House Commerce Widely Expected to Clear Revised STELA Bill

Communications Subcommittee Chairman Greg Walden, R-Ore., announced the deal between Democrats and Republicans Tuesday. “This agreement underscores the bipartisan commitment to advance legislation that will ensure that 1.5 million Americans in rural areas will continue to receive the satellite television services on which they rely,” Walden said in a written statement. “It’s imperative that we get this legislation to the president’s desk before the end of the year.”

"I am proud to say that STELA is another bipartisan success,” Walden said in his opening statement at the Wednesday markup session. “This bill will extend for five years the provisions of the Communications Act that enable broadcast carriage on satellite providers."

The full committee markup vote is scheduled for Thursday at 10 a.m. in 2123 Rayburn. The agreement was finalized late Tuesday, and Democrats now expect a smooth process going into the markup, said a Democratic staffer. Industry lobbyists last week and early this week had told us there was yet no compromise, pointing out that many key committee staffers were in Los Angeles for NCTA’s Cable Show. One communications industry lobbyist said the bill should pass relatively easily by voice vote, a sentiment others echoed.

Draft Details

The draft bill, which would reauthorize STELA for five years, would give more flexibility for existing joint sales agreements. If holders of such agreements submit waiver petitions to the FCC, the agreements would potentially not be considered in violation of any ownership limitations until either 18 months after the FCC denies the petition or by Dec. 31, 2016, “whichever is later,” said a Wednesday GOP memo addendum for the markup session (http://1.usa.gov/QfoV1q). “The bill is constructed to encourage the FCC to act on waiver requests in a timely manner and to encourage broadcasters to file petitions for waiver as soon as they recognize the need for such waivers.”

Of joint retrans negotiation, “the discussion draft contained a provision permitting the joint negotiations if the satellite or cable operators agreed to such joint negotiations to reduce transaction costs,” the memo addendum said. “However, cable and satellite operators have claimed that no distributor would choose to negotiate jointly with the two television broadcasters in the market; moreover, smaller operators have argued that such choice could undermine the benefit of separate negotiations in all other instances. The final bill does not contain this provision.”

The draft retained earlier provisions, such as one ending the set-top box integration ban and killing the sweeps-weeks rule. One provision directs GAO to do a report on “necessary changes to the Code of Federal Regulations and the impact on consumers should Congress repeal the statutory compulsory copyright regime that governs broadcast content,” as the memo addendum said. Another section requires “each satellite direct broadcast service provider to report the local signals that it provides for each market in which it broadcasts such services and also report on the potential use of its technology for the retransmission of local signals in each market.”

"Eliminating the costly CableCARD integration ban repeals unnecessary regulation and allows for greater innovation in cable set-top boxes,” said Commerce Committee Chairman Fred Upton, R-Mich., in an opening statement, praising what he judged “targeted” fixes following a “spirited” debate at subcommittee level. “Changes to retransmission consent negotiations help level the playing field and ultimately benefit consumers.”

Eshoo flagged two “very important” bill text modifications: “It removes the ‘dealers choice’ exemption that could have been used as a coercive tool against small cable operators,” she said. “By eliminating this exemption, we ensure that broadcasters can’t team up against pay-TV providers for leverage during negotiations. This provision places in statute a reform that is even stronger than the FCC’s new rule banning joint retransmission consent between the top four broadcasters.” The bill also kills the provision prohibiting the FCC from “closing a loophole” in media ownership rules: “In its place, the bill ensures that broadcasters subject to the FCC’s recently adopted reforms on Joint Sales Agreements (JSAs) will have sufficient time to seek a waiver and if denied, unwind these agreements,” Eshoo observed.

Industry Reaction

"TiVo remains disappointed” in the committee’s “'compromise’ language,” General Counsel Matt Zinn said in a statement, saying “the new House language would still hurt consumers and undermine competition in the set-top box market.” The legislation would “chill competition and innovation by making it difficult or impossible to offer competitive devices on a national basis,” he said. “TiVo and other independent manufacturers could not offer products that provide the same programming and services as are available through operators’ leased devices. This is contrary to the core language and fundamental purpose of the provision amended, Section 629 of the Communications Act."

Dish Network and DirecTV back “swift passage” of the STELA draft, they said in a joint statement: “Critically, the legislation ensures continuity of service to more than 1.5 million distant signal subscribers who would, otherwise, lose service at the end of this year. It also addresses one of the most egregious forms of retransmission consent abuse -- joint negotiating agreements among broadcasters.” The American Cable Association is “very pleased with the STELA bill that is expected to receive approval” Thursday, President Matthew Polka said in a statement.

MVPDs have a clear agenda, cautioned Center for Boundless Innovation in Technology Director Fred Campbell. “The STELA license is set to expire at the end of the year unless Congress reauthorizes it, and MVPDs see the potential for Congressional action as an opportunity for broadcast television to meet its Waterloo,” Campbell wrote in a blog post Wednesday (http://bit.ly/1o6u4HL). “They desire a decisive end to the compulsory copyright licenses, the retransmission consent provision in the Communications Act, and the FCC’s broadcast exclusivity rules -- which would also be the end of local television stations."

The House Judiciary Committee and the Senate Commerce and Judiciary committees have yet to weigh in with any STELA legislative language. Given their jurisdiction, the Commerce committees in both chambers seem the hubs of more activity on STELA, as opposed to Judiciary, focusing more narrowly on the copyright side of the legislation, said a communications industry lobbyist. Top Senate Democrats told us Tuesday they plan to address STELA before long but did not spell out any timeline (CD May 7 p10).

The House Judiciary IP Subcommittee will hold a STELA hearing Thursday at 2 p.m. in 2141 Rayburn. Witnesses are Marci Burdick, senior vice president of Schurz Communications, testifying on behalf of NAB; Dish General Counsel Stanton Dodge; ACA’s Polka; and William Roberts, acting associate register of copyrights at the U.S. Copyright Office. Dodge plans to propose “two possible solutions to end blackouts and ensure that consumers have continuous access to network programming from the pay-TV provider of their choice,” according to his written testimony: a mandatory “standstill” provision in retrans negotiations or perhaps permission for pay-TV companies to import a distant network signal when a local affiliate removes its signal during a retrans fight.

The Commerce Committee legislation is an excellent start,” Dodge will say at the Thursday hearing, disputing the virtues of a clean STELA reauthorization and saying it ignores the threat of retrans blackouts. “But more is necessary to accomplish the fundamental goal of ensuring that broadcast programming fulfills its public interest mandate and always stays up for consumers.”