Democrats and Republicans Not Yet Aligned on STELA Draft

Democrats “are going to want some things that frankly are going to blow up an agreement that’s already been reached,” House Communications Subcommittee Chairman Greg Walden, R-Ore., told reporters after the hearing. “As you see, we've negotiated some pretty troubled waters to get where we're at.” Broadcasters had initially opposed the draft due to a dropped provision that would have allowed cable operators to remove broadcast stations from the basic tier (CD Feb 28 p1). Walden sees it as crucial to get “those most affected to rally around a common bill,” as he believes they are now, he said. “My preference would be to move sooner rather than later.”

"I'm not prepared to support the bill in its current version,” said House Commerce Committee ranking member Henry Waxman, D-Calif., though he expressed hope for getting to a version everyone could support. Much of the draft bill passes the public interest test but not every provision, he said. His “initial preference” was a clean reauthorization, he said. The draft is not a “bipartisan, narrowly tailored bill,” Rep. Doris Matsui, D-Calif., said in her opening statement, expressing surprise.

Subcommittee ranking member Anna Eshoo, D-Calif., asked House Republicans to “eliminate or redraft the provisions” of concern, in her opening statement. She cited the rising retransmission consent fees, $3 billion last year and predicted to reach $7 billion by 2018. There were 127 broadcast TV blackouts last year, she said, citing legislation she introduced in December that has not been incorporated into STELA: “It’s pretty clear who the losers are in this -- it’s consumers.” She has outlined deep concerns with the language on the integration ban, which demands cable operators use CableCARDs instead of built-in security in set-top boxes. Democrats indicated divides may be bridged. Rep. Diana DeGette, D-Colo., said by the hearing’s end that there are “concerns,” but the subcommittee members can work together to bring the bill to markup.

"We've found a good place with the legislation, but we'll take what we learned from the hearing and we'll talk to our colleagues and see where we go from there,” Walden told reporters, citing the careful balance between competing industry interests: “We'll go to a markup at some point soon and move forward. Because we know we need to get this out of here, and we know we need to lead on it.” Walden has not directly talked to the other committee heads who have jurisdiction over STELA reauthorization -- Senate Commerce Committee Chairman Jay Rockefeller, Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., and House Judiciary Chairman Bob Goodlatte, R-Va. -- but Walden said discussions “are going on.”

Integration Ban Concerns

House Republicans have tried to reach out to Democrats, Walden said. “The integration ban is a bipartisan bill,” Walden told reporters, referring to the language of HR-3196, incorporated into the STELA draft. “It has four or five Democrat co-sponsors on the committee.”

TiVo General Counsel Matt Zinn testified in opposition to the integration ban provision. “There’s a lot of misinformation, starting with the fact that cable operators can’t deploy low-cost set-top boxes,” Zinn told us after the hearing. “It’s completely untrue. Low-cost set-top boxes have a waiver -- a blanket waiver from the FCC. Every operator can deploy low-cost set-top boxes to their heart’s content. That has nothing to do with this. The integration ban is about the advanced functionality of set-top boxes.”

A coalition of Public Knowledge, the National Consumers League, Free Press, Consumer Action, Writers Guild of America-West and the AllVid Tech Company Alliance, which counts members such as Best Buy, Google, Sony and TiVo, have objected to the provision (CD March 11 p3). The Computer & Communications Industry Association, which has Google and Dish Network as members, also came out against the provision Wednesday, despite backing the STELA draft otherwise. “Adding an unrelated provision aimed at protecting incumbent companies goes against Congress’s usual goal to avoid picking winners and losers when writing technology bills,” CCIA President Ed Black said in a statement. “Even worse, it undermines the very reason for this piece of legislation -- to give customers more TV choices -- not fewer."

"Probably the most interesting takeaway was that cable industry is not committing to lower set-top box costs to consumers, even though that’s what they're complaining about,” Zinn told us of the hearing. “The reality is that cable companies make a lot of money leasing equipment.” His estimate is $7 billion a year, so around $50 billion since the integration ban went into effect. “That’s a lot of dough,” he said. “They want to keep that money, they want to reinvest it.”

During the hearing, Eshoo pressed NCTA President Michael Powell on his claim that the integration ban costs the cable industry style billion a year. She asked Powell whether cable companies would try to reduce consumers’ bills if the integration ban were killed, as the STELA language proposes. Powell said he wasn’t in a position to judge “how the savings will be returned.” Eshoo interrupted: “Some thought needs to be given to that,” she told Powell. “We have to protect the public interest in this -- we try to, anyway.” During the hearing, Eshoo, Zinn and Free Press Policy Director Matt Wood compared the integration ban to the issues of cellphone unlocking, an analogy Powell blasted. He also referred back to his time as FCC chairman and his dissent in imposing an integration ban. Cable companies have been forced to seek waivers in order to get new boxes, Powell contended. “Those waivers have often taken up to two years."

The author of the integration ban bill introduced last fall, Subcommittee Vice Chairman Bob Latta, R-Ohio, defended its importance. “If the integration ban is eliminated from set-top boxes, is the cable industry still going to support CableCARDs?” Latta asked Powell during the hearing. “Absolutely,” Powell replied, citing 44 million subscribers using CableCARDs.

Retrans Debate

Sharing agreements were another concern, with tension among witnesses about what the STELA draft should include and its effects. Rep. Peter Welch, D-Vt., pointed to the high costs consumers pay for video and wondered whether the STELA draft provision allowing multichannel video programming distributors to opt out of joint negotiation with broadcasters would help with those high costs. DirecTV Executive Vice President Mike Palkovic said yes, citing the high costs of retrans battles and suggesting retrans blackouts would “significantly” lessen if the STELA draft at hand is enacted. “We don’t earn what the viewership would suggest we should,” said Schurz Communications Senior Vice President-Broadcasting Marci Burdick, a board member of NAB and speaking on its behalf, defending broadcasters’ history of negotiation. She said broadcasters never had a problem with the provision limiting joint negotiation, saying that in the past decade, there have barely been any cases where MVPDs requested to opt out of such joint negotiation.

Burdick called a recent Justice Department filing at the FCC on joint sales agreements (CD Feb 24 p7) “sloppy, disingenuous, and I don’t think it should be relied on as a document of fact.” She said sections were lifted from a filing on radio JSAs in the late 1990s and cable is never mentioned. “Probably most disingenuous” is a footnote where DOJ says it has reviewed several JSA complaints and found no problems, which flies in the face of the filing’s conclusions, Burdick said.

Rep. Steve Scalise, R-La., hammered home his support for the failed provision that would have allowed cable operators to drop broadcast stations from the basic tier. “It is the position of NCTA that must-buy has outlived its usefulness,” Powell said. Scalise waved around a large archaic cellphone to illustrate his point that Congress is overdue for writing new video laws. “It’s pretty clear the time for reevaluation is well past,” Scalise said. He and Eshoo mentioned one another in describing a broader push for video updates addressing such concerns as retrans blackouts -- coordination that lobbyists have observed is very real and goes back to the two having introduced two different bills on the same day in December.

Walden and House Commerce Committee Chairman Fred Upton, R-Mich., touted the STELA draft, in opening statements. STELA is not “the venue for comprehensive reform,” Upton said, reminding members that the Communications Act overhaul is better suited. Walden defended his STELA language limiting FCC action on sharing agreements. FCC Chairman Tom Wheeler “is putting the JSA cart before the media ownership horse,” Walden said in his opening statement. “The FCC is required by law to review the entire set of media ownership laws every four years. It has consistently failed to follow the law. If a licensee of the FCC failed to follow the law, it would lose its license or suffer some severe penalty.”

The American Television Alliance, a coalition of MVPDs, said the subcommittee hearing showed that “the majority of the members of the Committee … want to see more done on retransmission consent.” It lamented in a statement after the hearing “the very minor efforts included in the draft bill.”