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February 19, 1999

Executive Summary: Why Congress Must Fix the Satellite Home Viewer Act

By and

The satellite industry is one of the fastest growing and most important high-technology sectors of today's U.S. economy. It provides, among other things, communications, television, cable, and sophisticated imagery and sensory satellites for U.S. intelligence-gathering operations. Over the past decade, home satellite subscriptions for television service have grown dramatically. Five years ago, for example, there were barely 1 million home satellite subscribers; today, there are over 8 million. For many of these subscribers, satellite transmission is the only way they can receive broadcast television programs from such networks as ABC, CBS, NBC, and Fox Television.

Soon, however, millions of Americans may lose these network broadcasts. A U.S. District Court judge in Florida has ruled that satellite providers must begin terminating the retransmission of network broadcasts to customers by February 28, 1999. If this ruling stands, 2.2 million subscribers could lose their service by late spring, and millions of new satellite consumers would be unable to receive such broadcasts in the future. As Federal Communications Commission Chairman William B. Kennard recently warned, "an impending train wreck" will occur if reform is not undertaken.

Senators John McCain (R-AZ) and Conrad Burns (R-MT) have introduced the Satellite Television Act of 1999 (S. 303) to address this issue by correcting some of the problems in an obscure statute known as the Satellite Home Viewer Act of 1988 (SHVA). The SHVA allows satellite providers to retransmit broadcast station signals to "unserved households," subscribers who otherwise could not receive network broadcast signals satisfactorily.

But S. 303, as written, cannot prevent the "impending train wreck." Legislators are becoming mired in a debate over the legalities and technicalities associated with SHVA reform. For example, under S. 303, by 2002 satellite carriers would be required to carry every local broadcast signal upon request by a local station. It is uncertain whether the technology will be available to accomplish this goal. Even if it is, such "must-carry" mandates interfere with the workings of the free market in satellite service.

In addition, the new standards that S. 303 would establish are just as subjective as the current standards in the SHVA. S. 303 merely alters the status quo to appease the interests of local broadcast affiliates. Policymakers appear to be putting the interests of consumers behind those of industry. If S. 303 passes as currently written, millions of Americans will lose their current satellite TV service, and many more will be unable to obtain high-quality television programming signals from the providers of their choice.

Congress would do well to adopt a bold new paradigm for the industry which embraces the principles of deregulation, competition, and consumer choice. Specifically, all television consumers should be able to purchase service from whomever they prefer and on whatever terms they can negotiate, and neither legislation nor regulation should stand in the way of such voluntary market transactions. These "consumers first" principles would help guarantee that competition is preserved in this vital sector of the economy.

In the short term, to fix the SHVA, Congress should:

  • Extend the court-imposed deadline to cut off satellite transmission of network broadcasting until this problem is resolved;

  • Allow households that already subscribe to broadcast affiliates through a satellite provider to be grandfathered into any new arrangement;

  • Allow existing subscribers to carry over grandfathered services when they change residences;

  • Eliminate the 90-day waiting period for
    canceling cable service for new satellite subscribers;

  • Allow a grace period after a reform bill is passed during which additional consumers may sign up for distant network signals; and

  • Broadly define "unserved households" so that consumers are seen by the government as the best judges of whether the quality of their local broadcast signals is satisfactory.

Over the longer term, Congress should create a deregulatory framework to sunset all regulations governing satellite signal delivery and competition. Such a framework should:

  • Articulate a clear and unfettered "consumer choice" standard;

  • Sunset the SHVA's compulsory licensing requirements and allow voluntary negotiation and freedom of contract between buyers and sellers of television programming;

  • Reject the new "must-carry" mandates; and

  • Clarify that state and local regulation of the delivery of global satellite programming interferes with interstate commerce, and therefore would be unconstitutional.

Such reforms would help bring about a more competitive and innovative satellite industry that guarantees consumers greater choice in programming and service. It also would ensure continued vitality and growth in an industry with important ramifications for U.S. global competitiveness, as well as U.S. national security.

Adam D. Thierer is a former Alex C. Walker Fellow in Economic Policy in The Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation. Bryan T. Johnson is a former Policy Analyst for International Economic Affairs in The Kathryn and Shelby Cullom Davis International Studies Center at The Heritage Foundation.

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