The Honorable John McCain
Committee on Commerce, Science, and Transportation
United States Senate
508 Dirksen Senate Office Building
Washington, D.C. 20510
The Honorable Tom Bliley
Committee on Commerce
United State House of Representatives
2125 Rayburn House Office Building
Washington, D.C. 20515
Dear Chairman McCain and Chairman Bliley:
I share many of your concerns about the preliminary injunction issued by the U.S. District Court for the Southern District of Florida on July 8, 1998, relating to the Satellite Home Viewer Act ("SHVA").
This is an impending "train wreck" that need not occur. I too am concerned that the court's action may disrupt satellite service to subscribers who cannot receive an acceptable local network signal over-the-air. I am also concerned that the court's action may impede the continued development of competition in the multichannel video programming distribution market. In my view, aspects of this dispute can and should be resolved through a privately-negotiated licensing agreement.
The Florida federal court litigation highlights one of the difficulties with the SHVA. As you know, the SHVA provides that only households that cannot receive an over-the-air signal of Grade B intensity are eligible to receive satellite-delivered network signals. However, by definition some households within the Grade B contour (and thus presumed by the court's preliminary injunction to be able to receive an over-the-air signal of Grade B intensity) cannot receive a local broadcast signal. Indeed, at the contour boundary approximately half of the households cannot receive a Grade B signal. As a result, some of these consumers choose satellite-delivered services precisely because satellite signals are the only way for them to receive a network signal.
There are currently two petitions pending before the Commission that urge the Commission to adopt rules that would clarify, among other things, which consumers are eligible to receive satellite-delivered network broadcast signals. In response to these petitions, the Commission could commence an expedited rulemaking proceeding this Fall on ways to improve implementation of the SHVA for those consumers who are unable to receive an adequate local over-the-air signal. The Commission cannot, however, extend SHVA to permit delivery of satellite network broadcast signals to consumers who can receive an adequate local over-the-air signal. In order to prevent consumers who cannot receive an adequate local signal from losing service while the Commission conducts such a rule making, the court can and should postpone the effective date of the injunction. The Commission should be able to conclude this expedited proceeding by February 1, 1999.
In your letter, you ask four questions regarding the effects of the court's action. I answer each of your questions below.
1. Please estimate how many households which subscribe to satellite television service may have their network programming service terminated as a result of the court's preliminary injunction.
It is our current understanding, based on publicly available information, that the preliminary injunction issued by the U.S. District Court for the Southern District of Florida affects approximately 700,000 to one million satellite television subscribers. The majority of these subscribers are served by DirecTV, which receives network service from the defendant PrimeTime 24.
2. Please estimate how many households which subscribe to satellite television service may have their network programming service terminated if and when the court issues a permanent injunction.
It is estimated that about 2.2 million subscribers could lose distant network signal service if the court issued a permanent injunction (out of PrimeTime 24's total subscriber base of 2.6 million.) The reason for the increased number is because a permanent injunction could affect an estimated 1.5 million additional satellite television subscribers nationwide that subscribed to PrimeTime 24 prior to March 11, 1997.
3. Please discuss what, if any, effect service terminations may have on competition in the MVPD market.
It is our belief that service terminations brought about by the court's action would likely have a significant detrimental effect on multichannel video competition. Today there are approximately 9.5 million satellite television subscribers nationwide; about 25%, or more than 2 million of those subscribers, may lose distant network signal satellite service as a result of the court's action. Subscribers who are no longer able to receive distant network signals and are unable to receive acceptable quality local broadcast service are not likely to find that satellite television is a competitive substitute for cable television. Although the nonbroadcast programming distributed by cable systems and by satellite has become increasingly attractive to consumers, more than one-half of the viewing time of the typical television household is still devoted to the viewing of broadcast programming. Current satellite television subscribers, and those consumers considering purchasing satellite television service that cannot receive local service, are thus less likely to consider satellite service without network broadcast signals to be an effective alternative to cable television service. Moreover, negative publicity generated by the discontinuance of distant network signal service could slow the growth of satellite television.
4. Please discuss what, if any, action the Commission could take to protect consumers from having their network programming services terminated.
As I discussed above, the Commission could conduct a rule making, which could assist some but not all of the consumers affected by the injunction. In order for the Commission to do so, either the Florida court would need to postpone the effective date for enforcement of the preliminary injunction for those consumers not demonstrably served by local network signals or the parties -- CBS, Inc., Fox Broadcasting Company, and PrimeTime 24 -- would need to voluntarily agree to ask the court for a postponement. A postponement would have the additional benefit of allowing consumers more time to evaluate options to receive local broadcast signals. Ultimately, because the language of the SHVA prevents the Commission from ensuring continued satellite service to the entire class of consumers affected by the injunction, a more comprehensive solution would require Congressional action.
I do not condone the conduct of any satellite provider that is not in compliance with SHVA. But I am concerned that those consumers who are unable to receive an acceptable over-the-air signal have a lawful alternative means to receive network programming via satellite. I look forward to working with you and your colleagues in the Congress to assist these consumers and to promote competition in the multichannel video programming market.
William E. Kennard