Coming Soon: STELAR Reauthorization

KEY TAKEAWAYS

• Three key sections of the Satellite Television Extension and Localism Act Reauthorization – governing retransmission and other agreements between broadcasters and cable and satellite operators – are scheduled to expire at the end of this year.
• The television-viewing landscape has changed dramatically in the five years since Congress last updated these laws.

An estimated 119 million U.S. households – 93% of the country – watch television. Their experience is governed by a variety of laws and regulations, including the 2014 Satellite Television Extension and Localism Act Reauthorization. STELAR governs retransmission agreements between broadcasters and cable and satellite operators, as well as copyright terms. Three key provisions of the law are set to expire at the end of the year.

Background

Historically, television viewers received broadcast signals either from traditional antennas, free of charge, or from a “multichannel video programming distributor,” such as a cable or satellite provider. People also are increasingly watching broadcast television through streaming apps and services over the internet.

The regulations governing TV broadcasts attempt to balance a number of competing interests, including supporting competition, protecting property rights and copyright, localism, and the public’s interest in the airwaves. The Federal Communications Commission grants licenses for stations to use broadcast spectrum for “the public interest, convenience, and necessity.”

STELAR includes parts of legislation that was first passed in 1988 and revised in 1992, 1999, 2004, and 2010.

Competition and technology change the industry

Television viewing methods have changed in the five years since STELAR was enacted. Today, around 29 million households watch television through a satellite provider such as DirecTV or Dish. MVPDs have lost about 9.1 million subscribers, falling from 88% of households to 77%.

There are a variety of reasons for this decline. First, the price of cable and satellite television service for urban consumers rose 12% from 2014 to 2018, more than double the rate of inflation.

Consumers also have more viewing options than they did in the past. As of June 2018, 11.6 million households, or nearly 10% of viewing households in America, watched television exclusively via the internet through services such as Hulu and YouTube. This number is expected to grow as new streaming services backed by big names like Disney, HBO, and Apple are set to enter the market.

The Changing Face of Television

expiring provisions

Broadcast areas and frequencies are allocated across the country geographically to ensure that communities have access to local news and information. There are currently 210 “designated market areas,” and stations are generally granted a license to broadcast within a specific DMA.

Broadcast networks produce some of their own programming and broadcast it over the air free of charge. They own the copyright for the content they produce. Under STELAR, MVPDs are required to obtain the permission of the copyright holder in order to retransmit the broadcast signal, known as retransmission consent.

Broadcasters can grant permission either by requiring MVPDs to carry their signal to local customers without compensation – known as “must carry” – or negotiating a price for retransmission consent. The first expiring provision in STELAR allows satellite operators to import distant signals to unserved households without obtaining retransmission consent.

A second expiring provision grants a statutory license for distant signal importation. STELAR reauthorized language from 1988 that allows satellite operators to skip the retransmission consent negotiation and instead pay a royalty set by the Copyright Royalty Board. The provision was enacted with the goal of injecting competition into the marketplace by helping make new satellite companies viable.

Satellite operators can use this provision when households are unable to receive the signals of one or more local stations. Instead, the satellite company will import a signal from outside the local area, often from New York or Los Angeles. According to Dish and DirecTV, this provision is used for about 870,000 viewing households in 12 markets, many in rural communities. RVs and long-haul truckers are also authorized to use this provision, which is expiring at the end of the year.

In June, the director of the U.S. Copyright Office sent a letter to the chairman and ranking member of the House Judiciary Committee recommending that this provision be allowed to expire as scheduled. She wrote that it “has been made unnecessary by the substantial growth of the satellite industry, now a strong incumbent, and the changed realities of the programming delivery market.”

The third expiring section of the law requires MVPDs and broadcasters to negotiate retransmission consent agreements in “good faith,” which is enforced by the FCC. High-profile blackouts, like a recently resolved dispute between Dish Network and Fox, are usually the result of the parties being unable to negotiate a payment despite this provision.

options for congress

In addition to the Copyright Office, other groups have weighed in on the expiring parts of STELAR. The National Association of Broadcasters has advocated letting all three provisions sunset. The NAB contends, “STELAR is not only unnecessary today due to considerable advances in the media marketplace, but any reauthorization will further harm the satellite viewers currently being denied access to their local television stations.” Broadcasters also advocate for free market negotiations between broadcasters and satellite companies in lieu of the statutory copyright license, the rates for which are set by the Copyright Royalty Board.

In contrast, the DirecTV and Dish satellite networks support renewing the expiring provisions, reforming the retransmission consent process, and making the distant signal license permanent. Among their reasons are the 870,000 subscribers who they contend would not be able to receive network broadcast programming without this provision.

Consumer and industry groups including Consumer Reports, Consumer Federation of America, and a number of RV associations support renewal of STELAR.

Representatives Steve Scalise and Anna Eshoo have introduced the Modern Television Act of 2019 in the House. This bill would repeal the retransmission consent and distant signal provisions, but would retain and extend the good faith provision.

The House Energy and Commerce Committee held a hearing on STELAR in June, and the Senate Commerce Committee held a hearing October 23.