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House Launches Reauthorization—or Not—of Satellite Distant-Signal License

The House Communications Subcommittee opened the curtain
early on the reauthorization of the Satellite Television Extension and Localism
Act (STELA) Wednesday with a hearing that only hinted at the contentiousness
that could come as the expiration date gets closer.

The compulsory license that allows satellite operators to
import distant network-affiliated TV station signals into a market without
negotiating for that retransmission expires at the end of 2014, as does the
requirement that broadcasters and MVPDs negotiate carriage deals in good faith.

Satellite operators want Congress to wade into
retransmission consent, leveling the playing field, they say, as part of the
reauthorization, while broadcasters say leave it alone.

Several legislators suggested a broader look might be
required given the changes in how viewers access content. In teeing up the
hearing, Subcommittee chairman Greg Walden (R-Ore.) suggested everything was
still on the table, from a "clean" reauthorization -- essentially
just changing the date -- to expanding its scope or letting the compulsory
license expire.

Rep. Anna Eshoo (D-Calif.), ranking member of the
subcommittee, was hedging her bets. She said she preferred a "clean" reauthorization,
but also brought up retrans disputes. Rep. Steve Scalise (R-La.), whohas long called for sweeping deregulation, appeared ready to bring out the
broom once again.

"It's clear that based on some of today's written
testimony, that as much as folks want to focus only on the expiring narrow
satellite provisions, that there's an interest in raising other interconnected
issues," he said in his opening statement.

The witnesses staked out their respective territories in
what was billed as in informational hearing.

Jane Mago, executive VP and general counsel,
National Association of Broadcasters, said that issues with short markets -- ones
without a full complement of network affiliates -- and orphan counties -- where
viewers may get out-of-state station because the DMA stretches into another
state -- were diminishing, including in the first instance with the ability of
stations to program their digital streams as network affiliates. NAB has
suggested it is open to the possibility of letting the license expire, but Mago
did not endorse that position in the hearing, saying it was early in the

Motion Picture Association of America witness Michael
O'Leary came closer to advocating not reauthorizing the bill. He said that
license, as well as the cable compulsory license, was an anachronism and urged
the committee to consider whether either was still needed. Whatever it did, he
said, should take into account that the license was not providing fair market
value for his members' valuable content. "With due respect to the
satellite carriers and cable operators who ever more efficiently deliver
programming to the homes of consumers, it is not head ends, or satellites, or
fiber-optic cables that consumers crave and for which they are willing to pay.
It is entertaining and informative programming that consumers desire."

Dish witness R. Stanton Dodge said the key for Dish in the
bill is "fixing" a retrans system he says was skewed toward
broadcasters. That would include allowing the importation of distant signals
during retrans impasses. In response to O'Leary's call for fair market value,
Dodge pointed out that the satellite industry had been able to negotiate the
compulsory license with content providers after each preceding reauthorization.
Where unfair market value came into play was in retrans disputes, where
broadcasters were teaming up to get more than their fair share.

Mago, who joked that she had kicked Dodge under the table,
suggested that that price was for continued access to valuable local content,
which could be provided thanks to that additional revenue stream.

Witness Eloise Gore from the FCC did not weigh in on policy,
but did raise the issue of the expiring "good faith negotiations"
provision that would expire without reauthorization, and also raised the issue
of significantly viewed stations and whether satellite operators were
sufficiently availing themselves of that opportunity. Gore also said the FCC's
principal complaints over satellite carriage were only 60 or 70 in 2012 and
were about what local stations they could get, and their desire to choose which
ones those were.

The last reauthorization of the bill in early 2011 included
a change allowing satellite operators to deliver out-of-market, but "still
significantly" viewed, stations to their subscribers, mirroring cable's
ability to do so. Dodge said that Dish's solution would be to give viewers in
orphan counties getting out-of-state stations a choice of one in-state station.

On the issue of delivering significantly viewed stations,
Dodge pointed out that even with that ability, the significantly viewed station
might not be on the same spot beam as the other local stations in the market,
and could, at least, theoretically require the launching of a $350 million
dollar satellite.

Rep. Lee Terry (R-Neb.), vice chair of the committee, who
raised the significantly viewed issue related to his own district and access to
local college football teams, said his time for questioning had run out, but he
was not done with the issue.

The committee has only begun the process. Walden signaled
there would be many more hearings, and conversations, both public and private,
about the issue.