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69-006

106TH CONGRESS

REPT. 106-79

HOUSE OF REPRESENTATIVES

1st Session

Part 1
SATELLITE COMPETITION AND CONSUMER PROTECTION ACT

APRIL 7, 1999- Ordered to be printed
Mr. BLILEY, from the Committee on Commerce, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 851]
[Including cost estimate of the Congressional Budget Office]

The Committee on Commerce, to whom was referred the bill (H.R. 851) to require the Federal Communications Commission to establish improved predictive models for determining the availability of television broadcast signals, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

CONTENTS Page
Amendment 2
Purpose and Summary 11
Background and Need for Legislation 11
Hearings 15
Committee Consideration 15
Rollcall Votes 15
Committee Oversight Findings 16
Committee on Government Reform Oversight Findings 16
New Budget Authority, Entitlement Authority, and Tax Expenditures 16
Committee Cost Estimate 16
Congressional Budget Office Estimate 16
Federal Mandates Statement 21
Advisory Committee Statement 21
Constitutional Authority Statement 21
Applicability to Legislative Branch 21
Section-by-Section Analysis of the Legislation 21
Changes in Existing Law Made by the Bill, as Reported 27
Additional Views 57

AMENDMENT

SECTION 1. SHORT TITLE.

TITLE I--AMENDMENTS TO THE COMMUNICATIONS ACT OF 1934

SEC. 101. RETRANSMISSION CONSENT.

SEC. 102. MUST-CARRY FOR SATELLITE CARRIERS RETRANSMITTING TELEVISION BROADCAST SIGNALS.

`SEC. 338. CARRIAGE OF LOCAL TELEVISION SIGNALS BY SATELLITE CARRIERS.

signal or signals of such stations that are identified by Commission regulations for purposes of this section.

least 12 months, or, in the case of the failure to meet other obligations under this section, shall take other appropriate remedial action. If the Commission determines that the satellite carrier has fully met the requirements of this chapter, the Commission shall dismiss the complaint.

SEC. 103. NONDUPLICATION OF PROGRAMMING BROADCAST BY LOCAL STATIONS.

`SEC. 712. NONDUPLICATION OF PROGRAMMING BROADCAST BY LOCAL STATIONS.

SEC. 104. CONSENT OF MEMBERSHIP TO RETRANSMISSION OF PUBLIC BROADCASTING SERVICE SATELLITE FEED.

SEC. 105. INQUIRY ON RURAL SERVICE REQUIRED.

SEC. 106. DEFINITIONS.

SEC. 107. COMPLETION OF BIENNIAL REGULATORY REVIEW.

TITLE II--AMENDMENTS TO TITLE 17, UNITED STATES CODE

SEC. 201. LIMITATIONS ON EXCLUSIVE RIGHTS; SECONDARY TRANSMISSIONS BY SATELLITE CARRIERS WITHIN LOCAL MARKETS.

`Sec. 119. Limitations on exclusive rights; Secondary transmissions by satellite carriers

transmissions, and such other data as the Register of Copyrights may from time to time prescribe by regulation, and

`119. Limitation on exclusive rights: Secondary transmissions by satellite carriers.'.

SEC. 202. REDUCTION IN ROYALTY FEES.

PURPOSE AND SUMMARY

The purpose of H.R. 851, the Satellite Competition and Consumer Protection Act, is to promote competition in the market for multichannel video programming distribution (`MVPD') through the availability of satellite-delivered local broadcast television programming. H.R. 851: (1) clarifies the scope of local broadcast stations' rights in granting retransmission consent to satellite carriers; (2) delays implementation of satellite must-carry rules until January 1, 2002; (3) imposes network non-duplication, syndicated exclusivity, and sports blackout rules for satellite-delivered broadcast programming; (4) provides satellite carriers with a permanent compulsory copyright license to transmit both local and distant broadcast television programming; and (5) reduces the copyright royalty fees that satellite carriers pay for the out-of-market distribution of broadcast programming.

BACKGROUND AND NEED FOR LEGISLATION

THE CURRENT STATE OF VIDEO COMPETITION

At its core, the Satellite Competition and Consumer Protection Act is about promoting competition in the MVPD market. A recent Federal Communications Commission (`FCC') report on the status of competition in the MVPD market1

[Footnote] found that, while subscribership to satellite television services is growing exponentially, incumbent cable operators still retain a dominant position in the MVPD market, with about 85 percent of the MVPD market. Moreover, the FCC's report also found that cable rates increased an average of 8.5 percent over the 12-month period from June 1997 to June 1998, compared to a 1.7 percent increase in the consumer price index (`CPI') for the same period.

[Footnote] 1See Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, Fifth Annual Report, CS Docket No. 98-102 (rel. Dec. 23, 1998).

It is important to note that these cable rate increases have occurred under the auspices of the FCC's cable rate regulation regime (the statutory authority for which expired on March 31, 1999). As a result, competition is widely viewed as the most effective tool for protecting consumers against rate increases. Thus, the Committee is exploring alternative, non-regulatory means to promoting more competition in the MVPD market, and satellite-delivered television is a key component of that effort.

EMERGENCE OF SATELLITE TELEVISION

Satellite-delivered television arrived in the mid-1970s, and emerged as a serious competitor in the MVPD market in the 1990s. During that period, it never competed directly against other multichannel video programming providers, such as cable. Instead, it served those markets (particularly rural markets) where cable and over-the-air broadcast either could not or would not provide service.

But recent advances in satellite technology (e.g., smaller dishes, added signal capacity) have enabled distributors to compete directly with cable and over-the-air broadcast television service, even in urban markets. Satellite television has, therefore, become a key competitor in the MVPD market. To be sure, satellite television is not yet a complete substitute for other terrestrial-based multichannel systems, such as cable and wireless cable. In part, this is because satellite television systems have traditionally lacked both the technology and legal authority to distribute local broadcast signals (i.e., `local-into-local').

Satellite television distributors have, therefore, sought to differentiate their service by offering consumers hundreds of channels of high-quality national programming, including `packages' of out-of-market broadcast signals (e.g., WCBS in New York, or WRAL in Raleigh) as well as superstation signals (e.g., WGN, WWOR). Notwithstanding the unavailability of local broadcast programming, consumers have responded positively to satellite television offerings. Satellite television--and particularly high-powered direct broadcast satellite (`DBS') service--has made substantial inroads into incumbent cable's historically dominant position in the MVPD market. The FCC's report on the MVPD market found that over 10 million households subscribe to satellite television service, and that two out of three new subscribers to an MVPD service choose DBS.

SHVA'S COMPULSORY LICENSING REGIME

The Committee finds that in order for satellite television to compete more effectively with cable in the MVPD market, Congress must reform the Satellite Home Viewer Act (`SHVA'). First enacted in 1988, and then re-authorized in 1994, SHVA governs the manner in which satellite television distributors can re-transmit broadcast network programming to households in markets unserved by either cable or over-the-air broadcast television service. Specifically, SHVA currently extends to satellite television distributors a `compulsory copyright license' to re-transmit distant network-affiliated signals to `unserved households.'2

[Footnote] Through a compulsory license, satellite television distributors avoid the significant transaction costs and practical difficulties of obtaining clearance for every program carried on every broadcast station. A compulsory license essentially `compels' a copyright holder to license its programming to a distributor (such as a satellite television operator or a cable operator), in return for the distributor paying a fee that is either statutorily or administratively prescribed.

[Footnote] 2The current compulsory license also includes superstation signals, such as WGN in Chicago. The superstation license, however, has no geographic limitation similar to the unserved household limitation on network programming signals. 17 U.S.C. 119(a)(1).

Congress, however, placed a key limitation on the satellite distributors' compulsory license, i.e., the license permits satellite television distributors to re-transmit out-of-market network programming only to `unserved households.' SHVA currently defines `unserved households' as those that: (1) cannot receive an over-the-air signal of `grade B intensity'3

[Footnote] from a local broadcast station affiliated with that network using a conventional roof-top antenna, and (2) have not subscribed to a cable system that provides the signal of a local broadcast station affiliated with that network within the previous 90 days. Unserved households are colloquially referred to as `white areas,' because their television sets receive only `white snow' when using a rooftop antenna.

[Footnote] 3`Grade B intensity' measures the strength of the television signal at a given location.

The unserved household limitation is intended to protect the traditional network-affiliate relationship. Broadcast networks give local affiliates an exclusive license to distribute network programming in a given market. Local affiliates, in turn, rely upon and market this exclusivity to attract commercial advertisers. Because advertising revenue is its only source of revenue, a local broadcast station strives to reach as many households as possible within its market. Thus, when a satellite television operator distributes out-of-market, or distant, network signals to households that can otherwise receive local signals over the air, the local broadcast station's viewership (and hence, advertising revenue) necessarily declines. The unserved household limitation therefore has helped to preserve local affiliates' bargained-for exclusivity, and in doing so, promoted the development of local programming and free, over-the-air television.

`WHITE AREA' LITIGATION

The unserved household limitation, however, has proven to be difficult to enforce, and as such, has led to a great deal of confusion and uncertainty for consumers. In March 1997, local television broadcast stations affiliated with CBS and Fox filed suit in Miami, Florida, against PrimeTime 24, a distributor of satellite-delivered network programming. The broadcasters argued that PrimeTime 24 willfully violated SHVA's unserved household limitation by selling packages of out-of-market broadcast signals to households that were otherwise able to receive local broadcast signals via conventional rooftop antennas.

In December 1998, the Miami court ruled in favor of the plaintiff broadcasters in light of the overwhelming evidence that a substantial number of PrimeTime 24's subscribers lived in close proximity to local broadcast station transmitters (or, stated technically, lived `within the stations' Grade A contours'). The court, therefore, ordered that satellite television distributors shut off network programming signals for about 2.2 million households. But at a recent Subcommittee on Telecommunications, Trade, and Consumer Protection hearing, the Committee learned that the scope of the court's injunction was unnecessarily broad. Specifically, testimony before the Subcommittee made clear that as many as 10 percent of the homes subject to the court's injunction were genuinely `unserved' and, therefore, eligible for satellite-delivered network programming. While the courts' ability and authority to interpret the law is unquestionable, their remedies are sometimes too blunt, particularly in cases, such as this one, where the remedy affects a broad class of consumers who, to the best of their knowledge, violated no Federal law. It is, therefore, critical that, on a going-forward basis, Congress empower expert agencies with implementing and enforcing telecommunications policy.

SHVA REFORM: ENABLING LOCAL-INTO-LOCAL

The key to more competition with cable, as well as a partial solution to the `white area' problem, is to provide satellite carriers with the legal authority to distribute local broadcast signals back into local markets, i.e., `local-into-local.' As previously stated, satellite carriers traditionally lacked the technological capability to provide local broadcast signals, and as a result, sold packages of distant network signals to meet consumer demand for network programming. Consequently, the satellite compulsory license was limited to superstation and distant signal distribution.

But digital compression, as well as `spot beam' technology, have advanced to the point where satellite carriers have enough capacity to carry many (if not all) local broadcast signals from around the country. The Subcommittee received testimony from two satellite carriers--Local TV on Satellite, and EchoStar--that, within a couple of years, plan to provide consumers living in numerous cities with access to their local broadcast stations via satellite. Satellite television, in other words, now has the technological ability to offer consumers a complete substitute for incumbent cable offerings.

SHVA REFORM: REFINING DISTANT SIGNAL ELIGIBILITY RULES

The other key component to reforming SHVA is to further refine the rules regarding consumers' eligibility for distant network signals. Under current law, a consumer's eligibility for satellite-delivered network programming turns on whether he or she, among other things, `cannot receive, through the use of a conventional outdoor rooftop receiving antenna, an over-the-air signal of grade B intensity (as defined by the Federal Communications Commission).'4

[Footnote] This eligibility standard has led to protracted litigation between the television broadcast industry and the satellite television industry. The broadcast industry argues that the standard is sufficient. The problem (in the broadcast industry's view) lies not in the statute but with satellite television distributors that have willfully violated the unserved household limitation. The satellite industry maintains that the statute is too vague, as well as outdated given that it relies on a signal intensity standard that was acceptable to consumers in the 1950s but may be unacceptable to today's consumers.

[Footnote] 417 U.S.C. 119(d)(10) (defining `unserved household' for purposes of determining the scope of the network station compulsory license).

In any event, it is clear to the Committee that criteria for eligibility need refinement, both in terms of their implementation and enforcement. Consumers have become pawns in a lawsuit between two warring industries, and the Committee seeks to avoid a repeat of this scenario. At the same time, however, the Committee re-affirms its historical commitment to localism. As previously mentioned, the unserved household limitation served a valuable purpose: to preserve local affiliates' bargained-for exclusivity, and promote the development of local programming and free, over-the-air television.

H.R. 851, therefore, seeks to achieve a critical balance between promoting competition and preserving localism. In doing so, H.R. 851 makes numerous changes to telecommunications and copyright law to enable local-into-local, as well as to refine the rules for consumer eligibility for distant network signals. Moreover, these amendments are premised on the idea that, to the extent possible, similar rules and obligations should apply to similarly situated distributors of multichannel video programming. In other words, because local-into-local will enable satellite television service to serve as a more complete substitute to cable service, then satellite and cable service providers should operate on similar regulatory footing.

HEARINGS

The Subcommittee on Telecommunications, Trade, and Consumer Protection held a hearing on February 24, 1999, to consider issues relating to reform and reauthorization of the Satellite Home Viewer Act. The Subcommittee received testimony from Deborah Lathen, Chief, Cable Services Bureau, FCC; Charles C. Hewitt, President, Satellite Broadcasting and Communications Association (`SBCA'); Gene Kimmelman, Co-Director, Consumers Union; Andy Fisher, Executive Vice President, Cox Broadcasting; Jack Perry, President and Chief Executive Officer (`CEO'), Decisionmark; Sophia Collier, President and CEO, Northpoint Technology; Al DeVaney, President, NewsWeb Broadcasting; John Hutchinson, Executive Vice President and Chief Operating Officer, Local TV on Satellite; and David K. Moskowitz, Senior Vice President and General Counsel, EchoStar.

COMMITTEE CONSIDERATION

On March 4, 1999, the Subcommittee on Telecommunications, Trade, and Consumer Protection met in open markup session and approved H.R. 851 for Full Committee consideration, amended, by a voice vote. On March 25, 1999, the Full Committee met in open markup session and ordered H.R. 851 reported to the House, amended, by a voice vote, a quorum being present.

ROLLCALL VOTES

Clause 3(b) of rule XIII of the Rules of the House requires the Committee to list the recorded votes on the motion to report legislation and amendments thereto.

There were no recorded votes taken in connection with ordering H.R. 851 reported. An Amendment in the Nature of a Substitute offered by Mr. Tauzin, was agreed to, amended, by a voice vote. An Amendment to the Tauzin Amendment in the Nature of a Substitute offered by Mr. Boucher to require the National Telecommunications and Information Administration to conduct a study and report to Congress on the availability of local television broadcast signals in small and rural markets as part of a service that competes with, or supplements, video programming delivered by satellite carriers or cable operators was agreed to by a voice vote. An Amendment to the Tauzin Amendment in the Nature of a Substitute offered by Mrs. Wilson to exempt the provision of the bill relating to network non-duplication for subscribers that install a satellite receiver on a recreational vehicle, was agreed to by a voice vote. An Amendment to the Tauzin Amendment in the Nature of a Substitute offered by Mr. Green to require satellite providers or vendors to provide a free, over-the-air antenna to receive local broadcast signals to subscribers who have been terminated from receiving a distant network signal, was withdrawn by unanimous consent.

A motion by Mr. Bliley to order H.R. 851 reported to the House, amended, was agreed to by a voice vote, a quorum being present.

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House of Representatives, the Committee held an oversight hearing and made findings that are reflected in this report.

COMMITTEE ON GOVERNMENT REFORM OVERSIGHT FINDINGS

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House of Representatives, no oversight findings have been submitted to the Committee by the Committee on Government Reform.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the House of Representatives, the Committee finds that H.R. 851, the Satellite Competition and Consumer Protection Act, would result in no new or increased budget authority, entitlement authority, or tax expenditures or revenues.

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, the following is the cost estimate provided by the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974:

U.S. Congress,

Congressional Budget Office,

Washington, DC, April 7, 1999.

Hon. TOM BLILEY,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 851, the Satellite Competition and Consumer Protection Act.

If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contacts are Mark Hadley (for federal costs), Hester Grippando (for revenues), Theresa Fullo (for the state and local impact), and Jean Wooster (for the private-sector impact).

Sincerely,

Barry B. Anderson,

(For Dan L. Crippen, Director).

Enclosure.

H.R. 851--Satellite Competition and Consumer Protection Act

Summary: H.R. 851 would allow satellite carriers (companies that use satellite transmissions to provide television signals directly to consumers) to retransmit the signals of local television broadcast stations into the local markets of those stations. The bill would allow a local broadcast station to require, by January 1, 2002, satellite carriers that serve customers in its market to transmit its signal. In addition, the bill would eliminate a 90-day waiting period for households that switch from cable to satellite service.

Under the Satellite Home Viewer Act of 1988 (Public Law 100-667), satellite carriers pay a monthly royalty fee for each subscriber to the U.S. Copyright Office for the right to retransmit distant network and superstation signals by satellite to subscribers for private home viewing. The Copyright Office later distributes the fees to those who own copyrights on the material retransmitted by satellite. The bill would permanently extend the requirement that satellite carriers pay royalty fees to the federal government. Beginning July 1, 1999, the bill would reduce the current royalty fees charged to superstations by 30 percent, to $0.19 per subscriber per channel per month, and the fees paid by network stations by 45 percent to $0.15.

CBO estimates that enacting H.R. 851 would result in a net increase in revenues of $477 million over the 2000-2004 period and of $916 million over the 2005-2009 period. After review by an arbitration panel, royalty fees are paid to copyright owners, along with accrued interest earnings. With higher royalty collections, the payments to copyright holders would also be higher under H.R. 851, by an estimated $152 million over the 2000-2004 period, and by another $750 million over the following five years. Because H.R. 851 would affect both revenues and direct spending, it would be subject to pay-as-you-go procedures. Assuming appropriation of the necessary amounts, CBO also estimates that complying with the provisions of the bill would cost the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) about $2 million in 2000 and less than $500,000 in each subsequent year.

H.R. 851 would impose both intergovernmental and private-sector mandates, as defined by the Unfunded Mandates Reform Act (UMRA), but CBO estimates that the cost of the mandates would not exceed the thresholds established by UMRA ($50 million in 1996, adjusted for inflation for intergovernmental entities and $100 million in 1996, adjusted for inflation for the private sector).

Estimated cost to the Federal government: The estimated budgetary impact of H.R. 851 is shown in the following table. The costs of this legislation fall within budget function 370 (commerce and housing credit). 



-----------------------------------------------------------------------------------------------------------


                                         By fiscal year, in millions of dollars--                          


                                                                             1999 2000 2001 2002 2003 2004 


-----------------------------------------------------------------------------------------------------------


REVENUES AND DIRECT SPENDING 1                                                                             


Recepits and spending under current law:                                                                   


Estimated revenues 2                                                          244  185  118  112  107  101 


Estimated budget authority 3                                                  272  281  219  142  131  121 


Estimated outlays                                                             209  207  259  264  220  182 


Proposed changes:                                                                                          


Estimated revenues                                                              0   17   92  107  122  139 


Estimated budget authority                                                      0   18   97  116  136  155 


Estimated outlays                                                               0    0    4   19   35   94 


Net increase in the surplus                                                     0   17   88   88   87   45 


Receipts and spending under H.R. 851:                                                                      


Estimated revenues 2                                                          244  202  210  219  229  240 


Estimated budget authority 3                                                  272  299  316  258  267  276 


Estimated outlays                                                             209  207  263  283  255  276 


-----------------------------------------------------------------------------------------------------------


Basis of estimate: H.R. 851 would allow a satellite carrier to make secondary transmissions of local television broadcasts, eliminate the waiting period for switching from cable to satellite service, reduce the rates of copyright royalty fees, and permanently extend those fees. All of these provisions would affect payments by satellite carriers to the federal government and payments by the federal government to copyright holders. CBO assumes that payments from the federal government to copyright holders for satellite transmissions would follow historical patterns. Assuming enactment of the bill before the end of fiscal year 1999, CBO estimates that H.R. 851 would increase revenues by $477 million and increase spending by $152 million over the 2000-2004 period.

Secondary transmission- H.R. 851 would allow satellite carriers to retransmit the signals of local television broadcast stations into the local markets of those stations. The bill also would eliminate a provision of current law that requires households to wait 90 days between ending cable service and beginning satellite service. These provisions would make the services provided by satellite carriers more attractive. As a result, CBO expects that the number of subscribers to satellite services would increase more rapidly than under current law. Based on information from the Copyright Office, CBO estimates that under H.R. 851 the annual change in the volume of satellite services would increase from a projected rate of 10 percent a year to 17 percent in 2000.

In addition, H.R. 851 would allow a local broadcast station to require, by January 1, 2002, satellite carriers that serve customers in its market to transmit its signal. This provision would reduce revenues from fees in two ways. First, satellite carriers might enter new markets more slowly as they grapple with the technical difficulty of carrying hundreds of local signals. Second, satellite carriers would provide subscribers with fewer distant network signals and more signals of local broadcast stations. Under the bill, satellite carriers would not pay the royalty fee for local broadcast stations.

CBO estimates that the annual growth in fee volume would gradually decrease from the projected rate of 17 percent in 2000 to about 3 percent by 2009. Because the bill's provisions could increase the incentives for choosing satellite service over cable service, they might lead to a loss in revenues from cable fees. However, based on information from the Copyright Office and the cable and satellite industries, CBO estimates that any such reduction in revenues would not be significant.

Reduction in the copyright royalty fee- A rule issued on October 28, 1997, by the Librarian of Congress, increased the royalty fee to $0.27 per subscriber per month. H.R. 851 would reduce the royalty fee on superstations by 30 percent to $0.19 per subscriber per channel per month and the rates on network stations by 45 percent to $0.15, effective July 1, 1999. Based on information from the Copyright Office, CBO estimates that this provision would reduce revenues by $26 million in fiscal year 2000, when the fees would expire under current law. But this reduction would be more than offset by permanently extending the copyright royalty fees.

Extension of copyright royalty fees- Under current law, the royalty fees for satellite carriers expire on December 31, 1999. H.R. 851 would permanently extend royalty fees, increasing both revenue from satellite carriers and payments to copyright holders (including interest) during the 2000-2004 period. In fiscal year 2000, the net change in estimated revenues would be relatively small--$17 million--because the additional revenue from extending the fees ($43 million) would be partially offset by a reduction in fee payments due early in the year under current law. By 2004, CBO expects additional revenues to total $139 million  because of the fee extension.

Payments to copyright holders- H.R. 851 would result in additional spending because all revenues are eventually paid to copyright holders with  interest. Historical spending patterns indicate that copyright holders may receive the fees and interest up to 10 years after the Copyright Office has collected the revenues. Thus, CBO estimates a significant lag between changes in revenues and the eventual changes in the outlays that stem from copyright fees.

Discretionary spending- H.R. 851 would require the FCC to conduct rule makings containing technical and business relationships between satellite carriers and local broadcast stations. The bill also would require the FCC to report on methods for facilitating the delivery of local signals in local markets, especially smaller markets. Based on information from the FCC, CBO estimates that implementing H.R. 851 would cost the commission about $1 million in 2000 and less than $500,000 in each subsequent year, subject to the availability of appropriated funds. H.R. 851 would require NTIA to report on the availability of local television broadcast signals in small and rural markets. Based on information from NTIA, CBO estimates that conducting the inquiry would cost $500,000 to $1 million in 2000, subject to the availability of appropriated funds.

Pay-as-you-go considerations- The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The new changes in outlays and governmental receipts that are subject to pay-as-you-go procedures are shown in the following table. For the purposes of enforcing pay-as-you-go procedures, only the effects in the current year, the budget year, and the succeeding four years are counted.





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                    By fiscal year, in millions of dollars--                                                   


                                                        1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 


---------------------------------------------------------------------------------------------------------------


Changes in outlays                                         0    0    4   19   35   94  108  125  153  173  191 


Changes in receipts                                        0   17   92  107  122  139  156  172  186  197  205 


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Intergovernmental and private-sector impact: H.R. 851 would impose both intergovernmental and private-sector mandates, as defined by UMRA. The cost of the intergovernmental mandate would be insignificant and would not exceed the threshold established by UMRA ($50 million in 1996, adjusted for inflation). The cost of the private-sector mandates imposed on satellite carriers and network broadcast stations also would not exceed the annual threshold for private-sector mandates ($100 million in 1996, adjusted for inflation).

Section 104 would impose a mandate on the Public Broadcasting Service (PBS). The requirement would be both an intergovernmental and private-sector mandate because PBS is owned and operated by local noncommercial television stations that include both publicly and privately owned stations. This bill would require that PBS annually certify whether the majority of its member stations support the retransmission of PBS's national satellite feed. PBS must also provide such certification to the satellite carriers that carry that feed. Based on information from PBS, CBO estimates that the cost to comply with this mandate would

be insignificant because PBS regularly surveys its members for other purposes and could easily incorporate this new requirement into existing surveys.

The remaining mandates would impose requirements on satellite carriers and network stations, all private-sector entities. Section 101 would require satellite carriers to obtain consent from a television broadcast station to rebroadcast programs to subscribers outside the local broadcast. That requirement would be effective seven months after enactment of this bill. The costs imposed on the satellite carriers would be mostly administrative costs for negotiating agreements with local network stations. CBO believes that those costs would be small.

Section 103 would require that both satellite providers and network television stations maintain a publicly available file of subscribers' requests to allow the satellite retransmission of the signal of a network affiliate. Information from satellite carriers and networks indicates that most currently maintain some or all of that information. CBO estimates that the additional costs incurred by the satellite carriers and network television stations would be small.

An additional economic effect of this bill (not associated with a federal mandate) would result from changes to the royalty fees paid by satellite carriers to copyright holders, including some state and local government entities. The bill would reduce the fees from current levels and permanently extend them. If the current arrangement for collecting royalties were to expire, satellite owners would have to reach agreement with each copyright owner, which would be difficult and expensive.

Previous CBO estimate: On March 8, 1999, CBO transmitted a cost estimate for S. 247, the Satellite Home Viewers Improvements Act, as ordered reported by the Senate Committee on the Judiciary on February 25, 1999. That bill would extend the requirement that satellite carriers pay royalty fees only until December 31, 2004. Thus, S. 247 and H.R. 851 would have different effects on revenues and spending over the 2005-2009 period. S. 247 does not contain provisions affecting the FCC or NTIA.

Estimate prepared by: Federal costs: Mark Hadley; Revenues: Hester Grippando; Impact on State, local, and tribal governments: Theresa Gullo; Impact on the private sector: Jean Wooster.

Estimate approved by: Robert A. Sunshine, Deputy Assistant Director for Budget Analysis.

FEDERAL MANDATES STATEMENT


The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act.

ADVISORY COMMITTEE STATEMENT


No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT


Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House of Representatives, the Committee finds that the Constitutional authority for this legislation is provided in Article I, section 8, clause 3, which grants Congress the power to regulate commerce with foreign nations, among the several States, and with the Indian tribes.

APPLICABILITY TO LEGISLATIVE BRANCH


The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION


Section 1. Short title

Section 1 provides for the short title of the Act, the `Satellite Competition and Consumer Protection Act.'

TITLE I--AMENDMENTS TO THE COMMUNICATIONS ACT OF 1934


Section 101. Retransmission consent

Section 101 amends subsection 325(b) of the Communications Act of 1934, which currently requires MVPDs to obtain the consent of broadcast stations before retransmitting their signals (unless the station has elected must-carry status pursuant to section 614 (cable must-carry) or new section 338 (satellite must-carry)). New subsection 325(b), however, provides for four exceptions to the general retransmission consent rule. First, no MVPD need obtain consent to retransmit the signal of non-commercial television broadcast stations. Second, no satellite carrier need obtain consent to retransmit the signal of any station outside the station's local market if such station was a superstation as of May 1, 1991, was distributed directly to

subscribers pursuant to the satellite compulsory license as of July 1, 1998, and the satellite carrier complies with all network non-duplication, syndicated exclusivity, and sports blackout rules pursuant to new section 712. Third, until seven months after enactment, no satellite carrier need obtain consent to retransmit station signals to subscribers residing in distant markets. And fourth, no non-satellite MVPD need obtain consent to retransmit the signal of any station outside the station's local market if such station was a superstation as of May 1, 1991, and the signal was distributed to the non-satellite MVPD's headend pursuant to the satellite compulsory license as of July 1, 1998.

Subsection 325(b) further requires the FCC to issue implementing rules within one year of enactment. Subsection 325(b) specifically directs the FCC to ensure that its rules (1) establish election time periods, and (2) prohibit stations from engaging in discriminatory practices, understandings, arrangements, and activities, including exclusive contracts for carriage, that prevent a satellite carrier from obtaining retransmission consent from stations. With regard to the second criteria, the Committee notes that the FCC's rules may not require stations to provide retransmission consent to different MVPDs on identical terms. Each MVPD is architecturally unique. Cable systems serve a local or regional territory, whereas satellite systems have a national footprint. Stations may therefore properly choose to provide consent on varying terms and conditions to reflect the inherent differences in video programming distribution systems.

Finally, subsection 325(b) makes clear that a station electing carriage pursuant to retransmission consent may not avail itself of the satellite must-carry requirements under new section 338. This limitation is parallel to the limitation on stations' ability to secure cable carriage pursuant to cable must-carry once they have elected retransmission consent.

Section 102. Must-carry for satellite carriers retransmitting television broadcast signals

Section 102 creates new section 338 of the Communications Act of 1934 to address satellite carriers' must-carry obligations. In particular, subsection 338(a) requires satellite carriers, by January 1, 2002, to carry all local broadcast stations signals in a market in which it carries at least one such signal. The Committee points out that nothing in subsection 338(a) is intended to compel the carriage of multiple signals from any one broadcast station, to require the carriage of both digital and analog signals during the transition to digital television, or to otherwise supersede existing statutory authority regarding the carriage of analog or digital signals transmitted by broadcasters.

Subsection 338(b) requires television broadcast stations that assert must-carry rights to bear the costs of delivering a good quality signal to the designated local receive facility of the satellite carrier, or to an alternative facility that is acceptable to at least one-half of the stations in the same market that are also asserting must-carry rights. Subsection 338(c) provides that, notwithstanding the general must-carry requirement, satellite carriers are not required to transmit substantially duplicative local television station signals within the local market, nor are satellite carriers required to retransmit more than one affiliate of a television broadcast network. With regard to carriage of multiple local non-commercial television stations, subsection 338(c) directs the FCC to ensure that such stations receive the same degree of carriage by satellite systems that they presently receive from cable systems.

Pursuant to subsection 338(d), even though they are not required to provide local television broadcast signals on any particular channel, satellite carriers must retransmit local television broadcast signals to subscribers on contiguous channels, and provide access to such signals at a nondiscriminatory price, and in a non-discriminatory manner, on any on-screen program guide or similar interface. Subsection 338(e) provides that satellite carriers may not accept or request compensation in cash or in kind in exchange for carriage of a local television broadcast station, or for channel positioning rights provided to the local television broadcast station.

Subsection 338(f) outlines a complaint procedure for a local television station to follow in the event that the station believes a satellite carrier has wrongly denied carriage to the station under section 338. Finally, subsection 338(g) gives the FCC 180 days to implement satellite must-carry rules.

Section 103. Nonduplication of programming broadcast by local stations

Section 103 replaces section 712 of the Communications Act of 1934 to establish rules relating the non-duplication of broadcast programming distributed via satellite. As amended, subsection 712(a) requires the FCC to issue rules that enable local broadcast stations to assert network non-duplication, syndicated exclusivity, and sports blackout rights against satellite carriers distributing other broadcast programming. Subsection 712(a) further states that, to the extent possible, local broadcast stations shall have the same degree of protection against duplication as they do in the context of cable distribution of other broadcast programming.

Given the uniqueness of the network-affiliate relationship, subsection 712(b) provides specific guidelines with regard to the duplication of network programming via satellite. In the cable context, the FCC's network non-duplication rules permit a local network television station to ask that a cable operator delete duplicative network programming from another network television station retransmitted by the cable operator into a specified zone associated with the local network television station. Subsection 712(b) is intended to operate as the satellite equivalent of the network non-duplication rules that currently apply to cable operators. To begin with, it directs the FCC to establish a `Network Nonduplication Signal Standard' that, at least initially, will be the FCC's existing grade B signal contours,5

 [Footnote]  and to also establish a new `Network Nonduplication Reception Model' that can reliably and presumptively predict the ability of a consumer to receive a signal in accordance with the Network Nonduplication Signal Standard. Subsection 712(b) directs the FCC, within 180 days of enactment, to incorporate into its Model signal interference caused by terrain, building structures, and other land cover variations. The FCC is further directed to continually refine the Model and additional data as it becomes available. Together, the Signal Standard and the Model will generate a `Reception Model Area' (`RMA') for each television broadcast station, throughout which consumers are predicted to have access to a signal in accordance with the Network Nonduplication Signal Standard.

[Footnote 5: See 47 C.F.R. Sec. 73.683.]

Subsection 712(b) then identifies the scope of television broadcast station's network non-duplication rights, depending upon whether the satellite carrier is distributing local broadcast signals back into their originating markets (i.e., local-into-local). Specifically, in cases where the satellite carrier is offering local-into-local, a network television station may assert non-duplication rights against a satellite carrier within the same geographic area throughout which the station may assert non-duplication rights with respect to cable retransmission of television broadcast signals. (However, in cases where there are two network stations that are affiliates of the same television network, and both stations are located within the same local market, neither station may assert non-duplication rights in an area that is outside the station's RMA.) In cases where a satellite carrier is not offering local-into-local, a network television station may assert non-duplication rights against a satellite carrier within that network television station's RMA.

The Committee recognizes that, even though subsection 712(b) requires the FCC to continually refine its Network Nonduplication Reception Model, there inevitably will be occasions where some consumers are erroneously deemed ineligible for satellite-delivered network programming. Accordingly, subsection 712(b) provides consumers with the added protection of an expeditious waiver process. In particular, subsection 712(b) makes clear that consumers may seek a waiver from a network television station that has asserted network non-duplication rights affecting the consumer. The station must accept or reject the waiver request within 30 days. In the event the station denies the waiver, subsection 712(b) further permits the consumer to submit a petition to the FCC (or a neutral third party of the FCC's choosing), alleging that he or she does not receive the required signal intensity. The petition will be deemed granted, unless the network television station submits to the FCC (or the neutral third party) the written findings and results of a test that prove that the consumer does, in fact, receive the required signal intensity. Subsection 712(b) makes clear that under no circumstances is the consumer to be required to bear any portion of the cost of the test. Finally, in cases where consumers adequately demonstrate that they have installed satellite television services in a recreational vehicle, subsection 712(b) deems those consumers to be outside network television stations' local markets and RMAs, and thus eligible for satellite-delivered network programming without restriction.

Section 712 provides one other measure to ensure that the eligibility criteria serve the interests of both competition and localism: an ongoing review of the signal intensity standard and the predictive model. Subsection 712(c) directs the FCC to conduct an inquiry, and report to Congress within two years of enactment, on the extent to which the Network Nonduplication Signal Standard, the Network Nonduplication Reception Model, and the Reception Model Areas are adequate to reliably measure the ability of consumers to receive an acceptable over-the-air television broadcast signal. As part of its inquiry, the FCC must consider, among other things, the number of consumers that have requested waivers from their local broadcaster, and the number of waivers that broadcasters have denied. The Committee believes that, in cases where the Model fails to accurately predict consumer eligibility, the waiver process is critical to ensuring that consumers are expeditiously served, with the least amount of administrative and financial burden.

Subsection 712(c) directs the FCC to revise its eligibility rules in accordance with the findings from its inquiry, within six months of completing the inquiry and submitting a report to Congress. The Committee emphasizes that the FCC is required to make only those changes that flow from the findings from its inquiry. Thus, if the FCC finds that the grade B signal intensity standard, when applied in conjunction with a refined predictive model, and an expedited waiver process, adequately serve consumers, then the FCC shall refrain from modifying the signal intensity standard.

Section 104. Consent of membership to retransmission of public broadcasting service satellite feed

Section 104 amends section 396 of the Communications Act of 1934 to require the Public Broadcasting Service (`PBS') to annually certify to the Corporation for Public Broadcasting (`CPB') that a majority of PBS' member stations support a national PBS satellite feed. Satellite carriers will have access to the feed through a compulsory license that is created in subsection 201(a) of H.R. 851.

No later than two years after enactment, however, the compulsory license for a PBS feed will be conditioned upon the annual certification process in subsection 396(n). The Committee views this annual certification process as a critical component of the compulsory license. While the Committee supports wide availability of satellite-delivered PBS programming (and therefore provides for a conditional compulsory license), the Committee at the same time seeks to ensure that PBS member stations support the satellite feed.

Section 105. Inquiry on rural service required

Section 105 directs the National Telecommunications and Information Administration (`NTIA') of the Department of Commerce to conduct an inquiry into the availability of local television broadcast signals in small and rural markets as part of a service that competes with, or supplements, video programming delivered by satellite carriers or cable operators. NTIA is further required to submit to the Committee, as well as the Committee on Commerce, Science, and Transportation of the Senate, a report on the results of the inquiry.

Section 106. Definitions

Section 106 amends section 3 of the Communications Act of 1934 to include definitions of `local market,' `satellite carrier,' and `television network; television network station.'

Section 107. Completion of biennial regulatory review

Section 107 provides that, within 180 days after the date of enactment, the FCC will complete the biennial review required by section 202(h) of the Telecommunications Act of 1996. In particular, the FCC will issue a notice of proposed rulemaking and a final report and order on those rules that are covered under `MM Dkt. No. 98-35, NOI, FCC 98-37.'

TITLE II--AMENDMENTS TO TITLE 17, UNITED STATES CODE


Section 201. Limitations on exclusive rights; secondary transmissions by satellite carriers within local markets

(a) In general

Subsection 201(a) amends section 119 of the Copyright Act.6

 [Footnote]  Subsection 119(a) expressly establishes a compulsory license for satellite carriers to retransmit local and distant television broadcast station signals to subscribers, irrespective of where they reside. The license is conditioned upon carrier compliance with FCC rules and regulations (which are established in Title I of the bill), as well as compliance with monthly submissions of detailed subscriber lists.

 [Footnote] 617 U.S.C. Sec. 119.

The Committee notes that new subsection 119(a) removes all provisions regarding the unserved household limitation that are currently in the satellite compulsory license. It is illogical to place territorial restrictions on compulsory licenses, given that they are designed to effectuate telecommunications policy goals (e.g., localism, and the viability of free, over-the-air television), and not copyright interests. Therefore, Title I of H.R. 851--which addresses amendments to the Communications Act of 1934--properly identifies any and all geographic limitations on satellite carriers' ability to retransmit broadcast programming, and Title II conditions the carriers' compulsory license on compliance with FCC rules established pursuant to Title I.

The Committee also notes that new subsection 119(a) unifies the compulsory license for local and distant licenses, and makes both licenses permanent (as opposed to sunsetting one, but making the other permanent). Many rural and small markets rely, and will continue to rely for some time, upon satellite-delivered distant signals as their only source of network programming. It therefore makes no sense to the Committee to effectively discriminate against consumers living in these markets by sunsetting the distant signal license, while also making the local license permanent. Similarly, new subsection 119(a) makes the compulsory license available for distribution to both residences and commercial establishments alike. Many consumers have no access to multichannel video programming at their place of residence. They therefore rely on commercial establishments for access to a wide variety of satellite-delivered information and video programming. The Committee is satisfied that submissions of detailed subscriber lists will minimize any potential piracy associated with distribution to commercial establishments.

Finally, subsection 119(a) also establishes a compulsory license for satellite carriers to retransmit a national PBS feed. The compulsory license for a national PBS feed, however, is conditional. Beginning no later than two years after enactment, PBS must make an annual certification to CPB in accordance with subsection 396(n) of the Communications Act of 1934.

Subsection 119(b) makes clear that the local-into-local license is royalty-free. Subsection 119(b) also codifies the current statutory royalty fees paid by satellite carriers for the retransmission of distant network and superstations. Those rates are then reduced by the percentages provided in section 202 of the bill.

(b) Conforming amendments

Subsection 201(b) makes certain conforming amendments to Title 17. It also removes the standing of local broadcast stations to sue for infringement under Section 501 of the Copyright Act. The Committee finds that local broadcast stations have sufficient remedies available to them under the Communications Act of 1934 to protect their legitimate telecommunications-related interests. It is, therefore, unnecessary to give stations an additional right of action under the Copyright Act to protect their non-copyright-related interests. This is not to say that stations have no legal recourse in cases where their copyright interests have been infringed upon. To the contrary, the Copyright Act still permits a station to bring an infringement action, but only for those programs for which the station owns the copyright.

Section 202. Reduction in royalty rates

Section 202 of H.R. 851 reduces the copyright royalty fees paid by satellite carriers for the retransmission of network and superstation signals by 45 percent and 30 percent, respectively.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED




COMMUNICATIONS ACT OF 1934


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TITLE I--GENERAL PROVISIONS


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SEC. 3. DEFINITIONS.






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States, he is also required to be licensed as a `radio officer' in accordance with the Act of May 12, 1948 (46 U.S.C. 229a-h).













































engaged in providing telecommunications services, except that the Commission shall determine whether the provision of fixed and mobile satellite service shall be treated as common carriage.



























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TITLE III--PROVISIONS RELATING TO RADIO


PART I--GENERAL PROVISIONS


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SEC. 325. FALSE DISTRESS SIGNALS; REBROADCASTING; STUDIOS OF FOREIGN STATIONS.






















those terms, respectively, in section 119(d) of title 17, United States Code, as in effect on the date of enactment of the Cable Television Consumer Protection and Competition Act of 1992.































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SEC. 338. CARRIAGE OF LOCAL TELEVISION SIGNALS BY SATELLITE CARRIERS.














































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PART IV--ASSISTANCE FOR PUBLIC TELECOMMUNICATIONS FACILITIES; TELECOMMUNICATIONS DEMONSTRATIONS; CORPORATION FOR PUBLIC BROADCASTING


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Subpart D--Corporation for Public Broadcasting


SEC. 396. DECLARATION OF POLICY.




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TITLE VII--MISCELLANEOUS PROVISIONS


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 [Struck out->][ SEC. 712. SYNDICATED EXCLUSIVITY. ][<-Struck out]










SEC. 712. NONDUPLICATION OF PROGRAMMING BROADCAST BY LOCAL STATIONS.
















rights against the satellite carrier in the geographic area that is within such station's Reception Model Area, but such geographic area shall not extend beyond the local market of such station.

































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-

TITLE 17--COPYRIGHTS


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CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT




Sec.

101. Definitions.

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 [Struck out->][ 119. Limitations on exclusive rights: Secondary transmissions of superstations and network stations for private home viewing. ][<-Struck out] 

119. Limitation on exclusive rights: Secondary transmissions by satellite carriers.



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 [Struck out->][ Sec. 119. Limitations on exclusive rights: Secondary transmissions of superstations and network stations for private home viewing ][<-Struck out]






























viewing, of the primary transmissions of any primary network station affiliated with the same network, and the court may order statutory damages of not to exceed $250,000 for each 6-month period during which the pattern or practice was carried out; and



































carrier who shall, within 60 days after receipt of the measurement, terminate the service to the household of the signal that is the subject of the challenge, and shall reimburse the station for the costs of the measurement within 60 days after receipt of the measurement results and a statement of such costs; or



































Librarian of Congress finds the existence of a controversy, the Librarian of Congress shall, pursuant to chapter 8 of this title, convene a copyright arbitration royalty panel to determine the distribution of royalty fees.















































broadcast by a network station, that is owned or operated by, or affiliated with, one or more of the television networks in the United States which offer an interconnected program service on a regular basis for 15 or more hours per week to at least 25 of its affiliated television licensees in 10 or more States; or



























Sec. 119. Limitations on exclusive rights; Secondary transmissions by satellite carriers














transmission of a television broadcast station under paragraph (1) shall, within 90 days after commencing such secondary transmissions, submit to that station a list identifying all subscribers to which the satellite carrier currently makes secondary transmissions of that primary transmission.  Such list shall be organized by State, identifying all subscribers by name (including street address, county, and 9-digit zip code) in that State that receive secondary transmissions of that primary transmission.































funds held by the Secretary of the Treasury shall be invested in interest bearing securities of the United States for later distribution with interest by the Librarian of Congress as provided by this title.  The Register may, in the Register's discretion, at any time after four years have elapsed since the close of any calendar year, close out the royalty payments account for that calendar year, and may treat any funds remaining in such account and any subsequent deposits that would otherwise be attributable to that calendar year as attributable to the succeeding calendar year.







































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CHAPTER 5--COPYRIGHT INFRINGEMENT AND REMEDIES


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Sec. 501. Infringement of copyright




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ADDITIONAL VIEWS


H.R. 851 the Satellite Competition and Consumer Protection Act established a means for satellite television carriers to legally carry and retransmit local television network signals, thus providing a viable competitor to the cable industry.

Recent events led to the termination of network signals to millions of satellite television subscribers. Under current law only those persons who can not receive a network signal through an over the air television antenna are eligible to receive and purchase a distant network package through their satellite carriers. Unfortunately, there are many customers who live in areas of the country, for example in downtown areas, that can receive a clear network signal and were still sold these distant network packages. It is these customers who deserve a measure of relief. These are ineligible customers who were sold an illegal product.

H.R. 851 takes many steps to solve the problem of satellite customers who might have been ineligible to receive a distant network signal but were still sold distant network packages. The provisions providing for local into local service will start to alleviate this problem. However, many of these customers were still sold either through the carrier or a local vendor a distant network package that was terminated. Until local into local service is available in all markets, these satellite carriers or local vendors should be held accountable and are obligated to provide their customers with access to a local network signal.

Satellite carriers and the local vendors need to fulfill their obligations to their customers and provide them with access to a network signal.

GENE GREEN.









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