Order Code RS21768
Updated June 23, 2004
CRS Report for Congress
Received through the CRS Web
Satellite Television: Reauthorization of the
Satellite Home Viewer Improvement Act
(SHVIA) — Background and Key Issues
Marcia S. Smith
Specialist in Aerospace and Telecommunications Policy
Resources, Science, and Industry Division
Summary
Congress is considering reauthorization of certain provisions of the 1999 Satellite
Home Viewer Improvement Act (SHVIA) that will expire at the end of 2004. They
allow satellite television companies to provide “distant network signals” to subscribers
who cannot receive broadcast network television signals via over-the-air television
antennas. Other issues related to competition among satellite, cable, and broadcast
television also are arising in the context of the reauthorization debate. Five bills related
to the SHVIA reauthorization (S. 2013, H.R. 2862, H.R. 4024, H.R. 4501 and H.R.
4518) are pending. A comparison of the three major reauthorization bills (S. 2013,
H.R. 4501 and H.R. 4518) will be provided in a forthcoming CRS report. This report
provides background and an overview of key issues; it will be updated as warranted.
Background
The three most common methods by which consumers receive television signals are
broadcast, cable, and direct broadcast satellite (DBS). Broadcast television is free to
consumers, who receive the signals via over-the-air (rooftop or “rabbit ear”) antennas.
Cable and DBS compete in the Multichannel Video Programming Distribution (MVPD)
marketplace, where providers offer packages of video (and sometimes audio) programming
for a monthly fee. According to the Federal Communications Commission (FCC), there
are 107 million television households in the United States.1 Of those, 88% subscribe to an
MVPD service. Cable TV serves 75% of MVPD subscribers, while DBS serves 22%. The
remainder use other MVPD services that are described in the FCC report. Cable and
satellite offer greater programming choices, and sometimes better signal quality, than
broadcast television, but can be costly. Congress has fostered competition in the MVPD
marketplace, partially in an attempt to keep cable TV rates in check.
1 The FCC prepares an annual survey of the MVPD market. The current edition was released in
January 2004 [http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-04-5A1.pdf].
Congressional Research Service ˜ The Library of Congress

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Two major companies offer DBS services today: DirecTV (a subsidiary of News
Corp.) and EchoStar, which markets its service as Dish TV. Another company, Rainbow
DBS (a subsidiary of Cablevision) offers a comparatively small number of satellite
channels through a service called Voom.
The Satellite Home Viewer Improvement Act (SHVIA)
The 1999 Satellite Home Viewer Improvement Act (SHVIA)2 extended and expanded
upon provisions of the 1988 Satellite Home Viewer Act (SHVA), as amended in 1994. In
passing SHVA and SHVIA (as well as the 1984 and 1992 Cable Acts3), Congress has
attempted to balance the interests of the broadcast, satellite, and cable industries, with the
goal of ensuring that as many households as possible have access to free local television
programming, while also enabling consumers to have as much choice as possible both in
TV programming and service providers.
SHVA, enacted in the early days of satellite television, allowed satellite companies to
retransmit broadcast network and superstation programming only to households that could
not receive “viewable” signals via over-the-air antennas because they are too distant from
the transmitters, or in areas where TV signals are blocked by buildings or terrain (formally
called “unserved households”). The limitation was designed to protect the nationwide
system of broadcast network affiliates, which depend on advertising revenue based on their
number of viewers. The goal is to preserve “localism,” where consumers can watch local
news, weather, and community-oriented programs. The availability of local programming
is largely dependent on network affiliates, which in turn are dependent on viewers. Under
SHVA, satellite companies could retransmit broadcast network programming only to
unserved households, so the majority of viewers would watch their local affiliate. But the
small percentage of consumers in unserved households could also receive network
programs, even though they came from an “out-of-market” affiliate. These out-of market
signals are called “distant network signals.”

SHVA created a five-year “compulsory copyright license”4 wherein satellite
companies may retransmit distant network signals to unserved households without
permission from the copyright owners, and the government sets the price the satellite
companies pay as copyright royalties. The satellite companies pay the royalties to the
Copyright Office of the Library of Congress, which passes them on to the copyright owners.
A similar compulsory copyright license was given to cable companies in 1976, although
the cable license is permanent. The satellite distant network signal license is codified in
§119 of the Copyright Act (Title 17 U.S.C.), and was renewed for another five years in
2 SHVIA is Title I of the Intellectual Property and Communications Omnibus Reform Act of
1999, included in the FY2000 Consolidated Appropriations Act, P.L. 106-113. Historical
information on SHVA is available in CRS Report 98-942. The FCC has a website that provides
information on the legal and regulatory regime for satellite TV: [http://www.fcc.gov/mb/shva/].
3 An FCC fact sheet on cable television summarizes the legal and regulatory regime for cable
television, including the 1984 and 1992 Cable Acts: [http://www.fcc.gov/mb/facts/csgen.html].
4 This compulsory copyright license is for both broadcast network and superstation signals, but
is usually referred to as “the distant network signal” license. That terminology is used hereafter
in this report. Superstations are independent broadcast stations.

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1994. It was extended for a further five years in SHVIA, and is now set to expire on
December 31, 2004.
In addition to extending the distant network signal compulsory license, SHVIA
significantly expanded upon SHVA by allowing satellite companies to retransmit local
broadcast network programming back into the same market area where it
originated—called “local-into-local” service. The law permits, but does not require,
satellite companies to offer local-into-local service. SHVIA created a royalty-free
compulsory copyright license for local-into-local satellite signals that is codified in §122
of the Copyright Act, and is permanent, like the cable license. As of June 7, 2004,
EchoStar offered local-into-local in 128 of the 210 Designated Market Areas (DMAs,
discussed below) in the country.5 DirecTV offered it in 77 DMAs, and plans to increase
that number to at least 130 by the end of 2004.6
Local versus Distant Network Signals
The distinction between local and distant network signals is important for
understanding SHVIA. A local signal is received within a broadcast network television
affiliate’s local market area. A distant network signal is from elsewhere in the country. For
example, if a consumer lives in Denver and receives a signal from a Denver network
affiliate, that is a local signal. If a consumer lives in West Virginia and receives a signal
from that Denver network affiliate via satellite, it is a distant network signal.
Who May Receive Distant Network Signals—“White Areas” and
“Grade B” Signals
The issue of which consumers are eligible to receive distant network signals via
satellite is complicated and is discussed in more detail in CRS Report RS20425. Generally,
only consumers living in unserved households— where broadcast television reception is
extremely poor or non-existent—may receive distant network signals via satellite.
Unserved households, colloquially known as “white areas,” are defined based on the
FCC’s “Grade B” signal intensity standard. Congress mandated in SHVA that the Grade
B standard be used for this purpose, and, in SHVIA, directed the FCC to review whether
the Grade B standard still should be used. In 2000, the FCC concluded that it should.7
Computer models are used to mathematically predict which households can receive at least
a Grade B signal; if they cannot, they are unserved for purposes of SHVIA. In 1999, the
FCC adopted an improved model, called the Individual Location Longely-Rice (ILLR), to
predict signal intensity at specific households, instead of in a general area.
5 EchoStar announced when it passed the 100 DMA mark that it offered local-into-local to 90
million TV households, representing 83% of the population. News Release, Dec. 18, 2003:
[http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=dish&script=410&layout=-6&item_id
=478973].
6 DirecTV Names 18 New Local Channel Markets to Launch in 2004. News Release, January
8, 2004:[ [http://www.directv.com/DTVAPP/aboutus/headline.dsp?id=01_08_2004B]].
7 See FCC Report FCC 00-416, ET Docket No. 00-90, November 29, 2000
[http://www.fcc.gov/Bureaus/Engineering_Technology/Orders/2000/fcc00416.doc] for a
definition of Grade B signals.

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Some satellite companies transmitted distant network signals to consumers who were
not eligible to receive them, leading to court challenges by the networks to try to force the
satellite companies to obey the law. One landmark case was a 1998 ruling by a Miami
judge [CBS Broadcasting v. Primetime 24 Joint Venture, 48 F. Supp.2d 1342 (S.D.Fla.
1998)] under which over 2 million consumers reportedly had, or were scheduled to have,
distant network signals terminated by their satellite companies. That action was pending
when Congress was considering SHVIA. Congress decided to “grandfather” those
consumers who had been receiving distant network signals illegally as long as they could
not receive a Grade A signal. For new subscribers, however, the original rules apply.
Exceptions were made for recreational vehicles, commercial trucks, and consumers using
“C-band” satellite dishes.8 In summary, the following consumers may receive distant
network signals until December 31, 2004:
! if they do not receive a signal of Grade B intensity from the local affiliate
of a particular network;
! if their satellite dish is installed on an RV or commercial truck (but they
cannot be a fixed dwelling), or
! if they had been receiving distant network signals illegally and those
signals were terminated or scheduled to be terminated under the 1998
Miami court ruling, and they do not receive a signal of Grade A intensity
from the local affiliate of the network (“grandfathered subscribers”).
Consumers using C-band dishes are not subject to the five year limitation. They may
receive distant network signals they were receiving before October 31, 1999 indefinitely.
Consumers who believe they cannot receive a signal of Grade B intensity, despite
predictive models showing that they can, may request a waiver. For more information
about waivers and how consumers can apply for them, see CRS Report RS20425.
The issue of who may receive distant network signals via satellite remains
controversial even with the advent of local-into-local service. First, distant network signals
primarily serve consumers in the most rural parts of the country who also are likely to be
in the DMAs that do not yet receive local-into-local service from the DBS providers.
Second, some consumers want distant network signals not because of reception problems
with their own local signals, but because they want greater programming choices, or to
watch network programming airing at different times in the various U.S. time zones.
Key Issues Regarding the Reauthorization of SHVIA
Compulsory Copyright License. The impending expiration of the distant
network signal license is the central point of debate. Certain satellite subscribers (see
bulleted list above) could have their access to distant network signals discontinued if the
date is not extended. Copyright owners, usually represented at congressional hearings by
the Motion Picture Association of America (MPAA), object to the compulsory licenses.
They argue that the cable and satellite companies should be required to negotiate copyright
royalties like everyone else. Prices for the cable and satellite compulsory licenses are set
by different methods and on different cycles. Prices for the satellite license were last set
8 C-band dishes are the original, large, “backyard” antennas. The number of C-band subscribers
has declined from a high of about 2.5 million in 1995 to less than 0.5 million at the end of 2003.

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in 1997. As required by law, the Copyright Office attempted to charge what it considered
to be “fair market value”: 27 cents per subscriber per year for both distant network and
superstation signals. The satellite companies objected because the prices were a significant
increase, and much higher than what cable companies pay (see CRS Report 98-140 for
more about this historical debate). In SHVIA, Congress rolled the rates back by 45% for
distant network signals, and 30% for superstation signals.
The MPAA argues that if the distant network signal license is extended, the royalty
rates should be substantially increased and adjusted annually to reflect market prices. The
Copyright Office objects to the compulsory licenses in general, but also wants parity
between the cable and satellite licenses and therefore recommends that the satellite distant
network signal license be renewed for 5 more years during which time both licenses be
reexamined. The Satellite Broadcasting and Communications Association (SBCA),
representing the DBS companies, wants the distant network signal license made permanent.
The National Association of Broadcasters (NAB) wants the distant network signal license
extended only for five years, and limited to areas where local-into-local is not available.
H.R. 4518 (L. Smith) and S. 2013 (Hatch, as reported from the Senate Judiciary
Committee) would extend the license for five years and create a new process for adjusting
the copyright royalty rate. H.R. 4518, S. 2013, and H.R. 4501 (Upton) would require most
subscribers eligible for distant network signals to choose between the distant or local-into-
local signals if the latter are offered in their area.
“Digital White Areas”. To date, white areas have been defined based on the
transmission of analog television signals. The broadcast television industry, however, is
transitioning from analog to digital signals (see CRS Report RL31260). In its 2000
proceeding regarding the Grade B standard for analog signals, cited earlier, the FCC
concluded it would be premature to adopt a distant network standard for digital TV.
Satellite television signals already are digital (they must be converted to analog to be viewed
on most television sets). SBCA is suggesting that “digital white areas” be defined where
satellite companies would be allowed to provide digital signals to subscribers unable to
receive digital TV from local broadcasters. Defining digital white areas would be different
from analog white areas. Analog TV signal strength falls off gradually, creating areas of
varying signal quality. Also, the signals may reflect off various objects, producing “ghost”
images. Digital signals are either received or not. There are no fuzzy pictures or ghosting.
SBCA noted that broadcasters are converting to digital more slowly than some had hoped,
and suggested that allowing satellite TV to provide digital distant network signals to
unserved households would spur the broadcasters to convert more quickly. The NAB calls
SBCA’s proposal “a recipe for mischief” and disputes SBCA’s assessment that broadcasters
are moving slowly on digital TV. H.R. 4501 does not create digital white areas, but requires
the FCC to initiate an inquiry about setting a standard and creating a predictive model.
Local-into-Local Issues, Including EchoStar’s “Two Dish” Policy. As
discussed earlier, local-into-local allows satellite companies to retransmit a local station’s
signal back into the Designated Market Area (DMA) from which it originated. The use of
DMAs9 to define the areas into which a particular signal can be retransmitted is mandated
9 DMAs are defined by Nielsen Media Research, which explains that “A DMA consists of all
counties whose largest viewing share is given to stations of that same market area.”
(continued...)

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by SHVIA. However, DMAs often cross state borders, so a consumer in one state may
receive programming from another state when subscribing to local-into-local service. Also,
consumers within a state that might have only one network TV station may not be eligible
to receive that station’s signal because, based on DMA boundaries, it is a distant network
signal that the consumer is ineligible to receive (because the consumer can receive a Grade
B signal from a station in a neighboring state). H.R. 2862 (Bradley) would define a
commercial TV station’s local market to include all communities within the geographic
borders of the state in which it is licensed if it is the only commercial network station, of any
network, within that state. H.R. 4518 provides that if a state has only one full powered TV
station, it may be retransmitted to any subscriber in a community within that state as long
as the community is not within the first 50 major TV markets. S. 2013 has the same
language as H.R. 4518, and adds that if a state has all network stations and superstations in
the same local market, and that market does not encompass all counties of the state, those
signals can be retransmitted to all subscribers in the state residing in a local market that is
within the first 50 major TV markets. H.R. 4501, H.R. 4518, and S. 2013 also would allow
satellite companies to retransmit “significantly viewed” stations (as defined by the FCC),
though the specifics in H.R. 4501 are different from H.R. 4518 and S. 2013.
SHVIA permits, but does not require, DBS companies to provide local-into-local.
There is confusion on this point partially because the law also creates a “must carry”
provision under which if a DBS company chooses to provide one local broadcast station in
a particular market, it must provide any other local broadcast station in that market that
requests carriage. H.R. 4024 (Paul) would, inter alia, revoke the must carry requirements
for satellite (and cable) companies. Commercial stations alternatively may choose to
negotiate a “retransmission consent” contract under which they are carried in exchange for
money and/or other conditions. Stations choose between must carry or retransmission
consent status on a three-year cycle. Business arrangements for retransmission consent are
unrelated to the copyright royalty fees discussed earlier. Retransmission consent has
become controversial as satellite (and cable) systems discontinue certain programming when
agreements cannot be reached (see CRS Report RL32026).
Questions have arisen about EchoStar’s “two dish” policy under which, in some areas,
consumers must obtain a second satellite dish to receive all their local programs. This is
necessary because EchoStar uses satellites in different orbital locations to transmit the
programming, so separate antennas are needed to point toward the satellites. The NAB and
others complain that EchoStar’s practice is discriminatory because the channels for which
the second dish is needed are primarily religious or Hispanic or other foreign language
stations. EchoStar responds that there is no cost for the second dish, the channels all appear
on the TV program guide, and no special steps must be taken by the consumer to access
those programs once the second dish is installed. EchoStar insists that its strategy of putting
some local channels on a separate satellite is what enables the company to offer local-into-
local into many more markets than DirecTV. H.R. 4501 would require EchoStar to offer
all local channels on a single dish within one year of the law’s enactment (except that digital
TV service signals and non-digital TV service signals may be on separate dishes).
9 (...continued)
[http://www.nielsenmedia.com/FAQ/dma_satellite%20service.htm]

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