we understand there are got the standards of perfection and then there are the world standards of perfection that are superficial and often materialistic and do not matter. you all know what really matters. that is why it is so good for us and be fed byed you knowing you're out there. you've got our back. we've got your back. with that, i thank you. happy father's day tomorrow. happy father's day to our founding fathers. in their honor, let us do better for the country that they have bestowed upon us. thank you all so much. god bless you. god bless the united states of america. winky. -- thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

>> tomorrow, we have dedicated the whole show to the patriot act. first, paul singer of usa today will talk about the role of congress in creating the act beginning 2001. .ollows by nathan sales

he helped write portions of the patriot act and will discuss sections that deal with surveillance. this is live at 7:00 a.m. eastern here on c-span. >> the c-span video library has reached a milestone since its online launch in 2007. there are now more than 200,000 hours of original programming, public affairs, and on history books. the public service created by this. media and cable executives testify on the future of the satellite television extension and inalism act set to expire 2014. it was adopted in 1948.

representatives ensures communications. this is about two hours and 15 minutes. >> good morning. thent to call to order committee for the satellite television law. second hearing on this issue. i want to welcome our witnesses. thank you for coming and sharing your knowledge and opinions with us. welcome amy tyson and congratulate her on her award last night. she was into it into the cable industry hall of fame. leader in theic cable industry and the central oregon community and we are delighted she made the trip out here and is willing to testify. the hearing will examine whether

the law authorizing television providers to redistribute programming still serves an important portion. -- function. the lots 25 years old. the question is, should congress repeal the law, reauthorize it as it is, or revise it? congress passed the original law in 1988 to give them a leg up in providing distant broadcast signals to viewers out of range of over the air signals. onectv and dish control third of the television market. their the second and third largest largest pay television providers behind comcast. one of the half-million of the 115.9 million television households still receive distant signals.

that is about 1%. dish carries this to all 200 and 10 markets. on the other hand a million viewers to represent a lot of thatngry level letters about cause in the constitution. it gets americans to watch what want, whenever they want and however they want on whatever device they have. some stakeholders argue we should use the reauthorization to visit retransmission consent. they argue we should take another look at table -- cable regulation. regulations state to 1992 and 1996 when cable at 98%. as of 2010 shares dropped 59.3% .6%aid tv households in 51

of all tv households. i am open to debate on a whole host of these issues. all options remain on the table. one of our responsibilities is to make sure we open public lee -- publicly and transparently an opportunity to contribute to this dialogue. the market is changing rapidly. over wires and wireless. netflix is offering original content over the internet. the question is, can we better ensure they have access to the programming they want while respecting the broadcasters and paid tv companies that deliver it? today the government interviewees -- in terpenes in many ways. it does so to the benefit of one.

others to the benefit and another. should intervene at all question if the answer is yes, what is the justification? with that i yield the balance of my time to the vice chair of the subcommittee the gentleman from ohio. them for the expertise they have and that the subcommittee considers the law. i am glad that we have started the process of examining stella early. we know that december 2014 will be here before we know it. it is important to have an opportunity to have a discussion and determine if the law needs to be reauthorized or revealed -- repealed. obligation tohe review this law. changedunication has radically and is constantly evolving. i hope this is the continuation

of a thoughtful public debate surrounding the video marketplace. i look forward to hearing from our witnesses. i yield back. yield back the balance of my time and recognize the ranking member from fellow when you, mrs. eshoo. holding thisfor hearing. welcome to our witnesses and many distinguished representatives from many sectors that are in the audience this morning. they begins the second in subcommittee's series of hearings on the satellite television extension and localism at, s.t.e.l.l.a, allowing consumers across our country who subscribe to satellite tv to receive local broadcast programming. following today's hearing, we all have had and heard from total of 11 witnesses in the

first six months of this congress less countless others individually visited our offices to provide their perspective on s.t.e.l.l.a. this includes representatives of the satellite, rockettes, and motion picture industries. we need to look forward to taking action. i think following today's hearing we should instruct our respected staff to work expeditiously on drafting text so we can pass a bill long before the december 31, 2014 deadline. we have both stated publicly that we want a clean bill. judiciary hashe some jurisdiction. it will take some time them to do their work. i think we need to get going with this. since thes changed

1992 cable act, the process by which paid tv providers proliferation of blackouts in the emerging online video marketplace. be examininged to all of these aspects. we have a lot of work to do beyond s.t.e.l.l.a. i am struck on the broader video market, the rapid transformation underway, three statistics highlights how consumer behavior is changing. 58 billion hours of television and video is expected to be viewed on tablets per year. that is a remarkable statistic. forne video will account 69% of consumer internet traffic 2012.7, up from 57% in

the number of web enabled televisions will grow from close to 100 and 80 million in 2017.o 827 million in what do all the statistics mean for our work here at the subcommittee? in addition to expanding the deployment, we need to record highs that the shift is occurring. means of video distribution may be radically different than the options available to consumers today. consumers want greater choice and programming and how they received it. i think the subcommittee should not ever be viewed as a barrier to exciting innovation. a video marketplace with , titian is very healthy. i welcome each one of the witnesses -- is really very

healthy. i welcome each of the witnesses. thank you all for being here. thank you for how instructive your testimony will be to us. i will be happy to yield the remainder of my time. any takers? with that i will yield back. >> thank you. time andyou for your for being here? this is important for us to learn how we can continue to give consumers the best value, the very best value in terms of price, content, quality and delivery. in the subcommittee last june, members of both parties acknowledge that the 20 year old video regulations on the

books are obsolete. i do not think there is any disagreement on that at all. technology has changed dramatically. the law has not kept up. they offer competing delivering services. the question before us is how can we fix a really complex search and content this and contributing to rising prices. how do we change the innovation that is happening this. once that can provide broadcast antent without paying performance rights. that is one of my issues. debateld have a vibrant and welcome input from everyone as re-review it.

we need to look at what is the proper role of government and refocus on the constituents who are the consumers of video content. they do expect a level playing fields. thank you. i yield back. >> the chair now recognizes the gentleman from louisiana. >> thank you. this you for holding hearing. i look forward to hearing from the panelist as well. the satellite television laws repeal or revise this. i would think the subcommittee would be wise to revise and extend the debate i addressing the other issues. many are issues are governments once. they involve dramatic transformation.

we do so many other things that make our life very convenient. the device of the day was more like a list device. when you think we are currently governed by laws that were written based on the technology of this device, it shows us that when we think of the new technologies that we have the ability to have access to, the laws of dramatically need revision. for anyone who seeks further transformation, look no further than the aereo court case. instead of allowing fast governments to affect it, we should trust the consumer demand that it is strong enough to ensure that quality programming is insured at a rate buyers and sellers can agree upon.

we can accomplish this by reverting back to the basic tenets of property rights and consumer demands. i encourage my colleagues to join me in this pursuit. i look forward to the testimony and the questioning from our witnesses. i think the chairman. >> is there anyone else on the republican side that wants the remaining minutes? if not, we will yield back the town. i now recognize the gentleman waxman.ifornia, mr. >> today's hearing is the second time this year that this subcommittee has convened to examine issues surrounding the upcoming exploration of the satellite television extension .nd localism act of 2010 reoperation involves lawrlocking copyright provisions that must be jointly

addressed by our committee and the judiciary committee. our hearing,n because of the complexity of i start with the presumption that we should pursue a clean reauthorization. congress must complete its work before the law expires so consumers do not inadvertently lose access to programming. at the same time, reauthorization provides us an opportunity for members to learn more about today's video whetherace and assess laws and regulations are keeping pace. as we begin this conversation, we need to consider how we continue to ensure diversity, localism, and competition which under ourinciples nation's media policy. congress has recognized the need to protect many of these values especially when the market might not.

this is creating exciting new opportunities for consumers and content consumers alike. competitors may need access to content. i represent many interested parties. many of my constituents are the writers and producers interact others whose creativity drives consumer demand for video and who deserved to be compensated fairly. aty work at the studios studios that make desirable content available. i also represent companies like santa monica taste tennis channel. it is an independent cable channel that offers consumers

unique tennis and tennis related programming. congress sought to protect the diversity offered by independent channels at the tennis channel in the 1992 cable act by adopting provisions to guard byinst discrimination vertically integrated distributors. the ceo says the committee -- sent the committee a letter outlining his perspective on programctiveness of the carriage rules. i ask consent that the b injured into the records records. >> without objection. >> -- be entered into the records. >> without objection. independentng content available to all americans.

this is the second-largest video gesture richer in the united states. it it is now serving over 20 million subscribers. not only do they have 3000 employees based in california, the company operates 100% californian made satellite. as one of the satellite , directv can educate the subcommittee about why it believes the act should be reauthorize, what aspects are working well, what parts of the law might need to be modified. welcomextend a special to our witness from direct television. >> >> thank you to all of the panel members who are here today. we look forward to your continued engagement as we move forward with this.

since i have 35 seconds i will be pleased to offer it. it did not seem to be with other. anybody who wants it can have it. if not i will yielded. that takes care of our opening statements. we will start with my queue is the executive vice resident or services and operations at directv. thank you for being here. will the microphones close and turn them on. the time is yours. sorry about that. >> there you go. thank you for inviting directv to discuss reauthorizing the satellites authorization act. as we speak, millions of

americans are leaving for vacation. lists include summer reading. couldea that someone take tv to the beach would be unimaginable when congress passed the 1992 cable act. when they wanted and at prices they can afford. for the most part they get it. there is one exception. broadcast television. ing remains governed by antiquated laws. we hear more complaints about broadcast related issues than almost anything else. our subscribers complained about high prices, lack of choice, and blackouts. much of this results when the consent regime created in the 92 cable act. there are three major problems. retransmission consent raises prices. costen 2010-2015, the

will increase 600% per subscriber. top of the enormous feed the already pay the broadcasters. it is referred to as bundling. in 1992, the broadcasters own for cable channels. today there are over 100 for cable channels. one992, in the scene owned channel. -- nbc owned one channel. today they own 22 cable channels plus 11 regional sports network.

they deny consumers access to what was once a free program. last year broadcasters pulled the plug and 91 markets. we see to pass i had as congress considers reauthorization. one is to eliminate these laws entirely. we believe the approach is better than today's hodgepodge of aging regulations. the other possibility would be to make existing law smarter. to do so we strongly believe congress should address blackouts. in light of the fact that broadcasters use the public spectrum, block out should be considered. unger's could allow it to provide our customers with distant network signals. this is important to consumers. distant networks will be a poor

substitute and we would have every incentive to negotiate a carriage deal. they can negotiate directly with consumers. a consumer could, for example, choose abc and nbc, but opt out of cbs and fox. as they do today with hbo and show time. this would end blackouts, allow for consumer choice, and allow the networks to charge as much they think their content is worth. let me also address senator mccain's allah cart legislation. this bill demonstrates the growing frustration over the rising cost of content and the inability of consumers to make programming choices. over the years we have tried in vain to negotiate more choice in packaging such ability for our customers. the broadcast corporations either outright refuse or make offers that can best be described as hollow. the result is always the same. higher prices for consumers and forced bundles of channels they don't want or can't afford. we believe the marketplace is

best suited to resolve this conflict. ideally we would like to work with the broadcast companies to give consumers what they want. more choice over their programming. however, these media companies continue to reject calls for packaging flexibility, they leave us no option but to support government intervention. in closing, i cannot emphasize enough that the status quo no longer works for the american viewing public. we speak with over 300,000 of our subscribers every day and they tell us they want change. while directv is not whetted to any particular proach, we do believe congressional action is needed. we stand ready to explore all proposals. thank you. i look forward to your questions. >> appreciate your testimony, sir. thank you for being here. now we return to marcy berdict, the senior vice president of broadcasting for shers communications incorporated. welcome back. >> thank you. thank you chairman walden, good morning, ranking member eshoo, good morning. members of the subcommittee, hello.

my name is marcy, senior vice president as you heard of schurz communications where i oversee a television stations three cable companies, and 13 radio stations. i am leas the television board chair for the n.a.b. on whose behalf i testify today. local broadcast television remains unique because it is free, it is local, and it is always on, even when other forms of communication fail. television is the most watched media for high quality entertainment, sports, local news, emergency is weather warnings, and disaster coverage. schurz has television stations in tornado-prone places like wichita, kansas, and springfield, movement, and i can tell you from my own personal experience our viewers rely on us to stay informed during times of weather emergencies, not unlike the terrible storms we have seen is this year. . >> as broadcasters, we approach

this debate asking a simple question. it satellites compulsory license still in the public interest? we know the universe of distant signals is shrinking. more and more are receiving their service through satellite. to justify the extension of this law, we need more specific information. for instance, how many subscribers rely on the distant signal? how many subscribers are grandfathered? what is the number of subscribers that receive the distant signal, only for use in an rv or a boat. unfortunately this information only resides in the hands of dish and direct.

nab asks this committee to embrace a clean authorization which does not include controversial provisions that undermine the ability of broadcasters to provide high- quality content. for example, someone like to use della -- stella's reauthorization for reauthorization consent. i believe this would harm consumers. this hearing with a very unique perspective on the video marketplace. my company is a member of both nab and aca. we are a broadcaster, and we are a small cable operator. i can tell you from our vantage the current system works. if the the subcommittee system isn't broken, why fix it?

the retransmission consent system in place today has a success rate of 99%. only in washington dc could something that works 99% of the time provide for thousands of deals a year be called broken. the success rate comes -- free-throw percentage of the most accurate basketball players, and the approval ratings of the dalai lama and the pope. no one would doubt whether they are effective. the false fix is being suggested by my friends in the cable and satellite industry when only harm consumers, but nothing to improve on the system we have today. just the opposite would be true. one proposal would allow the importation of distant, out of market signals. in the real world, that means that congress would negate existing contracts between broadcasters like abc and their .ocal affiliates

if congress were to allow distant signals to come into local markets, you will leave viewers to receive los angeles or denver news and sports. signalwing distant importation, congress would be placing it some on the bargaining scale by skewing the negotiating leverage of the party pretty resulting effect would be more contractual impact, not less. with fewer viewers unless advertising, localism and tv --adcasters provide would be this would leave your viewers with less places to reachlocal customizers through tv advertisements, and politicians without effective mediums to reach their constituents. none of this is good for the consumer. as television broadcasters, we are coming to congress asking

for a leg up and our negotiation, or for changes by law to benefit one side or the other prayed we will fight our own fight. it will make our own. we only ask that congress not to the scales in favor of anyone industry. thank you for inviting me here today. >> thank you. we appreciate your comments. we will turn to the president of global distribution of the disney media networks. we are delighted to have you here. >> thank you. >> i'm not sure he microphone is on. there you go. >> thank you. i had the opportunity to appear before you six years ago at a hearing entitled the future of video. ,t that hearing, i promised we the walt disney company, would find ways to get our content to any screen consumers use.

, mobile phones, ipods, and tv sets. you may have noticed that i did not use word ipad in 2007. it was introduced three years after that hearing. i am proud to tell you today we continued our commitment to developing and using new technology to improve the consumer experience. we now make live streaming of our channels available to subscribers on tablets in smartphones. espn is downloaded more than 18 million times, the first application to provide live streaming of a cable channel. downloaded 15s million times since last year offers the same convenience to subscribers of disney channel. just last month, we were the first broadcaster to launch a streaming service. our service allows users to watch their local abc stations inine, and on smart devices

their hometowns. we hope the service will soon be available in markets across the country. weaddition to our service, recognize the value of using online video distributors to reach consumers who want to enjoy our content in many other ways. andre a part owner of hulu, mr. be our content on a host of other platforms, including netflix, and xbox. critical to our future, we continue to face a high value on distributing content through him vpd's -- mvpds. we are main committed to did the lovering outstanding programming to these viewers at all times. we've reached long-term deals with many of the largest mvpds. common thread is that each

allows us to provide additional value to consumers and customers, while achieving a return on our investment and quality programming. quality content is expensive to produce. laster we spent approximately $3 billion producing programming for abc in their own stations. given the significant risk and expense, and producing great content, it is critical we continue to be permitted to negotiate freely for compensation for the distribution of our content. in this context, we believe the current regime requiring him mvpds is working well. this across that insurers they compensate for the value of the carriage of that signal. the model of compensating local broadcasters of carriages working for americans.

local stations are able to provide outstanding local news, and coverage for emergency events. with the launch of our watch abc services, we will work with affiliates to offer more value for mpds. i recognize that this committee has heard pleas for changes for re-transmission consent. programming.ocal they want to carry our programming because their customers want to watch it. these incentives encourage the successful resolution of negotiations. additional government action is not necessary. finally, i would like to turn to satellite legislation. the original law adopted by the wavyease technology available technology available at that time to be used to distribute distant

network programming too many households, especially in rural areas, that would not be able to receive a network programming at all. sevenir credit, the companies have made significant investments in the technology, and they are able to deliver local broadcast stations to more households than ever. as a result, the necessity of the satellite legislation to ensure the availability of network programming is simply not as great as it once was. in fact, we believe congress could give serious consideration to letting the legislation sunset. you may be concerned by the certainty regarding what would happen with rural. we asked you would do so by extending the current expiration date. thank you ray much. >> we appreciate your testimony.

>> good morning. i am president and ceo of been broadband, it family owned company in central oregon. f tok you for inviting me testify this morning. my goal is to highlight the challenges facing cable operators, particularly smaller operators like been broadband. it is time for congress to update the law to meet consumers needs and interests. let me tell you a little bit more about my company. all.agline says it we are the local dog, we better be good. we have invested about $100 million to upgrade our network and bring people the best services available. andmployee 270 associates,

where the fourth-largest employer in central oregon. we are a first mover, and we recognize as an industry leader. i want to discuss three examples of how the outdated rules are hurting my customers, and should be addressed. i cannot create the programming packages my customers want. the retransmission consent process is broken. for set topandates boxes should be repealed. givee tell you why cannot them the packages they want. when in date the -- negotiate with them, they tell me i have to take all of the channels, and i have to package them with the programmers want. not really my customers want. these bundling arrangements are resulting in significant fee increases for my customers. program bundling is harmful for

smaller operators, who are only presented with a take it or leave it offer. my customers are being hurt by the re-consent process. i have been through a retransmission consent blackouts, and my customers do not want it to happen again. i fear it will, unless the rules are updated. for example, congress intended for retransmission consent to support local stations. not to subsidize the operations of the big national broadcast networks. the networks are demanding increasing share of their affiliate retransmission consent fees. this harms localism by diverting revenues from the local stations. it also drives up the cost of retransmission consent, and makes negotiations more contentious.

cost of retransmission consent has grown him about $260 million to nearly $2.4 billion in just six years. $6 billionstimated by 2018. in my market alone, retransmission consent demands have nearly tripled over the last thee-year negotiating cycle. my final example kerps section 629 of the -- concerns section 629 of the communications act. that rule for set-top boxes that have cost the industry more than $1 billion and have not benefited customers. today, consumers watch programming on a plethora of diadvices, some of which we talked about -- devices, some of which we talked about this morning. these three examples show how it can be detrimental to consumers when government does not review and update

applicable laws. the time has come for a comprehensive review of the existing video framework. at a minimum, i would urge congress to amend stela to address issues like the ones i have identified today, to yield more choice, lower prices and a healthy marketplace to benefit consumers. finally, i want to acknowledge representative scalise and other members of the subcommittee who've advanced the debate on video reform. i look forward to working with you, to examine these important issues and welcome your questions. thank you. >> thank you, ms. tykeson. we appreciate your comments and testimony. we look forward to continuing the dialogue. we'll turn now to the director of navigant directives, mr. hal singer. please go ahead. >> thank you. complaints, including an expert for the nfl network, tennis

channel and madison. the role of the s.e.c. and that oversight process -- to design the proper regulatory framework, one must first understand the nature of the potential harm presented by vertical integration in the cable industry, namely, real estate dux in innovation among independent content providers. why we care about that potential harm? because some of the best content has sprung and will likely continue to spring from independents who are free from the scriptures of a clumsy conglomerate. without any protection against discrimination, independents will be forced to surrender equity in exchange for carriage and thus will be less willing to take risks which would result in fewer programming choices and less programming diversity. there are two schools of

thought on how best to deal with this problem of vertical integration. the first, advocated by professor tim wu of columbia law school in his book, "master switch," is to ban vertical integration. and police discriminatory acts on a case-by-case basis. the downside of an outright ban is that it sacrifices potential efficiencies related to vertical integration. the downside of a case-by-case approach is if we leaf from discrimination does not come swiftly or if the evidentiary burden imposed on an independent cannot be satisfied under any fact pattern, then after the fact adjudication affords no protection at all. assuming the case-by-case review is the best solution to the problem of vertical integration, the policy question turns to which legal framework is best suited for the task? should the s.e.c. adjudicate

these disputes under the public interest standard or should complaints of discrimination by vertically integrated cable operator be addressed under antitrust laws? the problem with the latter approach, the reduction in integration by independents may not be under the antitrust laws which were designed primarily to prevent the exercise of pricing power. because discrimination and program carriage often does not produce price affects, antitrust is the wrong framework to address discrimination by a vertically integrated cable operator. the lack of price affects in these cases is also why it makes no sense to interpret the nondiscrimination protections of the cable act and antitrust context, even if congress used the word unreasonably in the statute. by seeking to identify harm to an independent programmer rather than harm the competition, congress meant to fill a gap in the antitrust laws. namely, the preservation of diversity in the video

programming marketplace. how do we know this? at the time the cable act was passed, the largest cable operator in the country, t.c.i., controlled less than 20% of national video subscribers. if congress meant to import antitrust concepts into the cable act as some now argue, then congress also intended to immunize all vertically integrated cable operators, including t.c.i., from the nondiscrimination protections of the act as none would have sufficiently high marketplace to constitute monopoly power under the antitrust laws. the absurdity of this conclusion that congress passed eapt trust regulation that was applicable to no one proves that the cable act has nothing to do with antitrust enforcement. finally, i'd like to speak briefly about the appropriate evidentiary burden on complainants under the administrative approach. the -- it is to ensure that a vertically integrated cable

operator does not deserve the benefit to an upstreaming programming affiliate when deciding to carry a similarly situated independent network. now, there are two primary ways to establish evidence of this kind of biased decisionmaking. complainants could show direct evidence that benefits to an upstream network were considered inappropriately considered. in absence of such direct evidence, complainants could establish that the downstream cable division incurred a loss by carrying the independent network narrowly. this finding would create a presumption that there was an offsetting benefit to the affiliated upstreaming network. however, with the exception of a handful of networks such as espn, most independent networks lack must-have status. and thus would be hard pressed to demonstrate any forgone benefit from broader carriage. cable operators create value for their consumers with a buffet of program. requiring them to estimate

forgone benefits would be tantamount to asking a leading columnist for "the new york times" to estimate what fraction of its subscribers would switch to another newspaper if they excluded that columnist? the answer could be none due to customer loyalty to the "times" in general does not imply that columnist adds no value to the "times." complainants should not be required to estimate forgone benefits from broader carriage to it as the current law demands. thank you. >> we appreciate your testimony. thank you. now we'll go to our final witness, from techfreedom, mr. geoffrey manne. >> thank you, mr. chairman, ranking member, members of the subcommittee. in addition to being senior fellow at techfreedom, i'm also

executive director of the international center for law and economics and lecture in law at lewis and clark law school in portland. if you remember three words from my testimony today, remember these -- house of cards. netflix's hit show shows how the video marketplace has changed since congress enacted the special regulations that now govern that market. it represents the work of a new distribution -- a new form of distribution, a new source of content creation. it's based on new technology. it's rapidly innovating. those regulations are themselves house of cards as well. in the face of technological change, shifting consumer preferences and policy aims, it has a fragile structure that shapes content owners, networks and regulators is bound to fall down. its purposes frustrated, unintended consequences is legacy. to start, stela should be allowed to sunset. the license limit on copyright

protection repealed. congress should repeal the related provisions of the cable act, access and carriage, among others. and congress shouldn't extend this regime to -- regulatory regime online. this isn't deregulation. this is smarter regulation. because behind all of these special outdated regulations are laws of general application that govern the rest of the economy. antitrust and copyright. these are better, more resilient rules. they're simple rules for a complex world. they'll stand up better as video technology evolves and they don't need to be sunsetted. the f.c.c.'s numbers say video prices went up -- cable prices went up 20% between 2006 and 2010 but adjusting for inflation they went up only 10%. meanwhile, the number of channels increased 42%. spending on program went up 30%. americans spent 20% more time watching video. there is an endless range of

quality improvements that wept along with it. to say that the current market is in any way constrained, anti-competitive or crabbed seems very difficult to sustain. in short, consumers are getting more for their money, more content, more choices and higher quality. if net flicks were regulated like a cable network it's not likely the law would allow it exclusive programs like "house of cards." why invest $100 million in a franchise if you -- if it doesn't offer you a leg up on your rifles? exclusive programming helps drive -- your rivals? exclusive programming helps drive competition. it is not restricting programming innovation. if we're looking for rules to change, it's removing local regulatory impediments to competitive infrastructure, like franchising licensing and access to rights of way. allowing more towers to be built would be faster 4-g wireless service making 4-g wireless yet another established competitor the

legacy cable and satellite. and intense competition in some markets can benefit consumers everywhere. i point out when we're looking at the potential problems -- the abc of localized -- the absence of localized competition, these are networks. competition from verizon's fios in new york city, for example, has driven cable vision to enter into agreement with netflix's c.d.n. that means better streaming for customers outside new york as well. competition need not be local to have local benefits. so what should congress do? again, let stela sunset. a clean re-authorization of stela sent clean at all. stela's a mess. we need rules that minimize error costs, that affects policy goals, to default which we want to encourage. that is regulatory mistakes discovered in retrospect. the definition of copyrights performance rights over the

complex effort to use compulsary licenses, must carry, etc., aimed at boastering localism. but arguably, a simple copyright rule, retained and enforced by the copyright holder would have avoided the problem entirely. while the interest of the dwindling percentage of americans who've used television programming on the air shouldn't -- only on the air shouldn't be ignored, we have to take seriously the possibility that serving this segment under the current regulatory regime carries with it enormous costs that outweigh the benefits. these costs include retransmission fees passed on to viewers, technological and business model constraints and most importantly the enormous opportunity costs, perhaps as much as there are 1 billion, of more efficiently deploying spectrum currently used for broadcasting. i want to address quickly -- excuse me -- also the program access and program carriage

rules. these rules ashoe anti-truss rules to promote program disversity and competition among providers. by focusing on the program carriage and program access rules as constructed, we shifted the terms of analysis to a starting point that assumes all content should be available everywhere. but that not all content is available from all distribution channels is not proof of market failure. similarly, equating diversity with independence is inappropriate. if independence means not affiliated with the distribution network, that amounts for a preference for the abc's "the bachelor" over nbc's "the biggest loser." it prescribe an undesirable effect but is not an undesirable effect but a particular business model and it's a mistake to try to prescribe a particular business model when we don't know in the future what the optimal business model will look like. ending the regulations won't leave consumers unprotected. there is a road for the roit

law. >> we thank all the witnesses for your testimony. we go into the question. mr. palkovic, wh deciding to revise the current satellite law, it's important i think we understand what the impact of each of these decisions really would be on the current satellite television subscribers. how many viewers receive a sdan signals? because that was one of the underlying reasons for these acts, how many consumers would receive a local signal from their local provider and how many would not receive signal from an outdistant signal? so who's in that pool today? >> the entire pool between us and dish is a million and a half customers receiving that. i don't have a breakdown how many people are grandfathered. i think it's a fraction of that, couple hundred thousands. and i thoy those are largely on the directv side.

so it's in that range. it's a small piece of the million and a half. but if we were to lose that right through this process, you would basically be taking broadcast programming not only away from the million and a half customers but there would absolutely be no substitute for it. if there was a substitute they wouldn't be paying us to get the distant signals. they would be getting it in a different way. >> ok. if we could work with you a little bit going forward just so we get an understanding of what that pool looks like in terms of grandfathering in that would be terrific. ms. burdick, i'm interested in getting constituents programming they say are truly local. how do they not get out-of-state programming because they fall into a d.m.e. out of the state? >> i'm a living example of that, mr. chairman. i live in liles, michigan. my front yard is in michigan.

my back yard is in indiana. i vote in chairman upton's district. >> you are in five time zones, too. >> we changed that a couple years ago. although my lawnmower did use to change -- my cell phone would change when i would go around the lawn. at any rate, i happen to receive comcast michigan signal from its michigan head end. and what comcast does in that case is they reserve channel 3 for -- i'm the cbs affiliate in south bend and i have protections across the market. comcast reserves channel 3 for the local broadcast of the cbs station in grand rapids. so its programming, local news and information can be broadcast in that area. my point of telling you that is there are ways to resolve those situations and we have solved them in the market today. >> i know we have that problem in yuma county. there is a certain former

senator who is aware of that. anyway, it's an issue elsewhere in my district. ms. tykeson. when congress passed the 1992 cable act and 1996 telecom act, cable had 90%. cable share dropped to 59.3%, as i mentioned in my opening statement, and 51.6% of all tv households. is there still a justification for imposing on the cable industry regulations such as must carry, basic tier, by through, program carries, program access and set-top box requirements? go ahead and push that microphone. >> chairman walden, thank you for the question. i think when we described earlier how shift have changed and unfolded since 1992 it's a completely different marketplace than it is now. many of the rules you've just mentioned are outdated and they need to be repealed.

so my suggestion would be to consider sunsetting the 1992 act and potentially some of the other requirements in the 1996 act so there's a way to go back and revisit some of those rules. in the stela bill -- >> right. >> there's an opportunity for an examination because of the sunset clause. we don't have that in the 1992 act and as a result we're stuck with a lot of outdated rules that are harming consumers. >> all right. mr. pyne. do you have any comment on that issue of these rules that are put on the cable industry? should they stay or go? >> in terms of stela? >> no. in terms of the must carry, the basic tier, the by through program carries, program access, set-top box program from your perspective. we're trying to get different

perspectives here. >> in terms of the broadcast basic by through, i think the marketplace in essence has spoken in terms of the value of local broadcast. for instance, one of the reasons satellite has shown tremendous growth over the past 12 years, especially, is because of their investment in satellite space to drive local into local. to -- and it's a huge investment on their part. but clearly it's because of the value of the local -- each local broadcast community or each community in this country that has allowed their investments. so in essence even though they is it have the option to have national programming, they actually decided as a matter of course to deliver local programming. >> if i may add one quick point, though. i think the problem now is we have competitors in markets like mike's company in, say, bend broadband that have different rules so the playing field isn't level. i think we need to, for example, on the must buy,

that's got to go. >> marci, go ahead. >> can i speak about must carry for just a second? i think many members of this committee have rightly been concerned about diversity. one of the values of must carry is that these are stations in a local community that are sprung up by service to that local community. of the stations that are must carry stations today, 69% of them carry some religious broadcasting. 39% of them carry some directed ethnic program to those communities they serve. and must carry as a result of must carry today networks like -- channels like fox, univision, and others like that began as mississippi must carry stations, got traction and developed a business model of their own but they are extremely important today in localism.

>> i've actually gone a minute 41 over my time and the committee has been indull gent. i at the ter fought ranking member of the subcommittee, mr. eshoo, for five minutes. >> mr. chairman, i never mind listening to you so thank you. well, the title of today's hearing is "the satellite television law, repeal, re-authorize or revise." and in some way, shape or form, each one of you have taken up one of those words. so it really fits with what the title of the hearing is. i'm also mindful, you know, as you make your recommendations to us, that these are really some huge rewrites of business plans. and those are gigantic lobbies, quite frankly, around here but

we're going to do our best to come up with the best and i thank you because we really have a mix of views which is very healthy here today. the question i want to ask -- and i am going to have to submit some for the record to respond to because i won't have enough time to ask all of them -- are a little beyond just stela. since you're here, i still want to ask them. mr. palkovic, i now understand why it's called directv because you are very direct in your approach. in misburdick's testimony, she stated that the -- in miss burdick's testimony, she stated that they negotiate with paid television providers for the retransmission of their signal is working just as congress intended. do you agree with the assertion? and if not, what would you

propose changing? try to be as brief as possible. >> i'll make a quick distinction. working as intended as working well. it's working fantastic because they have all the protection and rights of the laws that were in place in the 1992 cable act. what i don't think was intended they would go from four cable channels to 104 with regional sports networks and use the retrans process for us paying an exorbitant amount because we risk them blacking out channels as part of the renegotiations. what we want to address here is the unintended part of the combination of those laws. ok. and that's what's different today than was there in 1992 was we were in a situation where we were dealing directly with broadcasters. now we're dealing with huge conglomerates that include

cable m.s.o. if they raise it exorbitant they are paying themselves. >> mr. pyne, welcome. nice to have you here. should arrow prevail in court? some network executives have been quoted of saying, there would be a radical shift away from the free over the year broadcast signal that consumers have enjoyed for more than half a century? if broadcasters began offering programming on a subscription only basis, do you think they would still be in compliance with the public interest terms of their f.c.c. licenses? >> as it relates to the area of case -- i know there are other network executives who have said certain things. our company's position is -- i think is evidence, we are in pending litigation with arrow. we'll always -- we'll always to everything we can to protect our content and the copyright

and the illegal appropriation of our content. >> very carefully crafted response. very good. >> it is on the prevailing litigation. >> i understand. thank you. to mr. singer, do you think our current law is sufficient in ensuring the availability of diverse independent programming like ovation, hallmark and the tennis channel? and if not, why do you think the cable act is failing to accomplish its intended goals? should we modernize the program, access in the program, carriage laws and if so how? now, maybe if so how is to -- i don't have very much time but you have 36 seconds for a question. >> i think that the laws as written, program access are fine. the problem is in the details of the implementation.

and i actually think that the f.c.c. has done a nice job here in implementing rules. san francisco, once they come to a decision their de-- of course, once they come to a decision, the judge's decision can be overturned by the f.c.c. and there is a period, again, the decision of the f.c.c. can be overturned by the district court. d.c. court of appeals. i think the problem now very shortly is that they've -- the court has layered on certain burdens that will make it all but impossible for complainists to prevail. i think at the current moment there might not be carriage complaints brought and that would be certainly inconsistent with the mantra of congress. >> thank you very much. mr. chairman, i'm going to submit my other questions to the witnesses and i'm especially interested in the whole issue of copyrighted material deserving competition -- compensation.

i think it's a very important area for us to explore. especially when it comes to radio fairly compensating artists for their copyrighted materials. so with that i yield back. >> i thank the gentlelady. and we'll now go to the vice chair of the full committee, the gentlewoman from tennessee, mrs. blackburn, for five minutes. >> thank you, mr. chairman. ms. eshoo and i think have some of the same questions. and i'm going to go right to the copyright issue. ms. burdick, let me come to you. i appreciate your comments and how you expressed support for property rights. i'm quoting, recognizing local broadcasters' property interest in their signal seeking compensation. i agree, program deserves to be compensated and incentivized. what about the radio side, refusing to recognize the sound

recordings, if that undermines your position before us as we look at the video prame work and the retransmission -- framework and the retransmission rights? as you know radio broadcasters say they shouldn't have to pay performance royalties because they help distribute an artist's music. so square that up for me. where's the contradiction in that? >> sure. just by way of background, our company has been in the radio business for 90 years, 18 months after the first commercial station was -- >> quickly. >> there's been a relationship between radio and artist -- radio and artists during that period of time. and the difference is that when my radio stations play the artists' music, the listeners are getting it for free. we are talking about taking the local television program and repackaging it and selling it

to consumers. in the latter case, if you're charging for it i should be compensated for it. on the radio side, i recognize there is a healthy debate in the industry. we are providing that for broadcasters for free. >> ok. you can look at it and say that they are helping to distribute your signal which helps to increase your ad revenues, and so maybe brauferts, radio brauferts should be -- broadcasters, radio broadcasters, should be paying for those rights for entertainers. mr. manne, you had a little bit to say about this. do you want to weigh in on this side? >> just briefly i would say i think the distinction is a distinction without a difference. i don't think you can really square the rejection of the compulsary right in one case and not the other except other

recognize the broadcasters are net beneficiaries in one regime and they're net payers in the other. and so it makes perfect sense they would prefer one over the other. i don't think that squares with the public interest. >> ok. thank you for that. i think this is one of those points that we will continue to look at because content does deserve to be compensated. and the creator and the holder of that content deserves to be compensated. ms. tykeson, given how government granted retransmission consent fees have grown from $216 million in 2006 to what will be over $3 billion this year. who is benefiting and what is driving that growth? >> congresswoman, thank you for the question. there's two groups that are benefiting from the retransmission consent fees. originally those fees were designed to allow to help level

the playing field between the local broadcaster and the cable company. of course back in 1992 it was a very different circumstance than it is today. what's happening now is the national broadcasters are requiring fees be paid through the local affiliates and that's increasing the fees at huge rates, as you mentioned. so that -- all those fees are going -- they're accruing to the large conglomerate broadcast companies that control 60% of the top 50 networks to on the backs of my customers. >> ok. you also stated in your testimony that there are barriers to creating programming packages that are responsive to consumer needs. so what has led to your business' hands being tied in meeting the needs of your consumers? >> congresswoman, there's three things that are happening that affect my customers in bend, oregon.

the first is the size of the increases that we're asked to play by all of these programming channels on an annual basis which range between 8% and 10% roughly for every channel. in addition with these large bundles of programming, there's always a must-have channel in there but there's a lot of other channels that maybe my customers wouldn't want. what's happening is the large programming companies are forcing those channels into certain packages. i used to be able to have a special sports package that could meet the needs of customers that want a sport but now in many cases those expensive channels are being pushed down into the more popular packages that is increasing the prices for my customers. >> ok. my time has expired. mr. chairman, i got a question i'll submit to all witnesses and ask for their response in writing. and i yield back. >> i thea the gentlelady from tennessee, the vice chair of the committee. we'll go to the former chairman

of the committee, the gentleman from michigan, mr. dingell. five minutes. >> thank you, mr. chairman. i commend you for this hearing. i appreciate your kindness and courtesy to me. to the surprise of all, i probably won't be asking questions today, but i got some brief cautionary remarks. i am somewhat alarmed by the preference of comments in the testimony -- prevalence of the comments in the testimony of our witnesses today that are extraneous to the basic issue that we seek to address. successive iterations of the 1988 satellite home viewer act, shva, were enacted by congress in order to extend the principle of localism to the greatest degree possible, to unserved viewers. i note that thanks to shva and with subsequent re-authorization, directv and dish are now the second and

third largest paid television providers in the country. and are able to compete on a more level footing with the traditionally dominant cable companies. these facts tell me that shva and its successor legislation have fulfilled their intended effect. now, the committee last considered the satellite television extension and localism act legislation in october of 2009. that bill was comprised of nine titles, but it had only 30 pages or thereabouts. it's main provisions extended sections 325-b of the communications act with respect to distant signal carriage and good faith negotiations as well as address problems related to significantly viewed stations and the aftereffects of the transition to digital television. now, to put this in simple

terms, the committee's work on satellite television legislation has been predicated on the simple principle of localism and it should continue to do so. in closing, i recognize the landscape for video has changed significantly in the past 5 -- 25 years. if the cable act or related laws related to the video marketplace are to be amended, they should be amended on the sound basis of a thorough record established by the committee's diligent record -- diligent efforts to achieve such record. at present, the committee has not established such record. and i have to confess that i don't think that most of my colleagues, including me, understand full well what the situation is or what it is we should do about these matters. and so without those kinds of

things and without a record to define what our efforts should be, i think we would be well served to confine our efforts here to a clean re-authorization of the satellite television extension and localism act. i would observe to fail to do this is probably going to project the committee into one of the dog gonest downing brooks in recent history and i hope for the benefit of all of us and for the need to do other things that we would keep that thought in mind. with that, mr. chairman, i return with my thanks and gratitude a minute and 44 seconds. and i appreciate your courtesy to me. thank you. >> would the gentleman just yield? >> if i have time, of course. >> the gentleman yields. >> thank you, mr. teengle. i can't help but -- thank you, mr. dingell.

i can't help but jump in here given what the gentleman from michigan has said. i think everyone here knows, and if you don't you're going to be reading about it, that mr. dingell is now the single longest serving member of the united states congress in the history of our nation. and he's spoken again very, very wisely and prudently today. so we not only congratulate him and celebrate what -- the work that he has done at this committee. every major law that we can point to has his name on it. thank you, mr. dingell. and thank you for what you said today and bravo. >> mr. chairman, i want to express my thanks and respect to the gentlewoman from california and my thanks for her kind words. my dad used to say.

son, it ain't how long you took but how well you did it and how hard you tried. i've tried to concentrate on the second part of that comment. thank you very much, ms. eshoo. mr. chairman, i thank you for your courtesy again. >> the chairman emeritus yields back. and at this time the chair recognizes himself for five minutes and, again, i want to thank all the panelists for appearing before us today. and it is a very important hearing. we're going to be going in the next year and a half with the re-authorization or where we go. if i can start with ms. tykeson, if i could start with you and ask you a couple questions and first, again, congratulations on your award. i represent a very interesting area and one that's south of mr. dingell's area in ohio and it's a -- it goes from an urban

area to a very rural area. and so it's serviced by many small operators like bend broadband. i want to ask you about step top -- set-top box, if i could. and you've called on congress to repeal the ban on integrated security on the set-top boxes, but you note in where you are written testimony that your company was granted a waiver of that rule. and why is this rule relevant in today's area given all the areas that we can get programming from and do we need the 629? >> thank you for your question, congressman. we were able to receive a waiver back in 2008 so we were able to go all digital. we were the first company in traditional cable company to go all digital and reclaim all of our analogue spectrum. what's changed since even since then is the plethora of devices

that are available and so determining how people receive their signals using hardware in today's world where applications or software can do the job is a much more efficient way to do that. a lot of companies can't do -- put together a waiver because they're too small. and having this rule on the books that is outdated and no longer relevant is costing billions of dollars and preventing technology from moving forward. thank you. >> let me just follow-up. you said some of the companies out there can't do it because they're too small. how small is few maul? >> i'm a member of the a.c.a. which is represents small operators and there's companies out there with a couple of hundred cable customers. >> ok. if i could follow-up with you on that. i understand that the f.c.c. has admitted that their cable

card rules have not been successful and market for set-top boxes as section 629 of the 1996 act intended. however, the f.c.c. has been encouraged to adopt all rules that apply to all paid tv providers to remedy this situation. what's your position on that? >> well, i think the problem with the rules that -- with regards to the -- accuse me. i'm a little bit nervous. >> no, go right ahead. >> is that some of these rules are only applying to cable companies. and they're only applying in the united states. and so we're artificially impacting the cost of hardware, and i am not in favor of trying to regulate who should be doing what with technology that's changing fast and rules like we have in the 1992 become outdated and they're impacting

the marketplace and how it unfolds. >> thank you very much. and mr. pyne, if i could ask you just a couple questions. i find it really in your testimony you stated that in cooperation with our mvpd's, for example, cable, satellite, and telco distributors, you make live streaming of many of our channels to subscribers on their tablets and smartphones. we hear how things are changing out there. across the country are getting their information, and i'm just kind of curious. when you talk about making that live streaming available on all these different channels and subscribers, do you have any breakdown of the ages of the individuals or the regions? is it particular or is this across the region just on the age groups, out of curiousity for one? >> on the specific -- with our

watch services, i don't have the breakdown. we can certainly look into that. just to be clear, part of the reasons -- we call this tv everywhere. the industry calls it tv everywhere. it really is part of the industry's effort to continue to find ways to provide an incredible valuable package to consumers. just quickly, this week michael powell, head of the nctt, said on stage the average viewing -- the average cost per hour of viewing entertaining content is 23 cents. so 23 cents is the average cost of viewing which in terms of entertainment options, he was saying it's a very gret bargain. i commend companies like bend, direct and others for doing a great job in creating that value. i will tell you abc.com, in 2004, when we had such great hits as "lost," "desperate housewives" and grey's

anatomy," when they were off the hour they were pirated off the air. we created abc.com, which is live streaming at that point, and statistics we found in that >> the statistics we found in that is that the average age of a linger television was in the early 40's. the average age of somebody watching abc.com was in his or her early 30's. that may gave you some indication. >> thank you very much. my time has expired. i recognize the gentleman from pennsylvania, mr. doyle, for five minutes. >> thank you, mr. chairman. both of your companies deal with retransmission consent of small cable providers yet you seem to have a disagreement on the effectiveness of the regime. why do you think that is? i said, i'm the

small broadcaster, small cable company at either side of the table. there have been some remarks day about consolidation of broadcasters. we're small fry compared to the consolidation of the video provider world. the top four video providers control 62% of the market. the top 10 control 91%. so in my negotiations as a broadcaster, i'll start with a millions of th subscribers that say, you cover in your six markets 1.8% of the country, i can afford that. it's a tough business negotiation either way. if i spoke as a cable operator, which i'm not today, i'm speaking on behalf of n.a.b., but the negotiation is equally tough on that side of the table. i think what it proves is that the marketplace works. >> as a small cable operator, though, you think it works? >> yeah, we made it work.

i don't think it works because it's not a free market. so i have a choice of one affiliate in my market and in some cases, it's a great affiliate because they provide local news. if we have an impasse, for example, i'm given a price i have to pay. i don't have any recourse. i can maybe negotiate a little bit, but at the end of the day, that broadcaster can take the channel off of my system. so my customers either have to pay the price or we go, have to go black with the channel. we can't bring in another signal during that interim period and in the other point i wanted to make in some markets, about 48 markets around the country, there are broadcasters orking together to negotiate with the mvpd or that local operator. that collusion is driving up prices by about 20% and making it very challenging to

negotiate. i don't think there is any other industry where competitors can work together to concluded to come up with a solution. i know that she said in her market she is not doing that, but my smaller cable constituents around the country have had those circumstances that are very disruptive to their customers. >> thank you. has disney ever conditioned the purchase of your most popular channels on the purchase of your least popular channels? >> no, we have not. in fact, i have signed three affidavits saying we do not employ what is commonly known as tying. >> has anyone requested price quotes from you for most of your popular channels only? me? cuse >> has anyone requested price quotes for your popular channels? >> espn and espn2 which are two of our most popular channels, 15% of our cable systems out there only carry espn and espn2. >> very good, thank you.

>> how does channel bundle affect the types of packages that your companies can offer and how does it affect the prices you charge your consumers? directv, it's simple. we're offered a price for all of the channels with a particular program including retrans. any offers that would break that down into individual pieces are just economic. i think that's intended. that usually doesn't go anywhere. and you end up with situations where even if we could create a package for consumers that was affordable that only had in that package enough programming to support a price point that they would want, we'll run afoul of penetration obligations in those agreements. so you can do it, but you end up either having to stop selling that package or you have to pay through the nose to

the programmers for violating those terms. it's not just the tying of all of the channels. there penetration obligations on the most popular channels that accrue to the rest of the suite of services. it's a tough situation today to deal with. >> thank you, ms. tyseson. what that means, if we wanted to have a channel down in a lower level -- usually we don't, but say for example with basic cable, we -- limited cable, we would be prevented from moving those channels to a higher tier if they're too expensive. we're forcing our customers through, unfortunately, the programmers are to put these channels in tiers where customers don't want them. if we pierce the floor and i think that's what mike is saying, now we're in breach of contract. so i have to put these channels in these wide penetrated tiers

and customers don't want them. my packages are becoming way too expensive. it's just not fair for my customers. >> thank you, mr. chairman, i see my time is up. i'll submit the rest of my questions for the record. >> thank you very much. the gentleman yields it back and the chair now recognizes the chairman emeritus, mr. barton, from texas, for five minutes. >> thank you, mr. chairman. before i go into my questions, i have a commercial. tomorrow night at 7:00, mr. behemoth of a team is going to apply the rag tag republicans and i'm scrounging a team together this afternoon to make sure that we can get nine folks to show up, but the game, the game is at 7:00 and there are a lot of energy and commerce members and mr. doyle is the manager of the democrats

and i'm the manager of the republicans. this is our second base. we are hoping -- >> we'll be gentle, mr. chairman. >> we want you to be very gentle. he want you to be very gentle. if you can start the clock, i'll get into my comments. i have three homes, which is unusual, but two in texas and one up here. one of them is covered by directv. one is covered by comcast, and one is covered by charter communications. the two that are covered by cable and also includes an internet package. directv is just tv. all of those i'm paying in the neighborhood of $200 a month. each, yeah. i am really looking at going back to the old free tv.

it's illustrative when you're having commercials show up on cable television that you can get an antenna and the government requires free over the air broadcast. got a whole generation of americans who don't realize that they can get free over the air tv. it's like it's a new product. i'm about to rejoin going back to the future because of the cost. major e last time we did cable bill, there was a republican congressman in nathan diehl and he was hot to trot on ala carte pricing. i discouraged him and, but anyway, we let him have a vote on his amendment. i think he got two or three votes. well, he is now governor of

georgia, but if he were still a member of this committee, i think he would get a lot more votes. i'm not real happy. i understand that i can get 1,000 channels, but i only watch two or three and my friends at directv, i know it's not fair to pick on you, but one of the channels that i really, really like to watch is fox southwest. it's the regional sports channel in texas. in order to get it, i had to pay about $70 for a package, a tiered package of which all of those, really only one i want to watch is fox southwest. so i'm not sure, i haven't talked to mr. walden or mr. upton, i don't know what their personal views are on reauthorization where they want to reopen it or they just want a so-called clean bill.

if they want to go beyond a clean reauthorization, i'm willing to look at the basic at the nets and revisit -- tenets and readvisement it. to an average american family, $200 is a significant amount of money. that's mine in three locations, in two of the three includes an internet package. it doesn't in the package for directv. that's just something as an observation. my question, i'm going to mr. singer here because he seems to be the economist neutral man here. retransmission consent was meant to be a level playing negotiation between a local broadcaster and a local cable operator. in many cases, the local cable operator was a national cable operator. it wasn't somebody like mrs.

tykeson who has a local system. apparently now, retransmission is becoming a national negotiation between a broadcast network where the local affiliate yields to the national network who then gets a fair amount of the retransmission package if there is compensation. that was not the intent of the congress, at least that's not my recollection. so i would like mr. singer's comments on how retransmission has evolved and if he has a solution, if he thinks it needs to be changed, what would he go to? >> thanks for putting that to me. i will try to be fairer than them all. the point is that economics are the way that economists that think about things, is there a market problem. is there vertical integration that can distort incentives relative to an independent in

this situation. when i look at this problem, i see two behemoths on both sides of the bargaining table. in this situation, you will get fractures in the sense that deals won't be struck. there isn't a very solid basis, at least in economics, for regulatory intervention in those circumstances. it seems to me that there is an important caveat, so long as the copyright is protected on the broadcaster's side, we should let those guys beat each other over the heads until they come to the right price. >> so you don't see a problem ith the current law? >> i think that there is, again, what i have seen put on the table i think in mr. manning's testimony is that if we fix the copyright issue, we can repeal the law and let market forces dictate the outcomes. i do see problems, i just want to say, in terms of the size of the package that you mentioned before and i'm sympathetic to that. on this issue as to whether or

not government should lean in and put their hand on the scale of the negotiation between two large players on both sides of the equation, that doesn't have a very strong basis in economics. >> thank you, mr. chairman. >> thank you very much. the gentleman yields back and at this time the chair recognizes the gentleman from new mexico for five minutes. >> thank you very much, mr. chairman. i almost want to yield you more time to get through some of those questions as well, sharing some of those concerns especially with the rural districts that i represent. mr. ss a question to alkovich, mr. pine and ms. tyseson. prices from 1995 to 2011 time period increased by an annual ate of 6.1% compared to only

2.4% increases in the overall consumer price index. what factors do you attribute those causes as we talk about the impact of the programming to many of our consumers? >> sure. i think directv in recent years has been going up annually about 4% with our customers all in and just to kind of put it in some context, over 40% of our costs are costs paid directly to the programmers, to the content holders. and their prices have gone up double digit, so when 40% of your costs are going up 10% and we can only get 4% from our consumers because we still have to operate in a competitive environment, we're not making any money on this. all of the other operating costs we have for satellites and broadcast centers and overhead and customer service

and we're a huge believer in providing the best customer experience, we're eating all of those costs because all of the money that we're getting annually is going directly to the content holders. if people think that we're out there making money on these increases, we're not. >> so in our case, programming is the number one cost for my company. our expenses for programming are going up twice as fast as our revenue from video product. i wanted to also just comment on congressman barton's point because what we have now is this shifting in the power. we're negotiating, mike's company and my company are negotiating with a single broadcaster in a market. so this is the only example i can think of where you have more competition and higher prices. it's because i don't have any place to go besides to those broadcasters or programmers to

get that particular content. >> if i may just say something on programming costs, first of all, i want to make one point clear is that at the walt disney company, we only own eight television stations. when we negotiate retransmission consent, we negotiate for those eight stations. it sounds like there is a belief that all of the local broadcasters are puppets in some way. believe me, there is a great exchange of dialogue between local broadcasters who are affiliates and us in terms of whatever the appropriate exchange of value. they are the ones that drive that local decision and that local negotiation. we at the walt disney company spend billions of dollars every year in creating great content. i said earlier that for abc alone, it's $3 billion a year, but we always, whatever the service, we always are looking to make our networks must have. i wish it would as easy to call down to the local store and say, here, i would like to order two hits, but the

investment and the risk in developing that content is huge for us and ultimately we're looking, in terms of our negotiations to find a fair way whomever g terms with our distributor is. one of the advantages that small rule cable systems is the national cable cooperative. in that case for all of our cable networks, espn, disney hannel, abc family, we negotiate and broadband is a member, you maybe a member, too. eight million subscribers and we negotiate as if they're the fifth largest. >> i have to just jump in here because i'm going to lose all of my time here. i would love to get that maybe in a written way and we'll get that resubmitted. i am sympathetic to a comment you made in your prepared testimony that you're concerned that local communities could

lose access to local programming. i think that we would both agree that access to local news, local programming is critically important. i want to talk to you about something that is broken. i represent a district where many of my constituents can't receive local programming because of the d.m.a. that they're in. i would like your opinion on what we can do to make sure that we're including rural counties to get this done. if not, i want to work with my colleagues to find a way to fix this. since i have been in congress, i have been asking for help in this area. i have not found anyone willing to help me out to get this fixed. >> the head of the n.a.b., former senator smith was successful on the senate side and signing some fixes there. we would be glad to work with you there. broadcasters want local citizens to have local programming. we would be glad to work with you. may i take just a minute to address a couple of comments here. i think you raised something that was really important where you quoted cable rates from

1995 on. the fact of the matter is, broadcast retransmission consent has only existed since 1992. from a practical basis, it was really not until the late 1990's or 2000 that most broadcasters began successfully negotiating for pennies of every programming dollar to support local news and information. the cable rates have been going up in a larger percentage long before broadcasters were being paid for the most popular content on cable systems. >> i appreciate that. i know my time is up now, but as i look for some assistance to get this done, my savvy consumers, they go and get a post office box out of a metropolitan area, the largest city, albuquerque, i'll be darned they get local programming. if it's not against the law, we need to make this work somehow. this is just ridiculous. these are farmers and ranchers

in isolated areas that want local programming and know what is happening in the state that they're proud to belong to. we need to get this fixed. thank you very much, mr. chairman. >> he yields back his time and the chair recognizes the gentleman from louisiana for five minutes. >> thank you, mr. chairman. i enjoyed the testimony. want to start with mr. palkovich. competition normally drives down prices. here the congressional research service recently put it that ironically, the market consequences of greater competition appears to be greater negotiating leverage with programmers popular and specifically must have programming resulting in higher programming prices that partially on to

subscribers. how do you believe government regulation has contributed if at all to the findings that we saw from the congressional research service? >> i think it gets back to the tying and bundle of the retransmission consent rights that broadcasters have that are tied to the 1992 partially on c coupled with the consolidation of programming that is taking place since that time. right now there are six major companies that control the majority of programming. they're not all broadcasters, but four of them are broadcasters and they behave somewhat differently depending on who they are. when they bundle all of their content together, even the content that is less desirable that people should be allowed to choose in more niche packages in exchange for a very much high in demand programming, they just really point your gun at your head and say you got to take it or leave it. what makes it worse is when they throw blackouts on top of it. it feels like a free market situation, underlying is the

all of the protections they have more the local broadcast channels. it may be the small mom and pops, but the large conglomerates are using all of the rights they have with the cable act and leveraging that against distributors and driving the prices up. >> let me ask mr. pine, i know when you talk about the different services that your company provides. my kids would probably have a revolt if the disney channel or disney jr. went off the air, i would probably have a revolt if espn went off the air. if there was a repeal of retransmission consent, but lso tied in with the repeal of compulsory copyright license, that legs i brought forward and -- legislation i brought forward, that is often left out of the conversation. would it go back to a normal copyright negotiation where you would have two parties that would still be sitting at a

table negotiating but in this case, the consumer demand would be driving a negotiation that would still be based on a mutually agreed upon price? >> i think we don't -- we don't support the repeal of both of e retrans and compulsory copyright. clearly in that discussion, there are some things of interest to us in terms of the economic discussion, but we don't support the repeal of retransmission consent for the reasons i cited. i think in full candor, one of the reasons is the potential uncertainty we view that could take place in the marketplace. from our perspective and certainly from other broadcast perspective, we believe the system is working in terms of the negotiations. yes, there are disruptions. they're not officially blackouts because broadcasters are still broadcasting their signal. as in any negotiation in the

current system, i personally have been involved in two. one is when time warner dropped abc in 2000 and in 2010 when we dropped cable vision. in the first case it was resolved in 36 hours. in the latter, that was just abc, by the way, it was not other networks and the latter resulted in 20 hours of abc being off the air. we reached a resolution. >> thanks. one of the earlier, when i did an opening, the reason i held up the brick phone and you can find these on the internet still which we were able to do, it doesn't work, still can't get it to work, but the laws that were written were written during the time when this was the technology. i brought up the aerial case earlier. i appreciate that there is ongoing litigation, you can't talk about it here. if you lock just a few weeks ago, the head of cbs actually did chime in on this and indicated that they're right now in talks with pulling cbs down and going to a cable format. probably unlikely that it gets to that, but the fact that cbs,

one of the major broadcasters is right now talking about the possibility that if this court case goes a different way, that they could pull down their local broadcast signals and just go to a pure cable format, the marketplace is changing dramatically because of technology and the laws don't cover that. i want to finish with this. the context of laws that were written in 1992 that really haven't been updated, the technology has changed dramatically. >> we had amazing progress in his market despite the i pointed out in my testimony, the rules here and in particular when i hear all this discussion about high prices for must have content and all the talk about bundles, i think we seem to substantially disagree with this, what i hear

is that there are pieces of the existing regime, we have talked about them starting as you and i both agree with the compulsory license, but going through all of the many we have mentioned today that do dramatically, i think, impair the free contracting among the various parties here and probably do affect price. it's also really important that at the end of the day, you do have to pay a price for things like, things that you must have. if you really want something, you usually have to pay more for it. especially when it comes to the availability of content and that means both the production of the content and the stribution of it, i see this incredibly vibrant market with more content than we have ever had, more avenues of distribution that were imaginable. the fact that the particular business model by which they

were distributed, in some cases bundled, that doesn't foreclose access to all of this wonderful content. that's not how it works. because it doesn't work that y, i see it as a valid business decision that these owners and distributors that they negotiate with have made to actually maximize the production of that content. that may cost a little bit more, seems like it cost more because you have to pay more, for example, the bundle. the that has generated such a proliferation of content and, again, and distribution mechanisms for it that we have this really remarkable market that could be even better because they're so easily identifiable problems with the regulation of it that we could dispense it. >> thank you. i give you back the balance of my time. >> the gentleman yields back at

this time. the chair recognizes the gentleman from utah for five minutes. >> thanks, mr. chairman. i do appreciate the panel today. i find this to be a rather thoughtful and informative hearing which i wish that was always the case. this was a really good one today. i appreciate all of your input. i had a couple of questions, there are so many issues out there, but i wanted to ask you, there is this suggestion that has been put out by some folks that there is a situation where out of market programming could be allowed during retransmission consent disputes. if that happened, can you tell me what the impact would be on your company if that happened during a retransmission dispute? >> sure, i'll give you one line and then i'll lab. imagine what it would be like in moore, oklahoma, had distant signals been broadcast the day of the tornadoes. imagine what it would have been

like. we as local broadcasters are providing local news, weather, and sports services that are not duplicated by anyone else. the fact of the matter as the panelists have alluded as must have programming, it's watched more on their cable or satellite systems than any of the channels that they provide. you have to go to a c.w., a my network station over the air that even gets close to the top rated cable networks. so we are providing important content. a signal signal, if was allowed to be imported, a couple of things would happen. there would be more disputes and it would last longer because there is no incentive to settle that dispute. they're bring nage signal they're not paying for. why would you reach a resolution with a local content provider to pay for that content, number one.

at the second time, they would be shrinking my market area. i would be losing eyeballs. when i lose eyeballs, i lose advertisers. when i lose advertisers, i lose dollars. the only place as ms. t mine as the local broadcaster is people. that is the only place i have. that would be the impact. less local information. >> thank you. you talk about your testimony how your cost has gone up over the last few years. roughly, what is your breakdown between what is broadcast and what is not? >> i would say -- >> could you turn on your microphone?

>> it is growing at a faster rate than the cost for my other kinds of programming. byh are going up to be a -- significant amounts. is retransmission consent probably doubling and tripling each cycle. largeition with a bundles of programming that i am required to offer because there is not a system to offer smaller packages, each time those negotiations, round, my costs are going up. or evens by 20%-30% ise depending on what required of me and to moving some of those channels downs and offering more and taking the double or triple the cost of inflation costs of each of the channels that we provide. we have to in accordance with the agreements. >> can i make one clarification?

i have heard this several times. , we doher businesses offer packages of programming, but i will say three things. number one, we spend and in order amount of time -- andrtant amount of time energy. when a channel does not do very for example,ged, popularity has waned. we could have tacked on another channel. disney junior has incredible. if i may finish, we would love all of our channels to be one hundred percent penetrated. we have a portfolio. has only penetrated 18%.

disney junior, 49%. deportes only 48%. we understand that. that was a new course -- negotiated deal. finally, we have done as a company over the last two years, seven of the top 10 fields with major companies ranging from cox communications to cablevision to at&t. 30have done deals that after years of negotiating in the marketplace, i've been doing this for 21 years, we have established stander rates. >> because my neighbor mentioned the national co-op which is an opportunity for companies like broadband to participate. some of the problems with the rules that we are currently operating under is the co-op is not treated like a large

distributor. the prices that are offered to the members are in terms and in particular are different. in most cases, it costs more or there are more stipulations that are not attractive or as a tract it as a large distributor might be able to get. thank you. >> i yield back. but the gentleman yields back. the chair recognizes the gentleman from vermont. >> thank you. this a great hearing. i was on the committee to congresses ago. i am back. es ago.congress things are confusing for consumers. it is fabulous to be here. the work everybody is doing is

so important. and what the market requirements are and you have the revenue stream to do it is essential. we are talking about this in the context of satellite reauthorization in congress has successfully done. the elephant in the room that has been alluded to as the cable act of 1992. the world was totally different. the consumer needs and opportunities were completely different. it is raising the question in my mind as to in fact if there needs to be a serious revisit of the cable act of 1992? in my office, i have had many people in your sectors, in -- come in and talk about the status quo and the problems. some have said is the right way to go.

that is in contention. we are hearing that amongst you. the bottom line, i do not have any answers come out weave to figure this out and do it in a coherent way. think about it because as we have heard about. orphan counties and not being able to make any progress. what i hear about is for my consumers and because of this. we really appreciate your leadership. talk is to help caucus to help people in rural counties. the consumers do not have any power to affect the outcome. they are feeling the pressure of these high bills. and they need the services you provide. they benefit from the content create.

they benefit from local broadcasting. we had a tropical storm irene and it was the lifeline for us was local radio and local television. on the other hand, they have no control over what that bill list. they get all of these terms they never watch. they kind of wonder why these baseball players are getting to -- $20 million contracts and they cannot swing a bat anymore. you have a revenue service where there is no liability for the general manager who makes the deal he cuts they can pass it on to the subscribers. people are getting that up with that. -- fed up with that. for us tof it is time not only look at the satellite stela but the cable act of 1982 -- 1992 and understand where the

interests require your a stable revenue stream in order to provide the benefit to consumers and consumers have to be part of the equation. i will go to -- it down the line and ask if a revisit of the cable act makes sense. apart that everyone always hears whatever can go wrong will go wrong if congress starts to change anything. i get that part. let's start with you. >> we came to address the topic of stela. theme isn loon is -- the rules are old they need to be revisited. we try to come up with thetions -- anywhere from

total deregulation approach where everybody gives up all of those rights including us. you put the good and the bad on the table and start over. two more targeted approach is to take care of things that are directly beneficial to the consumer. that is the problem we have. you use the consumer with the blackouts to deal with the free market negotiations. that is where they have gone over the line. there is no question of revisiting -- >> my time is about up. i would like to hear every action. go ahead. >> you want us to continue to respond or later? respond later -- respond later. a yes or no would be helpful. i do not want to wear out his patience and goodwill.

>> if you want to go down the line. >> yeah, just yes or no. >> i cannot answer yes or no. >> ok. provideld say yes and a written response. that will take time. additionalfor some fixes now. some of which i have mentioned. thank you. >> there is still a valid need for the access and carriage. aside from those, it would be worthwhile to revisit the larger picture. >> i think absolutely. you cannot address stela without addressing those others. when you do, the most important thing -- i disagree with carriage. the most important is to understand how your regulations can avoid enshrining the

particular contractual arrangements we may have today if they are the only possible revenue models. that is what has happened. >> thank you very much. >> the gentleman yields back. the chair recognizes the gentleman from colorado. .> thank you, mr. chairman listening to the opening comments and questions, there is no doubt from the members here and the witnesses here today that the rules governing the marketplace were crafted 21 years ago. a very long time ago. none of the rules currently apply to some the latest internet competitors. , we these dramatic changes have a great opportunity to examine what has changed and how current laws can advance innovation. i know the broadcast industry

believes it is working. others disagree. the rise in costs and disputes show there are issues we need to look at. directv, i would ask this question. s -- thinklegally stela is the right vehicle? piece ofan appropriate legislation. we have a number of things to benefit consumers. in that act, we would not want any of that changed particularly taken away programming for 1.5 million customers without any benefit to the broadcasters accept for except for hurting the broadcasting industry. with reauthorizing that to the any minorcan have

changes like a blackout issue addressed. stela is not think the right way to move forward in the video industry and can you address the questions that tv >> that are underpaid? was evident again today. cablech of the programming dollars go to local stations? it was not answered. we get this percentage onward transmission consented. , it you start from zero always looks pretty big. the broadcast programming is the single highest viewed programming on any satellite or cable system. the compensation we receive for producing that program is miniscule compared to some of the other providers. in termssaid anything

of blackout. i would like to underscore when issue, these are contractual negotiations and when we reached an impasse, we are still on television. we never go away. i hope representative barton looks at what is available since he last looked. it may be 20 or 30 stations. cable is not asking you today that if they reach an impasse able to import and from another cable system. why should they be allowed to import a broadcaster? >> why we are comfortable with thea is that we believe fraction of affected americans and we are starting to believe -- trying to get the exact we go find a solution

with the broadcast companies. tothey asked the government refrain from intervening. compulsory copyrights it they further argue that broadcasters can decide who carry their content but they cannot choose which market to get their programming from. if i can start down the panel and i am going to run down -- out of time. to be concise here the broadcasters are combining their rights and they are leveraging those rights with all of the other cable content required overtime. using end of the day,

tactics like blackout bring the consumers into play and distribute have to deal with consumers. they do not, we have to. >> i will take a small chunk. whether it was copyright, what congress recognized the value of localism and protecting local markets. supportslace that local news and information. that still has to be recognize. if local broadcasters are not providing those lifeline services, who else will do it is to work -- who else would do it? >> we view that as a mechanism of entering into negotiations. one of the tenets of our business am a we spent a lot of money to great content and we want to be able to get a return on that content. would you do retrans mission

content, you enter into negotiations and you can either reach an agreement are not. to be clear, i know abc is one of the big broadcasters, we are not negotiating for the country. we are negotiating for our eight owned stations and those local markets only. i want to be clear about that. >> they were percent a huge percentage of the united states. >> it is only 23% of united states that that the smaller than any of the other broadcast groups. >> it is not a free market. i have one broadcaster to negotiate with. and that is it. if we cannot come to an agreement with the price, we have paid in other ways in terms of launching other channels. while it is true that consent fees have started, there are lots of other demands before that. we do not have a free market. i do not consider a $6 million

to be miniscule. if we come to an impasse, i have two choices. and pass thatce along to my customers or the channel is blacked out. mr. chairman,ss? it is up to you. if i could run through the rest of the panel members. let's finish with the rest. i do not think allowing broadcasters to be compensated for the signals is driving higher prices. bundling is. vertical integration. when a regional sports network is owned by a cable operator, it

charges were the independent and the premium increases with the market share of the affiliated. it is important to focus every buyer's attention on what is driving the prices higher than the fact that broadcasters are allowed to seek compensation is not one of them commit as it is not the vertical integration. >> it is not the vertical integration. much it can impact the prices like that, it is not as substantial as he thinks. if there was a free market, all of the benefits from local broadcasters with her to be mandated by law. and distributors would willingly purchase them. that may not happen.

it is not a free market. >> thank you. >> the gentlest time has expired. of theto thank on behalf ranking member and myself for your testimony and answers. we appreciate it. it is informative. on behalf of the committee, thank you. adjourned.ee stands >> education and workforce is our guest on "newsmakers."

it passed the house on the 23rd. this week, president obama weekly address is on the significance of father's day. the republican response is from representative lamar alexander. he talks about student loan interest rates. they are set to increase on july 1. , everybody. this sunday is father's day. i want to take a moment to talk about the most important job some of us will have, that is being a dad. we are blessed to live in a world where technology allows us to connect with almost anybody on the planet. no matter how advanced we get,

there would never be a substitute for the love and support and most importantly, the presence of a parent in a child's life. in many ways, this uniquely true for fathers. i never really knew my own father. i was raised by a single mom and two wonderful grandparents who made incredible sacrifices for me. there are single parents like my mom all across the country who do a royal job raising terrific kids. i still wish i had a dad who was not only around, but involved. another role model to teach me what my mom did her best to is still -- instill. to give a child a foundation to envision a brighter world. what my father was not for my mother and me. i've met plenty of other people, data and uncles -- dads and

uncles, who are trying to give strong malee -- role model. it requires your attention and sacrifices and a healthy dose of patience. nobody is perfect. to this day, i am trying to figure out how to be a better husband and a better father. i want to be up to do what i can to encourage strong marriages and strong families. we should reform our child- support laws to get more fathers engaged with their children. on a campaign to encourage strong parenting and fatherhood. because if there's one thing i have learned, all of our ifrifices shine less prickly we do it without family. that is what matters the most. when i look back on my life, i will not be looking at

legislation or policy ipass, i will be think about bush -- i passed, i will not be looking thinkingll be inkin about michelle. if you could do our best to be a source of comfort and encouragement to our kids, if you show them unconditional love and help them grow into the people that were meant to be, we will have succeeded. happy father's day to all of the dads out there and have a great weekend. >> i am lamar alexander. this is season for high school graduation. more than 2 million of those graduating are going to college. both republicans and democrats agree that colleges is the surest ticket to a middle class. we want to make it simpler and smarter to get a student loan.

that is why the republican house of representatives has passed and president obama agree on the same idea. a permanent solution to all student loan interest rates before some automatically rise on july 1. the idea is to allow the market to set interest rates. it is fair to the students and to taxpayers. some democrats want a short-term fix that only benefits 40% of new student loans. alone.and between now and the end of the month, senate republicans will work hard with the president and the house to produce an agreement that ensures all student borrowers benefit from the low interest rate. that would mean that 100% of all new student loans made in year would have a rated below 5%. we may be an agreement on student loans, we have a major

disagreement about who should be in charge of our public schools that educate and 50 million children. to put it simply, emma the crest want a national school board. republicans favorite local control. -- democrats want a national school board. it is actually become in effect a national school board. if you remember the childhood game mother may i, you have a good sense of how the process works. states must come to washington for approval to educate their students. this congestion of mandates is no child three things, left behind, the race to the top. they have imposed standards for what children must know in reading and math. some states adopted standard

courses. schoolsnitions of how should be rated. senate democrats submitted a plan that would not only freeze these mandates into place but double down creating more than 25 new programs as well as 150 reporting requirements. republicans and voted to move a different direction. tooffered a 220 page plan help children in public schools learn what they need to know and be able to do by restoring responsibility to states and communities and giving teachers and parents freedom, flexibility, and choice. we call it every child ready for college or career. state andmphasizes local decision-making.

it puts washington out of the business of deciding whether low schools are succeeding or failing. it rejects federal mandates the great a national school board and prohibits standards or accountability standards for states. it continues the requirement that states have high standards and quality tests. it does not prescribe those fixes. forproposal make it easier states to offer lower income parents more choice in finding the right public school for their child. it gives teachers and principals more freedom by encouraging the expansion and replication of successful charter schools. it encourages states to great evaluation programs free of federal mandates. it offers flexibility in spending federal education dollars while cutting waste. this is not a proposal just for

republicans. we believe this proposal for present the views and will attract the support of governors leading the charge for educational reform. teachers who value the freedom to teach. parents who want more choices for their children. and state legislators who are working for better schools. the democratic proposal establishes a national school board. with such a proposal really says is they do not trust parents and they do not trust classroom teachers and they do not trust states to care about and help educate their children. they want someone in washington to do it for them. we completely reject that. proposal places responsibility on helping our children learn squarely where it should be -- on states and communities. it does that by giving teachers and parents were freedom, more flexibility, and more choice.

"> next, "the communicators with brian. -- ladies,st latest item mckinley. c-span, but to you as a public service. the communicators where we interviewed leaders of two of the largest communication companies. >> we are pleased to be joined