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Competition and Copyright: Retransmission of Free-to-Air Television Signals by Pay TV Services
Abstract
Free-to-air television stations remain the most popular source of programming, even in pay TV households. Consumers value the bundling of pay TV channels with retransmitted free-to-air channels for a variety of reasons, in particular the improved signal quality provided in areas where off-air reception is less than ideal. Hence, the conditions under which pay TV services can retransmit free-to-air signals are of crucial importance. This paper compares US and Australian signal retransmission regulations and assesses their impact on competition between pay TV and free-to-air television and on actual or potential competition between pay TV media such as cable and satellite television. The analysis also touches on the competitive implications of common ownership of satellite and cable pay TV services. To place the signal retransmission issues in the proper context, the paper examines differences in the structure of free-to-air television distribution systems in Australia and the US. In particular, it contrasts the Australian tendency to distribute most programming and sell most advertising nationally with the more locally oriented network—affiliate system in the US. The paper considers the relative merits of compulsory licensing and full copyright protection for free-to-air television signals and examines mandatory signal carriage (‘must-carry’) regulations.
Content
Author and article information
Notes and References
The opinions expressed herein are those of the author and should not be construed to represent those of the Federal Communications Commission or any other member of its staff. The author wishes to thank Stephanie Riegg for assistance with research, data collection and analysis, Caterina Alvarez for assistance in revising the paper, and Matthew Dummett for helpful comments on Australian legislative proposals. All errors are die responsibility of the author. An earlier version was presented at the Cultural Crossroads Conference, Sydney, Australia, 26 November 1997.
US direct-to-home (DTH) satellite services include Direct Broadcast Satellite, a high-power Ku band service (internationally designated BSS, or Broadcast Satellite Service), a medium power Ku band service (internationally designated FSS or Fixed Satellite Service), and C-band, another FSS service, using lower frequencies. The first two services are digital, while the last one is analog. At the end of 1998 there were 6.4 million DBS subscribers, 2.3 million Ku band FSS subscribers, and 1.9 million C band subscribers. There has recently been a consolidation of US satellite television providers. DirecTv has acquired USSB, a complementary service that shares its orbital slot at 101 degrees west longitude. In addition, DirecTv has acquired Primestar, die medium power Ku band service provider, and the DBS permit at 119 degrees west longitude of Tempo. DirecTv plans to convert Primestar subscribers to DirecTv, but some have switched to EchoStar and some others will undoubtedly do so as well. Echostar has recently gained substantial additional DBS capacity by acquiring the MCI DBS permit. See Federal Communications Commission, ‘International bureau approves transfer of control to DirecTv of Tempo's DBS authorization’, www.fcc.gov/Bureaus/International/News_Releases/1999/nrin9020.txt; and Federal Communications Commission, ‘Commission acts to increase competition to cable TV by approving additional DBS capacity for Echostar’, www.fcc.gov/Bureaus/International/News_Releases/1999/nrin/9019.html, both visited 15 August 1999. DBS requires an 18-inch dish antenna, and Ku band FSS requires a 3-foot antenna, while C-band requires a 6–7-foot antenna.
These year-end 1998 figures are from Paul Kagan Associates, ‘Basic cable network economics 1983–2009’, Cable Program Investor, 14 July 1999, p. 3; and ‘US DTH subscribers’, www.skyreport.com/skyreport/dth_us.htm, visited 17 August 1999.
Paul Kagan Associates, op. cit. and www.skyreport.com, op. cit.
National Cable Television Association, ‘The cable industry at a glance: current estimates’, www.ncta.com/glance.html, visited 17 August 1999.
Television and Cable Factbook, Services Volume, Warren Publishing, Inc., Washington, DC, 1998, p. I-97.
This is in marked contrast to the Australian situation. Government regulation constrained DTH to 10 digital channels until 1 July 1997, Broadcasting Services Act, 1992, section 93. Although the number of satellite channels offered has increased, currently there is not a wide disparity in the number of channels offered by cable and satellite pay TV services.
See ‘Cablevision—request resource wire’, bound into Cablevision, 9 December 1996.
Users can, of course, purchase a second telephone line to avoid this problem.
Because of differences in the bundle of services provided and because DTH services require the subscriber to amortize an upfront investment in reception equipment, exact price comparisons across services are difficult. Basic cable service including any necessary equipment such as remote controls or set-top boxes averages $25–30 per month, with an initial installation cost of $30–40 on average. The basic satellite services range in cost from $15 to 30, with higher prices for larger packages incorporating premium services. The home reception equipment for DTH can be purchased for as little as $200 (less when a promotion is in effect). Customers can install their own equipment or pay about $150 for this service.
Cabletelevision Advertising Bureau, Cable TV Facts, New York, 1998, p. 15.
A. C. Nielsen data reported in D. Farrant, ‘Pay TV off to a running start: survey’, The Age, 3 August 1999, p. 3.
For a more detailed description of signal carriage regulation in the US., see J. Levy, ‘An evaluation of signal carriage regulation in the US’, presented at the Communications Research Forum, Communications Law Centre and Bureau of Transport and Communications Economics, Sydney, Australia, October 1995.
These rules are part of the United States Code of Federal Regulations. See 47 CFR $sC76.67 and $sC$sC76.92 et seq.
47 CFR $sC$sC76.51 et seq.
Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102–385, 106 Stat. 1460.
Turner Broadcasting System v. Federal Communications Commission, 117 S. Ct. 1174, 1997.
See Communications Act of 1934, as amended, 47 U.S.C. $sC325(b). (‘U.S.C.’ is the United States Code.)
The term ‘superstation’ refers to a non-network station retransmitted via satellite. The statutory definition is in 17 U.S.C. $sC119(d), a provision added by the Satellite Home Viewer Act of 1988, Pub. L. No. 100–667 102 Stat. 3949 (1988).
Satellite Home Viewer Act of 1994, Pub. L. No. 103–369 108 Stat. 3477.
D. Connell, ‘Senate, house satellite TV bills head to conference’, Satellite Business News, 2 June 1999, pp. 1, 21.
D. Connell, ‘White-areas get mixed reception in Washington’, Satellite Business Mews, 26 August 1998, pp. 1, 21, 22. The parties agreed on an extension of the original 28 February 1999 service termination date for some subscribers. D. Connell, ‘DirecTv and broadcasters end court fight; political spat continues’, Satellite Business News, 24 March 1999, pp. 1, 21, 22.
The Federal Communications Commission recently revised its prediction model for signal propagation and specified a new methodology for measuring signal strength at individual household sites. See Federal Communications Commission, ‘Report and order in CS docket no. 98–201’, 14 FCC Red 2654, 1999.
See D. Connell, ‘Senate, house satellite TV bills head to conference’, op. cit. A committee of members of the US Senate and House of Representatives will reconcile differences in the two bills, and the compromise will be referred back to the two houses for a vote. Both bills impose ‘must-carry’ obligations on satellite carriers, effective on a market-by-market basis in 2002.
US Satellite Broadcasting, Research Summary DSS Buyers and Non-Buyers, June 1997.
For more detail, see Local TV on Satellite, ‘LTVS solves DBS local-to-local problem with increased transponder capacity’, www.localtv-satellite.com/newsreleases/041999.html, visited 13 July 1999.
In a limited number of markets, Echostar retransmits local television stations to households that, due to terrain or other factors, do not receive strong enough terrestrial signals to be considered served under the Satellite Home Viewer Act.
The FCC uses this type of market definition in its national television station ownership rules and in determining the cable must-carry rights of television broadcast stations. The agency is transitioning from the ADI classification system, developed by Arbitron (which no longer measures television audiences) to the DMA classification system. The cable television compulsory license also uses this classification scheme to distinguish between local and distant signals for copyright royalty purposes.
Currently, cable television is the only MVPD to which must-carry rules apply. Other local distribution platforms, such as multichannel multipoint distribution service (MMDS) and satellite master antenna television service, are not subject to must-carry rules. The cable must-carry rules were imposed by Congress and upheld by the Supreme Court on the rationale that making the free-to-air television service widely available serves the public interest, and that due to cable's overwhelming share of the MVPD market, without cable must-carry, free-to-air television service is likely to suffer significant harm. See Turner Broadcasting System v. Federal Communications Commission, op. cit. and Cable Television Consumer Protection and Competition Act of 1992, op. cit., Section 2. Opponents of satellite must-carry rules might be tempted to claim that this rationale does not apply in the satellite context.
For a brief description of the proposed regime, see Department of Communications, Information Technology and the Arts (DCITA), ‘Review of the retransmission of digital television broadcasting services’, www.dcita.gov.au/cgi-bin/trap.pl?path=4080, visited 11 August 1999, p. 2. Both the Broadcasting Services Amendment Bill (No. 1) 1999 and the Copyright Amendment (Digital Agenda) Bill 1999 have been introduced into the House of Representatives.
Retransmissions outside of the station's license area by any party, including but not limited to self-help providers and those retransmitting the signal in remote areas, would also require the permission of the Australian Broadcasting Authority. The BSAB is available at www.aph.gov.au/parlinfo/billsnet/bills.htm. The retransmission provisions are in the new Part 14B.
The Copyright Amendment (Digital Agenda) Bill 1999 is available at www.aph.gov.au/parlinfo/billsnet/bills.htm. See new Part VC and sections 153M and 153N.
J. Levy, op. cit.
See 47 CFR $sC73.3555 and Broadcasting Services Act 1992, section 53.
A. Brown and M. Cave, ‘The economics of television regulation: a survey with application to Australia’, Economic Record, 68, 202, 1992, pp. 377–94. E. Jacka, ‘Remapping the Australian television system’, CIRCIT Working Paper 1993/2, Melbourne, Australia, June 1993.
TV Week, zoned issues, Pacific Publications, Melbourne, Australia, 16 August 1997.
The ABC calculation is based on 244 rather than 252 time slots because ABC had no programming listed for a few early hours on Saturday and Sunday of the test week.
This shift has recently been eliminated. See E. Simper, ‘SBS goes back to the future’, The Australian, Media Section, 20–26 May 1999, p. 4.
Communications Law Centre, ‘Media ownership update’, Communications Update, February 1997.
Bureau of Transport and Communications Economics, Report 93: Australian Commercial Television 1986–1995, Canberra, Australia, 1996, pp. 26–7.
Ibid., p. 89.
For the number of commercial television licensees, see Australian Broadcasting Authority, ‘TV profits up 6.9 per cent; radio up 26.8 per cent in 1997–98’, 17 March 1999, www.aba.gov.au/about/public_relations/newrel_99/23nr99.htm. For the source of the number of television households figure, see note 45.
Under the BSAB, new Part 8A op. cit., Australian Broadcasting Authority approval might well be needed for transmission of a national network feed, at least in regional areas. See BSAB, new part 8A and new section 205P, op. cit.
As with any other subscription service, it is necessary for some entity to assume responsibility for subscriber management, including the conditional access function.
All projections cited here are from I. Martin and P. Dobrijevic, Rationalisation in Cable Networks and Subscription Television, BZW Australia, Sydney, Australia, 1997, p. 31. (BZW Australia is now ABN AMRO.)
See J. Levy, ‘Competitive prospects for DTH satellite television service around the world’, Presented at the 25th Annual Telecommunications Policy Research Conference, Alexandria, Virginia, September 1997; and P. Colman, ‘No laurel-resting for Hartenstein’, Broadcasting and Cable, 3 November 1997, pp. 52–3.
Austar and Foxtel currently provide DTH Service in parts of Australia. The question of regulating the ‘set-top box’ used to implement the conditional access system of a pay TV provider, either by standard setting or access requirements, is beyond the scope of this paper. See Martin and Dobrijevic, op. cit., p. 52 for a brief discussion of Australian government policy.
However, DCITA, ‘Review of the retransmission of digital television broadcasting services’, op. cit., pp. 2–3, explicitly limits its discussion to cable pay TV systems.
In particular, analysis of the ownership of the B3 satellite platform (50% C&W Optus and 50% Austar) is beyond the scope of this paper.