Copyright Act and Communications Act Changes in 2019 Related to Television
Released: 2020-01-13T00:00:00

Introduction

The retransmission of television signals to subscribers of cable, telephone company (telco), and satellite services has been governed in part by the Satellite Television Extension and Localism Act Reauthorization Act of 2014 (STELA Reauthorization Act; P.L. 113-200 ). Some provisions of this law, which amended the Copyright Act of 1976 and the Communications Act of 1934, were set to expire at the end of 2019. As described in " Legislation ," with the enactment of the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019 (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020 P.L. 116-94 ), Congress permanently extended certain Copyright Act and Communications Act provisions that affect direct broadcast satellite service to viewers in rural areas; limited the ability of separately owned broadcast stations to jointly negotiate with cable and satellite operators over the retransmission of television signals; and affirmed the role of the Federal Communications Commission (FCC) in resolving disputes that could potentially interrupt television service to subscribers of cable, telephone, and satellite services.

In addition, Congress amended the Copyright Act to restrict the number of households eligible to receive non-local broadcast television signals via satellite distributors, and encouraged DIRECTV, a satellite operator, to retransmit local broadcast television signals, where available, in all local television markets. Congress amended the Communications Act to permit small video programming service distributors to negotiate collectively with large broadcast station groups, and increase transparency in bills for new customers of video distribution services.

To provide context for the current debate, this report provides background information about how households receive television programming, how the television industry operates, and how the Copyright and Communications Acts determine what programs viewers receive. After describing the now-repealed provisions of the copyright act, the report summarizes the provisions of the Copyright and Communications Act enacted by Congress in 2019. Finally, it addresses the relationship between the new provisions and FCC media ownership rules, which the FCC amended in December 2019.

Background

A household may receive broadcast television programming through one or more of three methods:

1. by using an individual antenna that receives broadcast signals directly over the air from television stations; 2. by subscribing to a multichannel video programming distributor (MVPD), such as a cable or satellite provider or a telco, which brings the retransmitted signals of broadcast stations to a home through a copper wire, a fiber-optic cable, or a satellite dish installed on the premises; or 3. by using a high-speed internet (broadband) connection. A household may subscribe to a streaming service either that includes broadcast television programming on an on-demand basis, or as a package of prescheduled programming, that is, a "virtual MVPD" (vMVPD).

As Figure 1 indicates, the total number of U.S. households subscribing to an MVPD has declined over the past 10 years. In 2010, about 104.2 million households subscribed to an MVPD, compared with about 87.4 million households in 2019. In place of MVPDs, an increasing number of households rely on video provided over broadband connections (including vMVPDs) or via over-the-air broadcast transmission.

Currently, two direct broadcast satellite providersâDIRECTV and DISHâoffer video service to most of the land area and population of the United States. As of June 2019, DIRECTV had approximately 17.4 million U.S. subscribers, while DISH had approximately 9.5 million U.S. subscribers. Both have lost subscribers since September 2014, when DIRECTV had approximately 20.2 million U.S. subscribers and DISH had approximately 14.0 million U.S. subscribers.

Broadcast Television Markets

Federal Communications Commission Licensing and Localism

The FCC licenses broadcast television station owners for eight-year terms to use the public airwaves, or spectrum, in exchange for operating stations in "the public interest, convenience and necessity," pursuant to Section 310(d) of the Communications Act. In 1952, the FCC formally allocated television broadcast frequencies among local communities. The basic purpose of the allocation plan was to provide as many communities as possible with sufficient spectrum to permit one or more local television stations "to serve as media for local self-expression."

Television Communities vs. Local Television Markets

Until the mid-1960s, the television audience research firm the Nielsen Company restricted its measurement of television station viewership to the major metropolitan areas that were the first to have broadcast television stations. Among other factors, the station considers the estimated number of viewers it attracts with programs when determining the prices that it can charge advertisers. Thus, station viewership plays a significant role in a station's ability to generate revenue. After hearings in the House of Representatives produced accusations that stations licensed to large cities were pressuring the rating services not to measure audiences of stations licensed to smaller cities, Nielsen began to assign each U.S. county to a unique geographic television market in which Nielsen could measure viewing habits. Nielsen's construct, known as Designated Market Areas (DMAs), has been widely used to define local television markets since the late 1960s. The definitions of DMAs are important in determining which television broadcast signals an MVPD subscriber may watch.

Nielsen generally assigns each county to one of 210 DMAs based on the predominance of viewing of broadcast television stations in that county. In addition, Nielsen assigns each broadcast television station to a DMA. Nielsen bases each station's DMA on the home county of its FCC community of license. Stations seek to have their signals reach as many people as possible living within their DMAs. They generally have little incentive to reach viewers living outside their DMAs, as they are typically unable to charge advertisers for access to those viewers.

Broadcast stations' contractual agreements with television networks and other suppliers of programming generally give them the exclusive rights to air that programming within their DMAs. Advertisers use DMAs to measure television audiences and to plan and purchase advertising from stations to target viewers within those geographic regions.

Retransmission of Broadcast Signals via MVPDs

Figure 2 illustrates the relationships among viewers; broadcast television stations; cable, telco, and satellite operators; cable and broadcast networks; and owners of television programming content.

Related Communications Laws

Generally, subscribers to cable, telco, and satellite services may receive television stations located within their DMAs as part of their video packages. Whether or not subscribers do so, however, depends in part on the decisions of broadcast stations to require these services to retransmit their signals or to opt instead to negotiate for compensation. In addition, satellite operators may choose not to provide any local broadcast service in a particular DMA. The Communications Act gives broadcast stations and satellite operators the rights to make these choices.

Must Carry; Carry One, Carry All

Every three years, commercial broadcast television stations may choose to require cable, telco, and satellite operators to retransmit their signals. By statute, a cable operator or telco must carry the signals of all television stations seeking "must carry" status and assigned to the DMA in which the cable operator is located. Satellite operators are required to carry the signals of all stations assigned to a DMA that seek must carry status to viewers in that DMA, if they choose to carry the signal of at least one local television station in the market. Policymakers often call this provision "carry one, carry all." The applicability of these provisions to telcos is uncertain.

Due in part to the carry one, carry all provision, DIRECTV has opted not to retransmit any local broadcast television stations in 12 DMAs. They are Alpena, MI; Bowling Green, KY; Caspar-Riverton, WY; Cheyenne, WY/Scottsbluff, NE; Grand Junction, CO; Glendive, MT; Helena, MT; North Platte, NE; Ottumwa, IA; Presque Isle, ME; San Angelo, TX; and Victoria, TX.

Retransmission Consent

In lieu of choosing must carry status, commercial broadcasting stations may opt to seek compensation from cable, telco, and satellite operators for carriage of their signals in exchange for granting retransmission consent. In contrast to the must carry laws, which differ for cable and satellite operators, the retransmission consent laws apply to all MVPDs.

If a broadcast station opts for retransmission consent negotiations, MVPDs must negotiate with it for the right to retransmit its signal within the station's DMA. In addition, cable operators may negotiate with the station for consent to retransmit the station's signals outside of the station's DMA. However, the contracts that broadcast stations have with program suppliers, such as television networks, may limit the stations' ability to consent to the retransmission of their signals outside of their markets. Most television broadcast stations are part of a portfolio owned by broadcast station groups. Most cable systems are part of multiple-system operations owned by corporations. Negotiations over retransmission consent generally occur at the corporate level, rather than between an individual station and a local cable system.

Greater competition among MVPDs has increased the negotiating advantage of broadcast television stations since 1993, when they first had the right to engage in retransmission consent negotiations. At that time, large MVPDs refused to pay broadcast stations directly for retransmission rights. Instead, several broadcast networks negotiated on behalf of their affiliates for alternative forms of compensation. The networks sought carriage of new cable networks owned by their parent companies, and split the proceeds they received from the cable networks with the affiliates.

As satellite operators and telcos entered the market in competition with cable operators, broadcast stations could encourage the cable subscribers to switch, and vice versa. Broadcast stations began to demand cash in exchange for carriage. As Figure 3 indicates, the total amount of retransmission fees paid by MVPDs has increased from $0.21 billion in 2006 to $12.38 billion in 2019. The 2019 totals include fees paid by vMVPDs, which did not exist in 2006.

Related Copyright Laws

Generally, copyright owners have the exclusive legal right to "perform" publicly their works, and, as is the case with online distribution of their programs, to license their works to distributors in marketplace negotiations. The Copyright Act limits these rights for owners of programming contained in retransmitted broadcast television signals. The Copyright Act guarantees MVPDs the right to perform publicly the copyrighted broadcast television programming, as long as they abide by FCC regulations and pay royalties to content owners at rates set and administered by the government. In some instances, MVPDs need not pay content owners at all, because Congress set a rate of $0.

The Copyright Act contains three statutory copyright licenses governing the retransmission of local and distant television broadcast station signals. Local signals are broadcast signals retransmitted by MVPDs within the local market of the subscriber ("local-into-local service"). Distant signals are broadcast signals imported by MVPDs from outside a subscriber's local area.

1. The cable statutory license, codified in Section 111, permits cable operators to retransmit both local and distant television station signals. This license relies in part on former and current FCC rules and regulations as the basis upon which a cable operator may transmit distant broadcast signals. 2. The local satellite statutory license, codified in Section 122, permits satellite operators to retransmit local signals on a royalty-free basis. To use this license, satellite operators must comply with the rules, regulations, and authorizations established by the FCC governing the carriage of local television signals. 3. The distant satellite statutory license, codified in Section 119, permits satellite operators to retransmit distant broadcast television signals. Congress has renewed this provision in five-year intervals. In 2004, Congress inserted a "no distant if local" provision, which prohibits satellite operators from importing distant signals into television markets where viewers can receive the signals of broadcast network affiliates over the air.

Under the statutory license, cable, telco, and satellite operators make royalty payments every six months to the U.S. Copyright Office, an agency of the Library of Congress. The head of this office, the Register of Copyrights, places the money in an escrow account and maintains the "Statement of Account" that each operator files. Congress has charged the Copyright Royalty Board (CRB), which is composed of three administrative judges appointed by the Librarian of Congress, with distributing the royalties to copyright claimants. It also has the task of adjusting the rates at five-year intervals, and annually in response to inflation. For additional information about these licenses, see CRS Report R44473, What's on Television? The Intersection of Communications and Copyright Policies , by Dana A. Scherer.

Through a series of laws ( Table 1 ) enacted over the last 30 years, Congress created new sections or modified existing sections of the Copyright Act and the Communications Act to regulate the satellite retransmission of broadcast television and to encourage competition between satellite and cable operators. Congress began the process with the enactment of the Satellite Home Viewer Act of 1988 (SHVA; P.L. 100-667 ), revised it further in several laws leading to the Satellite Television Extension and Localism Act (STELA) of 2010 ( P.L. 111-175 ), and amended the process again with the enactment of the STELA Reauthorization Act of 2014. Most recently, the enactment the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019, (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 ) permanently extended some legal provisions governing retransmission of distant network broadcast signals, while repealing others.

Expiring Provision of Copyright Act

Certain provisions in the STELA Reauthorization Act were set to expire on December 31, 2019. The copyright provision set to expire was Section 119 of the Copyright Act (17 U.S.C. Â§119). This section enables satellite operators to obtain rights to copyrighted programming carried by distant broadcast network affiliates, superstations, and other independent stations. Under this regime, the satellite operators submit a statement of account and pay a statutorily determined royalty fee to the U.S. Copyright Office on a semiannual basis, avoiding the transactions costs of negotiating with each individual copyright holder.

A satellite operator is allowed to retransmit the signals of up to two distant stations affiliated with a network (ABC, CBS, FOX, NBC, or PBS) to a subset of subscribing households that are deemed "unserved" with respect to that network. The "unserved household" limitation does not apply to the retransmission of superstations (see Table 1 , note a). Pursuant to Section 119, satellite operators may retransmit superstations to commercial establishments as well as households.

Section 119 specified five different categories of unserved households:

1. a household located too far from a broadcast station's transmitter to receive signals using an antenna; [Section 119(d)(10)(A)] 2. a household that received written consent from a local network affiliate to receive a distant signal; [Section 119(d)(10)(B)] 3. a household thatâeven if it could receive a local broadcast signal over the airânevertheless received a satellite retransmission of a distant signal on October 31, 1999, or whose satellite provider terminated the distant signal retransmission after July 11, 1998, and before October 31, 1999, pursuant to court injunction; [Section 119(d)(10)(C)] 4. operators of recreational vehicles and commercial trucks who complied with certain documentation requirements; [Section 119(d)(10)(D)] 5. a household that received delivery of distant network signals via C-band before October 31, 1999. [Section 119(d)(10)(E)]

In 2010, Congress provided an incentive for DISH to offer local-into-local service in all 210 markets with the enactment of STELA.

Revenues Collected by Copyright Office

As Table 2 indicates, between 2014 and 2019 the amount of Section 119 royalties collected by the Copyright Office declined by 89%. According to the Register of Copyrights, the decline is due in part to the drop in the number of distant network stations carried and the conversion of non-network superstations, such as WGN, to cable networks. In addition, as Figure 1 indicates, the total number of households subscribing to satellite television declined from about 34.4 million in 2014 to 27.3 million in 2019.

Expiring Provisions of Communications Act

Several provisions of the Communications Act were also set to expire at the end of 2019. Some of those provisions cross-reference Section 119 of the Copyright Act.

Cross-References to Section 119 of Copyright Act

Section 325(b)(2)(B) and (C) of the Communications Act [47 U.S.C. Â§325(b)(2)(B)-(C)] permit a satellite operator to retransmit distant broadcast signals of stations without first seeking retransmission consent from those stations, if the satellite operator is retransmitting the signals pursuant to Section 119 of the Copyright Act.

Section 338(a)(3) of the Communications Act [47 U.S.C. Â§338(a)(3)] states that a low-power station whose signals are retransmitted by a satellite operator pursuant to Section 119 of the Copyright Act [17 U.S.C. Â§119(a)(14)] is not entitled to must carry rights.

Section 339(a)(1)(A) of the Communications Act (47 U.S.C. Â§339) permits satellite operators to retransmit the signals of a maximum of two affiliates of the same network in single day to households located outside of those stations' DMAs, subject to Section 119 of the Copyright Act. Section 339(a)(1)(B) states that satellite operators may retransmit local broadcast signals under 17 U.S.C. Â§122 in addition to any distant signals they may retransmit under Section 119 of the Copyright Act. Section 339(a)(2)(A) discusses rules for retransmitting broadcast station signals to satellite subscribers meeting the "unserved household" definition under Section 119 of the Copyright Act [17 U.S.C. Â§119(d)(10)(C)]. Section 339(a)(2)(D) and (c)(4)(A), in describing households eligible to receive distant signals, cross-reference the "unserved household" definition under 17 U.S.C. Â§119(d)(10)(A). Section 339(a)(2)(G) states that "this paragraph shall not affect the ability to receive secondary transmissions ... as an unserved household under section 119(a)(12) of title 17, United States Code." Section 339(c)(2) describes the process under which a household may seek a local affiliate's permission to receive a distant signal, and therefore qualify as an "unserved household" under Section 119 of the Copyright Act [17 U.S.C. Â§119(d)(10)(B)].

Section 340(3)(2) of the Communications Act [47 U.S.C. Â§340] states that a satellite operator that retransmits a distant broadcast signal pursuant to 17 U.S.C. Â§119 need not comply with FCC regulations that would otherwise require the satellite operator to black out certain programs of that station.

Section 342 of the Communications Act [47 U.S.C. Â§342] cross-references Section 119 of the Copyright Act [17 U.S.C. Â§119(g)(3)(A)(iii)], and describes the process through which DISH may obtain a certification from that FCC demonstrating that it is providing local-into-local service in all 210 DMAs. Under 17 U.S.C. Â§119(g)(3), upon presenting this certification, among other documents, to the Florida district court that had enjoined DISH from using the Section 119 license, DISH would be eligible to use it. (See " Expiring Provision of Copyright Act .")

Good Faith Requirements for Retransmission Consent Negotiations

Section 325(b)(3)(C) of the Communications Act (47 U.S.C. Â§325(b)(3)(C)) prohibits broadcast stations from engaging in exclusive contracts for carriage. This section also requires both broadcast stations and MVPDs to negotiate retransmission in "good faith," subject to marketplace conditions. Moreover, according to this section, the coordination of negotiations among separately owned television broadcast stations within the same DMA is a per se violation of the good faith standards.

The FCC implements the good faith negotiation statutory provisions through a two-part framework. First, the FCC has a list of nine good faith negotiation standards. The FCC considers a violation of any of these standards to be a per se breach of the good faith negotiation obligation. Second, the FCC may determine that based on the "totality of circumstances," a party has failed to negotiate retransmission consent in good faith. Under this standard, a party may present facts to the FCC that, given the totality of circumstances, reflect an absence of a sincere desire to reach an agreement that is acceptable to both parties and thus constitute a failure to negotiate in good faith.

Complaints Regarding Good Faith Standard Violations

Over the last 13 years, both broadcast television station owners and MVPDs have filed complaints with the FCC that their counterparty has failed to negotiate in good faith. In some instances, the FCC has found that the complaint lacked validity. In 2016, the FCC reached a consent decree with Sinclair Broadcast Group after completing an investigation. In other instances, the FCC has monitored retransmission consent negotiations even when a party has not filed a complaint. In some cases, stations and/or MVPDs withdraw complaints from the FCC after reaching retransmission consent agreements. In November 2019, the FCC found that seven different station group owners had violated the per se good faith negotiation standards with respect to AT&T, and directed the parties to commence good faith negotiation.

Good Faith Provisions and FCC Media Ownership Rules

Section 325(b)(3)(C)(iv) directs the FCC to adopt rules that prohibit the coordination of negotiations among separately owned television broadcast stations within the same DMA. Unlike the good faith provisions of the Communications Act, the prohibition on coordination is permanent. Additionally, the FCC has adopted a rule declaring such behavior a per se violation of its good faith negotiation standards.

In a related matter, the FCC's rules regarding both the number of stations one entity may own within a DMA and the attribution of that ownership have been in flux. The FCC's ownership rules generally prohibit one company from owning two of the top four ranked stations (usually, stations affiliated with the ABC, CBS, FOX, and NBC networks) within the same DMA. In 2016, the FCC adopted rules specifying that if one television station sells more than 15% of the weekly advertising time on a competing local broadcast television station, it would consider the stations to be under common ownership or control, for the purposes of enforcing its local media ownership rule. In 2017, however, the FCC eliminated this rule as part of a reconsideration of its 2016 decision.

In September 2019, the U.S. Court of Appeals for the Third Circuit vacated and remanded the FCC's 2017 reconsideration. On November 29, 2019, the court vacated, as of that date, the rule changes adopted by the FCC in 2017. The FCC issued an order in December 2019 that amended its rules to reflect the court's mandate and clarify which rules remain in effect. The FCC has not publicly stated whether it will seek review of the Third Circuit's decision by the U.S. Supreme Court. Likewise, the FCC has not publicly stated how it will proceed with media ownership rulemaking it initiated in 2018, in light of the court's ruling.

Legislation in 2019

On December 20, 2019, President Donald J. Trump signed the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019 (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 ). These laws amended both the Copyright and Communications Acts.

Copyright Act Revisions

Title XI of P.L. 116-94 permanently extends Section 119 of the Copyright Act, but limits the scope of "unserved households" eligible to receive the distant signals to two categories of households. The first category includes operators of recreational vehicles and commercial trucks who have complied with certain documentation requirements. The second category, added by the act, includes households in "short markets" in the definition of "unserved household." The act defines a short market as

a local market in which programming of one or more of the four most widely viewed television networks nationwide is not offered on either the primary stream or multicast stream transmitted by any network station in that market, or is temporarily or permanently unavailable as a result of an act of god or other force majeure event beyond the control of the carrier.

The act also amends the Copyright Act to condition the eligibility of satellite operators to retransmit distant signals via a compulsory copyright license to unserved households on whether or not they retransmit local television signals in all 210 DMAs. After May 31, 2020, satellite subscribers who fall within the two categories of unserved households described above are no longer eligible to receive distant signals pursuant to the compulsory copyright license unless their satellite operator provides local-into-local service.

Likewise, the other four categories of households described in " Expiring Provision of Copyright Act " are no longer able to receive distant signals pursuant to the compulsory license after May 31, 2020, or until their satellite operator provides local service in all 210 markets, whichever is earlier.

The act also specifies that satellite operators will not lose access to the distant compulsory license if their failure to deliver local signals in all 210 markets is due to a retransmission consent impasse. As described in " Must Carry; Carry One, Carry All ," DISH currently does so, but DIRECTV does not.

Communications Act Revisions

Title X of the act permanently extends portions of the Communications Act set to expire at the end of 2019, while amending others. The following provisions that had been set to expire at the end of 2019 are now permanent:

A satellite operator may retransmit broadcast station signals outside of the station's local markets without retransmission consent from those stations, if the operator is retransmitting the signals pursuant to Section 119 of the Copyright Act. Broadcast stations may not enter into exclusive contracts with MVPDs. Broadcast stations and MVPDs must negotiate retransmission consent in "good faith." In the event any party accuses another of failing to negotiate in good faith, the accusing party may petition the FCC to mediate. Joint retransmission consent negotiations by separately owned broadcast stations within the same market constitutes failure to negotiate in good faith.

In addition, Title X amended the Communications Act to state that a qualified "MVPD buying group" representing smaller cable, telco, and/or satellite operators may negotiate retransmission consent with large broadcast station group owners without violating the good faith requirement. The buying group may represent only cable, telco, or satellite operators with 500,000 or fewer subscribers nationally. The broadcast station owner with whom the qualified MVPD group negotiates retransmission consent must reach more than 20% of the "national audience." This amendment takes effect no later than March 19, 2020, that is, 90 days after the enactment of P.L. 116-94 .

Relationship to FCC Media Ownership Rules

Local Ownership Rules

As described in " Good Faith Provisions and FCC Media Ownership Rules ," on December 20, 2019, the FCC reinstated the media and ownership rules it had adopted in 2016.

Under the reinstated rules, a single company may not own more than one station in a DMA unless eight independently owned stations remain (eight voices test). In addition, stations that jointly sell 15% or more of one another's advertising time count as "owned" for the purposes of the FCC's ownership rules. This means that non-top-four stations may not jointly negotiate with a separately owned top-four affiliate that sells its advertising time, if common ownership would violate the FCC's eight voices test. Likewise, two non-top four stations may not jointly negotiate retransmission consent in the same market if common ownership would violate the FCC's eight voices test.

National Ownership Rules

The FCC, in measuring the national reach of a broadcast station owner, discounts the number of television households reached within a DMA by a station operating in the Ultra High Frequency (UHF) band by half. In some instances, a station group may reach 20% or fewer households nationally with the "UHF discount," but more than 20% of U.S. households absent the discount. According to estimates from the research firm BIA Advisory Services, as of May 2019, the two companies falling in this category were NBC Universal and Gray Television. Thus, a qualified MVPD buying group could not negotiate with NBC Universal or Gray Television unless the FCC repeals the UHF discount.

In some markets, a television company may effectively operate stations under joint sales agreements or shared services agreements without having them count toward the national ownership limit. Thus, depending on how the FCC interprets the good faith provisions, an MVPD with fewer than 500,000 subscribers nationwide might not be able to use a qualified buying group to negotiate for retransmission of stations operated by a company that reaches 20% or more of U.S. households nationwide.

It is far less common for a company to operate third-party stations in a market in which it does not own a station than in a market in which it does own a station. There are 93 DMAs in which a third party operates at least one station and owns at least one station. In contrast, there are five DMAs in which a third party operates at least one station but does not own any stations. Nonetheless, as Congress advises the FCC on the implementation of this good faith provision, the role of third-party owners in retransmission consent negotiations remains an issue that may be considered.