his testimony, like 900 programs available now. we have gone from my first tv we got one channel on a good day, one channel. now we have got thousands literally. i think it is time to review the telecommunications video market. i think mr. walden and miss eshoo and mr. upton and mr. waxman are commended for agreeing to do this hearing. i think there are principles we need to remember as we look at this. this is just my scratches. i don't claim this as the universe. obviously in order to have a program you have to have a creator. in this country we never regulated the creator of the programming.

then you have to have a producer. to my knowledge we have never regulated the producers. there have been efforts at censure ship and in terms of creativity we have let that be a free market application. once have you a program you have to have somebody to package it and market it. you have to have somebody to transmit it and then obviously you have to have somebody to buy it, somebody to view it, somebody to consume it. when you get into the packaging and the transmission is where we have had a role for government. i think it is a truism that form follows function. in our original regulatory format was based on the fact that whether it was radio or television, there was a potential for a natural monopoly and government either tries to prevent monopoly or regulate

monopoly. a lot of the rules that we're talking about here originated when the radio market and the early tv market was getting started. as mr. powell pointed out, the advent of the cable industry brought video to more people but it also broad additional regulation. i was the only member of the committee back in the 80s that voted against the reregulation of cable, the only one on either side of the aisle when the first president bush was president and i was at the white house when we deregulated cable. when we passed the telecommunications act in 1996, there are at least four and maybe five or six witnesses at this table that their industry

or company did not exist, did not exist. i couldn't tell you today who roku is. i listen to the president of the roku try to explain what it is. so i think, mr. chairman, i know it is too late to do a major bill in this congress, but i hope in the next congress we take this up and use original principles to review the market and in general i think we're better off having less regulation than more and more enterprise and more market competition than less and the role of government is to provide a level playing field, to prevent a monopoly if possible. if we can't prevent a monopoly, to try to prevent undue market share and be fair to all, so i think this is an excellent hearing. i look forward to big things

happening on this committee in the next congress. the last thing i will say, if we're going to do big things, it has to be done on a bipartisan basis. this is not a partisan issue. it will go nowhere if it becomes r versus d. it has to be done in a bipartisan basis, and the good news is with the leadership on both sides of this committee, that is a very doable deal. with that i yield back, mr. chairman. >> would agree. general lady from california, you're now recognized for your five minutes. >> thank you very much, mr. chairman. first of all, i would like to welcome all the witnesses before us today, and i would just like to acknowledge the great work that a hearst owned station kcra is doing for my constituents in sacramento. local news and weather as well as other local programming is important to all americans, not just my constituents and i would like a better understanding from the witnesses about the role of retransmission consent and preserving our shared commitment

to localism. mr. ervin, i understand that retransmission consent payments are used by broadcasters to support local news and local weather. how would you respond to concerns that changes in the retransmission consent regime could under mine quality local programming? >> thank you for the question. first of all, retransmission contents and maybe mr. barrett can give us more information on that, in my understanding generally goes to some to the network, the change, the network or the major network may take some of that and a large part of retranscontent does not flow to the local broadcasters anymore. that's the way it started. now the national network will take a large portion that far and second, of course, it is the broadcast model is a two-prong model, the retransmission consent fees and also advertising fees, so they get revenue from two sources. the troubling thing is that

despite the fact that retransmission fees have gone up probably 2, 3, 400% since i started in this business, the actual localism in the local level has gone down from a local news perspective in the sense that to cut costs and operate more efficiently many broadcasters are sharing local and news networks and so forth and many cities today will you see that a network show, a news show, will be on multiple networks, produced or sharing of resources so similar to the newspaper industry did as well. >> sure. mr. barrett, would you like to comment on that? >> i disagree. the 21st century media company today needs a dual revenue stream. for years the television industry operated with an advertising-only model. the cable industry was launched and helped us get our signal into rural areas, but then built a significant business on the back of the most popular

programming available to americans in every community in this country and that was local television. i would say to you that we are using as an industry the retransmission consent fees to invest in our local businesses. it helps support the investment we made in digital technology which i mention multi billions of dollars over the last decade. i think you have seen most local stations m local stations go from producing 20 hours a week of programming to 40 hours a week of programming exclusively in the local news genre. we added multi cast channels on our signals now which are trying to get clearance on satellite and cable. so i would disagree with mr. ergan that money is not being used in a constructive way to advance the business interests of the local television. >> mr. barrett, how would you respond to concerns some parties have raised about the impact of broadcast stations coordination and consolidation on retransmission consent

negotiations? >> well, i think speaking for our company, we negotiate only on behalf of the owned stations of the hearst corporation. other companies have pooled some of their retransmission consent negotiations, have created bundles, but i believe in most cases and all cases people have been smart enough to acknowledge that they have to break up a bundle, mr. ergan wants to buy a station where we have duoopoly separately and sell sell kcra separately. >> i think the problem is that in retransmission consent the local broadcasters and in fact government sponsored monopoly, in other words, nobody else can bring that signal into that marketplace today, that dma, so it is a little unfair fight and what's happened is i will give you one example in wyoming where one individual got the rights to negotiate for the three

broadcast -- all three broadcast networks in cheyenne, wyoming, so there was either no local networks in cheyenne or you had to pay whatever rate. so that signal actually had to come down and consumers lost because of unfair bargaining between -- it is one thing to be unregulated monopoly. it is another thing to band together and negotiate on behalf of multiple stations in the same market. >> would you say this is not the same throughout the country? i mean, appears that what mr. barrett says in certain areas like where sacramento might be may not not same as wyoming or other areas. >> i would agree with mr. barrett that each broadcaster handles it differently, so mr. barrett's company handles it on a very professional manner with just their networks. other people utilize their market hour and that mischief can happen and legally

sanctioned. >> i have run out of time and i would like to submit written questions. >> absolutely. thank you, miss matsui. i recognize myself for five minutes. i will spend most of my time with you, mr. powell. first, i want to just give a little anecdotal story. when i walked into my 17-year-old's room and, by the way, we got him a tv for his room for christmas thinking when he graduates it will be a good thing for him to take to college. hopefully he is going to college. i walk into his room and he is on his iphone and i just said, hey, what's going on. just watching netflix. on his iphone and there is a tv sitting right there. that's the world we're living in. that's the people that are going to dominate the consumer products and video markets for

the years to come. i think of turning on the tv. they don't. >> was the tv internet connected. >> good point. yeah. he has the xbox 360. yeah, he can do it that way as well. he just chose to do it on his phone. so, mr. powell, it is interesting. you mentioned the 57%. in 1992 congress was concerned about the cable monopoly. that does not exist today. if you're at 57%, and the folks sitting at this panel, so what does that really mean to the cable industry? how is it evolving to be competitive and in reference to the 92 act without -- let's try to not be redundant on ms. mats matsui's questions of

retransmission, but what other under brush is there that from '92 that was just so focused on the cable industry, what do we need to do to clear out the brush? what specific things should congress look at if we want to review the '92 act? >> the first thing i would say is that the beauty of competitive dynamics is you have to increase value for consumers and you can do that through innovation, evolution of your service, and i think that the competition we face first and most formidably from the satellite companies increase both the quality of content that we are providing, the amount of content we are providing, and forced us to look at new businesses for revenue development, to continue to be competitive which is part of the dynamic that i think helped drive investment and broadband and ultimately brought that into the bundle of services we offer as well as telephony and the wonderful things that the over the top folks are doing and you

see companies know and they, too, have to be able to bring that value to your son to be able to allow him to watch what they're selling over ipads and xboxs as well. i think that dynamic has driven a lot of innovation. i would give you a more global answer about what to change. i think that the '92 act had two core fundamental foundational elements. one that we were vertically integrated exclusive monopolist and a whole bunch of roer rules premised on subsidizing broadcasting for the social compact that america wanted to advance in the context of broadcasting. i think vertical integration rules when an industry only has about 14% of its operators integrated with content, these would be rules like program access, program carriage, and rules that are premised on the idea that you have to guard against our incentives associated with both being a distributor and owner of content

and i think when we have a dialog, those are the kinds of rules we should have to talk about, but to be fair and honest, i think you also have to reevaluate elements of the social compact. is it still the policy in the united states that the cable industry should continue to forcefully subsidize the broadcasting model through must-carry retransmission consent and other elements? i am not prepared to answer them. >> well, one last question and then hopefully we can have time for the broadcasters, mr. barrett, to rebut that. we're getting calls in our office about cable rates going up. i want to talk because i think this goes to the vertical integration model that was thought of as cable then but you're not in the content provider today. can you explain quickly in 26 seconds how that's impacting the business model and what we should be telling our clients, our constituents. >> the price is two things. i think in the industry in this day and age under economic

stress who is not sensitive to affordability of the american consumer is acting at its peril and i think our industry is very focused and looking for ways to do that. you're seeing companies experimenting with smaller and lower priced packages and you're seeing basic packages being offered for one. secondly, i think it is very difficult to compare prices over time because there is so much more that's in the suite of bundled services that consumers are buying. dvr, more channels, i would leave you with one statistic. on an hourly basis cable is about 21 cents per hour. that's cheaper than even netflix subscription and most other entertainment products on the market. >> is that viewing hours or 24 hours in a day. >> viewing hours, eight hours a day. >> at this time the chair recognizes the general lady from the virgin islands, donna clish

ton son. >> thank you for holding this hearing. a couple of questions. probably won't use up all of my time. can you hear me? okay. tu advocate for eliminating the broadcast must-carry rule and you note on the other hand the importance of protecting the public and non-commercial stations. what policies would protect this programming without a must-carry rule? >> i think we would be comfortable with preserving must-carry for public stations, but as far as commercial stations are concerned, my feeling, our feeling is that if local broadcasters are indeed providing good local programming, cable casters want to carry them because their customers will demand it but i don't think they need the protection of must-carry. >> i see. mr. barrett, i know one of the concerns are advertising revenues, so how are broadcasters looking to respond to the pressures on advertising

revenues from the new technologies and services? >> one of our challenges has been to get accurate measurement from nielsen. it is a challenge as the world moved to a time-shifted world of viewing for nielsen to capture that television viewing and that puts pressure on commercial pricing and caps and business has been a new revenue stream for us and we're optimistic that it will be a new revenue opportunity for the stations as well [ inaudible ] and offset the pressure. >> is your mic on? >> i don't think so. >> now it is on. i am a tv broadcaster. i should know that. >> mr. powell, you and all of the other -- >> could he answer that again and we'll stop the time and let him catch up? >> sure. >> our challenge as broadcasters has been to be sure that nielsen

captures the viewing that has occurred on time shifted television experience that is time shifted on dvrs and the like and very briefly the new revenue opportunities we have with retransmission consent, multi cast and in the future mobile television, the extent those ad revenues will help replace and support some of the downward pressure on ad revenues against our core video product. >> thank you. thank you, mr. chairman. mr. powell, you and all of the other panelists have pointed out the way the competitive environment and technology has changed and is continuing to change. you recommended re-examining a lot of the rules, the regulatory rules, program access, content carriage obligations as well as must-carry transmission consent and non-duplication rights. so some would say that weakening -- if we were to weaken any of those rules it would give cable an unfair competitive advantage. given the wide choices that are

available today, how would you respond to that? >> it is a great question. i think the way i would characterize it is i don't think the cable industry's position is we're just looking for wild abandoned deregulation. i think we're looking for a more rationalized regulatory model that more properly reflects the reality of the market. we think a lot of the rules that we're currently living under if you accept the way they're premised would fall under a standard by today's measurements. now, imperfectly willing to entertain that somebody could conceive of a different basis or a different reason for some sort of regulatory rule, but i think that the obligation, the burden should be to prove that from a zero base, meaning given the reality of today, not the legacy of yesterday, why do you still need this rule or why do you need some new proposed rule? so i really wouldn't say we're a cooperative partner in trying to make sure the public policy is right as opposed to just some random, get rid of everything

because it is stupid, but we do think it should be justified based on what we're seeing in the market and given all the wonderful things you have erd that, we think on balance that would be a dramatically lighter that would be a lighter, regulatory regime. >> mr. chairman, i yield back the balance of my time. >> thank you. at this time we recognize mr. stearns for five minutes. >> thank you, mr. chairman. >> mr. barrett, you've been getting all of the questions and i have a more delicate question which is more or less confined to my district and i represent gainesville, and it appears that there's a dispute between directv and abc affiliate wcjb over transmission consent fees. you're probably not familiar with that? >> i'm not familiar. we own the nbc affiliate in nearby orlando. i don't necessarily want to get involved with this business dispute, but some have suggested that because now gainesville

county and they can't even get abc now that there's sort of a blackout and i guess in your opinion, are these blackouts becoming more frequent? >> i think they're very infrequent. cox happens to own the abc station in orlando. we with own the nbc affiliate wesh in orlando and over the past years or so there has been a new nbc affiliate licensed to gainesville to that marketplace and you may infer that we stood aside and did not challenge that nbc affiliate that went into that marketplace. what's your reply to that? are the blackouts becoming a problem for directv? >> they are becoming more frequent. >> mr. chairman, we have a clear difference of opinion here. >> i think and perhaps we can get the committee to -- >> your position is they're becoming more frequent. we had six blackouts last year. we've had nine already this year. >> so if you've had nine this

year and let's take gainesville, for example, and they call you up and say why they can't get abc, what do you say? you basically say you're working with the broadcaster to negotiate a fair wage for them and it's a bit of an unfair food fight because the broadcaster, because everyone has a choice to switch another video provider, a, and b, they only get -- their sweeps' ratings only happen four times a year and they only get measured four times a year which affect the advertising rates except by law and i understand cable companies can't take down and can't take down a network during the sweeps rating and it's not a fair fight out there today and it is becoming more prevalent. what do you think a solution should be? is there a solution? it seems like -- >> i think there are fairly easy

solutions. as an example, the -- if we're going to make a market determine at i'm all for that, but we should be able to -- if you don't have the gainesville station then you'd have to go to a standstill arbitration or you'd have to have the right to import an abc station so the customer doesn't do without the abc network while the dispute's going on and then you get a free market going where it'smore of a fair fight between the broadcaster. >> i don't want to get deployed to allow viewers to utsch what live, local news and emergency programming and what is the difference between broadband mobile, dtv and video overbroad band currently available on cell

phones and can mobile dtv help alleviate the pressure on the wireless bands? >> the architecture of the broadcast signal is the single point and multi-point distribution and it's a superior distribution system that doesn't run into broadband congestion. if i invited you to a yankee game in new york city and you wanted to go online you'd have trouble in yankee stadium connecting to a broadband supplier that didn't buffer and didn't have signal limitations. over the air broadcast signal could touch everyone in that stadium simultaneously and no degradation at all and it's a vastly superior level. >> i think we all understand the need for more spectrum. i think the fcc is moving forward on a rule regarding the spectrum dish recently acquired to build out a wireless network. what is the status of this item

and when will the sec issue a final order on this proceeding, in your opinion? >> we first went through a waiver process this year and were denied that by the fcc and went into the rule-making process that was complete. in a sense, all of the comments are in from all of the parties who might be affected here positively or negatively by the entry into the wireless business and now it's just -- and the rule making has to be decided by the full commission and the five commissioner to make a decisions and we're hopeful they can do that by the end of the summer, other than time and realize the fcc has an awful lot on their plate as michael can speak to when he was there. perhaps other than time, they have all of the facts to approve it so we're hopeful they'll do that by the end of the summer and that unleashes 40 megahertz of spectrum and a huge investment in this industry and

jobs at a time when, you know, a lot of companies are hoarding their cash because other than certainty out there we're certainly hoarding our cash because we're waiting the fcc uncertainty. it's a business where business and government can work together to do the right thing for consumers and also unleash productivity and investment in the united states. >> thank you, mr. chairman. >> thank you, the chair now recognizes the gentle lady from colorado. >> thank you very much, mr. chairman. sitting here listening to this testimony reenforces my view that this consent issue is a messy issue and there's not a one-size solution. most people would like to see agreements reached that are fair to consumers, and i think one thing, almost everybody could agree with is congress shouldn't put too heavy of a finger on that scale. we should really try to allow the market to come to a

solution. i believe that we need access to free and diverse and local news and local programming and information in an emergency. i was just looking at some of my local news at wildfires in colorado and there's a good example at how consumers in boulder or colorado springs or fort collins need to be able to get access to local news, and so that's a balancing that we have to have and also several members of the panel talked about mobile tv and how much promise that that has, but the strong argument supporting the value of broadcasting to consumers don't necessarily equate to a justification from pulling a signal from cable or from satellite viewers if retransmission consent negotiations fail. and i'm thinking about this from the standpoint of my constituents who work all day, who barely have time to sit down

in front of the television, who want to turn on the first game of the world series and they hope the rockies might be in it, although maybe not this year, but -- but they can't get the programming they want because we've had failed retransmission consent talks and so my first question is a simple question, and if preferable i would like to have a yes or no and that question is do you think blackouts as a result of the failure of these agreements are fair to consumers no matter how rare or how often they might be? mr. powell, i'll start with you. >> no. >> mr. barrett? >> no. >> miss song? >> no. >> and mr. ergen? >> no. >> okay. thank you. now, mr. ergen, i have a

question for you with the auto hop issue, as you testified in your statement, and i think everybody knows, the auto hop technology lets consumers skip over commercials and other things that they don't want to watch, and as you said that would mean that when kids are watching tv they wouldn't have to see junk food and alcohol commercials, i would submit that as the fall approaches, many viewers would skip over the shock and awe tv commercials that everybody will be treated to in the campaign this fall -- >> so. i'm sorry? >> and the volume, too. i think the volume is the issue, but if people had auto hop it would let them decide what they wanted to see. now, i know that this is in the courts right now, but talking not about the legal issues, the consumer choice and innovation in the