Dish Pushes for STELA Reauthorization to Address Retrans

NAB alleged at the hearing, in statements and ads that Dish, Time Warner and DirecTV comprise 90 percent of retrans disruptions. Dodge disputed the attack. “In our view of the world, there’s four companies -- ABC, NBC, CBS and Fox, and their affiliates that are responsible for 100 percent of the problem, right?” Although Dish can’t verify the numbers, he said, “it makes perfect sense that Dish, DirecTV and Time Warner would make up 90 percent of those fights.” Those three companies “represent 50 percent of the market,” he explained, saying the rest is made up of smaller companies without enough power to stand up for consumers. He said Comcast, which represents the other 25 percent, is conflicted because it owns NBCUniversal.

Top subcommittee members seemed reluctant on the role of compulsory licensing. Chairman Howard Coble, R-N.C., worried about consumers left “with no course” in such retrans disputes and said the subcommittee’s top priority is protecting consumer interests. Cable and satellite compulsory licensing systems are “not without their shortcoming,” he said. Ranking Member Mel Watt, D-N.C., said this was the first in a “series of hearings” House Judiciary plans. Compulsory licensing “represents a departure” from free-market negotiation, a “last resort in the event of market failure,” Watt said. He compared his position to that of Preston Padden, a former ABC Television Network executive testifying on his own behalf and advocating against compulsory licensing (CD Sept 9 p15). Watt questioned whether “an abrupt dismantling” would be fair to the entrenched industries.

"One core factor that this committee will weigh as we consider these important issues is ensuring that copyright owners maintain the right to distribute their intellectual property as they choose,” said House Judiciary Committee Chairman Bob Goodlatte, R-Va., in an opening statement. “This committee has traditionally disfavored compulsory licenses, although there are three in effect today in this marketplace.” Goodlatte pointed to written testimony for the hearing and noted the push for “more than a simple reauthorization” of STELA. “We must protect copyright owners,” said House Judiciary Ranking Member John Conyers, D-Mich., noting compulsory licenses are “generally not favored because they distort the marketplace."

Rep. Lamar Smith, R-Texas, asked witnesses how compulsory licensing works for TV viewers. “I would say it’s working wonderfully,” Dodge told Smith. Those systems still “have utility,” said Dodge. “With respect to the local channels, it might surprise you, I agree completely,” replied Covington & Burling attorney Gerard Waldron on behalf of NAB. “We're going to go three in a row,” said Shentel Cable Executive Vice President Earle MacKenzie on behalf of the American Cable Association. Congress should “provide a short transition period to allow the broadcast industry” to get its affairs in order when repealing compulsory licensing, Padden said. Rep. Ted Deutch, D-Fla., said Congress will be “tipping the scales” by either keeping or nixing compulsory licenses. “Why is walking out of the way altogether a fair solution?” he asked.

NAB dismissed the idea of retrans disputes. “We see this frankly as a manufactured crisis,” Waldron said. “We actually think in the vast majority of cases, the system is working.” Rep. Cedric Richmond, D-La., questioned the fairness of threatening such retrans disruptions when they may affect emergency communications. The retrans problem isn’t “manufactured,” Dodge told us. “If there’s one [blackout], it’s too many.” He said 3 million people “in one swoop” lost access for weeks in the CBS-Time Warner Cable dispute this summer (CD Bulletin Sept 2 p3). MacKenzie described how broadcasters collude against cable operators in retrans negotiations, problems compounded by mergers and acquisitions in the past year. “If you share my concerns, please inform the Department of Justice,” he said.

CenturyLink also faces problems in such retrans negotiations as a more recent entrant into the video market, said Vice President-Regulatory and Legislative Affairs Jim Campbell: “Without any leverage at all, we are the ones kind of getting swallowed up in this thing.” The American Television Alliance released a statement after the hearing blasting broadcasters, who “talk out of both sides of their mouth."

Dish, a member of that alliance, has pushed for Congress to resolve retrans disputes by “allowing cable and satellite carriers to substitute a distant network signal from a non-local market during an impasse in retransmission consent negotiations with a local market affiliate of that same network,” as Dodge said in written testimony. Rep. Judy Chu, D-Calif., said the number of households receiving service via distant signal is decreasing every year and asked Dodge for location data for the 1 million to 1.5 million households receiving such service. Dodge said they're “generally located in rural and underserved areas.” Waldron said a distant signal “undermines that localism” at the heart of broadcasting and satellite laws, which is a “strong argument” for why the committee should be skeptical about why a distant signal license is needed, as Dish argued.

"Tomorrow I think is going to be focused a little bit more about legislative solutions,” Dish Deputy General Counsel Jeff Blum told us, referring to the STELA hearing the House Communications Subcommittee has planned for 2 p.m. Wednesday in 2123 Rayburn. He cited legislative priorities that Rep. Steve Scalise, R-La., and House Communications Subcommittee Ranking Member Anna Eshoo, D-Calif., have advanced. NTCA CEO Shirley Bloomfield on Tuesday praised a draft bill that Eshoo released before the hearing. That draft calls for a greater FCC role over retrans disputes, attracting wide praise but strong NAB opposition. The bill should be “a catalyst for more discussion of how we can bring retransmission rules in line with modern-day consumer preferences and ensure that access to video programming continues to serve as a stimulant to broadband adoption,” said Bloomfield. A majority staff memo said that many rules are outdated and that current rules discriminate against multichannel video programming distributors (http://1.usa.gov/18N93qt).

"What’s also changed since last time, except for broadcasters, the rest of the industry -- the public interest groups, independent programmers, small cable, big cable, satellite, we're all aligned as part of a coalition,” Dish’s Blum said, comparing now with when STELA was passed several years ago. “When everyone is saying there’s a problem and we need to look at STELA as a way to fix that problem, that’s a significant shift from the last STELA reauthorization,” he said.

Dodge said the biggest surprise was NAB’s saying during Tuesday’s hearing that the local signal is always up and simply requires an antenna -- a contention he denied. Blum also denied it would be a practical solution to have people buy antennas, imagining a grandmother trying to attach one to her roof. Dodge also expressed surprise that the Major League Baseball testimony (http://1.usa.gov/15U1TO9) kept emphasizing that it’s not receiving a fair market rate for the distant signals. Arnold & Porter attorney Robert Garrett testified on behalf of Major League Baseball and emphasized the importance of copyright owners. They shouldn’t have to subsidize other entities, he said, saying cable and satellite companies must pay a fair market value for compulsory licenses.

Reauthorize STELA but pay attention to “outdated” and interconnected rules in the areas of copyright license, retrans and must-carry, Public Knowledge Senior Staff Attorney John Bergmayer plans to tell the House Communications Subcommittee Wednesday (http://1.usa.gov/15htddJ). Copyright Alliance Executive Director Sandra Aistars plans to say that “there is no need to regulate in this sector by imposing new compulsory licenses or renewing STELA” (http://1.usa.gov/1fWlJhx).