we have a mutual interest. broadcasters benefit from the exposure that cable and satellite provides and likewise the video operators benefit from reselling our incredibly popular content. it has been suggested by some in the cable industry that cable bills are rising because of the costs of broadcast programming. there is a chart on the screen that would indicate that the data does not support that assertion. as you can see, cable price increases have consistently outpaced inflation for 11 of the last 12 years. in actuality, it is the cable networks that have been collecting the vast majority of carriage fees. the next chart from keegan shows the differential and the disparity in fees paid to basic cable networks compared to the total fees paid to broadcasters. both on a trailing basis and as projected into the future. in 2012 it is estimated that cable will pay broadcasters approximately $2 billion in

retran fees while paying basic cable networks almost $29 billion. this does not give effect to the value of the inventory exchange that goes on from cable networks to the cable msos but that amount of money in no way equalizes a $27 million disparity. this is even more confounding when you consider broadcast ratings are many times higher than cable in so many cases. in fact, approximately 95 of the top 100 shows in the recent included television season aired on broadcast television both in the demographic of 18 to 49 and the demographic of 25 to 54 as measured by nielsen. in truth, retran payments are not the driver of increasing cable bills, and the money is not following the audience in terms of what is actually viewed on television in this country. how do we ensure our broadcast content is successful beyond

these traditional platforms to the new video technologies evolving at a break neck speed? i will observe that i think congress got it right in 1992 when it noted that broadcasters must be allowed to control the use of their signals by anyone engaged in retransmission by whatever means. new companies like sky angel are now part of the video marketplace but it appears to be unclear as to how the law will apply to them and other new entrants. the fcc is currently considering the question of what is a multi channel video program distributor. these seemingly simple questions have far reaching implications. who has program access? who pays retransmission consent fees? we believe it only makes good sense for the existing retran consent and exclusivity rules to be applied to all new entrants. as an industry that creates content or requires the right to content, it is imperative we have the right to negotiate over how our content is distributed. congress should reject any erosion of the bed rock

principles of retransmission consent and market exclusivity because they are essential to our uniquely local system of broadcasting. broadcast television is an indispensiblely important part of today and tomorrow's video ecosystem. as evidenced by our recent multi billion dollar investment throughout the digital transition american broadcasters are prepared to play a major role in the advancement of video services as we look down the road. i look forward to answering your questions when the remarks have been concluded. >> thank you, mr. barrett. we appreciate your testimony. our next witness is the chairman at dish network, mr. charlie erigan. thank you for being before the subcommittee. we look forward to your testimony. >> thank you for the opportunity to testify about the future of video. my name is charlie ergan and co-founder and founder of dish network. we serve approximately 14 million subscribers and employ over 27,000 people.

i believe and i understand the future of video goes hand-in-hand with two simple rules 6789 first, always try to understand what the customer wants and, second, change is inevidenceable. embrace is. what do customers want? they want to be able to watch their program on their tv of th communication services to every one of our customers anywhere any time. our company is moving in that direction with innovations like sling, our customers can use a wireless smartphone or tablet from any location to enjoy the video content they already paid

for. we recently purchased blockbuster and are integrating the video consent holdings to enhance our on demand offerings. we're a distributor of dvr technology and continue to innovate so our customers can watch the programming they pay for whenever, wherever, and however they want. our you noo technology takes the dvr to a new level giving consumers the choice to more easily view the preferred programming when they want while skipping what they do not want to see. this means thattal loug your kids to watch tv doesn't mean they have no choice but to see commercials for junk food or alcohol. this did nothing more than improve upon widely available technologies that give consumers to record television at a more convenient time. these are some of the ways we respond to our customers changing needs but we still have to go further. in the past we haven't shrunk from vetting the company in

order to stay competitive. we went from selling big dishes to launching our own small dish dvs business to give consumers what they want including mobile, video, voice and data and we'll have to take a significant risk once again. last year we invested billions to acquire two satellite bankrupt companies to transform them into a mobile broadband service. consumers with the choice and providers they seek. if we're successful, we'll fuel billions of dollars in investment and create tens of thousands of new jobs in the united states. this brings me to my second point. foster change. don't ignore it or be afraid of it. we're prepared to leverage our experience and financial strength to drive communications and entertainment forward and make them more mobile and dynamic than ever before. we can't get started, however, until the fcc releases updated rules governing how our satellite licenses can be used for mobile broadband. given the overwhelming support and the comments received today we hope the fcc will act and

finalize the rules by the end of the summer. we want to build the most advanced wireless network in the united states to compete against the well establishing compass and need to begin as soon as possible to have a chance. just as wireless rules must be modernized to keep up with consumers and technology the rules governing how broadcaster and tv providers retransmission agreements are outdated and in need of change. 20 years ago when congress first adopted the retransmission process in the 1992 cable act there was typically one cable operator in any given market negotiating with one broadcaster. today there are multiple paid tv providers in each market including satellite, telco, small, local, and large regional providers and there are new rove r over the top video providers like netflix, arrow and others and the broadcasters still main tans the government sanctioned monopoly in his market while paying tv providers stiff competition from one another, the result is almost always bad for consumers and the free market. broadcasters play the paid tv providers against one another and cut off the most popular

sports and entertainment programming if the demands for drastically higher rate increases are not met. consumers lose because they cannot see the programming they paid for and end up paying high rates or both. the problem is only getting worse. with more blackouts and more broadcast era bus. they cling to the status quo instead of meeting consumer demand and embracing new technologies and business models. the retransmission consent regime is a prime example of an outdated government policy in need of an overhaul by congress and/or the fcc. it is incredible to see how much we changed since 1992. likely, there are few of us who use the internet back then or had a cell phone. the idea of streaming movies or tvs to a smartphone was science fiscal. government should work to ensure its regulations mirror today's competitive realities, consumer expectations and advances in technology. thank you and i look forward to your questions. >> mr. ergan, thank you for your

testimony. our final witness, michael o'leary, the senior executive vice president for global policy and external affairs at the motion picture association of america. mr. o'leary, thank you for being here today. look forward to your comments. >> thank you, chairman wald on and ranking member eskew and members of the committee. i want to thank you all for the opportunity to testify on behalf of the motion picture association and the member companies and i want to acknowledge and thank my colleagues on the panel. i am honored to be with such a distinguished group here this morning. whether you are in a theater, at home, on the road, or choose to download and view when you want, content creators, consumer electronics companies, and content distributors are working together to provide new, innovative pgs 0s for audiences and easily access high quality content. we welcome this opportunity to testify and work with this subcommittee as you consider appropriate policies for the future of video. this is an important discussion and we're pleased to be a part of it. like all successful businesses we're driven by the desire to create and meet consumer demand for the products that we produce.

we're listening to our audiences. we're atune to their desires and every day we are developing innovative new pays to give viewers the experiences that they want. audiences today want to enjoy movies on multiple platforms from the big screen to televisions of all sizes to computers and tablets and even on their phones. we are partnering with companies of all stripes from around the globe including youtube, facebook, netflix, roku, and soon with others no doubt some other new platform which exists only in the mind of some invent active young person out there. all of these exciting innovations and distribution benefit both the consumers who receive the high quality viewing experiences they want and the creators who take the risk and invest in these productions in the first instance. for many people all around the world, there is no substitute for the theater going experience. the big screen is a foundation of the american movie industry. creating wonderful movies that people can watch in movie theaters is an important part of america's rich history and equally a part of the present of future and video.

in addition to utilizing cutting edge and sophisticated visual and special effects in our productions, our company embraced 3d, imax, and brilliant sand that enhanced and transformed the movie theater experience. the theater will play a significant role in the future of how people around the globe are entertained. our member companies are not just making movies available for the big screen. for decades people watched movies on television, but that experience is changing and improving, too, with each passing day. today our programs are being delivered to television screens by over the air digital broadcasts and through an astonishing range of channel choices enabled by our distribution partners in the cable and satellite business. audiences are able to watch programs at the time of the original airing or at the time of their choosing either through the dvr or through an increasing array of video demand pgs 0s. in addition, with the advent of interactive television, blu-ray players, roku boxes, microsoft's xbox 360, the sown playstation,

the wii and apple tv to name a few they can watch h d movies and tv shows streamed across the internet through services like netflix, vu did you, hulu or other services too many to list. audiences now find entertainment on their mobile devices as well. all of the major motion picture studios distribute full length films and television shows directly to the consumer mobile devices through major mobile operators such as at&t, sprit and verizon. the ability to access high con quality content is also as you heard this morning thriving online where competitors for consumer's attention are providing new offerings every week. just a few short years the quality of video delivery has improved tremendously and with it literally hundreds of licensed online services have sprung up around the world. among them is hbo go that adds significant value to exist subscribers by providing online access to to hbo program and not simply available on tv today, it is basically all of the catalog

in the past as well. netflix as you heard is not only delivering a staggering number of movies online but also moving into the production of online content, original content rather. youtube and facebook are entering into agreements to distribute movies well. online services today cater to every manner of consumer viewing model including rental, download to own, subscriptions, and ad supported viewing. they are provided by every conceivable type of commercial entity including technology companies like apple's itunes, broadcast television networks like abc, cbs, fox and nbc and cable networks like the comedy channel, tbs and usa and paid television channels like hbo, telecommunications cable and slight providers and retailers like amazon, best, blockbuster, netflix and walmart and gaming systems like playstation and xbox and new ventures like crackle and hulu.

finally, mr. chairman, a word about port ability. simply put, today audiences want the convenience to access the content they purchased on a variety of devices without having to buy the same thing twice. we're delivering to that promise. this began a few years ago as our company started to include with many dvd and blu-ray disk titles a transferable or downloadable digital copy for consumers to use on their computers or their portable devices. now there are a variety of ways to buy once and play everywhere. one exciting innovation comes from the digital entertainment content system which is a consortium of more than 60 studios, retail stores and technology firms that created ultra violet which is a cloud-based digital storage locker for consumer content. it works like this. when a consumer purchases ultra violet media such as a blu-ray or dvd or internet download, the consumer receives the enduring right to access that content on any ultra violet device registered to their household

and enjoy that content via streaming lieu the devices at home or on the go. presently, over 5,000 titles are available through ultra violet and over 3 million consumers have set up accounts in less than one year. this spring walmart will begin offering consumers the ability to convert the current dvd and blu-ray collections to digital ultra violet copy that is can download and stream. walmart estimates the average user of this service brings about seven disks to the store and each conversion takes approximately a minute. other complimentary digital initiatives are also being developed such as disney studio all access that will provide consumers with easy access to disney consent across multiple digital video services and devices. in closing, mr. chairman, wee are relentlessly innovating to keep pace with our audience and give them more choices on how they view our content. we're committed to that. as this committee considers the appropriate policies for future of video we hope you will continue to recognize that as promising as the new formsz of

distribution are they need content to reach the full potential. a video streaming site, satellite television company, a broadcaster, they're all terrific technologies and without the content that consumers want they simply don't reach their full potential. make no mistake, we will always have an incentive to seek out new ways for our consent to be distribute and had we must be allowed to be compensated to are it and must be a part of the discussions on how it is distributed. the topic today is an important one and we're pleased to be a part of this dialog and look forward to, woing with you in the weeks and months ahead. again, chairman walden, i want to thank you are for your time this morning thanks to you will aof our witnesses for enlightening us on your views on these very important issues in the world of video. i will start my question with mr. johnson. appreciate your comments and the situation you face. i want to just kind of get above your company per se, but raise the issues that come up in this

new world we're in. i understand why you want the protections of the communications act that affords multi channel video program distributors, but are you prepared for the responsibilities and so this probably goes to others as well. for example, are you willing to live under the must carry rules, the rules requiring the competitive availability of set-top boxes, the network non-duplication and syndicated exclusivity rules and the closed captioning emergency information requirements? that kind of comes -- that's all the other cars attached to the communications act. tell me what that means to your world. >> chairman walden, we're currently already offering closed caption. we currently offer the eas service. as far as must-carry retransmission consent, we're not going to be carrying any type of local broadcasting. we have done a marketing agreement with a company called antennas direct which sells over the air digital antennas so that our subscribers that want to

receive over the air programming can do that through them, so we will not be entering into any retransmission consent issues. >> what if you were required to? >> we would have to look at that when it happens. >> i mean, i ask the same of mr. heimen and mr. funk given the world you're operating in now. do you want everything in the communications act good and some might argue burdensome? >> i think our position is the current situation where there is a competitive environment to innovate is probably the right approach. there are some parts of the requirements that i think will naturally come to the markets such as closed captions and other things that are a benefit to consumers but a lot of the regulations that have been written were really written for a different environment than exists today. >> mr. heimen? >> i agree with mr. funk in the sense that i think this highlights some of the ant kuwaited notions of the cable

act and i think it is something that in connection with determining mvpd should be done on a broader scale than in a single regulatory filing. >> all right. mr. johnson, mr. hyman, mr. powell, mr. euro ergan, isn't it strange the child can be watching the sprout channel's caoiu on the same television and the same living room and the way the programming got from may have been subject to different rules depending on whether it was provided by sky angel, netflix, a cable company or dish? shouldn't the regulatory or non-regulatory treatment not same? mr. johnson, we'll start with you. >> well, we're asking for a level playing field. we have the same access to the programming that our competitors do, and because there is the definition of mvpd is up in question. >> right. >> we have not been able to have

the access to that programming. >> mr. euro began. >> in i would say yes in general, the rules should be the same. to the chairman's earlier point, if you're going to be an mvp provider to get all the rules or eliminate them for the current incumbents. there are cases where things are different between the technologies and i think you have to look at it on a case by case basis. cable is more of a local service. satellite is a national service. it remains to be seen how the ip network that is mr. johnson and others are doing, are those going to be national or are those going to be local? it depends on there may be some differences because of that. >> mr. powell? >> yes, mr. chairman. i largely agree with mr. ergan. i think what you're having is a continued evolution of the challenge of convergence in which technologies increasingly bring sameness to the way things are provided and distributed,

but that said, i wouldn't make the hallmark of suggesting that things are in similarly situated just because they can produce the same content, the same show. there are different business models, different terms, different technologies underlying it. the cable industry spends $186 billion over a decade to build an infrastructure that is optimized for premium high quality low latency content. that's very different than the same content being sold on itunes for $2.99 and in a model largely designed to sell ipods more than it is designed to sell content, so as long as we are cognizant of these different business models or off and pursuing different central objectives, just because they have the same content, doesn't necessarily make them identical. as we look at a new statute, i do think that there should be more sameness than there is today. >> my time expired. really trying to get to the heart of the issue here is everybody wants a little

different deal, the other guy's deal, so we're trying to sit here and figure out what's the right regulatory regime to really spur innovation, competition, and a marketplace that functions, so your input is most valuable. with that i will turn to my colleague from california, the woman who is proud to represent innovation technology, miss eshhu. >> i think you hit the nail on the head. i think that we all want to see an acceleration of innovation that is not only be motivate things through whatever it might be, a change of the law, whatever rules at the fcc because this is really one of the more exciting areas relative to our national economy that hold so much promise, and there is an insatiable appetite on the

part of consumers and so i think this morning's hearing is highly instruct active but right below the surface there are all of these different cases. i have four questions that i want to ask starting with mr. funk, mr. hyman. we know we're very well aware of the skurnl demand for innovative data intensive video applications like netflix, amazon video, and hulu. they all continue to grow while at the same time the wireless carriers are moving away from the unlimited data plans. there was a piece in the "new york times" yesterday that talked about broadband moving to meters. first of all, do you think that this curtails innovation, and if so, how would you address it? >> can i start?

first of all, there have been speed-based tiers in internet service for some time, so the idea of some different classes of service for internet consumers is not new. i think the important thing is that as long as there is competition among internet service providers, providers who give good value to consumers will get the business, and if the tiers become restrictive in a way that they disadvantage services or restrict choice in a competitive market, companies that provide those services will not succeed. i think the key here is really competition in order to ensure that the right outcome. >> thank you. let's go quickly. i have four questions. thank you. >> there is a lot of talk about the competition in the marketplace. >> you traveled across the country and you have 30 seconds. >> thousands of video channels and it is the golden age of video. i think that's true. i think the one thing that we have to be mindful of and i would suggest the committee to be mindful of is internet video, there is only one way to get

internet video over an internet pipe and there are very few carriers that provide internet video. in some places there is only one carrier that people can access that and the ability to have competition in that marketplace is something you should be mindful of as you go on and think about internet video and with respect to our issues out there, i know the issue that is we have raised and fairly public about is the application of discriminatory data caps and the way in which the same content is delivered. >> when are they discriminatory and when are they not? >> when are they and when are they not? the r? the same content from netflix or for instance comcast over data picks, one institute it is and one doesn't. if you implement data up caps there is innovation issues and they should be applied equally or not at all. >> let me give you an example. i agree with my colleagues to the left. a perfect example of skimt to her data caps we're concerned about is what comcast is doing with the xbox 360.

it is exempting its own exfinity app from the data cap but netflix and others are subject to the data cap. so while we don't think the data caps are inherently bad, when they're arbitrary, they can be abused. they can be anticompetitive. remember, isps also own video services. there is an incentive and ability to discriminate against online video competitors. if i can say one more thing, one of the things that really gaulz us is public knowledge has been asking the fcc now for almost two years to look at data caps, not to regulate them, look at them, find out how they're evaluated, raised or lowered, so people can have an idea of what these caps are intended to do. they refused. >> thank you. mr. funk, it is my understanding that 20% of your customers have dropped their cable or satellite service.

what factors do you think would leave more of your customers to consider roku as an alternative rather than a traditional complementing -- rather than a complement to traditional cable or satellite service? >> we do see a percentage of our user who is have cut the cord as it is called and dropped the cable or satellite package. it is the minority as you said. i think there is a variety of reasons for this. some cases it is cost. some cases it may be a living situation or just video preferences on programming. i think what's interesting is that there are now choices that allow consumers that opportunity. netflix and hulu plus give people a selection of video at a lower price the ability to get that. i think increased choice of offerings is really the key to providing the right service for all consumers. i think we provide one method for doing that. i think you will see a lot more innovation in the coming months and years as to how to do that

better. we're optimistic that cord cutting will need to continue video consumption but just in different fashions >> thank you. i had four questions. i will submit the other two in writing. i want to thank all of the witnesses because together you have made this a not only an important but instruct active hearing on the future of video. thank you. >> thank you. chair recognizes chairman emeritus mr. barton. >> thank you, mr. terry. i first want to take a little victory lap this morning. the college presidents announced yesterday we're going to have a non-bcs football playoff in college football, and i can take a little bit of credit because back when i was chairman of this committee we had hearings on that and we got the ball rolling and announced a four-team playoff so i want to commend

them and also take credit for this committee highlighting that issue several years ago. i don't think the four-team playoff is the ultimate but it is a start in the right direction. when they get to eight or 16, i think they will have it. my first question is to the audience. i want somebody in the audience to tell me the original analog televisions how many channels were on them. anybody that is my age ought to know. i see one handout there. how many? somebody. not how many you got, but how many were on the dial. there were 13. >> 12. >> there were 13, 2 to 13, but there are no number one. i never understood why there was no number 1. there were 13. you could go up to 13. as mr. powell just