Satellite Television: Reauthorization of the Satellite Home Viewer Improvement Act (SHVIA) -- Background and Key Issues
Released: 2005-01-05T00:00:00

RS21768 -- Satellite Television: Reauthorization of the Satellite Home Viewer Improvement Act (SHVIA) --Background and Key Issues

Updated January 5, 2005

Introduction

The three most common methods by which consumers receive television signals are broadcast, cable, and direct broadcast satellite (DBS). Broadcast television is free to consumers,who receive the signals via over-the-air (rooftop or "rabbit ear") antennas. Cable and DBS compete in theMultichannel Video Programming Distribution (MVPD) marketplace, whereproviders offer packages of video (and sometimes audio) programming for a monthly fee. According to the FederalCommunications Commission (FCC), there are 107 milliontelevision households in the United States. (1) Of those,88% subscribe to an MVPD service. Cable TV serves 75% of MVPD subscribers, while DBS serves 22%. Theremainder useother MVPD services that are described in the FCC report. Cable and satellite offer greater programming choices,and sometimes better signal quality, than broadcast television, but canbe costly. Congress has fostered competition in the MVPD marketplace, partially in an attempt to keep cable TVrates in check. Two major companies offer DBS services today:DirecTV (a subsidiary of News Corp.) and EchoStar, which markets its service as Dish TV. Another company,Rainbow DBS (a subsidiary of Cablevision) offers a comparatively smallnumber of satellite channels through a service called Voom.

Background

The Satellite Home Viewer Improvement Act. The 1999 Satellite Home Viewer Improvement Act (SHVIA) (2) extended andexpandedupon provisions of the 1988 Satellite Home Viewer Act (SHVA), as amended in 1994. In passing SHVA andSHVIA (as well as the 1984 and 1992 Cable Acts (3) ), Congress hasattempted to balance the interests of the broadcast, satellite, and cable industries, with the goal of ensuring that asmany households as possible have access to free local televisionprogramming, while expanding consumer choices in programming and service providers.

SHVA, enacted in the early days of satellite television, allowed satellite companies to retransmit broadcast network and superstation programming only to households that could notreceive "viewable" signals via over-the-air antennas because they are too distant from the transmitters, or in areaswhere TV signals are blocked by buildings or terrain (formally called"unserved households"). The limitation was designed to protect the nationwide system of broadcast networkaffiliates, which depend on advertising revenue based on their number ofviewers. The goal is to preserve "localism," where consumers can watch local news, weather, andcommunity-oriented programs. The availability of local programming is largelydependent on network affiliates, which in turn are dependent on viewers. Under SHVA, satellite companies couldretransmit broadcast network programming only to unservedhouseholds, so the majority of viewers would watch their local affiliate. But the small percentage of consumers inunserved households could also receive network programs, eventhough they came from an "out-of-market" affiliate. These out-of market signals are called "distant networksignals."

SHVA created a five-year "compulsory copyright license" (4) whereby satellite companies may retransmit distant network signals to unserved households withoutpermission from thecopyright owners, and the government sets the price the satellite companies pay as copyright royalties. The satellitecompanies pay the royalties to the Copyright Office of the Library ofCongress, which passes them on to the copyright owners. A similar compulsory copyright license was given tocable companies in 1976, although the cable license is permanent. Thesatellite distant network signal license is codified in �119 of the Copyright Act (Title 17 U.S.C.), and was renewedfor another five years in 1994. It was extended for a further five yearsin SHVIA, and is now set to expire on December 31, 2004. SHVIA also exempts satellite companies from therequirement to obtain retransmission consent from broadcasters torebroadcast distant network signals, and that provision expires on the same date.

SHVIA significantly expanded upon SHVA by allowing satellite companies to retransmit local broadcast network programming back into the same market area where it originated --called "local-into-local" service. The law permits, but does not require, satellite companies to offer local-into-localservice. SHVIA created a royalty-free compulsory copyright licensefor local-into-local satellite signals that is codified in �122 of the Copyright Act, and is permanent, like the cablelicense. According to their websites, on November 30, 2004, EchoStaroffered local-into-local in 160 of the 210 Designated Market Areas (DMAs) (5) in the country, and DirecTV offered it in 130 DMAs. Under SHVIA, unservedhouseholds could receivedistant network signals even if local-into-local service is offered in their area.

Local versus Distant Network Signals. The distinction between local and distant network signals is important for understandingSHVIA. A local signal is received within a broadcast network television affiliate's local market area. A distantnetwork signal is from elsewhere in the country. For example, if aconsumer lives in Denver and receives a signal from a Denver network affiliate, that is a local signal. If a consumerlives in West Virginia and receives a signal from that Denvernetwork affiliate via satellite, it is a distant network signal.

Eligibility for Distant Network Signals -- "White Areas," and "Grade B" Signals. Determining which consumers are eligible toreceive distant network signals via satellite is complicated and is discussed is more detail in CRS Report RS20425 . Generally, only consumers living in unserved households -- wherebroadcast television reception is extremely poor or non-existent -- may receive distant network signals via satellite. Unserved households, colloquially known as "white areas," aredefined based on the FCC's "Grade B" signal intensity standard. Congress mandated in SHVA that the Grade Bstandard be used for this purpose, and, in SHVIA, directed the FCC toreview whether the Grade B standard still should be used. In 2000, the FCC concluded that it should. (6) Computer models are used to mathematically predictwhich households canreceive at least a Grade B signal; if they cannot, they are unserved for purposes of SHVIA. In 1999, the FCCadopted an improved model, called the Individual Location Longely-Rice(ILLR), to predict signal intensity at specific households, instead of in a general area.

Some satellite companies transmitted distant network signals to consumers who were not eligible to receive them, leading to court challenges by the networks to try to force the satellitecompanies to obey the law. One landmark case was a 1998 ruling by a Miami judge [ CBS Broadcasting v. Primetime 24 Joint Venture, 48 F. Supp.2d 1342 (S.D.Fla. 1998)]under which over 2 million consumers reportedly had, or were scheduled to have, distant network signals terminatedby their satellite companies. That action was pending whenCongress debated SHVIA. Congress "grandfathered" those consumers who were receiving distant network signalsillegally if they could not receive a Grade A signal. For newsubscribers, the original rules apply. Exceptions were made for recreational vehicles, commercial trucks, andconsumers using "C-band" satellite dishes. (7) Insummary, under SHVIA,the following consumers could receive distant network signals until December 31, 2004:

if they do not receive a signal of Grade B intensity from the local affiliate of a particular network;

if their satellite dish is installed on an RV or commercial truck, or

if they had been receiving distant network signals illegally and those signals were terminated orscheduled to be terminated under the 1998 Miami court ruling, and they do not receive a signal of Grade A intensity from the local affiliate of the network ("grandfatheredsubscribers").

Consumers using C-band dishes are not subject to the five-year limitation. They may receive distant network signals they were receiving before October 31, 1999 indefinitely.Consumers who believe they cannot receive a Grade B signal, despite predictive models showing that they can, mayrequest a waiver (see CRS Report RS20425 for more information onthe waiver process).

The issue of who may receive distant network signals via satellite remains controversial even with the advent of local-into-local service. First, distant network signals primarily serveconsumers in the most rural parts of the country who also are likely to be in the DMAs that do not yet receivelocal-into-local service from the DBS providers. Second, some consumerswant distant network signals not because of reception problems with their own local signals, but because they wantgreater programming choices, or to watch network programmingairing at different times in the various U.S. time zones.

Key Provisions of the 2004 Satellite Home Viewer Extension and Reauthorization Act (SHVERA)

On November 20, 2004, Congress passed the Satellite Home Viewer Extension and Reauthorization Act (SHVERA), also known as the William J. "Billy" Tauzin Satellite TelevisionAct, as Title IX, Division J, of the FY2005 Consolidated Appropriations Act ( H.R. 4818 , P.L. 108-447 ). Thatfinal version was a compromise between H.R. 4518 , which passed the House on October 6, 2004, and legislation that was pending in the Senate. H.R. 4518 (L. Smith) had been reported from the House JudiciaryCommittee ( H.Rept. 108-660 ) on September 7, 2004. As passed, it incorporated many of the provisions of H.R. 4501 (Upton), which was reported from the House Energyand Commerce Committee on July 22 ( H.Rept. 108-634 ). In the Senate, S. 2013 (Hatch) was reported,amended, from Senate Judiciary (no written report) on June 17, and S. 2644 (Ensign/McCain) was reported, amended, from the Senate Commerce Committee ( S.Rept. 108-427 )on December 7. Neither bill reached the Senate floor.

Extension of Compulsory Copyright License. The compulsory copyright license was the chief impetus behind consideration ofSHVERA because it was due to expire on December 31, 2004. (8) Certain satellite subscribers (see bulleted list above) would lose access to distant network signalsif the license was notextended. Copyright owners, often represented by the Motion Picture Association of America (MPAA), object tothe compulsory licenses. They argue that the cable and satellitecompanies should be required to negotiate copyright royalties like everyone else. Prices for the cable and satellitecompulsory licenses are set by different methods and on differentcycles. Prices for the satellite license had last been set in 1997. As required by law, the Copyright Office, througha Copyright Arbitration Royalty Panel (CARP), set a price based on"fair market value": 27 cents per subscriber per year for both distant network and superstation signals. The satellitecompanies objected because the prices were a significant increase,and much higher than what cable companies pay (see CRS Report 98-140(pdf) ). In SHVIA, Congress rolled the ratesback by 45% for distant network signals, and 30% for superstationsignals.

The MPAA argued that if the distant network signal license was extended, the royalty rates should be substantially increased and adjusted annually. The Copyright Office wanted paritybetween the cable and satellite licenses and recommended that the satellite distant network signal license be renewedfor five more years while both licenses were reexamined. TheSatellite Broadcasting and Communications Association (SBCA), representing the DBS companies, wanted thedistant network signal license made permanent. The NationalAssociation of Broadcasters (NAB) wanted the distant network signal license extended only for five years, andlimited to areas where local-into-local is not available. The final versionof SHVERA extended the license for another five years, and allowed the parties to reach a voluntary agreement onthe royalty rate. If they cannot reach agreement, the rate is to be set bya CARP process. SHVERA also requires most subscribers to choose between local-into-local service or distantnetwork signals if local-into-local is available in their area. Generally,existing subscribers who are currently receiving distant network signals because they live in white areas (not thosewho were grandfathered in SHVIA) may continue to receive bothdistant and local-into-local signals. Other existing subscribers must choose one or the other. New subscribers maynot receive distant network signals once local-into-local is availablein their area.

"Digital White Areas". To date, white areas (or unserved households) have been defined based on the transmission of analogtelevision signals. The broadcast television industry, however, is transitioning from analog to digital signals, andeventually will cease transmitting analog signals (see CRS Report RL31260 ). SBCA and the Digital Transition Coalition (DTC) want "digital white areas" to be defined, similar tothe existing analog white areas, where satellite companies would beallowed to provide distant digital network signals to subscribers unable to receive local network digital signalsterrestrially. SBCA and the DTC argue that allowing satellite TVcompanies to provide digital distant network signals to unserved households would spur the broadcasters to convertto digital more quickly. The NAB called SBCA's proposal "a recipefor mischief," disputing the assessment that broadcasters are moving slowly on digital TV. The final version ofSHVERA contains complex wording about digital white areas, and bothsides declared victory. The details are explained in CRS Report RS21990(pdf) . Essentially, subscribers who areunserved for purposes of analog TV signals, and meet certain conditionsregarding the availability of analog or digital local-into-local service, will also be considered unserved for purposesof digital TV signals and receive distant digital signals. Othersatellite TV subscribers may receive distant digital signals only under very narrow circumstances that appear tominimize the number of eligible households.

Local-into-Local Issues: More Consumer Choices (Including "Significantly Viewed" Stations), and EchoStar's "Two-Dish" Policy. As discussed earlier, local-into-local allows satellite companies to retransmit a local station's signal back into theDMA from which it originated. The use of DMAs to define the areasinto which a particular signal can be retransmitted is mandated by SHVIA. However, DMAs often cross stateborders, so a consumer in one state may receive programming from anotherstate when subscribing to local-into-local service. Also, consumers within a state that might have only one networkTV station may not be eligible to receive that station's signalbecause, based on DMA boundaries, it is a distant network signal that the consumer is ineligible to receive (becausethe consumer can receive a Grade B signal from a station in aneighboring state). SHVERA permits additional stations to be retransmitted to subscribers in certain states becauseof such factors. Subscribers in New Hampshire are allowed toreceive via satellite signals from the one network station licensed in that state. Subscribers in Vermont are allowedto receive the signals of any network station licensed in that state. Subscribers in four Oregon counties (Umatilla, Grant, Malheur, and Wallowa) that are in DMAs principallycomposed of counties in a neighboring state are allowed to receive a signalfrom any network station licensed in Oregon. Subscribers in two adjacent Mississippi counties (Wilkinson andAmite) that are in a DMA composed primarily of counties in another stateare allowed to receive any network station from the state capital (Jackson). SHVERA also allows satellitecompanies to retransmit out-of-market " significantly viewed " stations. Asexplained in CRS Report RL32641 (p. 11), to be "significantly viewed," stations must meet threshold viewershiplevels based on the number of over-the-air viewers. For networkstations, a market share of at least 3% of total weekly viewing hours and a net weekly circulation of 25%; forindependent stations, 2% of total weekly viewing hours and a net weeklycirculation of 5%.

Another issue was EchoStar's policy that, in some areas, consumers must obtain a second satellite dish to receive all their local programs. That is because EchoStar uses satellites indifferent orbital locations to transmit the programming and separate antennas are needed to point toward thedifferent satellites. The NAB and others complained that the practice isdiscriminatory because the channels for which the second dish is needed are primarily religious or foreign languagestations. EchoStar responded that there is no cost for the second dish,the channels all appear on the TV program guide, and no special steps must be taken by the consumer to access thoseprograms once the second dish is installed. Nonetheless, SHVERArequires satellite companies to offer all local channels on a single dish within 18 months of the law's enactment(except that digital TV service signals and non-digital TV service signalsmay be on separate dishes).