Congress is
scheduled to consider the Satellite Television Act of 1999 (S.
303), legislation that will help decide the future of one of
America's most competitive and technologically important
industries: satellite television broadcasting.
The
satellite industry includes many services, from delivering cellular
phone service and television broadcasting to sophisticated imagery
and sensory satellites for U.S. intelligence-gathering operations.
Policymakers and regulators, however, are making decisions that
could stifle market innovation and competition within this
important industry, limiting consumer choice at home and
threatening the competitive advantage now enjoyed by many U.S.
satellite and broadcasting companies.
The
Satellite Television Act of 1999 is an attempt to correct some
problems with 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 using a rooftop antenna.
But
S. 303, introduced by Senators John McCain (R-AZ) and Conrad Burns
(R-MT), will not prevent what Federal Communications Commissions
(FCC) Chairman William B. Kennard calls an "impending train wreck."
1 Under pressure from network broadcast stations and
satellite providers, legislators are becoming mired in a heated
debate over the legalities and technicalities associated with SHVA
reform. Under S. 303, for example, 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.
Over
the past decade, home satellite subscriptions have grown
dramatically. Five years ago, there were barely 1 million home
satellite subscribers; today, there are over 8 million. Many of
these subscribers receive television network broadcasts (such as
those of ABC, CBS, NBC, and Fox Television) thanks to the SHVA. But
Congress is being forced to reexamine this little-known law on an
expedited basis because the current compulsory licensing
arrangement is set to expire on December 31, 1999, and millions of
Americans may soon lose their access to network broadcasts.
A
U.S. District Court in Florida has ruled 2 that
satellite providers must begin to terminate the retransmission of
network broadcasts to consumers by February 28, 1999. FCC officials
estimate that approximately 2.2 million satellite consumers could
lose the "out-of-market" network television signals they receive
through a satellite provider if the Florida District Court ruling
stands. 3 Millions of other video consumers would be
unable receive such broadcasts in the future.
If
Congress fails to correct this problem, the likelihood is that
competition within the U.S. satellite video programming industry
will decrease, severely harming the entire satellite industry.
For
decades, television broadcasters and cable television providers in
the United States sought to shield their industries from
competitive market forces by protecting their geographic service
monopolies. Using the regulatory system to their advantage, they
succeeded in stifling innovation and competition from such vital
competing industries as satellite production and services. Now,
after decades of stagnancy, broadcast and cable monopolies find
themselves threatened by genuine competition from these
industries.
Instead of welcoming this competition,
however, they are pressuring Congress to protect their monopolies
and deny customers true choice of service. Members of Congress are
being sidetracked by technical and legal concerns put forth
primarily by broadcast industry lobbyists who claim that increased
consumer choice and competition from the satellite industry
threatens their business. Senators McCain and Burns have introduced
the Satellite Television Act of 1999 to resolve this conflict, but
S. 303, as written, cannot prevent millions of satellite TV
consumers from losing their broadcast network programming.
Congress should act immediately to head
off the "impending train wreck" in the television programming
industry. It should fix the SHVA and implement sound measures that
will guarantee consumer choice and competition in this important
industry.
THE BROADCAST NETWORK INDUSTRY VS. THE
SATELLITE COMMUNICATIONS INDUSTRY
In
the ongoing legislative debate over SHVA reform, Congress will hear
from three vocal constituencies: the broadcast affiliates of
television networks; the satellite communications industry; and
household consumers of television (or video) programming. Each
group wants the law to accommodate its needs and interests, but
these interests vary and are quite complex. For example:
-
Broadcasters want to
preserve the government-sanctioned monopoly they have enjoyed since
the early days of TV broadcasting by ensuring that no company
(other than the current local broadcast affiliates of ABC, CBS,
NBC, and Fox TV located in each community) is permitted to transmit
or retransmit network television signals in the local market. They
are concerned that increased competition from "out-of-market"
competitors like satellite broadcast providers puts their local
advertising base at risk. If their advertising base shrinks,
broadcasters argue, their economic livelihood will be threatened
and "localism" in broadcasting endangered.
-
Satellite providers
want to continue to deliver "distant network affiliate signals" to
anyone who wants them, especially those who have poor signal
reception from local network affiliates using roof-top antennas,
set-top "rabbit ear" antennas, or cable television. Satellite
providers believe "unserved households" should be defined as
broadly as possible so that customers who do not receive adequate
broadcast signals at any time during the day can do so via
satellite transmission.
-
Consumers for the most
part want to make sure they do not lose their current service,
whether it is traditional broadcast programming from local
affiliates or retransmission of distant network signals via
satellite providers. Most important, however, they want to receive
the highest quality signal possible from a provider of their
choice.
Although most consumers have little
interest in, or understanding of, the complex and contentious
regulatory battle taking place between broadcasters and satellite
providers, they want to be able to choose from as many high-quality
programming options as possible. As FCC Chairman Kennard puts it, a
"train wreck" is about to occur between competing interests in the
television market. Before passing any new legislation, policymakers
should be certain they understand the issue and the technology
involved.
THE HISTORY OF SATELLITE TELEVISION
TRANSMISSION
In
the Satellite Home Viewer Act of 1988, Congress established a
compulsory licensing system so that satellite carriers could
retransmit out-of-market programming by major broadcast networks to
subscribers who had problems receiving those signals ("unserved
households") from local station affiliates using standard receiving
equipment. This compulsory licensing system mimics a similar
procedure between broadcasters and the cable industry established
as part of the Copyright Revision Act of 1976.
The
SHVA compulsory licensing system requires that broadcasters provide
their programming services to cable and satellite companies for a
royalty fee established by the federal government. Essentially,
under both systems of compulsory licensing, broadcasters
surrendered the right to negotiate freely with cable and satellite
providers to arrive at mutually agreeable terms for retransmitting
their signals.
Such
compulsory licensing schemes interfere with free-market
negotiations and constitute a form of copyright infringement. Yet
Congress felt it was necessary to institute these measures for both
the cable and satellite industries. Among the excuses commonly
heard for such market and copyright interference are:
-
Broadcasters use a publicly
owned resource (the electromagnetic spectrum) to deliver
their signals; therefore, they should be required to compensate the
public for the use of this valuable good.
-
Broadcasters are granted the equivalent
of a geographic monopoly in each community they
serve. Therefore, unique demands may be made on them to control
their market power.
-
In their early years, the cable and
satellite industries were entitled to special protection or
favoritism to enable them to become credible competitors
of the broadcast networks.
-
Broadcast television supposedly is a
"public good" to which every American is entitled.
Therefore, market interference and copyright infringement are an
acceptable means to a higher end: guaranteeing consumers the
maximum amount of choice, absent greater market competition.
WHY THE SHVA MUST BE FIXED
The
current compulsory licensing arrangement under the SHVA has long
been regarded as a "second best" solution for ensuring adequate
access to television programming. The first is the free and
voluntary negotiation of copyright contracts in the communications
marketplace. As the U.S. Copyright Office noted in its 1997 Review
of the Copyright Licensing Regimes Covering Retransmission of
Broadcast Signals:
[F]or licensing copyrighted works
retransmitted by cable systems and satellite carriers, the better
solution is through negotiation between collectives representing
the owner and user industries, rather than by a government
administered compulsory license. 4
Just
as it would be unthinkable for the government to demand that
newspaper companies or book publishers surrender their copyrights
and freedom to negotiate with buyers, so too is it unjustifiable to
demand that broadcasters surrender their copyright protections and
freedom to contract voluntarily in the free market. Technological
developments and growth in the television market have made the need
for such regulatory involvement unnecessary. Consequently, the SHVA
is now badly outdated and extremely ineffective.
For
example, the SHVA's system of compulsory licensing worked well when
coverage in the satellite marketplace was quite limited. For many
years, few Americans subscribed to satellite television services
provided via the large "C-Band" satellite dishes that could be
placed only in large open spaces. This was the leading technology
of the time, but the large receiving dishes were eyesores, and most
consumers did not have adequate open space on their property for
them.
As a result, the number of satellite dish owners
who signed up to receive distant network signals under the SHVA was
relatively small, and satellite subscriptions did not raise
concerns about competition among local broadcast affiliates. In
addition, during the late 1980s and early 1990s, most households
receiving distant network signals under the SHVA generally were
situated far enough away from broadcast towers to be considered
genuinely "unserved households."
But
with the rise of the direct broadcast satellite (DBS) television
industry in the mid-1990s, this changed. Unrestrained by burdensome
regulations, and able to provide a much smaller dish that was
easier for customers to situate on their property, DBS market
subscription rates began to explode around 1994. As indicated in
Table 1, the number of DBS subscribers skyrocketed from roughly
1.8 million in October 1995 to over 8.9 million in February
1999.
As
DBS subscription rates have multiplied, so has the number of
consumers seeking to receive distant network signals through their
satellite providers because:
-
Their reception from
traditional roof-top or set-top antennas was poor;
-
They wanted the
highest quality sound and the sharpest reception of network signals
possible, which digital retransmission through a DBS company
provided;
-
They were dissatisfied
with their current cable provider's prices, service standards, or
picture quality; or
-
They wanted to receive
out-of-market stations instead of traditional local affiliates'
programming.
Many
DBS subscribers began to request distant network signals from
satellite providers during the mid-1990s. When they did, they
typically were asked whether they felt qualified as "unserved
households" to receive such signals. (See sidebar, "Defining
`Unserved Households.'") Essentially, to qualify as an "unserved
household" under the SHVA, consumers had to respond that (a) they
could not receive high-quality reception by using a rooftop
antenna, and (b) they had not subscribed to a cable provider within
the past three months. Transactions between consumers and satellite
providers were undertaken in good faith.
Testing every home to see whether it was
"unserved" was an expensive and impractical consideration for most
satellite companies. It was easier simply to trust the judgment of
consumers who called the provider to request distant network
broadcast stations. If a consumer requested a distant network
signal, the satellite provider had to assume that the consumer felt
the reception quality of the local broadcast affiliate was
poor.
As
the ranks of satellite-owning Americans grew and subscriptions to
distant network signals multiplied, local broadcasters grew
increasingly concerned that "localism" in broadcasting was
threatened by direct competition from out-of-market providers. They
argued that what was needed was a very strict interpretation of the
term "unserved household," so that only consumers who fit certain
regulator-defined "contours" would be eligible for retransmission
of distant network signals.
PROBLEMS
WITH THE SHVA DEFINITION OF "UNSERVED HOUSEHOLDS"
The
SHVA's definition of "unserved households" is rife with controversy
because of its inherent subjectivity. For example, reception is
graded "B" after measuring a signal 30 feet above the ground. But
why is "30 feet above the ground" the standard for Grade B
reception when not every household has an antenna that reaches 30
feet off the ground? The determination is made for a "median
observer," but it is unclear whether such an entity is a regulator,
a consumer, or a broadcast or satellite company. In addition, it is
unclear just what constitutes an "acceptable" picture.
Instead of providing answers to such
questions, the FCC attempts to define the Grade B standard
technically to clarify which households fit within its "contours."
The agency notes that "The Grade B contour is defined as the set of
points along which the best 50% of the locations should get an
acceptable picture at least 90% of the time." 5 But this
definition clarifies little; it does not answer, for example, the
question of how these percentages are determined accurately.
Measuring difficulties also make such precise determinations very
difficult.
Worse, under FCC logic, households that
receive the equivalent of a grade B signal may be able to receive a
respectable signal only for a certain portion of their viewing day,
yet they are not eligible to purchase distant network signals under
the law. This makes very little sense. It is analogous to
Congress's mandating that a hypothetical Federal Automobile
Commission establish a "Grade B" standard for automobiles and then
telling consumers that 50 percent of automobile owners will have to
be satisfied to own a Grade B car that runs properly only 90
percent of the time.
In
addition, although Grade A consumers are considered those who
receive good quality signals everywhere in their Grade A contour,
this is not always the case. In fact, consumers within the
boundaries of a Grade A contour (typically residing in metropolitan
areas or the surrounding suburbs) often confront serious obstacles
to receiving high-quality broadcast signals because skyscrapers,
high-rise buildings, power lines, heavily forested areas,
interference from other broadcast stations and wireless
communications systems, or other environmental or atmospheric
factors may prevent the reception of a clear signal. And not every
household, especially one in a heavily congested urban area, is
able to install the type of roof-top antenna needed to pick up
clear signals.
These factors cannot always be predicted
by the engineering models that the FCC and the broadcasting
industry use to define Grade A and Grade B contours and to
determine who will be categorized as an unserved household. Just
because customers are assigned a Grade A contour does not mean they
will be able to receive a broadcast signal of the highest quality
at all times.
Between using predictive models (which are
not always accurate) and testing every home (which is too expensive
and intrusive), few serious options exist by which to determine
accurately which households do and do not receive high-quality
television reception. The FCC's Notice of Proposed Rule Making on
this matter described the problems with one such ad hoc method as
follows:
The
Commission's current method of measuring the field strength of
over-the-air signals in a station service area requires a so-called
100-foot mobile run. The run typically involves a truck with a
30-foot antenna that takes continuous measurements while being
driven a distance of 100 feet. The antenna must be rotated to the
best receiving position, and engineers record factors that might
affect signals, such as topography, height and type of vegetation,
buildings, obstacles, and weather. If overhead obstacles get in the
way, a cluster of measurements must be taken at locations within
200 feet of each other. This elaborate procedure can cost several
hundred dollars each time it is performed. This is an expensive
proposition for a satellite company or a consumer who wants to
prove that a household is unserved by over-the-air signals. When
multiplied over hundreds of households at the outer edges of a
station's service area, the cost may become prohibitive and may
prevent many truly unserved consumers from receiving broadcast
network services. 6
The
FCC is forced to conclude that "requiring clusters of tests and a
100-foot mobile run ignores the fact that homes are stationary and
that reception may vary considerably over a mobile run on a nearby
street." 7 In other words, if consumers cannot receive a
satisfactory picture from their specific location, they cannot
simply pick up their house and move it 100 feet down the road until
they find a spot that has good reception.
Ultimately, the individual must be given
the benefit of the doubt. No legislator or bureaucrat should be in
a position to dictate what qualifies as "reasonable reception."
Consumers should be allowed to decide for themselves whether the
reception they receive is satisfactory.
|
DEFINING "UNSERVED
HOUSEHOLDS"
In order to earn the "right" to subscribe to distant network
signals via satellite systems under the SHVA, consumers must be
able to prove that they are "unserved households."
"Unserved Households." Section 119(D)(10) of
Title 17 of the U.S. Code defines "unserved households" as
households that: "(1) cannot receive, through the use of a
conventional outdoor rooftop receiving antenna, an over-the-air
signal of grade B intensity (as defined by the Federal
Communications Commission) of a primary network station affiliated
with that network, and, (2) has not, within 90 days before the date
on which that household subscribes, either initially or on renewal,
to receive secondary transmissions by a satellite carrier of a
network stations affiliated with that network, subscribed to a
cable system that provides the signal of a primary network station
affiliated with that network."
"Grade A/Grade B." Grades are technical
measurements of the strength of a radio or television broadcast
signal, and are defined by engineers using various testing
technologies and modeling tools. Households are grouped into
specific grade "contours." "Grade A contour" households are thought
to have premium reception; "Grade B contours" typically receive
less clear reception. In other words, the "grade" of a particular
television signal that a consumer receives through an antenna is
not based on that consumer's personal subjective valuations; it is
determined by engineers as the quality of broadcast signals in any
given service area.
The FCC uses archaic guidelines from the 1950s to define which
households qualify as Grade A or Grade B. A recent FCC Notice of
Proposed Rule Making noted: "Grade B represents the field strength
of a signal 30 feet above ground that is strong enough, in the
absence of man-made noise or interference from other stations, to
provide a television picture that the median observer would
classify as 'acceptable' using a receiving installation (antenna,
transmission line, and receiver) typical of outlying or near-fringe
areas."
1
Under SHVA, households that fall under the FCC's definition of
"Grade A" households are not eligible to receive distant network
services since they are considered to have good reception quality
everywhere within the confines of their Grade A contour.
Merely because a household has been assigned arbitrarily to the
Grade A contour through the use of modeling techniques does not
mean that it will be able to receive a broadcast television signal
of the highest quality. Likewise, households assigned to the Grade
B contour by an FCC-employed model either may not be able to
receive any signal whatever on certain days or, if they do receive
a signal, may receive one that is riddled with interference,
ghosting, and shadows.
Prohibition of 90 Days After Canceling Cable
Subscriptions. Under the definition of "unserved
household" in the SVHA, new satellite consumers may not purchase
secondary broadcast transmissions if they have canceled their cable
subscriptions in the past 90 days. Cable companies wanted this
requirement included in the SVHA to discourage consumers from
switching to satellite companies. The end result is less
competition.
1. Federal Communications Commission,
In the Matter of Satellite Delivery of Network Signals to
Unserved Households for Purposes of the Satellite Home Viewer
Act, Notice of Proposed Rule Making, FCC 98-302, CS Docket No.
98-201, November 17, 1998, p. 4.
|
LITIGATION CLOUDS THE PICTURE
Several local broadcast affiliates in
Florida filed a lawsuit against PrimeTime 24 Joint Venture, the
leading U.S. provider of retransmitted network television signals.
Specifically, affiliates of the Fox Broadcasting Co. and CBS, Inc.,
convinced a judge in the U.S. District Court for the Southern
District of Florida that certain satellite consumers were receiving
distant network-affiliated television broadcast signals illegally
through PrimeTime 24. The Fox and CBS affiliates argued that under
the SHVA, only truly unserved households were eligible to receive
distant network signals via their satellite providers.
8
The
judge in this case ruled in favor of the broadcast affiliates and
imposed two deadlines by which distant broadcast services to
satellite consumers will be terminated. On February 28, 1999,
between 700,000 and 1 million consumers who signed up for distant
network feeds after March 11, 1997, will lose their network
affiliate services. On April 30, 1999, an estimated 1 million more
individuals who subscribed to distant network service before March
11, 1997, will lose their signals.
The
resolution of this debate has far-reaching implications for
millions of Americans. Congress should realize that there is a
technological, market-driven solution to this problem that would
appeal to all sides. As the U.S. Copyright Office has noted:
[A]
technological solution would be the best solution in the unserved
households debate. The problem can be eliminated entirely if
technology and business practices advance to enable satellite
carriers to retransmit local network affiliates to their
subscribers. If the subscribers can purchase the signals of their
local network affiliates, they have no need to import distant
network signals, and there will be no "unserved households."
9
Such
a technological solution is known in the industry as "spot
beaming." It should be available soon nationwide. Although
satellite broadcasting technology is evolving to provide such a
"local-to-local" option, in the short-term, the retransmission of
every local affiliate signal in America is impossible because of
the capacity limitations of current satellites. Industry interests
are asking Congress and the FCC to resolve the sticky legal and
technical debate over what constitutes an "unserved household." The
problem, however, cannot be resolved within the pre-existing
regulatory confines of the SHVA and its accompanying FCC regulatory
paradigm.
WHY S. 303 WILL NOT SOLVE THE
PROBLEMS
Although no action has been taken on this
issue in the House, there have been signs that the House might
simply adopt S. 303, the Satellite Television Act of 1999,
10 with only slight modifications.
S. 303 would not promote successful reform of the industry,
however. It would only allow satellite subscribers to have access
to the stations to which they currently subscribe if (a) there is
no local affiliate, (b) the local network cannot adequately be
received off-air, or (c) continued carriage would not be likely to
materially harm local television service.
This
definition presents at least three major problems:
Problem #1. The new standard for
service created in S. 303 is just as subjective as the old standard
in the SHVA, and in many ways is worse. Interpretation of
S. 303's terms is left entirely to the FCC, not to consumers. This
means that bureaucrats, not citizens, will still decide what is the
appropriate reception quality standard for households. Worse yet,
the third criterion in S. 303 for determining whether households
can continue to receive distant stations is so subjective that
almost any local broadcaster will be able to argue that it is
likely to suffer "material harm" if carriage of distant signals
continues.
Problem #2. Instead of eliminating
the overall regulatory burden, S. 303 contains new regulations in
the form of "must-carry" mandates on the satellite
industry. Under S. 303, by no later than January 1, 2002,
any satellite carrier that wants to carry a television signal to
consumers in any given community will have to carry the signal of
every local broadcast television affiliate back into its local
community via their satellites. The FCC would then be required to
promulgate regulations to achieve the "local-to-local"
retransmission of television signals in much the same way cable
companies are required to retransmit local broadcast television
signals over their networks to the communities they serve.
The creation of such a "local-to-local
must-carry" regime is troublesome for many reasons. Although it
appears highly likely that most satellite providers will have the
capability to provide local-to-local signal retransmission by 2002,
it is not a certainty that the industry will be able to meet this
timetable. It also remains unclear why any satellite provider
should be required by force of law to retransmit any broadcast
station. Legislative efforts to mandate such a conversion and a
regulatory timetable should be regarded as high-tech industrial
policy.
Problem #3. Under S. 303, millions
of satellite subscribers will be unable to purchase distant
broadcast signals. Essentially, legislators are accepting
the warped logic of broadcast industry interests who claim
Americans are entitled to one, and only one, broadcast television
affiliate per community. Furthermore, the outdated Grade A and
Grade B "contours" apparently will continue to be used to determine
who should qualify for service.
These problems stem from the fact that S.
303 accepts the confines of the debate as determined by only one
side--the broadcast affiliates. Legislators seem to think that the
only solution is to tweak current rules, regulations, guidelines,
and definitions to achieve a slightly better balance in the
industry. For the most part, the current regulatory guidelines,
such as compulsory licensing requirements, "unserved household"
guidelines, and Grade A or Grade B standards, remain intact. Many
consumers will still lose service, and many others will never be
able to purchase distant network signals in the future.
Finally, S. 303 embodies no substantive
deregulation. By attempting to balance industry interests within
the confines of current regulatory definitions and constraints,
policymakers will fall short of the important reforms that are
needed.
PRINCIPLES FOR EFFECTIVE
INDUSTRY DEREGULATION
As the discussion of unserved households
shows, policymakers can get lost in the many legalities and
technicalities associated with this issue. Instead of engaging in a
futile debate on what constitutes "unserved households" or "Grade B
contours," Congress needs to articulate a simple set of principles
to guide the reform process and communications policy in
general:
-
Deregulation, not new
forms of regulation;
-
Competition, not the
protection of monopolies; and
-
Consumer choice, not
bureaucratic empowerment.
Television viewers should be given the
right to purchase service from whomever they prefer and on whatever
terms they can negotiate with various providers of television
signals and service. By following these "consumers first"
principles, policymakers can bring about sensible and genuine
deregulatory reforms that:
-
Guarantee freedom of choice in
television service. The most important reason to reform
the SHVA is that it will allow consumers to make their own
television (video) programming decisions. Just as consumers have
the right to shop for a new television set free of regulatory
interference and meddling, so should they have the unfettered right
to shop for the best programming options available.
-
Improve the quality of video
programming available to consumers. Discriminating
shoppers will force programmers to improve the quality of
programming and the range of service options available.
-
Help bring competition to
stagnant local television and cable markets. For decades,
Americans have been forced to settle for the limited video
programming choices available in their local markets. This is
because government regulators long ago granted broadcast affiliates
geographic franchise service monopolies that still exist. The rise
of cable TV added a certain amount of competition, but cable
companies were granted exclusive franchise monopolies by local
governments as well. The recent explosion of satellite-based
service is due in part to the fact that such service offers a
competitive alternative to video programming without new government
rules or regulations. Since the Telecommunications Act of 1996
requires that all cable rate regulations sunset in late March,
government officials will be concerned that cable rates in these
monopolies will rise. SHVA reform would help encourage more
satellite industry competition, thus putting pressure on the cable
industry to keep rates low as they are deregulated.
-
Help ensure America's continued
global competitiveness. The United States is unrivaled in
satellite technology and, for the most part, leads in such areas as
satellite imagery, high-end telecommunications, and cellular
communications. The industry also contributes heavily to growth in
the important commercial space industry and off-shooting
technologies. Innovation in the satellite industry will progress
from intense competition, and deregulation would allow satellite
companies to compete directly with TV and cable broadcasters. Such
competition would spur exports and likely spur demand for spacelift
technologies, which also would ensure a plentiful supply of
companies that are able to produce satellites for America's
military and intelligence needs.
WHAT POLICYMAKERS SHOULD DO
Policymakers need to think "outside the
box" of the current regulatory state of affairs and consider a bold
new paradigm to resolve the conflict between broadcast network
affiliates and satellite providers that has been created by the
SHVA. If congressional policymakers want to stop the impending SHVA
debacle and achieve true deregulation, they will need to implement
a principled set of short-term and long-term reforms.
Short-term reforms should be focused on
ensuring that no one loses television services they currently
possess or would want in the near future. Longer-term reforms
should focus on sunsetting all regulations governing satellite
signal delivery and competition so that consumers, not regulators,
can determine what type of service they receive.
Short-Term Reforms
To
ensure that no one loses service in the short term, Congress
should:
-
Extend the court-imposed
deadline indefinitely until a firm resolution of this problem can
be achieved. It would be unwise for Congress to allow
millions of Americans to lose the service they currently receive
based on a ruling by one judge. Congress should make it clear that
the court-ordered service termination deadlines will not go into
effect until SHVA reform is completed.
-
"Grandfather in" households
already subscribing to broadcast affiliates through a satellite
provider. These consumers contracted with their satellite
providers in good faith because they believed they were "unserved
households." Having contracted in good faith, they should not lose
these services, regardless of their service contour.
-
Allow existing subscribers to
"carry over" grandfathered services when they change
residence. They should not lose the distant broadcast
television services they previously received. They should be able
to re-subscribe to those same services after they change
addresses.
-
Eliminate the 90-day waiting
period after canceling cable service for new satellite
subscribers. Consumers should be able to request distant
network feeds via their satellite systems whenever they want to do
so.
-
Allow a "grace period" after
passage of the bill during which additional consumers can sign up
for distant network signals under the current regime.
Prospective consumers should also be able to purchase distant
network signals if they so desire, even before full deregulation
has been achieved. A grace period should be instituted after
passage of SHVA reform that allows new satellite television
customers to purchase out-of-market signals on terms similar to
those that grandfathered customers would receive. This grace period
would end at roughly the time Congress sunsets the compulsory
licensing requirements.
-
Broadly define "unserved
households" so that consumers decide whether the quality of their
local broadcast signals is satisfactory. If Congress
refuses to go this far in the short term, the burden of proof in
showing that a household is not "unserved" should rest squarely on
the shoulders of broadcasters who hope to limit consumer choice and
competition.
Longer-Term Reforms
To
sunset all regulations governing satellite signal delivery and
competition, Congress should:
-
Articulate a clear and
unfettered "consumer choice" standard for all television (video)
program purchasing decisions in the future. Congress
should reject efforts by broadcasters to use the regulatory process
to destroy competition and lessen customer choice. The use of Grade
A and Grade B distinctions and the rigid and unrealistic "unserved
household" definition as the standard by which consumers are
considered entitled to purchase out-of-market signals should
cease.
-
Sunset compulsory licensing
requirements and allow voluntary negotiation and freedom of
contract between buyers and sellers of video programming.
The "grace period" during which new subscribers can sign up for
distant network signals should last until Congress believes all
compulsory licensing requirements are no longer needed. Optimally,
the requirement for broadcasters to surrender their right to
negotiate the copyright retransmission rights for their programming
should be abandoned as soon as possible, since it constitutes an
unjustifiable interference with their copyrights and general
freedom to contract. However, it might be more practical to wait
until "spot beaming" technology is widely available to satellite
companies so that they could negotiate "local-to-local"
retransmission contracts with local broadcast affiliates. Finally,
legislators simultaneously should sunset cable compulsory licensing
and "must-carry" require-ments to guarantee a level playing field
between cable and satellite television providers.
-
Reject new "must-carry"
mandates that replace one set of problems with another.
The creation of a customer choice paradigm involves the complete
rejection of any effort to impose burdensome new "must-carry"
mandates on satellite providers. Congress should not be creating de
facto industrial policy within this important industry sector.
Furthermore, once spot beaming technology is widespread, such
mandates will be unnecessary, since satellite providers will be
able to provide "local-to-local" retransmission of local broadcast
signals. Attempting to mandate such a result prematurely would
interfere with the natural progression of technology and
competition in this market segment.
-
Clarify that state and local
regulation of the delivery of global satellite programming would be
inefficient as well as unconstitutional, since it interferes with
interstate commerce. Federal policymakers must make clear
that state and local regulators should not interfere with the
provision of satellite-based services. Such interference would
constitute interference with the free flow of interstate commerce
and would be unconstitutional under Article I, Section 8, Clause 3
of the U.S. Constitution (the Commerce Clause).
CONCLUSION
America's satellite industry is at a
crossroads. It could go the way of the Internet, which has been
allowed to develop under intense competitive forces and has given
rise to entirely new industries. Or it could go the way of
telephone communications: burdened by endless government
regulation, characterized by limited innovation, and lacking in
true competition and customer choice. Its fate is in the hands of a
few select government bureaucrats within the Federal Communications
Commission, a handful of policymakers in Congress, and the
television and cable industries intent on protecting their
monopolies.
Although much of this debate may seem
technical, and the outcome may seem limited, few of those involved
understand the impact each decision will have. Even fewer
understand that technological innovation is occurring so rapidly
that much of the debate will be obsolete in the near future. For
example, every satellite carrier may soon have the ability to
retransmit millions of broadcast feeds from any community in
America back into that community or countless other communities
across the country. This would be the result of innovation, the
spontaneous evolution of a free market in satellite services, and
competition.
Congress would do well to abandon current
attempts to "tinker around the margins" in this sector of the
economy. Policymakers should reform the SHVA's current regulatory
framework and allow full competition and innovation to occur
without meddling and excessive regulation from Washington. Such an
approach will ensure consumer choice, result in a more vibrant and
competitive U.S. satellite industry, and benefit other industries
like the global telecommunications industry and the commercial
space sector. It will also help America achieve its national
security goals by ensuring a healthy source of technologically
advanced satellites and services for the U.S. military.
Adam D. Thierer is 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 Policy
Analyst for International Economic Affairs in The Kathryn and
Shelby Cullom Davis International Studies Center at The Heritage
Foundation.