Witness Testimony
Mr. Eddy W. Hartenstein
Vice Chairman
Hughes Electronics Corporation
Corporate Communications
P.O. Box 956
El Segundo, CA, 90245-0956
Oversight of the Satellite Home Viewer Improvement Act
Subcommittee on Telecommunications and the Internet
March 10, 2004
10:00 AM
Chairman Upton, Mr. Markey and members of the Subcommittee, my name is Eddy
Hartenstein and I am the Vice Chairman of Hughes Electronics Corporation. It is
my great honor and pleasure to be here today and I thank you for allowing me to
testify on behalf of DIRECTV regarding the reauthorization of the Satellite Home
Viewer Improvement Act ("SHVIA").
This is a return visit for me, as I testified in front of the full Committee
a few years ago. I am pleased to return to report on the progress that the
Direct Broadcast Satellite ("DBS") industry has made as a competitor
to cable.
The members of this Subcommittee and the full Committee deserve a great deal
of credit for their role in the success of the DBS industry. SHVIA, which you
played such an important role in enacting, extended a compulsory copyright
license to the retransmission of local television signals within each station's
local market (known as "local-into-local"). This, combined with
improved technology such as high power DBS satellites, digital signal
compression and small receive dishes, has allowed satellite operators to offer a
programming service more comparable to that offered by cable, unleashing for the
first time real competition in the Multichannel Video Programming Distribution
("MVPD") market. SHVIA capped a string of Congressional actions that
helped create and nurture the satellite television industry, including passage
of the original Satellite Home Viewer Act in 1988 (before which our customers
could not receive broadcast station signals at all), and the reauthorization of
that Act in 1994.
SHVIA identified several important objectives:
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Create robust competition to the cable
industry;
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Establish a more level playing field for
satellite operators by removing some of the significant advantages that
cable has as the dominant MVPD; and
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Provide consumers with greater choices and the
benefits of competition.
And it has largely succeeded in reaching these goals. When SHVIA was enacted
in 1999, the DBS industry had 10 million subscribers. In the last five years,
that number has more than doubled, reaching 22 million subscribers, of which
DIRECTV serves 12 million. The result is that, while cable still has about 66
million subscribers, DBS has played at least some small part in limiting cable
price increases and forcing cable companies to provide better customer service,
improved content, and digital services. We believe that none of this would have
been possible without more robust DBS competition, and that DBS competition in
turn would not have been possible without SHVIA.
In other words, we believe that SHVIA has been an extraordinary success. And
we hope Congress will build on its success:
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First, Congress should reauthorize the core
provisions of SHVIA that expire on December 31 of this year. These
provisions include the Section 119 compulsory copyright license for distant
network signals and superstations, which we believe should be made
permanent, and the so-called "Grade B Grandfather."
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Second, based on our experiences with SHVIA
over the last five years, we believe that Congress could improve the statute
and promote competition still further by giving DBS operators the ability to
provide subscribers with the same complement of local broadcast stations
offered by their cable operators.
I will discuss each of these matters in turn. But first, I would like to talk
briefly about what has worked particularly well - SHVIA's authorization of
local-into-local service.
Local-into-Local Compulsory Copyright License Again, the biggest success of
SHVIA by far has been the authorization by Congress of local-into-local service
and the provision of such service by DBS providers. As you know, SHVIA added a
new Section 122 to the Copyright Act that provides a permanent, royalty-free
compulsory license for satellite retransmission of local broadcast signals
within their Designated Market Areas ("DMAs"), or home markets.
The ability to offer local-into-local service has been critical to DIRECTV's
growth, because it has enabled us to offer a full slate of quality programming
comparable to cable offerings. With the successful launch of our DIRECTV 7S spot
beam satellite, which is scheduled for next month, we will provide
local-into-local service in just over 100 DMAs nationwide. We also have pending
before the FCC other proposals that will give us the capacity to reach at least
30 additional DMAs by the end of this year - and maybe even as soon as this
summer. At that time we will be offering local broadcast channels in markets
serving 92% of American television households. In coming years, we plan to
continue rolling out local-into-local service in as many markets as we possibly
can.
Reauthorization of Distant Network Signal and Superstation Compulsory
Copyright Licenses
The first provisions of SHVIA that need to be reauthorized are the Section
119 compulsory copyright licenses that permit DBS operators to provide distant
network signals to "unserved households" and to retransmit so-called
superstations.
The retransmission of distant network signals to unserved households allows
consumers who cannot receive an over-the-air signal from local affiliates to
enjoy broadcast network programming. Of course, the percentage of our customer
base subscribing to distant network signals has steadily decreased with the
rollout of local-into-local programming. But this service is still critical to
many subscribers, particularly those in rural areas.
Section 119 also permits satellite operators to retransmit certain
non-network broadcast "superstations" for a statutorily determined
copyright royalty. These stations, such as WPIX in New York, WGN in Chicago, and
KTLA in Los Angeles, have been offered by cable systems around the country since
the 1970s.
Each of these compulsory licenses for DBS operators lasts only five years -
indeed, it is because they expire in December that we are here today. By
contrast, cable operators have a permanent compulsory license that allows them
to provide both distant network signals and superstations to their subscribers.
In order to promote parity between competitors in the MVPD market, we ask that,
when Congress reauthorizes the DBS compulsory license for distant network
signals and superstations, it do so on a permanent basis.
Reauthorization of Grandfather Clause The second provision of SHVIA that
needs to be reauthorized is a provision allowing the retransmission of distant
network signals to satellite subscribers who, as of October 31, 1999, could not
receive a high intensity Grade A signal from a local network affiliate, even if
they are otherwise not considered "unserved" (and thus otherwise
ineligible to receive distant network signals). In 1998, Congress decided to
allow the "grandfathered" subscribers to receive distant network
signals until the end of this year. While their numbers are dwindling, these
subscribers' grandfathered status should be extended to preserve their network
service, their preferences and their expectations.
Neighboring Local Stations By and large, as I have indicated, SHVIA's
local-into-local provisions have worked extraordinarily well. There are, though,
some cases in which satellite television customers are unable to receive the
same local broadcast signals as their neighbors who subscribe to cable. This, in
part, is because SHVIA prohibits the retransmission of stations that most of us
would think of as "local" to so-called "served households."
You don't have to search far and wide for an example of this. Not thirty
miles from here in Columbia, Maryland, for example, a Comcast subscriber can
receive both Baltimore and Washington, DC network affiliates. This, in part, is
because, while Columbia is in the Baltimore DMA, the Washington stations are
considered to be "significantly viewed" by Columbia's residents. But
if that resident switches from Comcast to DIRECTV, he or she can no longer
receive the Washington stations. This is because, even though that subscriber
thinks of the Washington stations as "local," SHVIA defines them
otherwise. In Columbia, this means that the DBS customer (unlike the cable
customer) gets only one set of network affiliates. Yet in some markets, SHVIA
can operate such that a DBS customer (unlike a neighboring cable customer)
cannot receive any signals from a particular network, because the DMA in which
the customer resides does not have an affiliate of that network, but the
customer is ineligible to receive a distant network signal. This is not fair to
consumers. And it provides cable with a significant advantage for no good
reason.
If a station is considered "local" by a particular community, and
particularly if it is retransmitted by the local cable operator, satellite
television operators should be allowed to retransmit it as a local station, as
well. This would advance all of SHVIA's original goals: It would preserve local
television service, would fulfill consumer expectations, and would enhance
competition in the MVPD market. We hope to work with this Committee in the
coming weeks to help make this happen.
Conclusion In conclusion, Mr. Chairman, I would like to thank you for all
that Congress has done to nurture the satellite television industry as a vibrant
competitor in the MVPD market. With the reauthorization of the key provisions of
SHVIA along with the minor adjustment I have discussed, we will continue to
provide the highest quality, best-priced competitive service to consumers.
I am happy to take your questions.
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