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Satellite Debate Could See A New Wild Card
by Drew Clark
Every five years since 1988, renewing the law that authorizes satellite companies to retransmit broadcast signals has been a major test of wills between entrenched television players and the upstart satellite industry. Passage of some version of the bill is practically assured because millions of constituents flood Congress with hate mail if their satellite signals are terminated. The question has always been which version of the Satellite Home Viewer Act will be enacted.
This time, the debate could involve a new wild card: digital television. The transition from analog TV is finally gaining steam as consumers start to buy the pricey receivers and oversized screens they need to watch high-definition TV (HDTV). But because current law stipulates that analog signals cannot be halted until 85 percent of Americans can receive digital signals, legislators are beginning to realize that the transition could take decades.
"You have this carrot of all this billions of free spectrum but no obligation that you have to meet," Charlie Ergen, CEO of the satellite company EchoStar Communications, said of the broadcasters. He said they need "a little bit of a stick from government: 'If you do not make the investment in customers, we are going to let other people do that.'"
His proposal is to let direct-broadcast satellite (DBS) companies deliver HDTV where local broadcasters do not -- a move that he said would trigger either "a mad rush to buy towers" by broadcasters or the realization that such investments are not economical.
From Nascent Industry To Cable Competitor
The original satellite law was passed to both nurture and regularize the nascent satellite industry, which grew significantly in the mid-1980s by serving rural Americans who lived outside the metropolitan areas where broadcasters transmitted TV signals.
At the time, many satellite providers simply picked up and retransmitted broadcast signals from distant markets and retransmitted them to customers. That "satellite piracy" was a major concern of broadcasters, who accused their rivals of copyright infringement. Congress addressed the issue by creating a "compulsory license" under which the satellite industry could legally retransmit such signals for a set fee. The cable industry received a similar statutory license in 1976.
But unlike cable's permanent authorization, the satellite license expired in 1994. Satellite players pressed for permanence but instead received a five-year extension. More significantly, that year's reauthorization said that a Copyright Arbitration Royalty Panel (CARP) should review the rate that satellite firms paid and set it to reflect "marketplace value."
Meanwhile, advancing satellite technology fostered the modern DBS industry, with ever-smaller receivers, to the point that suburban and even urban customers could receive satellite service with pizza-sized dishes. From less than 70,000 subscribers in December 1993, the industry grew to 7.2 million in June 1998 and 20.3 million in June 2003, according to the FCC.
"Applying the new marketplace-value standard as it was required to do, the CARP not surprisingly raised the rates considerably," Register of Copyrights Marybeth Peters told the House Judiciary Courts, the Internet and Intellectual Property Subcommittee in February. "The satellite industry, with less than 10 million subscribers, was required to pay more in statutory royalty fees than the cable industry, which had nine times the number of subscribers."
The 'Local Into Local' Innovation
House Energy and Commerce Committee members heard complaints about rates from satellite subscribers as the 1999 reauthorization approached. The lawmakers also felt pressure over rising cable rates, which had been deregulated under the 1996 Telecommunications Act. From 1997 to 1998, cable rates rose 8.5 percent, compared with a 1.7 consumer price index.
Congress cut the royalty rates by 30 percent for network stations and 45 percent for "super stations," or independent, over-the-air stations, and abandoned the marketplace-value test. Cable and satellite rates under the compulsory license are calculated differently, with each industry claiming that it pays more for redistribution rights.
Perhaps the most significant change under the 1999 law, however, was the creation of a new statutory license to cover "local into local" retransmissions. The language was designed to address the heart of the controversy at the time -- and still a touchy issue in recent hearings -- about national satellite companies offering distant network signals to subscribers.
The issue involves satellite retransmissions, for example, of the CBS station in New York City to a remote area of Wyoming. Few people might complain in such cases if a Wyoming consumer cannot receive local broadcast signals. But if the satellite subscriber lives near Cheyenne and can receive local signals from KGWN-TV, that broadcaster would have one less person capable of receiving advertisements in his metro area.
By 1999, DBS technology had advanced to the point that it could offer local-into-local service in some top markets, meaning that it could retransmit signals from, say, Denver to subscribers within the Denver metro area. The law was changed to permit such retransmissions for free, as long as DBS companies carry all available local signals under the new license.
Once the service is offered, subscribers is cities like Denver no longer can get distant New York signals. DBS subscribers in Cheyenne, however, are much further down the list of metro areas, and they can receive distant signals from their choice of markets -- Denver, New York or Los Angeles.
The Battle Over Distant Signals
Exactly who qualifies for such distant signals is one of the key stumbling points in a current discussion draft by the Energy and Commerce Telecommunications and the Internet Subcommittee. In its current version, the measure does not accept the logic that EchoStar is pushing Congress to accept: just as distant analog signals are available to customers without service, distant digital signals should be available, too.
To Progress and Freedom Foundation senior fellow Thomas Leonard, the proposal "clearly makes sense on economic grounds." Consumers would benefit, he said, but more importantly, "this change will help move viewers to subscription TV" by increasing the amount of digital programming available and hasten the demand for digital televisions. That, in turn, would mean a sooner timeframe for returning the analog spectrum to the government for other uses.
Consumers Union senior director of public policy Gene Kimmelman said the proposal also would be an effective check against FCC rules permitting media consolidation.
Broadcasters object to the proposal and to a revision suggested by Rep. Rick Boucher, D-Va., that would let DBS companies offer distant digital signals only until local TV affiliates begin transmitting. Given a pattern where EchoStar has offered distant signals even when local ones were available, Robert Lee, general manager of the CBS affiliate WDBJ-TV in Roanoke, Va., called the idea "one of the most wrongheaded things" Boucher has proposed.
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