First STELA Draft Clears Committee with Ease

The Commerce bill would reauthorize STELA for five years and make some tweaks to the video marketplace provisions. New wording would end the set-top box integration ban and kill the sweeps-weeks rule as well as allow greater flexibility for broadcasters to unwind joint sales agreements. It also bans pay-TV industry stakeholders from entering joint retransmission negotiations with two broadcasters in the same market.

One uncontroversial amendment on designated market areas and orphan counties was tacked onto the Commerce STELA legislation during its markup session. Reps. Cory Gardner, R-Colo., and Ben Ray Lujan, D-N.M., offered the amendment, agreed to by voice vote. The amendment would ask the FCC to submit a report to Congress no later than 18 months after the STELA extension’s enactment analyzing “the extent to which consumers in each local market ... have access to broadcast programming from television broadcast ... located outside their local market, including through carriage by cable operators and satellite carriers of signals that are significantly viewed,” the amendment text said. That study would look at “whether there are technologically and economically feasible alternatives to the use of designated market areas” that could “provide consumers with more programming options and the potential impact such alternatives could have on localism and on broadcast television locally, regionally, and nationally,” it said.

Gardner said the amendment is aimed at “fixing a concern that I've worked on in the state Legislature and continue to now.” The report would help give stakeholders a better sense of “how vast this problem really is,” Gardner said. Lujan said he first proposed the amendment during subcommittee markup and withdrew it to see about attaining more support.

House Commerce touted several endorsements for the compromise version of STELA -- 21st Century Fox, ABC/Disney, the American Cable Association, American Television Alliance, CBS, Dish and DirecTV and NCTA. NCTA CEO Michael Powell praised House Commerce for clearing the bill and said it is glad it kills the set-top box integration ban, an “unnecessary mandate that forces cable customers with leased set-top boxes to bear added costs and higher energy use while offering no consumer benefit,” he said in a statement. The bill “rightly addresses concerns of anticompetitive harm in retransmission consent negotiations, by barring such collusion or coordination among local broadcast stations that are not commonly owned.”

"Though we have some concerns, there is much to be applauded in this legislative package,” NAB CEO Gordon Smith said in a statement, expressing desire for “a bipartisan bill that allows broadcasters to continue serving viewers with quality programming and sustains America’s unique system of local television.”

IP Subcommittee leaders posed questions of whether the Copyright Act Section 119 compulsory license should be renewed through STELA. Vice Chairman Tom Marino, R-Pa., led the IP Subcommittee STELA hearing, in the absence of Chairman Howard Coble, R-N.C. Marino and subcommittee ranking member Jerrold Nadler, D-N.Y., both mentioned the issue. Judiciary Committee ranking member John Conyers, D-Mich., also posed the question as well as asking whether Congress should address the alleged problem of retransmission consent blackouts.

Judiciary Chairman Bob Goodlatte, R-Va., brought up orphan counties as a problem during his opening statement. “I look forward to resolving these market-specific issues going forward,” Goodlatte said. He asked about what legislation Congress should consider to encourage new competition and services in the video marketplace.

"There are a host of issues that need attention,” American Cable Association President Matthew Polka told lawmakers, saying retransmission rules should be revamped through the STELA process. He cited a “fundamental shift in the marketplace where large corporate interests” are present and with factors, such as sports programming, driving up prices for broadcasters and ultimately consumers, he said: “What no one likes is blackouts, and we're seeing them increase at a historical pace.” “We favor unitary-type licenses where all competitors are treated roughly equally,” Dish General Counsel Stanton Dodge replied. He called retrans blackouts an “escalating” problem that’s “getting worse every day."

"The only leverage I have to get a deal done is pull the signal,” Marci Burdick, senior vice president of Schurz Communications and testifying on behalf of NAB, countered.

Burdick said broadcasters are at work on “mobile, online resources” seeking to monetize the content broadcasters create. Broadcasters receive 85-90 percent of revenue from advertising, and thus are worried about anything that expands the use of the distant signal or divides the market, Burdick added. It’s “extremely important” for the committee to look ahead so that consumers can receive content over the Internet, with broadband use rapidly increasing, Polka said.

Rep. Judy Chu, D-Calif., asked witnesses what Congress should consider as it awaits a Supreme Court Aereo case verdict. “Innovation is occurring, whether we like it or not,” Polka said, praising the power of “disruptive” technology. ACA backed Aereo “because we believe innovation in this marketplace is good,” he added. Aereo’s only innovation is avoiding the law, Burdick said. “Be careful in drawing lines so as not to unnecessarily impact innovation,” Dodge warned Congress. Rep. Doug Collins, R-Ga., slammed the Aereo model later during the hearing.

"Instead of abolishing all aspects of the statutory licenses at once, Congress could first eliminate the distant signal licenses under Sections 111 and 119, while retaining the local provisions of Section 111 and the local-into-local license of Section 122,” William Roberts, acting associate register of copyrights at the U.S. Copyright Office, testified (http://1.usa.gov/1nsNVhK). “Cable and satellite providers retransmit far fewer distant signals than local signals, so it may be more manageable for them to negotiate the comparatively fewer licensing agreements that would be required to maintain their distant signal carriage.”

The Writers Guild of America-West wants a “clean” reauthorization of STELA “rather than changes that will weaken the negotiating rights of broadcast stations and set-top box competition,” it told Congress in a Wednesday letter (http://bit.ly/Rvl9C1). It did not testify.