Witness Testimony
Mr. David K. Moskowitz
Senior Vice President & General Counsel
Echostar Communications Corporation
9601 S. Meridian Blvd.
Englewood, CO, 80112
Oversight of the Satellite Home Viewer Improvement Act
Subcommittee on Telecommunications and the Internet
March 10, 2004
10:00 AM
Thank you Chairman Upton, Representative Markey, and distinguished members of
the Subcommittee, on behalf of EchoStar Communications Corporation, I want to
thank you for inviting our company to discuss with you the Satellite Home Viewer
Improvement Act. My name is David Moskowitz, and I am Senior Vice President and
General Counsel of EchoStar Communications Corporation.
Let me begin by acknowledging the vision that members of this Subcommittee
had early of the potential for satellites to provide consumers with an
alternative source for news, information and entertainment programming. The
committee's support of program access rules in 1992, which was intended to
provide satellite TV companies with more comparable access to the same
programming available on cable, was instrumental to the growth of the Satellite
TV industry. Thus in 1996, when we launched our small dish satellite TV service
called DISH Network, we were successfully able to provide competitive television
services to consumers nationwide.
Since offering service 8 years ago, DISH Network has grown to become the most
technologically advanced television provider in the multichannel video market
today. We offer a variety of high-definition television networks with
state-of-the-art set top box receivers with built in digital video recorders, as
well as dozens of interactive services. Today we have more than 9 million
subscribers and expect that number to continue growing. We offer local broadcast
service in over 108 television markets nationwide, meaning that it is available
to more than 85% of all households in the country. We credit our dedication to
customer service and competitive pricing for our success as well as the
availability of traditional cable channels and our ability to provide local
service. We're proud to say that we have signed up more subscribers over the
last three years than all other pay television providers combined. Indeed,
twelve years ago it was thought that satellite TV could not compete with cable
and it was wishful thinking to think that we could; today it's a reality.
Reauthorization of the Satellite Home Viewer Improvement Act provides
Congress with an excellent opportunity to further improve the environment for
the broad-based availability of advanced services to the consuming public, in
addition to continuing many of the established and proven provisions of the Act,
which are essential to promoting competition in the multichannel video
programming distributors ("MVPD") market. In many critical respects,
satellite carriers are saddled with regulatory provisions that are not imposed
upon their competitors, and that makes satellite a less attractive option for
many potential subscribers. One of EchoStar's principal objectives is to ensure
that the satellite industry is able to compete more effectively with other MVPD
providers.
I urge the Committee to reauthorize the Satellite Home Viewer Improvement Act
(SHVIA) and extend the satellite distant network signal and superstation license
permanently. I would also like the Committee to consider allowing consumers that
otherwise cannot get digital service from their local broadcaster to receive
network digital television signals from a satellite TV provider. Lastly, I
believe a handful of modifications to the SHVA are needed to ensure satellite
television providers can continue to meet consumer expectations and compete
effectively with other multichannel video programming distributors.
Before I discuss the reauthorization of the Satellite Home Viewer Act, I
would like to begin my remarks by expressing my disappointment with network
broadcasters who continue to make a mockery of the retransmission consent
provisions of the 1999 Act. In exchange for permission to carry network
broadcast programming, the broadcasters are increasingly leveraging their
monopoly over this programming to force pay TV providers to carry the cable
networks they own. Often, consumers are not interested in this other
programming, and do not want to pay the higher monthly fees that come from tying
these programs to broadcast retransmission. We urge Congress to take a closer
look at the way retransmission consent is being implemented, and act accordingly
in the interest of consumers and market competition.
Reauthorization of Section 119
Section 119 of the Copyright Act, which expires on December 31, 2004, allows
satellite carriers to make distant network programming available to viewers
unable to receive the over-the-air signals of their local network affiliates.
Although this provision does not have an affect on many households in urban
areas, the service is of critical importance to consumers in rural areas. There
are millions of such "unserved households" throughout the nation and
one of the reasons appears to be that the cost to the broadcasters of providing
service to these additional households exceeds the advertising revenue that the
broadcasters would hope to generate. Subsequently, the satellite TV industry
sought to meet the consumer demand in the market-place and invested billions of
dollars to build and launch satellites that could serve these rural households
that broadcasters have long neglected. The broadcasters have still not made any
significant investment to expand the reach of their over-the-air-signal.
Therefore, satellite TV remains the only option for millions of rural
subscribers to receive broadcast network programming. Without the distant
network signal license, satellite TV providers could not continue making this
service available, and these subscribers would lose their ability to watch
broadcast network programming. We urge you to extend the license.
The broadcasters have argued that the availability of distant network service
should be limited to only those markets where local-into-local service by
satellite is now unavailable. We oppose this modification to the existing
license based on basic market principle -- consumers deserve choices. In the
same way that a consumer in Kalamazoo, Michigan can purchase either the
Kalamazoo Gazette or the Los Angeles Times, we believe that consumers who do not
have adequate access to an over-the-air signal and must pay for their television
service should have the option of watching their local broadcaster or a distant
broadcaster on their satellite platform. Besides, it would be odd to penalize
satellite carriers for the large investment that they have made to introduce
local into local service. Taking away the satellite carrier's distant network
license in areas for which they have made such an investment would be precisely
such an unjust penalty. Furthermore, the deletion of distant network signals in
markets where satellite provides local service would also be costly to the
consumer. Many satellite TV subscribers have legacy dishes and set top box
receivers that would require upgrading in order to switch from distant network
service to local service.
The distant network signal provides a marketplace motivation for the
broadcasters to continue improving their over-the-air reception and thereby
making their signal available to as wide an audience as possible. Without the
satellite carriers' ability to offer distant network signals, broadcasters would
not have any incentive to make such improvements. The broadcasters realize that
it is less costly to them for their signal to be delivered by satellite or cable
TV rather than over the air. Simply put, broadcasters would save money on their
power bills if they felt they did not need to bother about the quality of their
over-the-air signal. The anxiety of vying for their audience with network
signals would no longer exist. The result could be that the number of consumers
who can receive over-the-air signals could diminish if the broadcasters lower
their signal's strength and rely on satellite TV to deliver their signal. In
conclusion, the proposal to limit the availability of distant network service to
the markets unserved by local channels via satellite would create a disincentive
for the broadcasters to continue offering free service of acceptable quality in
rural areas, resulting in less choice for consumers and higher costs.
Section 119 also permits satellite carriers to retransmit non-network
broadcast stations to satellite subscribers. These so-called "superstations,"
such as WGN, have been a staple of cable system lineups since cable first began
making its service available to consumers in the 1970s, and helped drive the
growth of the satellite television industry. They continue to be among the most
popular program offerings. The statutory license ensures that satellite carriers
have the same opportunity as cable to make this popular programming available to
satellite subscribers.
Section 119 also allows certain eligible households to continue receiving
distant network signals if they subscribed to these signals prior to October 31,
1999. EchoStar strongly supports extension of the distant network
"grandfather" clause. This group of satisfied, long-term customers
numbering in several hundreds of thousands has come to rely upon this service
for at least the last five years, and in some cases much longer. It makes no
sense from a public policy standpoint to disenfranchise consumers by telling
them that they can no longer receive this programming.
Finally, the current playing field is not level - as long as the cable
industry continues to enjoy a permanent, statutorily granted license, the
satellite industry remains at a competitive disadvantage. Therefore, in the
interest of parity and Congress' role and oversight responsibilities in
promoting competition in the MVPD marketplace, we urge the Committee to allow
satellite carriers to avail themselves of a license under the same terms as
cable.
Transition to Digital Television
The reauthorization of SHVIA also offers Congress an opportunity to broaden
the existing "unserved household" definition so consumers who cannot
otherwise receive a digital television (DTV) signal from their local
broadcaster, will have the ability to receive it from their satellite TV
provider.
Congress passed the Telecommunications Act of 1996 which gave the
broadcasters for free $70 billion dollars worth of new spectrum for the
broadcast of DTV signals beginning in 1998. In the ensuing 1997 Balanced Budget
Act, Congress set deadlines for consumers to receive these digital signals, and
for the analog spectrum to be returned once the transition was complete. By law,
the commercial broadcasters were to be offering digital service in all 210
designated television markets (DMA) by May 1, 2002. Non-commercial broadcasters
were to be transmitting by May of the following year. The broadcasters were then
required to return the analog spectrum by December 31, 2006.
Despite the comprehensive transition framework created by Congress and the
Federal Communication Commission's (FCC) many efforts to accelerate the
transition, many broadcasters are still failing to provide digital service.
Currently 1,057 TV stations out of 1,688, or nearly two-thirds, are not meeting
Congress' expectations for available digital service in local markets according
to the FCC. Of these stations, 303 are not broadcasting at all and 754 are
broadcasting at a low power, serving an area smaller than their analog signal.
On a market-by-market basis, consumers in only 17 of 210 markets are able to
receive a full complement of over-the-air network DTV service (NBC, ABC, CBS,
FOX, and PBS) similar to analog service.
The broadcasters would like for you to believe that their DTV signal is more
widely available. In fact, during recent testimony in front of the House
Judiciary Subcommittee on Courts, the Internet, and Intellectual Property, the
National Association of Broadcasters claimed that broadcasters have built - and
are on-air with -- digital television ("DTV") facilities in 203
markets that serve 99.42% of all U.S. TV households. If we are to believe these
statistics, then it is hard to understand why broadcasters are so adamant about
preventing the satellite TV industry from serving the remaining 0.58% of
households who cannot now receive their service.
The Balanced Budget Act of 1997 provided only a limited number of rationales
for extending the December 31, 2006 deadline for broadcasters to return the
analog spectrum. The most significant is the so-called "15% rule."
Under that rule, the FCC may grant an extension if at least 15% of households do
not have a DTV set or a digital-to-analog converter enabling them to receive the
DTV signals of local broadcast stations. Today, less than three years from the
2006 deadline, there is no evidence that the percentage of American homes with
compliant sets exceeds even the single digits. The 15% loophole will ensure that
broadcasters will squat on both the analog and digital spectrum for years, if
not decades to come. New innovations that rely on the redeployment of the analog
spectrum will be put on hold and taxpayers across the country will be denied the
hundreds of billions of dollars that the auction of the analog spectrum would
bring to the U.S. taxpayer.
There is an immediate and practical solution to help ensure that the digital
transition does not continue to proceed at today's snail's pace. By allowing
satellite TV providers to offer DTV programming to households that are not
served with a local over the air signal, Congress would facilitate a demand for
digital television sets among satellite TV subscribers. Although these
households would be receiving distant network DTV signals rather than local
broadcast signals, these consumers would count toward the local broadcaster's
85% take rate because the satellite TV industry's HDTV set top box receivers
include over-the-air digital tuners. The network availability of HD service via
satellite will also motivate the broadcasters to make their digital signal
available to more households sooner, which will accelerate the time in which 85%
of the country can receive DTV. Congress will need to direct the FCC to develop
a propagation model to predict over-the-air digital reception on a
household-by-household basis. The Copyright Office, in its testimony before the
House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property
on February 24 agreed by saying "Congress will have to reexamine how to
determine what is an un-served household" in a digital world. This model
should be based on an average consumer's reasonable expectation regarding the
size and cost of an over-the-air digital antenna.
Lastly, the satellite TV industry's offering of distant digital signals would
have no real impact on the roll out of analog local-into-local service to
additional markets by DBS operators. Our industry continues to rollout of local
markets. This proposal would simply afford consumers nationwide currently
unavailable digital services.
Regulatory Parity
As I mentioned earlier in my testimony, one of our principal objectives in
the SHVIA reauthorization process this year is to ensure that we can continue to
compete on a level playing field with our competitors, which means establishing
some degree of regulatory parity with cable when it comes to regulations
governing carriage of broadcast channels. From an objective point of view, the
SHVIA imposes upon the satellite industry a number of affirmative obligations
and prohibitions that make it difficult for DBS providers to offer programming
comparable to that offered by cable. For example, while the cable industry
enjoys much broader leeway in providing broadcast signals - both network and
non-network, and distant or local - to its subscribers, satellite providers face
strict restrictions on the broadcast signals they can provide to subscribers. It
is provisions such as these that must be reexamined to ensure that true
competition is fostered and not inhibited by statutory barriers.
Carriage of Broadcast Signals
The first issue that I would like to address in connection with carriage of
broadcast signals involves DBS providers' ability to offer a full complement of
broadcast station programming. As DBS providers continue to offer more and more
local-into-local services in the 210 DMAs, there are at least 50 markets that do
not have a full complement of local affiliates of the major networks. Currently,
the law does not allow DBS providers to make available to subscribers a
broadcast station from a neighboring DMA in those circumstances to ensure that
subscribers get the whole complement of broadcast stations. This is because the
local-into-local license contained in Section 122 of the Copyright Act only
allows DBS operators to retransmit local stations back into the DMA where they
are broadcast. Cable, on the other hand, can fill in holes in local station
affiliate offerings with neighboring stations and routinely adds network
affiliates and other broadcast stations so that its subscribers have the full
line-up of major network and other popular stations. The inability of DBS
providers to offer subscribers a full complement of broadcast signals leaves
them at a serious disadvantage vis-à-vis cable in competing for customers and
is inconsistent with the FCC's policy objective of ensuring that consumers have
access to all of the major broadcast networks.
Similarly, DBS operators are not permitted to tailor their local channel
offerings to respond to local community needs or interests. Cable, on the other
hand, is permitted to include broadcast channels that do not originate in their
local markets if those signals are "significantly viewed" by the
community. There is no such provision for DBS. As a result, DBS providers must
adhere to DMA market designations that do not conform to a local community's
viewing habits. For example, Comcast in New Haven, Connecticut, which is in the
Hartford-New Haven DMA, offers CBS, NBC and FOX affiliates from both Hartford
and New York City and ABC affiliates from both New Haven and New York City. By
contrast, DBS providers cannot offer the New York City stations at all in New
Haven, and are thus at a serious competitive disadvantage.
Analog Predictive Model
With respect to distant analog signals, the consumers' interests are
paramount for EchoStar and it is this Committee that speaks for those consumers.
It is important for all of us to work to ensure that each and every consumer
without an adequate over-the-air network signal has access to a distant network
signal by satellite. We believe Congress should give the FCC the authority to
adopt a higher value for Grade B intensity, corresponding to modern consumer
acceptance standards, specifically for SHVA purposes.
Waiver and Signal Strength Testing Process
We believe that SHVIA's current waiver and signal strength testing process
for the receipt of distant network signals by those who are predicted to receive
a Grade B over-the-air signal, but who nonetheless do not receive a clear
picture, needs to be revisited. That process is not functioning as Congress
envisioned. After five years of experience, we can testify that the process
often leads to a bad customer experience. In some cases the law is unclear; in
other cases consumers have unrealistic expectations; still, in other cases DBS
providers and their customers are subject to the whims of broadcasters. We
recommend narrowing the waiver process to only permit consumers receiving a weak
Grade B signal to request a signal strength test. We also recommend a
prohibition on broadcasters from revoking waivers once given as long as the
subscriber receives continuous service from their DBS provider. Further, the
rules should be clarified to eliminate consumer confusion when a subscriber is
predicted to receive the same network signal from two local affiliates of
different DMAs by requiring a waiver only from the network station in the
subscriber's DMA. This will eliminate the need for customers to get multiple
waivers from affiliates of the same network.
Conclusion
Mr. Chairman, in closing I would like to reiterate that EchoStar appreciates
the efforts of this subcommittee as well as the Congress to ensure that DBS is a
true competitor in the MVPD marketplace. With a few exceptions, our experience
under the SHVIA has been a positive one. While the DBS industry is growing, it
is nowhere close to the size of cable operators. It is therefore essential for
Congress to reauthorize the extension of the satellite statutory license, allow
more regulatory parity with cable, which still enjoys preferential treatment
under the copyright laws, and ensure that the DBS industry is able to compete on
a level playing field. We at EchoStar look forward to working with members of
this committee and this entire Congress to modernize SHIVA so that we are able
to deliver the latest in technology to as many consumers, as quickly as
possible.
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