Satellite-Delivered Television: Issues Concerning Consumer Access to Broadcast Network Television via Satellite

Satellite-Delivered Television: Issues Concerning Consumer Access to Broadcast Network Television via Satellite

98-942 STM
Updated February 19, 1999
CRS Report for Congress
Received through the CRS Web
Satellite-Delivered Television: Issues Concerning
Consumer Access to Broadcast Network Television
via Satellite
Marcia S. Smith
Specialist in Aerospace and Telecommunications Policy
Resources, Science, and Industry Division
Summary
Congress is debating whether to revise the 1988 Satellite Home Viewer Act
(SHVA) to enable more consumers to receive broadcast network television via satellite.
Consumer access to broadcast network TV signals provided via satellite is restricted by
SHVA to households that cannot receive such signals via an over-the-air antenna and
have not subscribed to cable within 90 days. Some satellite carriers have transmitted
network signals to consumers in violation of the Act. When challenged, the satellite
carriers cease transmission of the signals to individual consumers voluntarily or by court
order. Numerous complaints from angry constituents over discontinued service have
generated congressional interest. Several bills to modify SHVA were considered last
year but none cleared Congress. Three bills have been introduced so far in the 106th
Congress (H.R. 89, Burr; S. 247, Hatch; S. 303, McCain). CRS Report 98-320,
Television Satellite and Cable Retransmission of Broadcast Video Programming under
the Copyright Act’s Compulsory Licenses provides a more extensive discussion of
SHVA. This report will be updated as events warrant.
Background
Large satellite dishes in the back yards of suburban and rural homes heralded the era
of direct-to-home (DTH) television broadcasting by satellite. DTH now encompasses
smaller dishes, too, and the newest type of service is referred to as DBS (Direct Broadcast
Satellites). The size of the dish is determined by the frequency at which the satellite
transmits and the power level of the signal. The original large back yard dishes, about 7
feet in diameter, receive low power “C-band” (4/6 Gigahertz) signals. Middle-sized (3
foot) dishes receive medium-power “Ku-band” (11/12 Gigahertz) signals, while small 18-
inch dishes receive high-power Ku-band signals. The high-power Ku-band satellites are
the ones called DBS. In the United States today, there are approximately 1.9 million C-
band dish (sometimes called Home Satellite Dish—HSD) owners, and 8.1 million Ku-
band dish owners (for both high- and medium-powered satellites). The main service or
Congressional Research Service ˜ The Library of Congress

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programming providers are PrimeTime 24 and Net Link for C-band, and EchoStar’s Dish
TV and Hughes’ DirecTV for DBS. Hughes is the process of buying Primestar, a
medium-powered Ku-band provider. PrimeTime 24 also provides or has provided
programming, including broadcast network television signals, to DirecTV and EchoStar
for transmission to their customers.
Satellites are one method of providing multichannel video programming distribution
(MVPD) services that offer a package of video programming, often including television
broadcast programming, to subscribers for a fee. Cable television is the best known
MVPD provider. Others are Multichannel Multipoint Distribution Service (MMDS) and
Satellite Master Antenna Television (SMATV). According to a December 1998 FCC
report (Annual Assessment of the Status of Competition in Markets for the Delivery of
Video Programming: Fifth Annual Report), of the 98 million homes that receive
television, 76.6 million subscribe to an MVPD. Cable has 85% of the MVPD market,
satellites have 12.1%, MMDS (or “wireless cable”) has 1.3%, and SMATV has 1.2%,
according to the report. Some telephone companies are beginning to enter the MVPD
market by building over cable systems (“cable overbuild”), but that segment of the market
is very small at this stage. Congress and the Clinton Administration assert they want to
facilitate competition with cable because of its large share of the MVPD market and
consumer complaints about cable TV rates (see CRS Info Pack 104C, Cable TV).
The Satellite Home Viewer Act (SHVA)
Congress passed the Satellite Home Viewer Act (SHVA, 17 U.S.C.§ 119) in 1988,
and amended it in 1994 and 1997. Part of the Copyright Act, it establishes, inter alia, the
copyright regime within which satellite carriers may retransmit network programming for
private home viewing. Under SHVA, satellites may retransmit network programming
only to customers living in “unserved households” (or “white areas”) where local signals
cannot be received via an over-the-air antenna and the household has not subscribed to
cable for 90 days. SHVA will expire December 31, 1999, unless extended by Congress.
SHVA provides satellite carriers with a compulsory copyright license for network
and superstation TV programming, meaning that those who own the copyright on
television programming must make that programming available for retransmission. SHVA
establishes a mechanism for determining how much satellite carriers must pay to
compensate the copyright owners. The fees are paid into a pool that is disbursed by the
Copyright Office of the Library of Congress. The cable industry has a compulsory
copyright license under the 1992 Cable Act and pays fees into the same pool. The cable
license is permanent, while the SHVA provisions will expire at the end of 1999. S. 247
(Hatch) would extend the satellite license by 5 more years. In 1997, the rate satellite
carriers must pay was raised in accordance with SHVA, causing some controversy. That
issue is discussed in CRS Report 98-140, Satellite Television License of the Copyright
Act (17 U.S.C. Section 119) and the 1997 Rate Adjustment).
The Unserved Household (“White Area”) Issue and Grade B Signals
Under SHVA, satellite carriers may retransmit network programming only to
households that cannot receive TV programming via an over-the-air antenna and have not
subscribed to cable within 90 days (the “90-day waiting period”). They are called

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unserved households in the law, or “white areas” colloquially (apparently a reference to
the fact that they receive only “snow” on their TV screens). The law was written to
protect local network affiliates that do not want customers receiving distant (or “out-of-
market”) network signals that do not carry local advertising, the primary source of
revenue for local affiliates, and to preserve “localism” so people watch local news and
receive weather advisories.
Under SHVA, the technical standard for determining whether a home is an unserved
household is whether it is inside or outside the Grade B contour of the local network
affiliate. Grade A and Grade B contours can be visualized as circles around a TV
station’s transmitter indicating the strength of a signal received within that area. The
Grade A contour is close to the transmitter and reception there is better than in the Grade
B contour. However, reception within the Grade B contour is still considered acceptable
by the FCC. In paragraph 33 of its February 2, 1999 Report and Order (see below), the
FCC explains these contours: “a quality acceptable to the median observer is expected to
be available for at least 90 percent of the time at the best 70 percent of receiver locations
at the outer limits of [Grade A] service. In the case of Grade B service the figures are 90
percent of the time and 50 percent of the locations.” Complaints about using the Grade
B standard to determine who can receive network TV via satellites center on the fact that
it does not necessarily mean a “viewable” signal—it may have “snow” or ghosting. The
standard is used because it is an objective measurement.
Some satellite carriers have transmitted network programming to customers that are
not unserved households despite the law. Customers may receive other TV programming
from satellites, but not network programming. The local affiliates have the right to
challenge any satellite customer they believe is receiving network signals in violation of
the law and have done so with increasing intensity. Upon being challenged, some satellite
carriers simply notify the challenged household that network TV service is being
discontinued, creating considerable consternation and angry letters to Washington.
Three carriers have been involved in disputes about providing network programming
illicitly: NetLink, Primestar, and PrimeTime 24. In 1997, the National Association of
Broadcasters (NAB), NetLink, and Primestar reached agreement on how to handle these
issues. Under the agreement, the Grade B contour still will be used, customers within the
Grade B contour that nonetheless cannot receive a signal from a local affiliate due to
building or terrain blockage may receive signals via satellite if the local affiliate agrees
and grants a waiver, and customers who currently are illegally receiving network signals
will be phased out gradually rather than suddenly having their service discontinued.
PrimeTime 24 chose not to participate in those discussions, preferring to settle the
issue through the courts. The networks have taken PrimeTime 24 to court in several
jurisdictions. One case that has caused considerable publicity was brought by CBS and
Fox in Miami (CBS, Inc. et al. v. PrimeTime 24 Joint Venture). Under a preliminary
injunction issued on July 10, 1998 and a permanent injunction issued on December 30,
1998, PrimeTime 24 must discontinue transmitting network TV signals from the
plaintiffs as follows: for customers enrolled since March 11, 1997 (the date the lawsuit
was filed), service must be discontinued by February 28, 1999 (postponed from October
8, 1998 by agreement among the parties and approval of the court); for customers enrolled
before March 11, 1997, service must be discontinued by April 30, 1998. The FCC
estimates that the permanent injunction affects as many as 2.2 million customers.

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Following the July 1998 preliminary injunction, multitudes of angry constituents
contacted their congressional representatives to complain that their network TV
programming via satellite would be discontinued. Several Members wrote to the FCC
asking for options to deal with the issue. FCC Chairman Kennard agreed to conduct an
expedited rulemaking by February 1, 1999 to clarify the Grade B standard. The FCC
released a Notice of Proposed Rule Making (NPRM) on November 17, 1998 (FCC 98-
302) and a Report and Order (FCC 99-14) on February 2, 1999. The FCC stated in the
Report and Order that it had concluded there was no reason to redefine what constitutes
a Grade B signal, but offered new methods of either directly measuring the signal strength
or using a predictive model to estimate its strength. The FCC set forth methods to
determine signal strength for a specific house instead of in a general area, and adopted a
variation of the long-used Longley-Rice model (called the Individual Location Longely-
Rice) for predicting signal strength. These new methods, however, may not help many
of those households whose network signals are to be discontinued due to the court ruling.
Individuals may request a waiver from their local affiliates if they believe they
cannot receive a Grade B signal despite being within a station’s Grade B contour and
hence should be allowed to receive distant network signals via satellite. Waiver
advocates have established a Web site [www.getawaiver.com] to assist consumers.
At the end of the 105th Congress, legislation was considered that would have, inter
alia, delayed until February 28, 1999 the date by which PrimeTime 24 would have to
cease providing network signals to unserved households. The legislation did not pass, but
the parties to the Miami case reached agreement to extend the date to February 28, 1999,
and the court approved.
On January 25, 1999, Senator McCain introduced S. 303 that, inter alia, would allow
customers within a station’s Grade B contour who were receiving distant network signals
as of March 1, 1998 to continue to receive them if the FCC determines that the local
affiliate will not experience any significant loss of revenue. Customers within the Grade
A contour would still be denied access to such signals. The FCC would have 180 days
from enactment of the bill to complete a rulemaking on the financial harm issue and
whether network exclusivity, syndicated exclusivity, or sports exclusivity rules should
apply to carriage of distant network signals. Regulations stemming from that rulemaking
would have to be approved by a two-thirds (rather than a majority) vote of the
Commission. Satellite providers could continue existing carriage of distant network
signals until the effective date of the new regulations. The National Association of
Broadcasters (NAB) objects to any change in the way households within the Grade B
contour are treated, arguing that it would be rewarding the satellite companies for having
illegally provided signals. The NAB has insisted that it will only agree to the proposal for
a three-year phase in period for must carry if no changes are made in determining
eligibility for households in Grade B contour. A bill (S. 247) introduced by Senator Hatch
would not change the Grade B signal criterion, but would eliminate the 90-day waiting
period for cable subscribers.
“Local-Into-Local” Satellite TV
The decision to limit satellites to providing network signals only to unserved
households arose because satellite providers could not take a local network signal,
transmit it to a satellite, and then retransmit it back to consumers only within that station’s

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local market area—called “local-into-local” service. Instead, they retransmit “distant
network signals” from locations such as New York, Atlanta, or Denver. Local network
affiliates want to ensure that customers within their market view the local signal.
Today, satellites using newer technology can provide local-into-local service,
however, ameliorating the concerns of local broadcasters. One DBS company, EchoStar,
has begun providing that service in several major U.S. markets. To comply with SHVA,
it is providing the service only to unserved households, but wants to expand the offering.
EchoStar is not retransmitting all local stations, but only ABC, CBS, NBC, and Fox,
raising the ire of many local broadcasters whose signals are not being retransmitted. They
argue that if satellites are allowed to retransmit local programming, they should be subject
to the same rules and regulations as the cable industry. Under the 1992 Cable Act, cable
systems are subject to “must-carry” regulations in that all local stations must be carried
by the cable service. Cable also is subject to other regulations— retransmission consent,
sports blackout, network nonduplication, and syndicated exclusivity. Some, including the
cable industry, argue that satellites should be subject to those regulations as well.
The issue of must-carry is significant for satellite carriers because a single satellite
may cover the entire continental United States and thus would have to carry all 1,600
local stations throughout the country. Cable systems need carry only those in their local
service area. Today’s satellites do not have the capacity to carry 1,600 stations plus all
the other programming satellite carriers want to offer. Satellite carriers argue that if they
are subjected to must-carry, they could not afford to launch enough satellites to carry the
required number of channels. This argument led to provisions in the McCain bill (S. 303)
that would have the must-carry requirement phased in over three years, by when sufficient
satellites or improved technology presumably would rectify that problem.
Proponents of must-carry for satellites buttress their case by pointing to a proposal
by a company, Capitol Broadcasting, to launch two satellites that would be devoted
entirely to local programming. Capitol Broadcasting would use satellites operating at a
higher frequency (Ka-band at 30/20 GHz) than existing commercial satellites and would
provide the local programming to all interested DTH companies. Some are cautious about
the proposal since commercial Ka-band satellites do not yet exist and face technical
challenges such as “rain attenuation” where rain degrades signal quality. Capitol
Broadcasting reportedly has recently modified its plans and now proposes to carry local
stations only from the top 64 markets (approximately 800 stations).
Legislation addressing the local-into-local issue was debated by the 105 Congress
th
(H.R. 3210, H.R. 4449, H.R. 4675, S. 1720, S. 2494) but did not pass. New legislation
has been introduced in the 106 Congress. Representative Burr has introduced H.R. 89
th
(virtually identical to H.R. 4449 from last year) that would allow local-into-local with
must-carry requirements. Senator Hatch and Senator McCain have introduced
complementary bills (S. 247 and S. 303) following the approach they adopted last year of
dividing the issues between the jurisdictions of their respective committees, Judiciary and
Commerce. Last year they said they would merge the bills after they were reported from
committee into a single bill for floor consideration. As noted, S. 303 would allow a three-
year phase-in of the must-carry requirements.

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Pending Legislation
The following legislation has been introduced in the 106 Congress relating to th
th
e
“white area” and “local-into-local” issues. Additional bills are expected to be introduced
in the House. This report does not address the 1997 rate increase for copyright royalties
paid by satellite providers (S. 247 contains provisions to reduce that rate increase). CRS
Report 98-140 covers that issue.
Table 1. 106th Congress Legislation To Increase Consumer Access to
Network TV Via Satellite
H.R. 89 (Burr)
Satellite Access to Local Stations Act (SALSA). Permits local-into-
Referred to
local; requires must-carry; and requires satellite carriers to notify
House Commit-
Register of Copyright each 6 months of stations whose signals are
tees on Judiciary
being retransmitted and to whom. (This bill is virtually identical to
and Commerce.
H.R. 4449 from the 105th Congress.)
S. 247 (Hatch)
Satellite Home Viewers Improvement Act. Amends the Copyright Act.
Referred to
Requires satellite carriers to submit to network stations a list of
Senate Judiciary
subscribers to whom the signal is being retransmitted; extends major
Committee.
provisions of SHVA, including the compulsory copyright license,
through Dec. 31, 2003; reduces the rate increase for copyright royalty
payments satellite companies must pay by 45% for distant network
signals and 30% for superstation signals; eliminated the 90-day waiting
period for cable subscribers as part of the definition of an unserved
household; and defines a Public Broadcast Service (PBS) satellite feed
that would be treated as a superstation (rather than a distant network
signal) under the Act. Hearing held by full committee January 28,
1999. (This bill a modified version of S. 1720 from the 105th
Congress.)
S. 303 (McCain)
Satellite Television Act. Amends the Communications Act of 1934.
Referred to
Allows for 3-year phase in period for satellites to abide by must-carry
Senate
rules; and permits customers within a local network affiliate’s Grade B
Commerce
contour (but not the Grade A contour) who currently receive distant
Committee.
network signals via satellite to continue to receive them if the FCC
determines it does not cause significant financial harm to the affiliate
and directs the FCC to complete a rulemaking within 180 days of
enactment of the bill on that matter and whether carriage of distant
network signals should be subject to network exclusivity, syndicated
exclusivity, and sports exclusivity rules, requiring a two-thirds (rather
than a majority) vote of the FCC to adopt regulations stemming from
that rulemaking. (This bill is a modified version of S. 2494 from the
105th Congress).