank you, Ms. Matsui. 

Now I recognize myself for 5 minutes, and I will spend most of 

my time with you, Mr. Powell. But first I want to just give a little 

anecdotal story. When I walked into my 17-year-old’s room and, by 

the way, we got him a TV for his room for Christmas thinking that 

when he graduates, it will be a good thing for him to take to college. Hopefully he is going to college. But I walk into his room and 

he is on his iPhone and I said hey, what is going on; oh, just watching Netflix, on his iPhone, and there is a TV sitting right there, 

and that is the world we are living in. That is the people that are 

going to dominate the consumer products and video markets for the 

years to come. I think of turning on the TV; they don’t. 

Mr. HYMAN. Is the TV Internet connected? 

Mr. TERRY. Good point. Yes, he has the Xbox 360. Yes, so he can 

do it that way as well but he just chose to do it on his phone. 

133 

So Mr. Powell, it is interesting that you mentioned the 57 percent. In 1992, Congress was concerned about the cable monopoly. 

That does not exist today if you are at 57 percent and the folks 

that are sitting on this panel. So what does that really mean to the 

cable industry? How is it evolving to be competitive? And in reference to the 1992 Act—let us try and not be redundant on Ms. 

Matsui’s questions of retransmission—but what other underbrush 

is there from 1992 that was just so focused on the cable industry? 

What do we need to do to clear out the brush? What specific things 

should Congress look at if we want to review the 1992 Act? 

Mr. POWELL. Well, the first thing I would say is, the beauty of 

competitive dynamics is, you have to increase value for consumers, 

and you can do that through innovation, evolution of your service, 

and I think that the competition we face first and most formidably 

from the satellite companies increase both the quality of content 

that we are providing, the amount of content we are providing. It 

forced us to look at new businesses for revenue development to continue to be competitive, which is part of the dynamic that I think 

helped drive investment in broadband and ultimately brought that 

into the bundle of services we offer as well as telephony. If you look 

at the wonderful things that the over-the-top folks are doing, you 

see cable companies knowing they too have to be able to bring that 

value to your son to be able to allow him to watch what they are 

selling over iPads and Xboxs as well. So I think that dynamic has 

driven a lot of innovation. 

I would give you a more global answer about what to change, so 

I think that the 1992 Act had two core fundamental foundational 

elements. One, that we were a vertically integrated exclusive monopolist and a whole bunch of other rules that were premised on 

supporting and subsidizing broadcasting for the protection of the 

social compact that America supposedly wanted to advance in the 

context of broadcasting. I think vertical integration rules when an 

industry only has about 14 percent of its operators integrated with 

content, these would be rules like program access, program carriage and rules that are premised on the idea that you have to 

guard against incentives associated with both being a distributor 

and owner of content. I think when we have a dialog, those are the 

kinds of rules we should have to talk about. 

But to be fair and honest, I think you also have to sort of reevaluate elements of the social compact. You know, is it still the 

policy of the United States that the cable industry should continue 

to forcefully subsidize the broadcasting model through must-carry, 

retransmission consent and other elements. I am not prepared to 

answer them. 

Mr. TERRY. Well, one last question and then hopefully we can 

have time for the broadcaster, Mr. Barrett, to rebut that. We are 

getting calls in our office about cable rates going up, and I think 

this goes to the vertical integration model that was thought of as 

cable then but you are not the content provider today. Could you 

explain very quickly in 26 seconds how that it is impacting the 

business model and what we should be telling our constituents? 

Mr. POWELL. So price is two things. One, I think any industry 

in this day and age under economic stress who is not sensitive to 

affordability of the American consumer is acting at its peril, and 

134 

I think our industry is very focused and looking for ways to do 

that. You are seeing companies experimenting with smaller and 

lower priced packages. You are seeing basic packages being offered 

for one. Secondly, I think it is very difficult to compare prices over 

time because there is so much more that is in the suite of bundled 

services that consumer are buying—DVR, more channels. I would 

leave you with one statistic. On an hourly basis, cable is about 21 

cents per hour. That is cheaper than even Netflix subscription and 

most other entertainment products in the market. 

Mr. TERRY. Is that viewing hours or 24 hours in a day? 

Mr. POWELL. Viewing hours, 8 hours a day. 

Mr. TERRY. Thank you. 

At this time the chair recognizes the gentlelady from the Virgin 

Islands, Ms. Donna Christensen. 

Ms. CHRISTENSEN. Thank you, Mr. Chairman, and welcome to all 

of the panelists this morning. Thank you for holding this hearing. 

I have a couple of questions. I probably won’t use up all of my time. 

Ms. Sohn, you advocate for eliminating the broadcast must-carry 

rule but you also note on the other hand the importance of protecting the public and non-commercial stations. So what policies 

would protect this programming without a must-carry rule? 

Ms. SOHN. I think we would be comfortable with preserving 

must-carry for public stations but, you know, as far as commercial 

stations are concerned, my feeling, our feeling is that if local broadcasters are indeed providing good local programming, cable casters 

will want to carry them because their customers will demand it, 

but I don’t think they need the protection of must-carry. 

Ms. CHRISTENSEN. And Mr. Barrett, I know one of the concerns 

is advertising revenues, so how are broadcasters looking to respond 

to the pressures on advertising revenues from the new technologies 

and services? 

Mr. BARRETT. Well, one of our challenges has been an accurate 

measurement from Nielsen. It has been a challenge as to we have 

moved to a time-shifted world of viewing for Nielsen to capture 

that television viewing, and that has had downward pressure on 

commercial pricing. Retransmission consent has been a new revenue stream as we have referenced. The multi-cast business has 

been a new revenue stream for us and we are optimistic that mobile television as it rolls out over the next several years will be a 

new revenue opportunity for local stations as well, and that will 

help offset some of the downward pressure on ad rev. 

Mr. TERRY. Is your mic on? 

Mr. BARRETT. Now it is on. I am a TV broadcaster. I should know 

that. 

Ms. CHRISTENSEN. Mr. Powell, you and all of the other—— 

Mr. TERRY. Could he answer that again and we will stop the 

time? 

Ms. CHRISTENSEN. Sure. 

Mr. BARRETT. Our challenge as broadcasters has been to be sure 

that Nielsen captures the viewing that has occurred on time-shifted—on the television experience that is time-shifted on DVRs and 

the like, and very briefly, the new revenue opportunities we have 

with retransmission consent, multi-cast and, in the future, mobile 

television, the extent that those ad revenues will help replace and 

135 

support some of the downward pressure on ad revenues against our 

core video product. 

Ms. CHRISTENSEN. Thank you. 

Thank you, Mr. Chairman. 

And Mr. Powell, you and all of the other panelists have pointed 

out the way the competitive environment and technology has 

changed and is continuing to change, and you recommended re-examining a lot of the rules, the regulatory rules, program access, 

content carriage obligations as well as must-carry transmission 

content and non-duplication rights. So some would say that if we 

were to weaken any of those rules, it would give cable an unfair 

competitive advantage. Given the wide choices that are available 

today, how would you respond to that? 

Mr. POWELL. That is a great question. I think the way I would 

characterize it is, I don’t think the cable industry’s position is we 

are just looking for a wild, abandoned deregulation. I think we are 

looking for a more rationalized regulatory model that more properly reflects the reality of the market. We think a lot of the rules 

that we are currently living under, if you accept the way they are 

premised, would fall under a standard by today’s measurements. 

Now, I am perfectly willing to entertain that somebody could conceive of a different basis or a different reason for some sort of regulatory rule but I think that the obligation, the burden should be to 

prove that from a zero base, meaning giving the reality of today, 

not the legacy of yesterday, why do you still need this rule or why 

do you need some new proposed rule? So I really wouldn’t say that 

I think we are a cooperative partner in trying to make sure the policy is right as opposed to just some random, get rid of everything 

because it is stupid but we do think it should be justified based on 

what we are seeing in the market, and given all the wonderful 

things you have heard, we think on balance, that would be a dramatically lighter regulatory regime. 

Ms. CHRISTENSEN. Thank you. 

Mr. Chairman, I will yield back the balance of my time. 

Mr. TERRY. Thank you. 

Ms. CHRISTENSEN. Thank you. 

Mr. TERRY. At this time we recognize Mr. Stearns for 5 minutes. 

Mr. STEARNS. Thank you, Mr. Chairman. 

Mr. Barrett, you have been getting all the questions. I have a little delicate question, which is more or less confined to my Congressional district. I represent the University of Florida in Gainesville, 

and it appears there is a dispute between DirecTV and the ABC 

affiliate, WCJB, over transmission consent fees. You are probably 

not familiar with that. 

Mr. BARRETT. I am not familiar with that. We own the NBC affiliate in nearby Orlando. 

Mr. STEARNS. I don’t necessarily want to get involved with this 

business dispute, but some have suggested that because now 

Gainesville and Alachua County, they have DirecTV, they can’t 

even get ABC now. It is sort of a blackout. And I guess in your 

opinion, are these blackouts becoming more frequent? 

Mr. BARRETT. I think they are very infrequent. Cox happens to 

own the ABC station in Orlando. We own the NBC affiliate WESH 

in Orlando, and over the past several years or so, there has been 

136 

a new NBC affiliate licensed to Gainesville to that marketplace, 

and you may infer that we stood aside and did not challenge that 

NBC affiliate that went into that marketplace. 

Mr. STEARNS. Mr. Ergen, what is your reply to that? Are these 

blackouts becoming more frequent? Are they a problem for 

DirecTV? 

Mr. ERGEN. They are becoming more frequent. I can speak for 

DISH Network. 

Mr. STEARNS. Mr. Chairman, we have a clear difference of opinion here between—— 

Mr. ERGEN. And perhaps we can get the committee to—— 

Mr. STEARNS. But your position is, they are becoming more frequent? 

Mr. ERGEN. Yes. I can speak for DISH Network. We had six 

blackouts last year. We have had nine already this year. 

Mr. STEARNS. So if you have had nine this year, and let us take 

Gainesville, for example, and they can’t get ABC so they call you 

up and say why can’t we get ABC, what do you say? 

Mr. ERGEN. You basically say you are working with the broadcasters to negotiate a fair rate for them. You know, what happens 

is, it is bit of an unfair food fight because the broadcaster—because 

everyone has a choice to switch to another video provider, A, and 

B, they only get—their sweeps ratings only happen four times a 

year so they only get measured four times a year by Nielsen, which 

affects their advertising rates except by law, is my understanding, 

cable companies can’t take down a network during a sweeps rating. 

So it is just not a fair fight out there today and it is become more 

prevalent. 

Mr. STEARNS. What do you think a solution should be? Is there 

a solution? It seems like—— 

Mr. ERGEN. I think there are some fairly easy solutions. I mean, 

as an example, if we are going to make it a market determinant, 

I am all for that, but that means that we should be able to—if you 

don’t have the Gainesville ABC station, then you would have to go 

to a stand-still arbitration or you have to have the right to import 

an ABC station from Orlando, for example, so the customer doesn’t 

do without the ABC network while the dispute is going on. Then 

you get a free-market system working where it is more of a fair 

fight between the broadcaster and the distributor. 

Mr. STEARNS. I don’t necessarily want to get involved with this 

dispute, so I mean—— 

Mr. BARRETT. You have opened Pandora’s box here. 

Mr. STEARNS. I know. 

Mr. BARRETT. We would strongly resist the—— 

Mr. STEARNS. Well, I have given you a chance to speak and I 

have given him, so I don’t know, because he will want to speak 

after. 

Mr. Barrett, I understand that broadcasters are poised to deploy 

mobile DTV services to allow viewers to watch live local news, 

emergency alerts and other programming on the go. What are the 

differences between broadband mobile DTV and video over 

broadband that is currently available on cell phones and can mobile DTV help alleviate some of the pressure on the wireless bands? 

137 

Mr. BARRETT. The architecture of the broadcast as a single-point, 

a multi-point distribution is the superior distribution system. It 

doesn’t run into broadband congestion. If I invited you to a Yankee 

game in New York City and we wanted to go online, you would 

have trouble in Yankee Stadium on any given weekend connecting 

with a broadband supplier that didn’t buffer and didn’t have real 

signal limitations. An over-the-air broadcast signal could touch everyone in that stadium simultaneously and there would be no signal degradation at all. It is a vastly superior distribution system 

of the signal 

Mr. STEARNS. OK. My last question, Mr. Ergen, I think we all 

understand the need for more spectrum. I think the FCC is moving 

forward on a rule regarding the S band spectrum DISH recently acquired in order to build out a wireless network. What is the status 

of this item and when will the FCC issue its final order on this proceeding, in your opinion? 

Mr. ERGEN. Well, we first went through a waiver process last 

year and ultimately were denied that waiver by the FCC. Then we 

went into a rulemaking process, which is now complete in the 

sense that all the comments are in from all the parties who might 

be affected either in a positive or negative way by our entering into 

the wireless business and now it is just in front—the rulemaking 

now just has to be decided by the full commission, the five commissioners, to make a decision. We are hopeful that they can do that 

by the end of the summer. Other than time—we realize the FCC 

has a lot of other things on their plate, as Michael Powell can 

speak to when he was there. Other than time, they have all the 

facts in to approve it, so we are hopeful they will do it by the end 

of the summer, and then that unleashes 40 megahertz of spectrum 

and of course obviously a huge investment in this industry and jobs 

at a time when, you know, a lot of companies are hoarding their 

cash because of an uncertainty out there. We are certainly hoarding our cash because we are waiting on the FCC uncertainty that 

they can alleviate that problem. So it is a case where business and 

government can work together to do the right thing for consumers 

and also unleash productivity and investment in the United States. 

Mr. STEARNS. Thank you, Mr. Chairman. 

Mr. TERRY. Thank you. 

The chair now recognizes the gentlelady from Colorado, Ms. 

DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Sitting here listening to this testimony reinforces my view that 

this retransmission consent issue is a very messy issue and there 

is not a one-size solution. Most people would like to see agreements 

reached that are fair to consumers and I think one thing almost 

everybody could agree with is Congress shouldn’t put too heavy of 

a finger on that scale. We should really try to allow the market to 

come to a solution. 

I believe that we need access to free and diverse and local news 

and local programming and information in an emergency. I was 

just looking at some of my local news on these wildfires in Colorado 

and there is a good example of how consumers in Boulder or in Colorado Springs or Fort Collins need to be able to get access to local 

news. And so that is a balancing that we have to have, and also 

138 

several members of the panel talked about mobile TV and how 

much promise that that has. But the strong argument supporting 

the value of broadcasting to consumers doesn’t necessarily equate 

to a justification for pulling a signal from cable or from satellite 

viewers if retransmission consent negotiations fail, and I am thinking about this from the standpoint of my constituents who work all 

day, who barely have time to sit down in front of the television, 

who want to turn on the first game of the World Series with hope 

the Rockies might be in it, although maybe not this year, but they 

can’t get the programming they want because we have had failed 

retransmission consent talks. 

And so my first question is a simple question, and if preferable, 

I would like to have a yes or no, and that question is, do you think 

blackouts as a result of the failure of these agreements are fair to 

consumers no matter how rare or how often they might be? Mr. 

Powell, I will start with you. 

Mr. POWELL. No. 

Ms. DEGETTE. Mr. Barrett? 

Mr. BARRETT. No. 

Ms. DEGETTE. Ms. Sohn? 

Ms. SOHN. No. 

Ms. DEGETTE. And Mr. Ergen? 

Mr. ERGEN. No. 

Ms. DEGETTE. OK. Thank you. 

Now, Mr. Ergen, I have a question for you about this AutoHop 

issue. As you testified in your statement, and I think everybody 

knows, the AutoHop technology lets consumers skip over commercials or other things that they don’t want to watch, and as you 

said, that would mean that when kids are watching TV, they 

wouldn’t have to see junk food and alcohol commercials. I would 

submit that as the fall approaches, many viewers would skip over 

the shock-and-awe TV commercials that everybody is going to be 

treated to in the campaign this fall. And so it—I am sorry? 

Ms. SOHN. And the volume too. 

Ms. DEGETTE. Yes, and the volume too. So I think the volume 

is the issue. 

But if people had AutoHop, it would let them decide what they 

wanted to see. Now, I know that this is in the courts right now, 

but talking not about the legal issues but consumer choice and innovation in the free marketplace, doesn’t AutoHop simply improve 

on technology that is already available from the DVR to what is 

possible through the DVR? 

Mr. ERGEN. Yes. I think it was settled legally 28 years ago in the 

betamax case but the AutoHop does what everybody in the pay-TV 

business does with DVRs which is, allows a customer with the 

push of a button to record a channel or series of channels and it 

allows customers with the push of a button to skip ahead through 

a commercial. What AutoHop does it make it more convenient for 

customers to do it. When I woke up this morning, my alarm went 

off at 6 o’clock in the morning as it does every morning, and I don’t 

have to reset it every morning for 6 o’clock even if I’m in a different 

time zone. So AutoHop allows you then when you choose to watch 

a prime-time show, you can make the choice to AutoHop through 

the commercial with the push of a button. And so it is—just as we 

139 

regulated—I’ve sat through regulation of, we have to have a rating 

system for our TV shows so that parents can block them out, we 

now have regulations to turn the volume down for commercials. It 

is amazing we had to do that. It is amazing that commercials could 

be that loud. And I think that we certainly don’t need regulation 

that prevents a customer, as I understand the broadcasters’ point, 

it is that consumers do not have the right to skip a commercial and 

do not have the right to record a show, and I think that, you know, 

we will fight the good fight for the consumer. 

Ms. DEGETTE. You know, I have to say, from the standpoint of 

the broadcasters, I understand their business plan and their revenue concerns but I think we have to balance the consumer decision of what they want to see versus that business plan. We need 

to work something out. I think we can all agree on that. 

Mr. Barrett is eager to make a point 

Mr. BARRETT. I think if this committee is interested in protecting 

localism, if you are interested in having your local station cover the 

wildfires in Fort Collins, the AutoHopper and that technology will 

be damaging to the local business model and you will lose local stations’ ability to provide the kind of coverage that is important to 

you and your district. 

Ms. DEGETTE. And that is why I am saying, I think for the local 

broadcasters, I am sympathetic to the business model, but we need 

to balance that plus the consumers wanting a choice. It is not 

DISH that wants to have that choice, it is the consumer. So I think 

we are going to have to work that out. 

Thank you very much, Mr. Chairman. 

Mr. SCALISE [presiding]. The gentlelady’s time has expired and 

now the gentlelady from Tennessee, Ms. Blackburn, is recognized 

for 5 minutes. 

Mrs. BLACKBURN. Thank you so much. 

I just have a couple of questions that I want to get to today but 

I do thank all of you for your patience, for your diligence in continuing to work on this issue. 

Ms. Sohn, since you are the only female on the panel today—I 

see seven guys and you—there is a lot I could say, right? We need 

more women down there. 

Let me go to something you said previously. You basically endorsed having usage-based billing at one point by saying the ISPs 

should charge a flat rate for a certain amount of bandwidth and 

then charge a per-bit metered rate for usage that goes beyond that 

limit. So what I wanted to see was if you still agreed with that. 

And let us say if somebody is a Netflix subscriber and they are 

using a large portion of capacity as opposed to someone who just 

checks email and does a little bit of surfing every day, should they 

be paying the same amount? So where are you on that one? 

Ms. SOHN. We don’t endorse usage-based billing or data caps. I 

mean, basically what we say is, data caps are not inherently bad, 

but they can be abused and they can be used anti-competitively to 

discourage people from using online video to disadvantage competitors, so we are very, very concerned about that. 

One of the problems here is what is the rationale for usage-based 

billing or data caps? Former Chairman Powell says in his testimony and he said yesterday in response to questions about the 

140 

DOJ investigation well, we have to deal with congestion on our networks. Well, data caps is a very blunt instrument to deal with congestion because congestion only happens at one point in time, 

right? So if I am backing up my data at 3 o’clock in the morning, 

I am not causing congestion, but that goes against my data cap. So 

I want to reemphasize that it is really, really important for Congress and the FCC to know how data caps are set, how they are 

evaluated, how they are moved over time. I mean, Comcast just 

raised its data cap for the first time in 4 years from 250 gigabytes 

to 300. Why did it take so long with the explosion of video? So no, 

we are—you know, we don’t think usage-based billing is inherently 

bad but it can be abused and it is very, very important to know 

how they are used. 

Mrs. BLACKBURN. OK. Mr. Powell, let me come to you. You might 

want to respond to that. Then I want to ask you also to talk a little 

bit about MFN and Most Favored Nation status, and looking at 

that plus the alternate distribution method clauses that are there 

in cable carriage contracts. You know, in Nashville with a lot of the 

entertainers, they understand an MFN approach when they are 

doing shows. And so with a lot of our content producers and people 

that are pushing content forward, we have got some questions 

about the MFN and the ADM approach, so if you want to respond 

to what Ms. Sohn had to say and then answer the second question, 

that would be great. 

Mr. POWELL. Sure. First, I would like to highlight something she 

did say and by the way has been echoed by the country’s leading 

regulations, both the chairman of the Federal Communication 

Commission and the chairman of the Federal Trade Commission. 

There is nothing inherently wrong with usage-based pricing just 

like there isn’t—if you run your air conditioning all day long at the 

lowest temperature and your neighbor chooses to open the windows 

and have the breeze blow in, you are going to pay more money 

than your neighbor is as a consequence of your use. So inherently 

usage-based pricing is about price fairness, that you are being allocated a portion of the cost consistent with your use, and that is a 

very well established economic principle and we don’t think just because you can condemn it in words makes it so. 

The other thing I would say about caps, first of all, let us be 

clear. Caps are not the industry standard. In fact, as far as I know, 

after Comcast’s recent change, there is not a cable company that 

employs a cap that penalizes a consumer after they exceed that 

cap. They are able to move to other pricing bundles or increased 

capacity. So, you know, this idea that we are all uniformly applying 

caps as a way of creating artificial scarcity is not factually accurate. And I do think there is an economically defensible reason for 

usage-based pricing and threshold models and it is not about congestion management, as Gigi suggested. It is about how do you 

fairly monetize a very high fixed cost network? You have to dig up 

the ground, put this thing in and you have to charge your end 

users. And also I might note because of net neutrality, we are not 

allowed to charge other corporations. We have to charge end users 

alone. And how to do that fairly is the question that cable companies are experimenting with. 

141 

On MFN, Congresswoman, honestly, I am not that much of an 

expert on the specifics of these contracts. They have been around 

a long time. I would note that in the DOJ supposed investigation 

that is underway, DOJ looked at these MFNs in the context of the 

Comcast/NBC merger and other merger-specific deals and didn’t 

find antitrust violations in those cases in passing on them. So to 

be honest, they are contract specific. I am not usually privy to the 

contours of them. I think they can serve a beneficial purpose. I also 

think they can be harmful, but that is what we rely on honest examination for. 

Mrs. BLACKBURN. Thanks. I appreciate that. 

My time is expired, Mr. Chairman. I will yield back. 

Mr. SCALISE. The gentlelady yields back. 

Now the gentleman from Pennsylvania, Mr. Doyle, is recognized 

for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman. 

Mr. Barrett, I want to thank you for joining us today. I know my 

constituents in Pittsburgh appreciate the Hearst station that you 

have there. I just want you to elaborate more on Mr. Ergen’s comments about the hopper service. 

My understanding is, there is a fair-use exemption for DVR recordings. Can you explain to me why you believe that the hopper 

service is so different than regular DVR service? 

Mr. BARRETT. I believe it goes beyond the contemplated fair-use 

parameters. I think it is a copyright issue. It is a matter that is 

in the court right now, and I will be anxious to see how the court 

adjudicates that. It remains a threat to the local broadcasting system and, you know, one of the best qualities of the American society is that we have a local broadcasting system that is in place in 

210 markets, and in all the determinations that you will make, 

there is going to be a prioritization and a tradeoff of things, and 

I am here on behalf of people who are committed to local communities and I think there has go to be a high prioritization for preserving that localism that these stations provide. 

Mr. DOYLE. Thank you. 

Ms. Sohn? 

Ms. SOHN. It is absolutely not a copyright issue, and to me, this 

is a perfect example about how copyright is misstated and misused, 

you know, to stop innovation. I mean, the Sony versus Universal 

case, as Mr. Ergen said, is absolutely clear. The public has the 

right to record what they want to record off of TV, whether it be 

a VCR or DVR. That was 1984. That was a long time ago. 

Look, people have been skipping commercials for 50 years since 

the guy who just died invented the remote control. This is about 

consumer choice. I remember it was about 10 years ago when 

Jamie Kellner from Fox said it was OK for people to go to the bathroom to skip commercials. So what Mr. Ergen’s AutoHop service is 

doing is just turning three steps with a remote control into one, 

and consumers should have the right to do that. 

Mr. DOYLE. Thank you. 

Mr. O’Leary, in your testimony you spoke about your UltraViolet 

service. My understanding is that it is basically a new way for consumers to be able to watch movies through the Internet rather 

than having to purchase a DVD that they can only watch on a 

142 

DVD player. I find the service very interesting. I have some questions. 

On the UltraViolet Web site, you indicate that customers can 

stream content on almost any Internet-connected device and that 

they can also download digital copies when they don’t have good 

Internet access. Can UltraViolet customers download a digital copy 

of a film onto any device or just certain compatible devices? 

Mr. O’LEARY. My understanding, Congressman, is that it has to 

be a device that is registered with UltraViolet service, and that 

downloading is a component of it. I think in the first phase, the 

emphasis, as your question highlighted, is in streaming but they 

will have the ability to download it onto different devices as long 

as they were registered. 

Mr. DOYLE. I just thought it was unclear on the Web site. Based 

on the advertising, it kind of seemed like to me that I could 

download the content onto any device of my choosing, and I noticed 

some similar confusion from some other UltraViolet users who 

thought they were going to get a digital copy of a movie to watch 

anywhere. Can you explain what some of the approved devices are 

that I can download my films to? What would be an approved device, for instance? 

Mr. O’LEARY. Well, you could download it, for example, onto your 

laptop, onto, you know, a tablet, onto different things like that. I 

would have to get back to you with a specific list of the types of 

devices, a complete list of the types of devices that—— 

Mr. DOYLE. Yes, I am just curious what these UltraViolet-compatible devices are. I think it just might be easier for consumers, 

you know, when you look at that Web site to understand what actually they can use and what they can’t use. 

Mr. O’LEARY. Absolutely. 

Mr. DOYLE. And just to follow up to that, does your service give 

customers any guarantee that they will always have access to the 

purchase they made? You know, I have my old DVD. You know, 

some of them might be scratched up but I can still go into the closet and pull out that DVD any time I want because I know they are 

always there. Is there a guarantee that people will always have access to a purchase they make? 

Mr. O’LEARY. Yes, Congressman, it is my understanding that 

there is a perpetual agreement between the consumer and the producer in that they will have access to those, yes. 

Mr. DOYLE. Thank you. 

Mr. Chairman, with that I will yield back. 

Mr. SCALISE. Thank you. 

The chair will now recognize himself for 5 minutes. When we 

look at the video marketplace today, it is drastically different than 

it was in 1992 when Congress passed the Cable Act yet the laws 

and regulations written then still apply today as if a monopoly 

power exists and as if innovation has come to a screeching halt. I 

think it is important for us to go back, you know, because we take 

for granted that technology—you know, I can look on my video device and watch Swamp People episodes on this video device and yet 

the laws that we have on the books today were written when we 

had these devices for telephones. So while I can do things today we 

all take for granted, just remember, the law was written when this 

143 

device was your communications device. And so I think when we 

start this conversation, it is real important to remember that technology has changed dramatically yet the law hasn’t changed at all 

and so we have got a process today where if you have a disagreement with the law, you have to go to the FCC and maybe they rule 

your way one day, maybe they rule against you one day, but 

shouldn’t we have this open discussion. 

Traditional distributors remain subject to archaic regulations 

while new entrants operate virtually free from the heavy of government but are constantly threatened by the possible extension of 

these same obsolete rules. Since Congress created the problem decades ago, it has a responsibility to review and fix them today. 

The current unfair system forces people to turn to the FCC for 

relief and encourages new entrants to cherry-pick regulations that 

benefit their platforms. I also question the wisdom of regulating 

new startups and innovative services as traditional video providers. 

They are not recipes for encouraging the utmost innovation, investment and ultimately competition benefiting consumers. 

Modernizing this decades-old regulatory framework should instead focus on providing relief to all stakeholders by repealing the 

intertwined 1976 and 1988 compulsory copyright licenses as well as 

the 1992 cable Act. Sweeping away these government intrusions altogether will actually level the playing field for content creators 

and video distributors alike. Negotiations for broadcast content will 

then look much like it does for cable programming where compensation is paid for the issuance of traditional copyright licenses. 

It is time we recognize the dramatic transformation that has occurred in the video marketplace by getting the government out of 

negotiations that should be strictly left up to the private sector. I 

think I know somebody in this subcommittee who has actually got 

legislation to do just that. 

I am going to ask some of our panelists some questions about 

this. First, if we can just go across the board and a yes or no question. Do you believe the current video marketplace allows consumers sufficient choice over what, when, where and how they 

watch video programming? Yes or no, starting with Mr. Johnson. 

Mr. JOHNSON. Well, regarding our service, I would say no because of the lack of programming. 

Mr. SCALISE. Thank you. Just yes or no. 

Ms. SOHN. No. 

Mr. SCALISE. Mr. Hyman? 

Mr. HYMAN. Getting there, yes. 

Mr. SCALISE. Mr. Funk? 

Mr. FUNK. I agree with Mr. Hyman. 

Mr. SCALISE. Mr. Powell? 

Mr. POWELL. Make that three, yes. 

Mr. SCALISE. Mr. Barrett? 

Mr. BARRETT. Yes. 

Mr. SCALISE. Mr. Ergen? 

Mr. ERGEN. No, not yet. 

Mr. SCALISE. Mr. O’Leary? 

Mr. O’LEARY. Yes. 

Mr. SCALISE. OK. So we have got clearly a split amongst the panelists here. 

144 

Mr. Barrett, I appreciate the work that WDSU–TV, the NBC affiliate in New Orleans, does. It is one of the Hearst affiliates. Do 

you currently have the legal rights to sublicense all broadcast programming transmitted over your signals to companies like Netflix 

and Sky Angel if so desired? Who do you not qualify for compulsory 

copyright licenses? 

Mr. BARRETT. We have a limited right from our networks with 

respect to how we may transmit their signal to other distributors. 

Mr. SCALISE. So limited rights? 

Mr. BARRETT. Yes. 

Mr. SCALISE. OK. Mr. Ergen, your company is opposed to paying 

for access to content? 

Mr. ERGEN. No, we are not opposed to paying for content. 

Mr. SCALISE. Mr. Johnson? 

Mr. JOHNSON. When you say content, do you mean local programming or cable channels? 

Mr. SCALISE. Any content that you—— 

Mr. JOHNSON. Well, no. We respect and have been paying for the 

content 

Mr. SCALISE. Mr. Hyman? 

Mr. HYMAN. All we do is pay for content. 

Mr. SCALISE. Right. So this is something that already occurs. 

I want to ask Mr. Barrett, you all own a stake in A&E, the History Channel, Lifetime, other cable channels, correct? 

Mr. BARRETT. That is correct. 

Mr. SCALISE. Now, those negotiations when you are negotiating 

with different video distributors, is that a free market? Do you all 

just sit at a table? Are there any government-enforced compulsory 

copyright laws or retransmission consent agreements that have to 

happen? 

Mr. BARRETT. We negotiate on behalf of Hearst Television for the 

retransmission consent rights and are not involved in any linked 

negotiations with Heart-owned cable assets. 

Mr. SCALISE. OK. I want to ask you about some comments you 

made in your opening statement. On page 9 and 10, you made specific reference to the legislation I filed, H.R. 3675. In it, you say 

‘‘Cable and satellite providers’’—you are referring to their content. 

You said, ‘‘First, they would turn back the clock to a time when 

cable and satellite providers confiscated and resold broadcast signals to their subscribers without obtaining broadcasters’ consent.’’ 

I would first suggest to you that my legislation does not do that. 

I would hope you have read the sections that not only repeal compulsory copyright but also retransmission consent, which means we 

would revert to traditional copyright laws, and under the legislation that I filed that you referred to, a company would have to pay 

for the content that you would provide before they could distribute 

it, yet you refer to my bill and you say that providers could confiscate the content under my bill, which is a mischaracterization. 

I wonder, did you read the bill and have you re-looked at this statement? 

Mr. BARRETT. I have read the bill. If you say that this is a 

mischaracterization, I will revisit that. 

Mr. SCALISE. And on a final question, Ms. Sohn, you look at this 

industry. You have read the bill, too. Does this legislation that I 

145 

filed allow for people to confiscate content and give it away or 

would they actually have to pay for it? 

Ms. SOHN. No, of course not. I think the thing that keeps getting 

lost in this conversation is that Mr. Barrett and his colleagues get 

their transmission, meaning spectrum, for free from the public, 

OK? They get it for free from the public. In exchange, they are supposed to make that signal available for free to the public. So this 

notion that they are somehow entitled to money for their signal, 

number one, that has only been the case for the last 20 years, so 

from the advent of television broadcasting in the 1950s until 1992, 

you know, other people were, quote, unquote, confiscating their signals. But again, that signal is supposed to be free. I don’t know 

how you confiscate something—— 

Mr. SCALISE. But under my bill, if somebody retransmits it, they 

would have to actually pay and get an agreement with one of Mr. 

Barrett’s companies, pay to get the copyright license. 

Ms. SOHN. Right, and that makes more sense. That eliminates 

the middleman. 

Mr. SCALISE. So I would just ask if you could go back and look 

at the statement. 

Mr. BARRETT. I will go back and look, but let me comment. I 

think the characterization that we get this for free is a 

mischaracterization. The public trustee model has been in place 

since the 1920s and the 1930s Communication Act and it acknowledges that the limited spectrum is a limited resource. It belongs to 

the public and those most capable of serving the public interest 

should be entrusted with that license, and I think the body of 

record would show that local broadcasters in this country have 

served the public interest very well and the notion of free is baloney. 

Mr. SCALISE. Right. Well, that is referring to over the air. I was 

specifically asking about the bill that was filed and the copyright 

laws that would still be in effect if the bill were to pass, that nobody should retransmit your signal without first getting an agreement and compensation to you. All right. I appreciate it. 

Now Mr. Dingell, the gentleman from Michigan, is recognized for 

5 minutes. 

Mr. DINGELL. I thank you. I commend you for holding this hearing and welcome to our witnesses. I have a lot of questions to ask 

and too little time, so I hope you will help me by answering yes 

or no. 

This question to all witnesses, and I am going to make a statement and then I am going to ask if there is anyone that disagrees. 

We can all agree that consumers want innovative, informative and 

entertaining new content. Absent such content, new delivery methods won’t matter much to consumers. Now, is there anyone that 

disagrees with the statement that content creators should be compensated fairly for the content which itself should be protected. Is 

there anyone that disagrees with that statement? 

Very well. Now, speaking of some content, there is some consternation, I understand—this question to Mr. Ergen—about your 

latest invention’s effect on content distribution so I would like to 

explore this issue perhaps a bit more carefully. 

146 

Now, Mr. Ergen, is DISH Network currently being sued for copyright infringement and breach of contract in Federal court over its 

new hopper service? Yes or no. 

Mr. ERGEN. Yes. I would characterize it a little bit differently. 

We filed a declaratory ruling—— 

Mr. DINGELL. Thank you. 

Mr. ERGEN [continuing]. In the State of New York based on—— 

Mr. DINGELL. Now, the next—— 

Mr. ERGEN. Just let me finish, please, because I want to make 

sure the record is clear. We filed a declaratory ruling because—— 

Mr. DINGELL. Mr. Chairman, may I have order, please? 

The next question, Mr. Ergen, is it true that hopper only automatically records and provides commercial skipping for programs 

on the local four network affiliations in the market? Yes or no. 

Mr. ERGEN. No, it does not automatically record. 

Mr. DINGELL. Thank you. Now, Mr. Ergen, is this so because the 

channels are the most popular channels on your system? Yes or no. 

Mr. ERGEN. It has to do with a variety of factors. 

Mr. DINGELL. Is that yes or no? 

Mr. ERGEN. Well, it is not a yes or no answer on that one because—— 

Mr. DINGELL. I have got an election coming up like all of my colleagues here on the committee, and like every politician everywhere, and we all use political ads on local stations to reach our 

constituents, those who vote in the districts. The hopper potentially 

limits the ability of every member of this subcommittee and every 

one of our challengers to reach constituents with ads to help them 

to make up their minds on Election Day. Do you understand and 

appreciate the concern that the politicians up here on the dais and 

other politicians everywhere would feel in this matter? Yes or no. 

Mr. ERGEN. I understand consumers very well. I am not a politician so I can’t say that I understand your concerns on whether 

someone—— 

Mr. DINGELL. Very well. Thank you. 

Now, given all of this, Mr. Ergen, I hope you understand my 

skepticism when it comes to DISH’s latest offering and its effect on 

the future of video. 

Now, I would like to use the rest of my time to learn a little bit 

more about how the cable industry is adapting to new Federal communications regulations to provide its subscribers with new types 

of content and ways to do this. Now, Mr. Powell, is it true that the 

cable industry supported the commission’s Open Internet Order? 

Yes or no. 

Mr. POWELL. Ultimately, yes. 

Mr. DINGELL. Thank you. Mr. Powell, again, if you please. Help 

me remember, was use-based billing considered and allowed by the 

Open Internet Order? Yes or no. 

Mr. POWELL. Yes. 

Mr. DINGELL. Mr. Powell, were managed services also considered 

and allowed as part of the order? Yes or no. 

Mr. POWELL. Yes. 

Mr. DINGELL. Mr. Powell, I want to thank you for the way you 

are proceeding here. So are cable companies delivering products 

147 

and services as well as practicing business models that comply with 

the Open Internet Order? Yes or no. 

Mr. POWELL. Yes. 

Mr. DINGELL. Mr. Powell, in other words, cable is complying with 

the order. Is that right? 

Mr. POWELL. Yes, we believe we are. 

Mr. DINGELL. Now, Mr. Powell, one last question, and I do want 

to commend you again. The FCC just sunsetted its Viewability 

Order. I think it is very important that cable subscribers be able 

to access local content by smaller broadcasters. Now, this is the 

question. What steps will NCTA’s member companies take to ensure that their subscribers can still access local broadcast signals 

affected by the Viewability Order’s sunset? 

Mr. POWELL. Yes, we agree that it is important that they continue to receive those signals. Eighty percent of the consumers 

have already gone digital and they will not be affected. As to the 

remaining 20 percent, we have committed to low-cost boxes that 

would make that an affordable transition, similar to the boxes 

broadcasters used for the HDTV transition, and we have committed 

to providing adequate notice and a transition period that will allow 

that to happen smoothly. 

Mr. DINGELL. Thank you, Mr. Powell. 

And Mr. Chairman, to you my thanks. To the panel, thank you 

for your assistance and your candor. 

I yield back the balance of my time. 

Mr. SCALISE. The gentleman yields back. 

The gentleman from Illinois, Mr. Rush, is recognized for 5 minutes. 

Mr. RUSH. Thank you, Mr. Chairman, and I want to thank the 

witnesses also for their appearance before this subcommittee. 

I have a question for the panel regarding the legal construction 

of the MVPD definition that I will submit for the record or may get 

to ask if we go another round of questions. And if there is time remaining, Mr. Chairman, I would also like to hear some of the panelists’ views regarding the consumer privacy matters. Privacy 

needs to be addressed as so many of your business models depend 

heavily on advertising and there are other emerging models not 

represented here today that are rolling out video offerings tied to 

social media platforms. 

But first, I would like to ask for the record questions that pertain 

to the importance of more diverse ownership of broadcasting, wireless, cable and information services licenses. Mr. Barrett, while I 

agree with you that we should lament the lack of diverse ownership and control of wireless services, I would like to look more into 

something that is written into your testimony. It says that, and I 

quote, ‘‘The broadcast model permits diversity of ownership and 

control that does not exist in wireless services.’’ Did you know, Mr. 

Barrett, for example, that minorities make up more than one-third 

of the U.S. population yet only own an estimated 3 percent of fullpower commercial television stations and a little more than 7.5 percent of commercial radio stations? And I strongly suspect that minority cable system ownership numbers are not much better or 

much lower. Do these numbers suggest to you that there is sufficient diversity of ownership and offerings of diverse video content 

148 

and should we be concerned that those levels could decrease even 

further following voluntary relocation of broadcasters during the 

lead-up to incentive auctions? 

Mr. BARRETT. I think those numbers suggest that there is a sad 

limitation of the number of minorities that are involved in ownership. I think my comments and my remarks were meant to suggest 

that there are 1,700 or so TV stations across the country. There is 

an opportunity for more diverse ownership than there may be in 

a world where the national licensees and national providers of this 

content is the reality that we live with. I think the country is at 

risk in terms of less diversity and I would note that minority 

groups are very dependent on broadcast reception. Twenty-eight 

percent of Asian households, 23 percent of African American households, 26 percent of Latino households are today receiving broadcast reception over the air. 

Mr. RUSH. Thank you very much. 

Mr. Chairman, without objection, I would like to enter into the 

record a copy of a letter that was just filed with the FCC a couple 

days ago by a number of stakeholders asking the FCC to study the 

state of black radio ownership and programming diversity and to 

adopt rules that address these disparities. Even though the subject 

we are taking up today is video and not audio, these stated concerns and the state of minority ownership in the video marketplace 

is even more acute and troubling. 

Mr. SCALISE. Without objection. 

[The information follows:] 

149 


82325.096

June 25,2012 

The Honorable Julius Genachowski 

Chairman 

Federal Communications Commission 

445 Twelfth Street, SW 

Washington, DC 20554 

Dear Chaionall Genachowski: 

There has been a great deal of discussion about the stllte of black radio following the 

format change of a top-rated New York City station that had long served the market's 

black community. 

For nearly three decndes, adult urban radio stations WBLS (107.5) and WRKS (98.7, 

KISS-FM) were fierce competitors, battling for listeners in out' nation's largest media 

market. But that Iivalry ended when Disney took over programming for 98.7 FM several 

weeks ago and immediately challged the station's format to SPOIts talk. 

This abmpt format change shocked New York City'S African AmeIican community and 

its larger urban radio audience. The Illost populous city in the country is now left with 

just one urban adult conlemporaty statioll. And two of the nation's most popular African 

American radio talk show progmms, the Tom Joyner MOJ'fling Show and the Michael 

Baisden Show, will no longer be broadcast in the New York City market due to the 

departure ofKISS-FM. J 

While KISS·PM listeners lament the suddellioss of a popular station, we believe what 

happened in New York City speaks to a much larger crisis plaguing black radio and the 

radio industry. 

We call on the FCC to Shldy the state of black radio. ownership and programming 

diversity, and to adopt 11I1es that finally address our nation's media inequality. 

Like the rest of the radio industry, black fIldio has been devastated by media. 

consolidation. The passage of the 1996 Telecommunicallons Act lifted the bEmon the 

number of stations a company could own natiollwide, allowing a fev;' large companies to 

control the radio landscape. Com])anies like Clear Channel went from owning 40 stations 

to as many as 1,200 ill just a few years. The number ofindepcndent radio station owners 

declined by 39 percent in the decade following the passage ofthe Telecommunications 

Act? . 

Greater consolidation in the radio industry created large radio conglomerates that are less 

responsive to the information and entertainment needs of the communities they serve. 

And perhaps no other comll1unity has been as negatively impacted by this growing media 

inequality as the African American community. 

1 
150 


82325.097

Many black radio stations have historically provided the community with a voice in the 

fight for greater equality. African American DJs not only provided the community with 

the latest news and infomlatioll, but they played records by local black artists that served 

as the soundtrack for African American empowerment. 

But today, with few exceptions, local radio has abandoned selving the needs of these 

communities - and at a time when many of them face enormous 

suffering. Unemployment among African Americans has often reached a figuretwiee as 

high as the national average. As of2007, African Americans were six times more likely 

to be in prison than whites. And as of 201 0, the median family income earned by black 

and Latino families was 57 cents to every dollar earned by a white family.3 

These social and economic disparities are one major reason that the African American 

community depends on local black radio stations now more than ever for news and 

entertainment. 

But media consolidation has made it harder for people of color to own radio outlets. 

African Americans own just 3 percent of all full-power cOllllllercial radio stnH'ons. And 

Illllny urban radio stations that purport to serve black audiences air little local 

programming and llfe seldom responsive to the needs of their communities. Indeed, the 

advocacy group Industry Ears has often raised concerns about the llmount of syndicated 

music programming targeting adult African Americans. 

Media corporations have a long history ofprofiHng off the suffering of African 

Americans, starting with the use of offensive stereotypes in radio programs like Amos 'n 

Andy dUling the early years of commercial radio. This shameful tradition continues. 

Today many radio stations play music that too often denigrates AfriCAn Americans. It is 

rare to hear records from independent black artists or musicians who use their music to 

uplift and infonn. 

As Industry Ears has long stated, the public remains largely unaware that major record 

labels and radio corporations too often control what music is played on local stations. We 

are concerned that payola could remain a major issue throughout the industry, including 

in black radio, despite an FCC payola investigation a few years ago. 

Media inequality persists as a result of govern men! policy that places control of media 

and the public airwaves ill the hands of corporations that prioritize profit over their 

responsibility to serve the public interest. 

This histOlY of inequality began with the government distributing our cOl1lltry's first 

commercial radio licenses almost exclusively to white males. This free, governmentgranted, exclusive use oflhe public airwaves enabled those early licensees to amass 

wealth and control practically all of our nation's media otltlets, leaying people of color 

with few broadcast ownership opportunities and virtually no say over how they are 

depicted in the media. 

2 
151 


82325.098

The FCC mus! take proactive steps to expand ownership OPPOliUni1ies for people of color 

and other marginalized communities, and must examine fully the impact on diversity of 

any media ownership rule changes the FCC proposes. 

We also calion the FCC to adopt nJles ensuritlg that local broadcasters are held 

accountable to the communities they are licensed to serve. Such changes could include 

shortening the length of a broadcast license, a position that former FCC Commissioner 

Michael Copps often advocated. 

Finally, we call on the FCC to do a thorough study of the state of black radio that 

examines who owns urbal1-fonnatted radio stations. This should OCCllr as part of a muchneeded effort to compile tmstworthy data on broadcast ownership and the identity of 

broadcast license holders. And we also call on the FCC to investigate whether payola 

continues to playa major role in determining what airs on these outlets. 

Sincerely, 

Paul POIter, co-founder, Industry Ears 

Joseph Torres, senior external affairs director, Free Press 

Rashad Robinson, executive director, ColorofChangc.org 

Steven Renderos, national organizer, Center for Media Justice 

Brandy Doyle, policy director, Prometheus Radio Project 

Maxie C. Jackson III, president, National Federation of Community Broadcasters 

Casey Rae, deputy director, Future of Music Coalition 

Paul Billings, genera! manager, WINS ,Muskegon LPFM 

Dr. Jared Ball, associate professor, Communication Studies, Morgan State University 

Dave 'Davey D' Cook, San Francisco State and Pacifica Radio 

Todd Steven Burroughs, Ph.D., author, journalist and lecturer, Communication Studies, 

Morgan State University 

cc: Commissioners Robert McDowell, Mignon Clyburn, Jessica Rosenworccl, Ajit Pai 

1 Richard Prince, Civic-Minded Jocks Out CIS KlSS Folds fnto WBL5; Maynard Institute for Journalism 

Education, April 30, 2012. 

2 George Williams, "Review of the Radio Industry, 2007," Federal Communications Commis$ioll, August 

2007. 

3 Tim Sullivun, Wonjiku Mwongi, Brion Miller, Dedrick Muhammad, Colin HOITis, Siale oJthe Dream 

2012: The fllllergillgMajol'lIy, United for A PnirEconomy, Jmnmry 12,2012. 

3 
152 

Mr. RUSH. This is a question I have for both Mr. Barrett and Mr. 

Powell around the issue of tax certificates. 

In the past, Mr. Barrett, the association you are representing 

here today, the NAB, has strongly endorsed passage of legislation 

to establish a new communications tax certificate program. Is that 

still the NAB’s position? 

Mr. BARRETT. Yes, it is. The NAB would continue to support such 

a legislative initiative. 

Mr. RUSH. And Mr. Powell, the association that you are representing here today, the NCTA, also previously endorsed passage 

of legislation for a new communications tax certificate program. Is 

that still the NCTA’s position? 

Mr. POWELL. Yes, Mr. Rush. In 2003, when Senator McCain introduced tax certificate, as chairman of the FCC, I was an enormous proponent and remain so. 

Mr. RUSH. Thank you very much. 

Mr. Chairman, without objection, I would like to enter into the 

record the FCC’s Section 257 report recommending that Congress 

reinstate a tax certificate policy. I will point out that the statement 

of former FCC Commissioner Michael J. Copps accompanying that 

order as being the source for the minority ownership percentages 

that I cited earlier. 

And with that, Mr. Chairman, I yield back the balance of my 

time. 

Mr. SCALISE. The gentleman yields, and there is no objection to 

the gentleman’s unanimous-consent motion, so that will be entered. 

[The information is available at http://www.fcc.gov/document/section-257-triennial-report-congress-identifying-and-eliminating-market-entry-barriers-ent.] 

Mr. SCALISE. Now the gentleman from Massachusetts, Mr. Markey. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

Ms. Sohn, could you tell me what you believe the effect will be 

of the proposed deal between Verizon and spectrum companies on 

the telecommunications marketplace? 

Ms. SOHN. So the Verizon/spectrum co. deal will have several 

negative effects both for competition and consumers. One is, because there are these side agreements—OK, there is a spectrum 

sale and there is affiliated side agreements. Two of the side agreements, one is a marketing agreement, one is a reselling agreement, 

basically is an agreement between the cable companies and Verizon 

to lay down arms and no longer compete in the video or wireless 

marketplace. So Verizon and AT&T will get the wireless marketplace to themselves and the cable industry will get the wireline industry to themselves. 

But even worse than that, there is something called the Joint 

Operating Entity, or the JOE, and that is essentially an agreement 

between those five cable companies and Verizon to develop patents 

and technologies that would help to stream a video from wireless 

to wireline systems, and that has an enormous capability to be 

anticompetitive and used against, for example, Mr. Ergen’s company. If he wants to use that technology, he would probably be 

charged, you know, very, very high licensing fees or he might be 

153 

told I am sorry, you are not part of the club, you are not part of 

the cartel, you can’t have this technology. 

Mr. MARKEY. Now, Mr. Ergen, are you afraid of that, that you 

might not be part of the club? I guess what Ms. Sohn is saying is 

that there is going to be cozy cooperation here that exists and you 

just might get walled out. Do you agree that that is a possibility? 

Mr. ERGEN. Well, unfortunately, we have not seen the 

unredacted comments so I can’t say specifically what they say, but 

we would certainly have a concern where two vicious competitors 

might get together to, A, not compete with each other, and B, exclude other people from competing with them. 

Mr. MARKEY. Yes. That has always been the beauty of the 1992 

and 1996 Telecom Act is that it created, you know, the conditions 

for Darwinian paranoia inducing competition, which, you know, ultimately results in innovation and more benefits for consumers. 

And so you always have to be wary, especially when people start 

talking about rewriting the 1992 and 1996 Telecommunications 

Act, that somehow or other there is too much competition or too 

many players that out there, and maybe some of the smaller players don’t need protection. 

So let me go to you, Mr. Powell. You just heard the two comments made by Ms. Sohn and Mr. Ergen. How would you comment? 

Mr. POWELL. I will be limiting my comments, because as the 

head of the association, I am not really a party to the transaction 

and don’t have the specifics, but the companies would in terms of 

their conversation. I would say that all deals like this deserve vigilance and that is why we have an antitrust process, and I think 

that we should rely on the confidence and the able skills of both 

the Federal Communications Commission, the Antitrust Division, 

to rigorously scrutinize the transaction for those purposes and to 

reach a conclusion in the public interest. 

I don’t believe that it is intuitively clear that it is a capitulation, 

there wouldn’t be continued competition among these companies, 

but I think that is why we have an antitrust process and I have 

a lot of faith in it. 

Mr. MARKEY. Let me ask you, Mr. Barrett, and you, Mr. O’Leary. 

July 1st is the deadline for the completion of kind of the rulemaking and the implementation of the provisions which I built into 

a 2010 law for video accessibility. Could you give us an update as 

to where your two industries are in terms of complying with that? 

Mr. BARRETT. Speaking on behalf of Hearst Television, we are 

well in hand. Our implementation will be fully complete, and I am 

very pleased with how that has proceeded, and I think on behalf 

of the NAB member stations, the same thing can be said. 

Mr. MARKEY. Mr. O’Leary? 

Mr. O’LEARY. Congressman Markey, I would say effectively the 

same thing in response to your question. 

Mr. MARKEY. And what was that? 

Mr. O’LEARY. That we are working towards compliance and I am 

also pleased with the way the process has gone. 

Mr. MARKEY. I mean, it is so important that the deaf and the 

blind do have access in the 21st century, that they are able to use 

all their God-given abilities to fully participate, and so it is very, 

154 

very important that we get the full cooperation, and we thank you 

for your positive comments about the process. 

I thank you, Mr. Chairman, and I yield back the balance of my 

time. 

Mr. WALDEN. The gentleman yields back the balance of his time. 

I believe that is the last member of subcommittee with time, so 

I want to thank all of the participants today. As you probably 

heard from some of our colleagues, they may have other questions 

that they would submit for the record, that if you can be responsive 

in your answers, it would really help us in our work. Your presence 

today certainly does that. These are consequential issues we are 

discussing at a policy level, and your input is really helpful in our 

process. So I thank you for participating, and with that, the hearing is adjourned. 

[Whereupon, at 12:40 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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Public 

The Honorable Greg Walden 

Chairman 

August 28,2012 

Subcommittee on Communications and Technology 

U.S. House of Representatives 

2125 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Walden, 

Thank you for the opportunity to testify before the Subcommittee on Communications 

and Technology hearing on "The Future ofYideo" held on June 27, 2012. 

As requested, 1 have attached my response to your additional questions for the record. 

look forward working with you and the members of the Subcommittee to protect consumer 

choice in this area of rapid innovation. 

If I can be of any further assistance please do not hesitate to contact me. 

Sincerely, 

Gigi B. Sohn 

President and CEO 

Public Knowledgc 

Cc; The Honorable Anna Eshoo, Ranking Member, 

Subcommittee on Communications and Technology 

1818 N St., NW 

Suite 410 

Washington, DC 20036 

( 

T 202.861.0020 

F 202.861.00 I 0 

publicknowledge.org 
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82325.100

Public 

Rep. Henry Waxman - Question for the Record 

Subcommittee on Communications and Technology 

Hearing: The Future of Video 

July 27, 2012 

Q: Many witnesses at the hearing discussed the increased availability of on-demand access 

to a variety of video content through Internet-connected devices and services. How do you 

view authenticated online video services like "TV Everywhere" and the impact these 

business practices have on consumer choice? 

A: As Adam Smith wrote in The Wealth of Nations, "People of the same trade seldom meet 

together, even for merriment and diversion, but the conversation ends in a conspiracy against the 

public." Thus it's no surprise TV Everywhere, the result ofa collaboration between large cable 

and content companies, is not good for consumers, competition, or innovation. 

Authenticated services do little to promote consumer choice, since--by definition--they require 

that you have a cable or other MVPD subscription to use them. Thus, they do nothing to 

promote competition, drive down prices, or change the marketplace dynamics that keep video 

programming out of the hands of innovators. They further perpetuate a "windowing" model that 

creates artificial distinctions between distribution platforms, which hanns independent 

programmers (who are strong-armed into windowing their content) and encourages piracy. 

Authenticated services such as TV Everywhere perpetuate a geography-based model for content 

distribution that has no place in the online world. Broadcasters and cable systems have limited 

geographic scope for physical and practical reasons, and a number of legal and business practices 

developed around this reality. There are no such physical geographic restrictions for online 

delivery of content, and it bodes ill for the future development of online video distribution if 

obsolete geographic distinctions continue to be made online. 

Finally, authenticated services such as TV Everywhere raise net neutrality concerns. Broadband 

ISPs who arc also MVPDs have an incentive to discriminate in favor of TV Everywhere traffic--

for instance, by exempting such video content from bandwidth caps. If TV Everywhere video 

content is not subject to bandwidth caps or metering, but competing services (like Vimeo or 

Netflix) are subject to caps and metering, then customers will gravitate to TV Everywhere 

content or other authenticated systems even if they arc less compelling than the competition. 

TV Everywhere could become a much more consumer and competition-friendly video platform 

with three simple fixes. First, TV Everywhere should not be tied to an MVPD subscription. 

Consumers who want an online-only option should have that choice. Second, providers should 

be free to sell TV Everywhere subscriptions on a nationwide basis. Different MVPDs should 

compete with each other to otTer the best TV Everywhere experience, and should not divide up 

the country hetween themselves. Third, no online video service, authenticated or otherwise, 

should receive preferential treatment with regard to data caps or metering. 
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82325.101

DAVID HYMAN 

GENERAL COUNSEL OF 

NETFLlX, INC. 

BEFORE A HEARING OF 

THE ENERGY AND COMMERCE COMMITTEE 

SUBCOMMTlTEE ON COMMUNICATIONS AND TECHNOLOGY 

UNITED STATES HOUSE OF REPRESENATATIVES 

ON 

THE FUTURE OF VIDEO 

Wednesday, June 27, 2012 

RESPONSE TO (FURTHER) QUESTION FOR THE RECORD 

The Honorable Doris Matsui: 

The transition of linear video programming to a world of anywhere, anytime, any 

screen video seems to be the future. Soon nearly half of all TVs sold will be smart 

TVs with an Internet connection and accessing a variety of video applications. Like 

audio, video consumption between PCs, mobile devices and TVs is also converging. 

With so many different business models and technologies coming to the Internet, 

how can we ensure, between broadband providers and companies like NetfJix, that 

there is meaningful competition, continued innovation and consumer choice? 

Netflix 

David Hyman, General Counsel, Response: 

The transition of linear programming to a world of anywhere, anytime, any screen 

viewing is indeed happening. What's more, Internet applications that increase 

consumer demand for broadband are also spurring a wave of innovation in the 

consumer electronics industry with virtually all new devices -including televisions -

connecting to the Internet. These devices and the applications they enable, are in 

turn, causing increased demand for broadband Internet access services provided by 

the cable and tel co industries. 

User interfaces, or Uls, through which consumers discover and enjoy content are 

also evolving rapidly. For example, the typical linear-channel selection grid that 

uses an up-down/left-right remote to access content will likely be replaced by 
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intuitive and visually stimulating UIs that use motion, touch, and voice as means of 

control. The ease with which the Internet can mix media - combining written, audio 

and visual together-is creating new and exciting ways to tell stories and convey 

information. With an open Internet, the ways of finding and presenting content will 

evolve in astounding ways if policymakers adopt the right measures designed to 

maximize choice. 

As more services like Netflix offer consumers great movies and TV programs in an 

easy-to-use, timely manner and at a low cost, it lessens many of the motivations for 

using the Internet to access content illegally. In this way, we have become a key 

partner with content providers in reducing piracy while at the same time adding 

new revenue sources. 

All of this represents a lot of change, and has led to speculation about the demise of 

traditional media distribution platforms and networks. But it is our belief that many 

of these platforms and networks will also adapt to today's shifting media landscape, 

For example, in the video delivery world we see the beginnings of this shift through 

various authenticated Internet video offerings, Commonly referred to in the U.s, as 

"TV Everywhere," these offerings provide cable subscribers on-demand access to a 

variety of content through Internet-connected devices like the iPad and Xbox, In 

this way, cable subscribers are afforded many of the benefits of Internet video 

within the bundled offering of their cable service, 

Implementations like TV Everywhere will grow in popularity and consumers will 

increasingly view traditional cable networks on devices connected to the Internet. 

At Netflix, especially as we focus on streaming and begin to offer original content, 

we are often asked if we are not becoming more like a traditional pay-TV operators, 

The fact, however, is that these networks are becoming more like Netflix. 

As traditional media platforms and networks move to distribute their programming 

in an on-demand fashion over the Internet, they are beginning to compete more 

directly with pure-play or "over-the-top" Internet media providers such as 

ourselves. As this trend continues, the openness of the Internet may be challenged. 

In particular, issues such as the discriminatory application of data usage caps and IP 

interconnection must be examined with a much more discerning eye, 

When you couple limited broadband competition with a strong desire to protect a 

legacy media distribution business, you have both the means and motivation to 

engage in discriminatory behavior. Add to this mix a regulatory and legislative 

framework largely crafted before the modern Internet era and you have the makings 

for confusion and gamesmanship that can be a challenge to maintaining an open 

Internet. 

There, one of the largest cable television and ISP services exempted its own 

proprietary Internet video offering from Internet data caps that otherwise applied 

to non-affiliated video traffic over its network. That is to say, the exact same movie 
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traversing this ISP's network is treated in a discriminatory manner based on who 

provides the content. 

When a corporation can exercise this kind of discriminatory control over the 

network, it challenges the openness of the Internet and threatens to stifle 

innovation. More importantly, it serves as a wake-up call that the historically open 

nature of the Internet is not guaranteed. Without certain safeguards or rules of the 

road to help preserve Internet openness, incentives can easily skew in favor of a 

highly fractured Internet with tollbooths and hurdles stifling innovation. 

Maintaining openness policy and ensuring the Federal Communications 

Commission, Federal Trade Commission and Department ofJustice have all the 

authority they need to protect innovation on the Internet is a central responsibility 

of the Congress. We look forward to working with you and your colleagues to 

realize the potential of an open Internet that maximizes choices for consumers. 
160 


82325.104

Subcommittee on Communications and Technology 

House Committee on Energy and Commerce 

"The Future of Video" - June 27, 2012 

Responses of Michael K. Powell, National Cable & Telecommunications Association 

To Additional Questions for the Record 

The Honorable Greg Walden 

1. DirecTV, the second largest pay-TV provider, is allowed to have a nationwide 

exclusive deal for the NFL Sunday Ticket but some cable operators are restricted 

from having their own exclusive deals. Does this make sense? Can't exclusive 

arrangements promote competition by enabling a pay-TV provider to differentiate 

itself and attract subscribers? And doesn't that force other pay-TV providers to 

differentiate themselves or lower rates in response to retain customers? 

lt makes no sense to prohibit cable operators from entering into exclusive programming 

contracts while allowing their DBS competitors to use such exclusivity as a means of 

differentiating their product and attracting customers. The existing restriction, which 

prohibits program networks in which a cable operator has an ownership interest from 

entering into an exclusive contract with any cable operator - a remnant of the 1992 Cable 

Act - was aimed at a perceived threat from marketplace circumstances that no longer 

exist. In 1992, cable operators faced little competition from other multichannel video 

programming distributors ("MVPDs"'). DBS was about to be launched, and Congress 

was concerned that cable operators - who, at the time, owned a significant percentage of 

the most popular cable networks being carried by cable systems - would, by refusing to 

make a critical mass of programming available to DBS, quash any prospect of 

competition before it could ever take hold. 

'fwenty years later, competition in the MVPD marketplace is flourishing and is here to 

stay. The two national DBS services - DIRECTV and DISH - are the second and third 

largest MVPDs in terms of customers nationwide, and competition from DBS and 

telephone company MVPDs like Verizon and AT&T has eroded cable's share ofMVPD 

customers to less than 58%. Moreover, the percentage of cable program networks in 

which cable operators have an ownership interest has sharply declined in the last two 

decades from approximately 53% to only 14%. In this environment, there is no longer 

any reasonable prospect that cable operators could use exclusivity to eliminate or cripple 

competition among video distributors. To the contrary, it is disparate treatment of DBS 

and cable allowing one but not the other to use exclusivity to attract customers - that 

threatens to unfairly distort and hamper such competition. Competition and consumers 

would benefit from a level playing field based on today's reality, not that of twenty years 

ago. 

2. Doesn't the current regulatory regime discourage diversity of content? Why would 

a distributor risk investing in new content if it is entitled under law to the most 

popular content of the day? And why would someone invcst in new content if all the 

shelf space is taken up because distributors availed themselves of that right or 
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because other programmers uscd regulations to muscle their way onto the 

platforms? 

There's little doubt that the regulatory environment impacts the willingness of entities to 

create new and diverse content. The two factors that led to the adoption of the program 

access and program carriage rules twenty years ago no longer exist today there is no 

cable television monopoly and vertical integration has dropped from 53% in 1992 to less 

than 14%. Competition among MVPDs is flourishing as noted above, with strong, 

established competitors in the marketplace. All of those competitors are attempting to 

gain a competitive advantage through product differentiation, including the development 

and acquisition of unique and attractive programming. But unlike its other MVPD 

competitors, when a cable operator considers investing in new programming it must 

weigh the fact that it will bear the sole risk of an unsuccessful venture while being forced 

to share the successful ones with its competitors. The program carriage rules also 

promote program "sameness" by giving non-affiliated programmers the right to demand 

carriage if their programming is similarly situated to programming affiliated with the 

MVPD. In a competitive market, cable operators should not be hamstrung by outdated 

regulations that ultimately harm their ability to select and package programming that 

meets the demands and interests of their subscribers. 

3. Ms. Sohn's testimony suggests that viewers today lack choice of provider and choice 

of content. Do you agree? Don't viewers have more sources of distribution and 

more sources of programming than ever hefore, not just from traditional players, 

but from the Internet? Isn't the problem not a lack of choice, but that the business 

models are still being ironed out amidst the constructive and creative chaos of it all? 

I disagree that today viewers lack choices in content or among providers. Today's video 

experience has never becn better. Much has changed since the days of three broadcast 

networks. There is more diverse and higher quality content available from more sources 

and distributors than ever before. Today there are over 900 channels ranging from those 

offering scripted dramas, educational content, kids programming, sports, cooking shows 

to news and public affairs shows. Plus, there is an abundance of non-linear video 

programming available on the Internet. 

The number of sources consumers may turn to has also grown exponentially as different 

providers compete. A consllmer may subscribe to cable, D1RECTV or DISH, or, in many 

markets, choose service from a telephone company as AT&T U-verse and Verizon FiOS 

have become popular new sources of video. As noted in response to your first question, 

the two national DBS services DIRECTV and DISH are the second and third largest 

MVPDs in terms of customers nationwide, and competition from DBS and telephone 

companies has eroded cable's share of the MVPD customers to less than 58%. 

MVPD competition is flourishing, but today the video market is comprised of much more 

than the MVPD market. The largest subscription video provider in the country is Netllix 

not a cable operator, DBS provider, or telephone company. A consumer can buy DVDs 

at Best Buy or rent them from one of the 30,000 plus Redbox kiosks. Finally, companies 

2 
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that stream conlent on the Internet arc proliferating; Netflix, Vudu, Huiti, Amazon, 

iTunes, CincmaNow, Network websites, HAOGo, and user-generated or special interest 

sites like YouTube, Vimeo, and TED,com are a few. Many more offerings are 

anticipated from the likes of Google, Apple, Intel, and Sony. Web video is not limited to 

the PC screen. Computers can connect to big screen televisions, and box companies like 

Roku, Tivo, and Boxee can deliver web video to the TV screen. There are web-enabled 

TV s, game consoles, smartphones and iPads - all giving consumers more choices on how 

and where they watch video. 

Lack of choice is not the problem, but admittedly, we are in a chaotic period of 

experimentation as consumers sample different content and experiment with how they 

view that content. and as content owners and distributors perfect business models based 

on consumer choices. 

4. Ms. Sohn's testimony describes "authentication" as anticompetitive. Would you 

care to respond'! 

It is exactly the opposite. Without "authentication" and the TV Everywhere concept, 

consumers would have access to less online content. TV Everywhere is just one of 

several concepts, based on different technologies and business models, being developed 

fO!' the online video marketplace. It provides a new service at no extra charge through 

authentication to consumers who subscribe to a multichannel video programming service 

- whether provided by cable, satellite or telephone companies - giving consumers the 

ability to watch TV programs on PCs or laptops, and potentially other Internet-connected 

devices. It could significantly increase the amount of high-value video content available 

online - something the FCC has said would help drive broadband adoption. Indeed, 

without authentication, it's quite possible that alleast some of this content would not be 

made available online at all. 

The TV Everywhere concept involves a multitude of competing program networks, most 

of which distribute their content on competing cable, satellite, telephone and online 

platforms. Distributors do not have the ability to unilaterally decide how content is 

distributed. Content owners, through individual business arrangements with a growing 

array of distributors, have the freedom to decide how to distribute their content These 

programmers invest tens of billions of dollars a year to produce high quality content; they 

have the right to experiment with different business models and determine how to recoup 

that investment in terms of distributing their content on different platforms. 

As an individual contcnt owner determines how to offer its product in a manner that 

brings value to the consumer in an economically sOllnd manner, some choose to distribute 

video online without requiring a cable subscription. Others believe the most economical 

approach is to expand the value of online distribution to their existing MVPD subscribers. 

For programmers choosing the latter approach, cable operators have partnered with the 

programmers in deploying TV Everywhere type-models. No single content owner or 

distributor is controlling this process or could do so. 

3 
163 


82325.107

The fact that market participants are experimenting with models in addition to fee or 

advertiser-supported models is not a sign of anti-competitive conduct. It is a sign of a 

dynamic and rapidly-changing market in which no one knows the ultimate outcome. 

Some may prefer one video distribution model over another. But that is for the 

marketplace - and content owners exercising their rights to distribute their content in the 

manner they choose to sort out. A model that would give consumers the option to get 

more value - by access to online content - as part of the TV subscription they already 

pay for is something that consumers should have the right to embrace or reject. 

Nothing about TV Everywhere or other similar cable industry initiatives limits the ability 

of cable Internet customers to go to the Internet directly for video programming. To the 

contrary, cable operators will continue to invest in and develop innovative technologies 

that enhance the capability of the cable broadband network to meet subscribers' varied 

demands for access to video over the Internet. 

There are nearly countless sources of online video that don't require MVPD 

subscribership. New means of watching video - from sUbscription services to iTunes' a 

fa carle approach - emerge constantly. 

5. Ms. Sohn's testimony suggests that online video providers should be allowed to 

voluntarily elect to be treated as an MVPD, Why would this be voluntary if cable 

and satellite operators are not given such an option, even though they too get both 

benefits and responsibilities from such treatment'? 

MVPD is a statutory definition. An entity either falls within the definition or it doesn't. 

Entities that don't qualify as MVPDs do not have the option to "voluntarily" elect that 

treatment. But as with all regulatory questions, there should be regulatory parity - a new 

provider should no! be entitled to enjoy the benefits without the responsibilities. 

6. The broadcasters seem to bc arguing that they should have absolute freedom to 

negotiate the terms of retransmission consent dcals as a pure market transaction. 

Under that theory, shouldn't pay-TV providers also be relieved of regulatory 

obligations like the must-carry rules, the basic tier requirement, and the buythrough requirement and allowed to negotiate pure market-based transactions? 

Broadcasters should be paid the fair market value for their content. However, the current 

market is not an environment where all terms are freely negotiated. Government 

mandates dictate many critical conditions for carriage that only one class of programmer 

enjoys - giving broadcasters advantages not available to other classes of programmers. 

Any disclission of a pure market transaction must include the future of decades-old rules 

like must carry, the basic tier placement guarantee, the buy-through, the non-duplication 

rights, and other rules that favor broadcast content. 

7. Do you think it is contradictory for pay-TV providers to argue for government 

intervention in retransmission consent negotiations with broadcasters but oppose it 

4 
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82325.108

when networks like the Tennis Channel, the NFL Network, the Big Ten Network, 

Wealth TV seek to force their way onto their platforms on more favorable terms? 

Not at all. Retransmission consent is a government creation and the government is 

already heavily involved in the relationship between broadcasters and pay-TV providers. 

By contrast, program carriage is an anomaly in the otherwise market-based negotiations 

between cable programmers and pay-TV providers. 

The Honorable Anna Eshoo 

1. Recently, we've seen MVPDs embrace new technologies like video game consoles, 

tablets and smartphones as a means of providing their customers with access to live, 

or on-demand programming. What are the roadblocks for widespread adoption of 

these new video distribution technologies? 

As you have pointed out, we are in a time of technological change. Consistent with the 

introduction of any new technology, there are copyright matters that must be addressed 

and resolved in order to ensure that content owners are fairly compensated. It is also a 

time when new business models must be considered taking into account a complex set of 

first-time issues involving multiple stakeholders. There may also be issues of 

technological compatibility that must be addressed, so that the content is formatted in a 

fashion that will display on a given device or platform. Finally, as I noted in my 

testimony, the "network of networks" that comprise the Internet does not yet offer the 

throughput and reliability to deliver video programming with the consistency of a plant 

that is specifically built to deliver cable and satellite television services. While that 

circumstance will change, it will require investment and innovation. Clearly, however, 

the growing availability of live and on-demand programming online is clear evidence that 

these matters can and arc being worked out without the need for government 

involvement. 

2. Last December, the FCC adopted final rules implementing the CALM Act and they 

will go into effect on December 13,2012. Which of your members have 

implemented the ATSC A/85 Recommended Practices, as stated in the FCC's final 

rules? What steps are they taking to ensure compliance by year's end? 

NCTA's member companies arc in the process of implementing the FCC's CALM Act 

requirements, and we expect our members to be in compliance with the A TSC A/85 

Recommended Practice by - if not before -- the December 13,2012 deadline. Cable 

operators are ordering and deploying necessary test equipment and are taking steps to 

ensure that the advertisements they insert locally comply with the Recommended 

Practice. Cable programmers are implementing the required processes for ensuring 

compliance for network advertisements they include in their programming. 

NCT A and its member companies are also taking steps to ensure that implementation 

proceeds smoothly. NCTA has distributed information to its membership about the rules; 

has held a seminar and webinar to explain the rules; is participating in technical 

5 
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82325.109

discussions to develop common testing protocols; and continues to proactively work with 

the companies to ensure compliance with the rules by the December deadline. 

The Honorable Henry Waxman 

1. Some popular programming is only available online for existing cable subscribers, 

which has led some consumers to ask how they get standalone online access to this 

content (See e.g., http://takemymoncvhbo.com). How would you respond to 

consumers that want to be able to access popular programming online through 

services like HBOGo without subscribing to a cable package? 

Content owners, through individual business arrangements with a growing array of 

distributors, have the freedom to decide how to distribute their content. These 

programmers invest tens of billions of dollars a year to produce high quality content; they 

have the right to experiment with different business models and determine how to recoup 

that investment in terms of distributing their content on different platforms. 

As an individual content owner determines how to offer its product in a manner that 

brings value to the consumer in an economically sound manner, some choose to distribute 

video online without requiring a cable subscription. Others believe the most economical 

approach is to expand the value of online distribution to their existing MVPD subscribers. 

For programmers choosing the latter approach, cable operators have partnered with the 

programmers in deploying TV Everywhere type-models. The TV Everywhere concept 

involves a multitude of competing program networks, most of which distribute their 

content on competing cable, satellite, telephone and online platforms. Distributors do not 

have the ability to unilaterally decide how content is distributed. No single content 

owner or distributor is controlling this process or could do so. 

Without "authentication" and the TV Everywhere concept, consumers would have access 

to less online content. TV Everywhere is just one of several concepts, based on different 

technologies and business models, being developed for the online video marketplace. It 

provides a new service at no extra charge through authentication to consumers who 

subscribe to a multichannel video programming service - whether provided by cable, 

satellite or telephone companies - giving consumers the ability to watch TV programs on 

PCs or laptops, and potentially other Internet-connected devices. It could significantly 

increase the amount of high-value video content available online something the FCC 

has said would help drive broadband adoption. Indeed, without authentication, it's quite 

possible that at least some of this content would not be made available online at all. 

Nothing about TV Everywhere or other similar cable industry initiatives limits the ability 

of cable Internet customers to go to the Internet directly for video programming. To the 

contrary, cable operators will continue to invest in and develop innovative technologies 

that enhance the capability of the cable broadband network to meet subscribers' varied 

demands for access to video over the Internet. 

6 
166 


82325.110

There are nearly countless sources of online video that don't require MVPD 

subscribership. New means of watching video - from subscription services to iTunes' a 

fa carle approach - emerge constantly. 

The fact that market participants are experimenting with models in addition to fee or 

advertiser-supported models is not a sign of anti-competitive conduct. It is a sign of a 

dynamic and rapidly-changing market in which no one knows the ultimate outcome. 

Some may prefer one video distribution model over another. But that is for the 

marketplace - and content owners exercising their rights to distribute their content in the 

manner they choose - to sort out. A model that would give consumers the option to get 

more value by access to online content as part of the TV subscription they already 

pay for is something that consumers should have the right to embrace or reject. 

2. Some of your member companies are experimenting with usage-based billing or 

data caps. Several witnesses at the hearing expressed concern about the effect these 

practices could have on online video services if used in a discriminatory manuer. 

a. Please explain the rationale behind usage-based billing practices. 

The cable industry continues to explore more efficient and consumer-friendly business 

models. On the video side, some operators are experimenting with smaller, more targeted 

bundles; and on the on the broadband side. operators arc exploring usage-based business 

models. The development of tic red pricing models simply reflects industry's efforts to 

price service fairly for consumers as demand rises, a concept widely endorsed by the 

FCC, the FTC Chairman and even consumer groups. Paying more for using more is a 

fair and common form of pricing in our economy. A consumcr who runs his air 

conditioning around-the-clock receives a higher electric bill than a neighbor who opens 

her windows instead. What applies to utilities, food, gasoline, and just about every other 

product or service we consume, can be applied to broadband as well. According to a 

recent Sandvine study, one percent of broadband users account for about 42% of 

upstream traffic and 15% of downstream traffic. Under an all-you-can-eat model, this 

I % pays nOl11ore for their massive bandwidth consllmption than the remaining 99%. In 

comparison, the lightest 60% of lIsers account for only 10% oftolal traffic. 

Bandwidth is not free nor is it unlimited. Like all resources. bandwidth on local access 

networks is finite. Cable operators and other ISPs continually invest in new capacity to 

accommodate skyrocketing consumer demand. Since 1992, the cablc industry has 

invested nearly $200 billion in its networks and other infrastructure and increased speeds 

900 percent. But as more bandwidth hungry applications eat lip capacity, ISPs need to 

prol11ote more efficient use of the network in a manner that is effective and fair to all 

subscribers. 

b. Should llsers be subject to data caps if they are consuming bandwidth at offpeak times when others aren't makiug great demands on the network? 

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Cable broadband operators are experimenting with broadband pricing models ranging 

from flat rates to tiers and everything in-between. Data caps without recourse are not a 

standard industry practice. Tiered pricing is the more common way industry is seeking to 

match demand and price. When used, data caps, I ike tiered pricing, are simply another 

way of ensuring that pricing reflects overall usage. Higher level tiers of service have 

higher caps. As noted above, matching price with usage is a concept widely endorsed by 

the fCC, the FTC Chairman and even consumer groups. Obtaining a level of service 

commensurate with what you pay is a fair and common form of pricing in our economy. 

The Honorable Doris Matsui 

1. The transition from linear video programming to a world of anywhere anytime any 

screen video seems to be the future. Soon nearly half of all TVs sold will be smart 

TVs with an Internet connection and accessing a variety of video applications. Like 

audio, video consumption between pes, mobile devices and TVs is also converging. 

With so many different business models and technologies coming to the Internet, 

how can we ensure, between broadband providers and companies, like Netflix, that 

there is meaningful competition, continued innovation and consumer choice? 

The cable industry believes that the future is bright, but it requires a business and 

regulatory framework that preserves and strengthens incentives to invest and innovate 

and one that builds on existing video competition. 

The last twenty years have shown that cable operators and programmers are willing to 

invest aggressively to bring new and innovative services, features and capabilities to 

consumers. But legacy rules rooted in outdated assumptions concerning the state of 

competition will only frustrate the ability to obtain capital for new investmentsinvestments that are deterred by policies that turn broadband networks into commodities. 

It is important that policy makers not revive the almost non-existent pace of innovation 

that residential telephone customers experienced from 1940 to 1990. That means doing 

away with rules predicated on marketplace conditions that no longer exist. 

The past twenty years has been a time of remarkable change. 

The number of video sources consumers may turn to has grown exponentially as different 

providers compete. A consumer may subscribe to cable, DIRECTV or DISH, or, in many 

markets, choose service from a telephone company as AT&T U -verse and Verizon FiOS 

have become popular new sources of video. The two national DBS services - DIRECTV 

and DISH - are the second and third largest MVPDs in terms of customers nationwide, 

and competition irom DBS and telephone companies has eroded cable's share of the 

MVPD Cllstomers to less than 58% in comparison to cable's 98% share in 1992. 

MVPD competition is flourishing, but today the video market is comprised of much more 

than the MVPD market. In fact, the largest subscription video provider in the country is 

Netflix -not a cablc operator, DBS provider, or telephone company. A consumer can 

buy DVDs at Best Buy or rent them from one of the 30,000 plus Redbox kiosks. Finally, 

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companies that stream content on the Internet are proliferating: Netf1ix, Vudu, Hulu, 

Amazon, iTunes, CinemaNow, Network websites, HBOGo, and user-generated or special 

interest sites like YouTube, Vimeo, and TED.com are a few. Many more offerings are 

anticipated from the likes of Google, Apple, Intel, and Sony. Web video is not limited to 

the PC screen. Computers can connect to big screen televisions, and box companies like 

Roku, Tivo, and Boxee can deliver web video to the TV screen. There are web-enabled 

TV s, game consoles, smartphones and i Pads - all giving consumers more choices on how 

and where they watch video. 

Twenty years ago vertical integration between cable operators and programmers was 

widespread. In 1992, 53% of cable nctworks were owned by cable operators in 

comparison to fewer than 14% today. More than 900 channels are avai lable today 

compared to 100 in 1992. Broadcast television over-the-air viewing has dropped from 

41%10 14% today. 

Despite all of these marketplace changes, old rules based on a very different video 

marketplace persist. To ensure continued innovation, investment and competition, it is 

time to revisit the 1992 Cable Act. 

2. Much of the testimony we heard during the hearing focused on the incredible new 

choices consumers have for accessing video content online. But we know that one 

third of Americans have not adopted broadband and that these numbers are 

particularly high among lower-income Americans, seniors, and people with 

disabilities, among others. 

Mr. Powell, what role docs online video have in driving broadband adoption in this 

country? 

Online video may well promote broadband adoption by making broadband more relevant 

to some non-adopters. An FCC survey cited in the National Broadband .Plan identified 

three major barriers that keep non-adopters, from getting broadband: cost, digital literacy, 

and relevance. In 2009, when the survey was conducted, some 19% of non-adopters said 

they didn't believe digital content delivered over broadband is compelling enough to 

justify getting broadband service. Many didn't view broadband as a means to access 

content they find important or necessary I'llI' activities they want to pursue. Others 

seemed satisfied with offline alternatives. These non-adopters say, for instance, the 

Internet is a "waste of time." But as online video increases and increasingly caters to 

diverse interests, it is likely that some non-adopters will explore broadband. 

9 
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Written Responses of David Barrett 

"The Future of Video" Hearing 

Subcommittee on Communications and Technology 

June 27, 2012 

Chairman Walden: 

1. When a party seeks government intervention in a retransmission consent 

negotiation, aren't they just trying to get a leg up in the negotiation? Don't 

both parties have something valuable to bring to the table, either content or 

distribution? And don't both parties have something to lose: viewers? Isn't this 

why virtually all retransmission consent deals get done? 

Retransmission consent negotiations benefit both broadcasters and pay TV providersand, most importantly, American viewers-by expanding the quality, quantity and 

diversity of available programming. Broadcasters have strong incentives to reach 

retransmission consent deals because their success depends upon maximizing 

viewership and thus advertising revenues. With large numbers of viewers subscribing to 

pay TV services, it is critical for broadcasters, such as Hearst Television, Inc., to secure 

distribution of its stations' signals via cable, satellite and telecommunications carriers 

offering video. Similarly, popular local broadcast stations form the backbone of every 

pay TV subscription package, and pay TV providers recognize the importance of 

making local stations available in order to attract and retain subscribers. Thus, market 

forces create natural incentives for the negotiating parties to find common ground and 

reach agreement in a timely fashion. 

As you correctly point out, the current, market-based retransmission consent system 

keeps both broadcasters and pay TV providers focused on reaching an agreement. 

Changes to the current system advocated by some pay TV providers, such as 

government-imposed mandatory arbitration or mandatory interim carriage in the event 

of a carriage dispute, would place the government's thumb squarely on the scales in 

favor of pay TV companies, and give them undue and unfair advantages at the 

bargaining table. Government intervention of this kind in retransmission negotiations is 

unwarranted because, as you recognize, virtually all retransmission deals are 

negotiated without disruption. A 2011 study confirmed that, since January 2006, the 

very few retransmission consent-related service interruptions have affected, on 

average, only about one one-hundredth of one percent (0.01 %j of annual total television 

viewing hours. Even in those cases, the signal of the local station continues to be 

available free, over the air for the affected pay TV subscriber. 

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It would be difficult to envision a less compelling case for government intervention in 

these market-based negotiations. 

2. If parties could invoke government intervention whenever they don't like the 

terms of the deal, wouldn't more deals ironically end up in a stalemate rather 

than fewer? 

Yes. Based on my experience with the retransmission consent process, that is exactly 

what would result. The retransmission consent system is successful because, as noted 

above, both parties have much to gain from successfully and timely reaching 

agreement, and much to lose if an agreement is not reached. If either party believed 

government intervention would be advantageous, it would create a disincentive for that 

party to reach a deal and an incentive to rely on the government to enhance its 

negotiating position. Should the various interventionist proposals advocated by pay TV 

providers be adopted, the FCC (and eventually the courts) would be saddled with 

literally thousands of adjudicatory cases, resulting in wasteful expenditures of scarce 

public funds for no legitimate public interest purpose. 

Moreover, if the ability of local broadcast stations to negotiate retransmission consent 

arrangements with MVPDs that resell their signals is impaired (and, in turn, the ability of 

those stations to secure the retrans revenue necessary to purchase high-quality 

programming is impaired), then program rights holders will simply withdraw their best 

programming from broadcast stations and place it on less regulated and less 

encumbered video distribution platforms where they could more effectively monetize 

their investment in programming. In that event, viewers-especially those who rely 

exclusively on the over-the-air service-would be harmed. 

The mere suggestion of change to the retransmission consent rules has given pay TV 

providers incentives to engage in tactics tending to delay or derail negotiations to create 

a misperception among policymakers that the current retransmission consent process is 

broken, when it is not. 

3. You seem to be suggesting that broadcasters should have absolute freedom 

to negotiate the terms of retransmission consent deals as a pure market 

transaction. Under that theory, shouldn't pay TV providers also be relieved of 

regulatory obligations like the must-carry rules, the basic-tier requirement, 

and the buy-through requirement and allowed to negotiate pure market-based 

transactions? 

The current system of retransmission consent already largely allows both broadcasters 

and pay TV providers to negotiate deals as a "pure market transaction." Neither 

broadcasters nor pay TV providers have "absolute freedom" in negotiating these 

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agreements. Both pay TV providers and broadcasters are required by statute and FCC 

rules to negotiate retransmission consent in good faith, and any aggrieved party can file 

a complaint with the FCC alleging that another party violated this good faith 

requirement. Broadcasters take their good faith obligations seriously. Notably, the FCC 

has never found that a broadcaster failed to negotiate in good faith, although it has 

found that a cable operator violated the good faith negotiation standard, and that a 

satellite TV provider was abusing the good faith complaint process. 

The fact that pay TV providers are also subject to certain other consumer-oriented 

obligations is no more relevant to the terms and conditions of a retransmission consent 

negotiation than are broadcasters' regulatory requirements to comply with children's 

programming requirements, equal employment opportunity requirements, political 

broadcasting rules, decency requirements and other public interest obligations. In 

addressing the specifics of your question, it is important to recognize at the outset that 

broadcasters are required to elect either must carry or retransmission consent. Once an 

election of retransmission consent is made by a station, that broadcaster must 

successfully negotiate with each pay TV provider to secure carriage for its signal on the 

pay TV provider's platform. At that point, the pay TV provider has no must carry 

obligation or any other carriage obligation with regard to that station. There is no option 

to revert back to an election of must carry if the broadcaster cannot reach a 

retransmission consent agreement with the pay TV provider. Thus, the fact that other 

broadcasters may elect must carry has no bearing at all on the negotiations between 

pay TV providers and stations that elect retransmission consent. 

As your question also notes, some - but not all - pay TV providers are required to place 

certain channels on the basic tier they offer to consumers. This requirement does not 

materially alter the retransmission consent process between broadcasters and pay TV 

providers. Retransmission consent negotiations typically involve multiple issues, 

including, but not limited to: (1) carriage of the station's primary channel and various 

multicast channels, (2) channel position and service tier of carriage, (3) network and 

syndicated program exclusivity, (4) carriage of other commonly owned stations, (5) 

carriage by other commonly owned cable or satellite systems, (6) after-acquired station 

and cable system provisions, (7) mutual and/or reciprocal advertising and promotion 

arrangements, (8) carriage of local news and/or weather services, (9) confidentiality, 

(10) remedies for breach, (11) geographic scope of carriage rights and commitments, 

(12) quality of signal carriage, (13) downconversion of digital for analog subscribers, 

(14) channel guide placement, (15) emergency broadcast, video description, closed 

captioning, and digital copy protection requirements, (16) copyright issues, 

(17) indemnification of the parties, (18) assignment provisions, and (19) of course, 

financial consideration, if any. 

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It is difficult to see how this wide range of retransmission consent negotiation issues 

between a pay TV company and a local station could be affected by a basic tier ruleespecially one that does not apply to many pay TV providers. There is no basic tier rule 

for satellite providers of video service, and cable operators that have been found to be 

subject to "effective competition" are not subject to this requirement. The pay TV 

industry cannot fairly or reasonably argue that a requirement for some cable operators 

to offer a basic tier to consumers somehow negates the multi-faceted market-based 

nature of the retransmission consent process. 

Finally, the tier buy-through provision of the Cable Television Consumer Protection and 

Competition Act of 1992 serves to protect consumers. It does not impact the 

broadcaster-pay TV relationship or retrans negotiations. This rule prevents cable 

operators from requiring subscribers to purchase tiers of programming other than the 

basic service tier in order to obtain access to video programming offered on a perchannel or per-program basis. The provision also prohibits a cable operator from 

discriminating between consumers who subscribe to only the basic tier and other 

subscribers with regard to the rates charged for programming on a per-channel or perevent basis. As with the basic tier rule, the tier buy-through prohibition does not apply to 

the many and increasing numbers of cable operators subject to "effective competition" 

as defined in federal law, and it has never applied to satellite providers. This consumer 

protection provision simply does not concern broadcast signal carriage or otherwise 

have the potential to impact market-based retransmission consent negotiations. 

Ranking Member Eshoo 

1. Last December, the FCC adopted final rules implementing the CALM Act and 

they will go into effect on December 13, 2012. Have you implemented the ATSC 

A/a5 Recommended Practices, as stated in the FCC's final rules? If not, what 

steps are you taking to ensure compliance by year's end? 

Hearst Television Engineering has held numerous internal conference calls and 

operational tutorials in preparation for the CALM Act. One such example, at the 

corporate engineering conference held last March with all engineering managers in 

attendance, was a two-hour session that specifically addressed understanding the 

implications of the CALM Act. This presentation was made by our vendor, Ken Tankel of 

Linear Acoustics, who has an industry leading role in Broadcast Audio Processing. 

The ATSC document, "A/a5 - Techniques for Establishing and Maintaining Audio 

Loudness for Digital Television - July 2011," has been sent to all Hearst Television 

stations. Our engineering team has been asked to review, understand and implement 

these practices. 

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Furthermore, Hearst Television has made substantial investment in Audio Processing 

equipment for its outbound distribution channels at ali stations and will be making 

further investments in 2013 to improve our stations' capabilities to monitor audio 

loudness as recommended by the ATSC. 

Our group has also assembled monthly conference calls to foster continued dialogue on 

this topic. The goal is to improve and socialize our company-wide "Best Practices." 

These will continue monthly throughout 2013. 

There is however one aspect of concern: proving compliance in response to complaints 

received. As the deadline for the CALM Act nears, stations have yet to see any FCC 

rules or, at a minimum, some guidance on points related to compliance. 

Hearst Television has taken a responsible course in employing new technology as well 

as operational practices to implement the full range of ATSC Recommended Practices. 

235358.2 5 
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DISH's Response to the Questions Posed by The Honorable Anna Eshoo 

Recently, we've seen MVPDs embrace new technologies like video game consoles, tablets 

and smartphones as a means of providing their customers with access to live, or on-demand 

programming. What are the roadbloeks to widespread adoption of these new video 

distribution technologies? 

Our focus on expanding our library of streaming content combined with unique innovative 

products gives DISH one of the most robust offerings in the industry. DISH customers have 

access to over 20,000 movies and TV shows on their computers (by logging onto 

dishonline.com) and on the DISH Remote Access app on portable devices. In addition, Sling -

based in Silicon Valley -- gives DISH customers the ability to watch their DVR recordings and 

even live TV on devices with Internet access. Programmers and content owners should applaud 

such legitimate innovation that empowers the customer with choices over the content they are 

paying for. If programmers and content owners seek to stifle such innovation through lawsuits 

and other tactics, it will be a significant roadblock to the widespread adoption of the services you 

describe in your question. 

Last Decembel', the FCC adopted final rules implementing the CALM Act and they will go 

into effeet on December 13,2012. Have you implemented the ATSC A/8S Recommended 

Practices, as stated in the FCC's final rules? If not, what steps are you taking to ensure 

compliance by year's end? 

DISH has been working hard to update its systems and hardware to implement the ATSC A/85 

Recommended Practice ("A/85 RP"), and believes it will be able to comply with the new rules 

by the deadline this December. We hope that all programmers will issue public certifications 

that they comply with the CALM Act, which means DISH will not need to conduct annual 'spot 

checks' for those channels. In addition, DISH plans to ensure compliance with the A/85 RP for 

commercials that DISH inserts. 
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FilED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A, WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED TWELFTH CONGRESS 

~ongre55 of tbe ~ntttb ~tatt5 

j!)ou~t of !\tpre£ittttatiUt£i 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 

MU10rtlY !102'j 21S-;,sn 

Minority 1202} 225°,,364 t 

August 14,2012 

Mr. Michael P. O'Leary 

Senior Executive Vice President, Global Policy and External Affairs 

Motion Picture Association of America 

1600 Eye Street, N.W, 

Washington, D,C, 20006 

Dear Mr. O'Leary: 

Thank you for appearing at the Subcommittee on Communications and Technology hearing 

entitled "The Future of Video" on June 27, 2012, 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for 10 business days to permit Members to submit additional questions to witnesses, which are 

attached, The format of your responses to these questions should be as follows: (1) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your answer to that question in plain text, 

To facilitate the printing of the hearing record, please e-mail your responses, in Word or PDF 

format, to Chal'lotte.Savercoo!@maiLhouse.gov by the close of business on Tuesday, August 28, 2012, 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

(kf}JLChairman 

Subcommittee on Communications and Technology 

cc: The Honorable Anna Eshoo, Ranking Member, 

Subcommittee on Communications and Technology 

Attachment 
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82325.120

The Honorable Greg Walden 

I. When a party seeks government intervention in a retransmission consent negotiation, 

aren't they just trying to get a leg up in the negotiation? Don't both parties have 

something valuable to bring to the table, either content or distribution? And don't both 

parties have something to lose: viewers? Isn't this why virtually all retransmission 

consent deals get done? 

Answer: The MPAA does not participate directly in retransmission consent negotiations. 

We agree, however, that regardless of the specific context for a commercial negotiation over 

the carriage of content, the government would do best by refraining from intervening, and 

instead leave the negotiation to the parties. My written testimony underscored a related 

point: "As the creators of content, we are the entities that are taking financial risk in 

investing in product with no guarantee it will be profitable." As the party that takes the 

financial risk, content creators should have the final say in negotiations related to the 

distribution of their content. 

2. If parties could invoke government intcrvention whenever they don't like the terms ora 

deal, wouldn't more deals ironically wind up in a stalemate rather than fewer? 

Answer: MPAA members have long supported the view that copyright licenses should be 

subject to free market negotiations. Copyright owners are not all the same, so they should be 

free to adopt the licensing approach (or combination of approaches) that best suits their 

unique business interests. 

3. Ms. Sohn's testimony suggests that viewers today lack choice of provider and choice of 

content. Do you agree? Don't viewers have more sources of distribution and more 

sources of programming than ever before, not just from traditional players, but from the 

Internet? Isn't the problcmnot a lack of choice, but that the business models are still 

being ironed out amidst the constructive and creative chaos of it all? 

Answer: Chairman Walden, I believe that Ms. Sohn got it right in her testimony when she 

said that "there is widespread agreement that we are currently living in the golden age of 

television. Programs like Mad Men, Breaking Bad, Game of Thrones, Modern Family, The 

Daily Show and The Colbert Report have become part of our cultural landscape, and even in 

this era of 500 channels, still inspire discussions around the water cooler. There are numerous 

ways to watch TV - be it on a flat screen LED television, on a tablet or on a smartphone. And 

the Internet and DVRs have the ability to allow a viewer to watch what they want to watch 

when they want to watch it." And, as mentioned in my written statement, new services like 

Ultraviolet serve as a cloud-based clearinghouse where UltraViolet retailers, streaming 

services, and Ultra Violet-capable devices and apps can confirm your rights to watch movies 

or TV shows and provide access via download or streaming. 

When a customer buys an UltraViolet-enabled movie or TV show, whether as a stand-alone 

online digital purchase, or a Blu-ray or DVD that comes with UltraViolet, a digital "proof of 

purchase" representing the consumers' digital rights is added to their UltraViolet Collection. 
177 


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This enables UltraViolet Services to identify to which content a consumer has rights; to 

stream to most any Internet-connected device, including PCs, tablets, smartphones, Blu-ray 

players, and cable set-top boxes; and to download copies for permanent retention to view 

when they do not have internet access. Additionally, retailers may allow consumers to make 

a physical media copy along with the digital purchase. An UntraViolet purchase always 

allows consumers to download the title to their UltraViolet-enabled portable device for 

offline viewing and, if the consumer choses, to their home server for permanent retention. 

When a customer adds an UltraViolet title to their collection, the record of this title does not 

expire and will remain in the collection unless an account member deletes it or terminates the 

account. Even if the retailer from whom the customer originally purchased the content goes 

out of business, the customer's UltraViolet rights would endure and they would be able to 

continue to access their content from other sources. 

The MPAA's member companies are committed to providing audiences with an abundance 

of delivery options to experience the content they produce. At the same time, our companies 

invest significant resources and take significant risk to produce that content, so the 

distribution models they pursue must also he economically viable. 

It is always easy for some to criticize perceived shortcomings of the current marketplace, but 

the fact is that the marketplace has evolved - and will continue to evolve - to provide 

consumers more choice as to the content available to them, as well as the way they are able 

to view that content. 

4. Does it make sense to revisit network non-duplication and syndicated exclusivity without 

also revisiting the compulsory copyrights? 

Answer: Although the MPAA has not taken a position on network non-duplication or 

syndicated exclusivity, we have long supported the view that it is time to phase out 

compulsory copyright licenses in a non-disruptive manner. These lWO FCC rules arc 

premised on the existence of privately negotiated contracts. In the absence of these rules, the 

compulsory copyright licenses would defeat the exclusivity provisions in such privately 

negotiated agreements. I n that sense, these provisions are directly related to the compulsory 

licenses. Without taking a specific position on the need for the retention of these rules, I 

would note again that as the parties that take the financial risk, creators of content should 

have the final say in granting distribution rights, including whether those rights include 

exclusivity. 

The Honorable Mike Doyle 

I. Ultraviolet permits consumers to purchase and view video entirely from the web without 

having to buy a physical copy, altering the manner by which ownership of motion picture 

content is exercised. In answering my question during your testimony at the House 

Communications and Technology Subcommittee hearing on Future of Video on June 27, 

2012, you mentioned that Ultraviolet provides a "perpetual agreement" between the 

consumer and producer of that content to guarantee that users will always be able to 

access the digital material they purchase. Please provide a detailed description about this 
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82325.122

guarantee, including how consumers will continue to be able to access that content should 

the Ultraviolet service be discontinued or otherwise altered at some time in the future. 

As I indicated at the hearing, I believe Ultraviolet has the potential to revolutionize the 

way consumers access copyrighted con lent in a very positive way. However, when users 

pay a certain price for a product with the belief that they will be able to access that 

product "forever," they should have the comfort of knowing that they do in fact own that 

product for an unlimited amount of time, no matter what changes may occur to the 

business from which they purchased it. Therefore, I would like to receive more specific 

assurance that consumers will have guaranteed access to this content as they do when 

they purchase physical copies of such material, even when they purchased that content 

tor streaming only. What specific legal rights does Ultraviolet provide to consumers in 

this regard? 

Answer; To be clear, UltraViolet is not itselfa content delivery service, but rather a new 

industry standard digital distribution ecosystem developed by the Digital Entertainment 

Content Ecosystem (DECE) that guarantees consumers certain benefits when they 

purchase UltraViolet-branded content. It serves as a cloud-based clearinghouse where 

UltraViolet retailers, streaming services, and UltraViolet-capable devices and apps can 

confirm your rights to walch movies or TV shows and provide access via download or 

streaming. 

When a customer buys an UltraViolet-enabled movie or TV show, whether as a standalone, online digital purchase, or a Blu-ray or DVD that comes with UltraViolet, a digital 

"proof of purchase" representing the consumers' digital rights is added to their 

UltraViolet Collection. This enables UltraViolet Services to identify to which content a 

consumer has rights; to stream to most any Internet-connected device, including PCs, 

tablets, smartphones, Blu-ray players, and cable set-top boxes; and to download copies 

for permanent retention to view when they do not have internet access. Additionally, 

retailers may allow consumers to make a physical media copy along with the digital 

purchase. An UntraViolet purchase always allows consumers to download the title to 

their UltraViolet-enabled portable device for offline viewing and, ifthc consumer choses, 

to their home server for permanent retention. When a customer adds an UltraViolet title 

to their collection, the record of this title does not expire and will remain in the collection 

unless an account member deletes it or terminates the account. Even if the retailer from 

whom the customer originally purchased the content goes out of business, the customer's 

Ultra Violet rights would endure and they would be able to continue to access their 

content from other sources. 

2. Please provide a specific list of devices that are currently compatible with the download 

function of Ultraviolet service; a list that are planned to become compatible with that 

function in the future; and how such decisions on Ultraviolet device compatibility are 

made. In other words, why does Ultraviolet permit digital downloads only to certain 

·'approved" devices, and why are those devices chosen in partieu lar? 
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Answer: Today, Consumers may not need any new or additional equipment to watch 

UltraViolet movies. UltraViolet Services such as Walmart's VUDU or Flixster allow 

consumers to stream or download UltraViolet movies on apps that are available on a wide 

array of devices including PCs, Macs, PS3. Xbox, iOS and Android. DECE does not 

determine which devices support UltraViolet. It is up to CE manufactures and software 

developers to make UltraViolet compliant players. 

In the near future UltraViolet wilt launch a new interoperable digital format that can be 

downloaded by Customers and copied across compatible UlraViolet devices without having 

to download another copy. Similar to the Blu-ray or DVD formats, any device manufacturer 

can build an UltraViolet device or app. This will allow devices to be marketed as optimized 

to work with UltraViolet right out of the box, and for the first time allow interoperabiJity. 

Customers may be interested in making such a feature one of their "checklist" items when 

buying new devices.