How the Satellite Television Extension and Localism Act (STELA) Updated Copyright and Carriage Rules for the Retransmission of Broadcast Television Signals

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How the Satellite Television Extension and

Localism Act (STELA) Updated Copyright and

Carriage Rules for the Retransmission of

Broadcast Television Signals

Charles B. Goldfarb

Specialist in Telecommunications Policy

January 3, 2013

Congressional Research Service

7-5700

www.crs.gov

R41274

CRS Report for Congress

Prepared for Members and Committees of Congress

c11173008

The Satellite Television Extension and Localism Act of 2010 (STELA)

Summary

The Satellite Television Extension and Localism Act of 2010 (STELA), P.L. 111-175, modified

the copyright and carriage rules for satellite and cable retransmission of broadcast television

signals. The legislation was needed to reauthorize (through December 31, 2014) certain expiring

provisions in the Copyright Act and the Communications Act and to update the language in those

acts to reflect the transition from analog to digital transmission of broadcast signals, as well as to

address certain public policy issues. Had the expiring provisions not been reauthorized, satellite

operators would have lost access to a statutory compulsory copyright license and to statutory

relief from retransmission consent requirements. This would have made it difficult, if not

impossible, for them to retransmit certain distant broadcast signals to their subscribers, including

signals providing otherwise unavailable broadcast network programming.

The Copyright Act and Communications Act distinguish between the retransmission of local

signals—the broadcast signals of stations located in the same local market as the subscriber—and

distant signals. Statutory provisions block or restrict the retransmission of many distant broadcast

signals in order to foster local programming. These provisions typically take the form of defining

which households are “served” or “unserved” by local broadcasters, with unserved households

eligible to receive distant signals. But there are many grandfather clauses and other exceptions

built into the rules that allow households to receive otherwise proscribed distant signals. STELA

generally retained, and in some cases expanded upon, these grandfathered and exceptional cases.

STELA provided broadcasters two new incentives to use their digital technology to broadcast

multiple video streams (to “multicast”). It clarified that royalty fees are payable to copyright

owners of the materials on non-primary digital voice streams as well as primary streams, thus

encouraging broadcasters (who often hold some of those copyrights) to expand their multicasting.

STELA specifically gave broadcasters the incentive to undertake such multicasting to offer

otherwise unprovided network programming in so-called “short markets”—markets that do not

have network affiliates for all four major networks. It did this by defining households that can

receive the programming of a particular network from the non-primary multicast video stream of

a local broadcaster as being served, rather than unserved, with respect to that network, thus

prohibiting satellite operators from retransmitting to those households distant signals that carry

that network’s programming. The local broadcaster can then seek retransmission consent

payments from satellite operators. Several other provisions in STELA also were intended to

reduce the number of short markets or increase flow of distant network signals into short markets.

Today, satellite operators are allowed, but not required, to offer subscribers the signals of the

broadcast stations in their local market. Until enactment of STELA, the satellite operators chose

not to offer this “local-into-local” service in many small markets, preferring to use their satellite

capacity to provide additional high definition and other programming to larger, more lucrative

markets. The costs associated with providing local-into-local service in small markets may

exceed the revenues. STELA provided DISH Network, which had been subject to a permanent

court injunction that in effect prohibited it from retransmitting to its subscribers the signals of

distant broadcast stations, the opportunity to have that injunction waived if it provided local-intolocal service in all 210 local markets in the United States, which it began doing on June 3, 2010.

STELA did not address the issue of “orphan counties”—counties located in one state that are

assigned to a local market, as defined by the Nielsen Media Research designated market areas, for

which the principal city and most or all of the local broadcast stations are in another state.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

Contents

Overview of STELA ........................................................................................................................ 1

Background ...................................................................................................................................... 3

Issues Addressed in STELA ............................................................................................................ 5

Reauthorization.......................................................................................................................... 5

Revising Existing Rules That Are Based on Analog Technology.............................................. 7

Fostering Digital Multicasting, Especially Multicasting to Provide Network

Programming in Those Markets That Lack a Network Affiliate (“Short Markets”) .............. 8

Providing an Incentive for DISH Network to Offer Local-into-Local Service in All

Designated Market Areas: Allowing DISH to Use a Statutory License to Retransmit

Distant Network Signals into Short Markets ........................................................................ 10

Reducing the Number of Short Markets by Eliminating the “Grade B Bleed” Problem ........ 12

Household Eligibility to Receive Distant Signals: Grandfathered Subscribers, Other

Subscribers, and Households That Are Not Subscribers When Legislation Is

Enacted (“Future Applicability”).......................................................................................... 12

Modified Copyright Treatment of the Satellite Retransmission of Low Power

Television Station Signals .................................................................................................... 15

Satellite Carriage of Noncommercial Educational Television Stations ................................... 16

Satellite Carriage of State Public Affairs Networks ................................................................ 17

The Retransmission of In-State, but Non-Local, Broadcast Signals into Counties

Assigned to Local Markets in Other States (“Orphan Counties”) ........................................ 18

Changing the Statutory Copyright License Applied to the Content on the Signals of

Significantly Viewed and “Exception” Broadcast Stations .................................................. 20

Allowable Signal Formats for the Retransmission of Significantly Viewed Stations ............. 20

Studying What the Impact Would Be If the Statutory Licensing System for Satellite

and Cable Retransmission of Distant Broadcast Signals Were Eliminated .......................... 21

Providing Digital Service on a Single Dish ............................................................................. 22

Modification of the Methodology for Setting Copyright Royalty Rates and of

Severability .............................................................................................................................. 24

Contacts

Author Contact Information........................................................................................................... 24

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

Overview of STELA

The Satellite Television Extension and Localism Act of 2010 (STELA), P.L. 111-175,1 extended,

updated, and modified provisions in the Copyright Act2 and the Communications Act3 relating to

the retransmission of broadcast television signals by satellite television and cable television

providers. Among other things, STELA:

•

Reauthorized through December 31, 2014, expiring provisions that provide

satellite carriers access to a simple statutory compulsory copyright license and

free satellite carriers from retransmission consent requirements, when

retransmitting to their subscribers the signals of certain broadcast stations located

outside the subscribers’ local markets (“distant signals”). Had these provisions

expired, it would have been difficult, if not impossible, for satellite operators to

provide to their subscribers broadcast network programming that the subscribers

are unable to receive from their local broadcasters.

•

Revised provisions in copyright and communications law to take into account the

transition from analog to digital transmission of broadcast signals.

•

Created an incentive for broadcasters, who often hold copyrights on of the

programming they broadcast, to use their digital capabilities to offer multiple

video streams (“multicasting”) by requiring satellite operators to pay royalty fees

for the programming on the non-primary, as well as primary, video streams.

•

Provided local broadcasters in markets that currently do not have network

affiliates for all four major networks (so-called “short markets”) the incentive to

offer the programming of the currently unavailable networks on their nonprimary digital video streams. Specifically, STELA defined households that can

receive the programming of a particular network from the non-primary multicast

video streams of a local broadcaster as being “served” rather than “unserved”

with respect to that network, thus prohibiting satellite operators from

retransmitting to those households distant signals that carry that network’s

programming and allowing the broadcaster to seek retransmission consent

payments.

•

Freed DISH Network of a permanent court injunction against retransmitting the

signals of distant network stations into short markets in exchange for the

requirement to make available to its subscribers in each of the 210 local markets

in the United States the signals of all the full-power broadcast stations in the local

market. To meet that requirement, on June 3, 2010, DISH began providing such

“local-into-local” service to the 29 local markets it had not been serving.

•

Modified the rules governing which households are eligible to receive distant

signals from satellite carriers, generally grandfathering those households that

currently receive such signals. These rule changes, which attempt to better reflect

124 Stat. 1218.

17 U.S.C. §§111, 119, and 122.

47 U.S.C. §§325, 335, 338, 339, 340, and 341.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

the current market and technological environment, may increase the number of

households that qualify to receive distant signals.

•

Modified the copyright administrative procedures, reporting requirements,

royalty fees, filing fees, and non-compliance penalties for the improper

retransmission of broadcast television signals by both satellite carriers and cable

operators.

•

Changed the statutory licenses applicable to the copyrighted material on the

retransmitted signals of “significantly viewed” broadcast stations,4 low power

broadcast stations, and other statutorily exceptional5 stations.

•

Required satellite operators to make available to their subscribers all the

programming of non-commercial television stations that is in high-definition

format.

•

Required the Register of Copyrights to submit a report on market-based

alternatives to statutory licensing and also required the Comptroller General to

submit a report on changes to carriage requirements currently imposed on

multichannel video programming distributors (MVPDs) and to Federal

Communications Commission (FCC) regulations that might be required if

Congress were to phase-out the current statutory satellite and cable licensing

requirements.6

STELA did not address the situation in which a county has been assigned to a local market for

which the principal city is in another state and the television stations located in that local market

primarily address the needs of households in that other state, rather than providing news, sports,

and other programming of interest to the county. There had been a number of legislative

proposals intended to address this “orphan county” issue, but none was included in STELA. But

STELA did require the FCC to submit a report on the in-state broadcast programming available to

“Significantly viewed” stations are located outside the local market in which the subscriber is located but have been

determined by the Federal Communications Commission to be viewed by a “significant” portion of those households in

the local market that do not subscribe to any multichannel video programming distributor (MVPD). The specific

threshold viewing level for a significantly viewed station are, for a network affiliate station, a market share of at least

3% of total weekly viewing hours in the market and a net weekly circulation of 25%; for independent stations, 2% of

total weekly viewing hours and a net weekly circulation of 5%. The share of viewing hours refers to the total hours that

households that do not receive television signals from MVPDs viewed the subject station during the week, expressed as

a percentage of the total hours these households viewed all stations during the week. Net weekly circulation refers to

the number of households that do not receive television signals from MVPDs that viewed the station for 5 minutes or

more during the entire week, expressed as a percentage of the total households that do not receive television signals

from MVPDs in the survey area. A satellite operator can retransmit the signals of these significantly viewed stations

only with the retransmission consent of the station.

The 2004 Satellite Home Viewer Extension and Reauthorization Act allowed satellite operators to retransmit in-state

but non-local broadcast television signals to subscribers located in certain counties in Vermont, New Hampshire,

Oregon, and Mississippi that are assigned to local markets (as defined by Nielsen Media Research designated market

areas) whose local broadcast stations are located in another state. For convenience, these stations are referred to as

statutorily exceptional stations.

The United States Copyright Office submitted its report, Satellite Television Extension and Localism Act §302 Report

(available at http://www.copyright.gov/reports/section302-report.pdf) on August 29, 2011, and the United States

Government Accountability Office submitted its report, Statutory Copyright Licensing: Implications of a Phaseout on

Access to Television Programming and Consumer Prices Are Unclear, GAO-12-75 (available at

http://www.gao.gov/new.items/ d1275.pdf), in November 2011.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

households that receive the signals of broadcast stations that are considered, by statute and rule,

to be local but are located in a different state. The FCC submitted its report on August 29, 2011.7

Background

Congress has constructed a regulatory framework for the retransmission of broadcast television

signals by satellite television operators through a series of laws—the 1988 Satellite Home Viewer

Act (SHVA),8 the Satellite Home Viewer Act of 1994,9 the 1999 Satellite Home Viewer

Improvement Act (SHVIA),10 the 2004 Satellite Home Viewer Extension and Reauthorization Act

(SHVERA),11 and most recently STELA. These laws have fostered satellite provision of MVPD

service and, as satellite has become a viable competitor to cable television, have attempted to

make the regulatory regimes for satellite and cable more similar. Today, the regulatory framework

for satellite exists alongside an analogous, but in some significant ways different, regulatory

framework for cable.12

The various provisions in these satellite acts created new sections or modified existing sections in

the Copyright Act and the Communications Act of 1934. Under current law, in order to retransmit

a broadcaster’s signals to its subscribers, a satellite operator or a cable operator, with certain

exceptions, must obtain a license from the copyright holders of the content contained in the

broadcast for use of that content and also must obtain the consent of the broadcaster for

retransmission of the broadcast signal. The statutory provisions addressing copyright are in the

provisions addressing signal retransmission are in the Communications Act and are administered

by the FCC. But in several cases, the provisions in one act are conditioned on meeting conditions

prescribed in the other act or meeting rules adopted by the agency that administers the other act.

The satellite and cable regulatory frameworks attempt to balance a number of longstanding, but

potentially conflicting, public policy goals—most notably, localism, competitive provision of

video services, support for the creative process, and preservation of free over-the-air broadcast

television. They also attempt to balance the interests of the satellite, cable, broadcast, and

program content industries. Congress incorporated sunset provisions in SHVERA—and again in

STELA—because of its concern that market changes could affect these balances. Indeed, as

Congress debated the legislative proposals that were included in, or left out of, STELA, it gave

substantial weight to a proposed package of changes in copyright procedures, royalty rates, and

other parameters constructed and supported by a wide range of industry players through a process

of direct negotiations and compromise.

In the Matter of In-State Broadcast Programming Report to Congress Pursuant to Section 304 of the Satellite

Television Extension and Localism Act of 2010, MB Docket No. 10-238, Report, adopted August 26, 2011, and

released August 29, 2011.

P.L. 100-667.

P.L. 103-369.

P.L. 106-113.

P.L. 108-447, passed as Division J of Title IX of the FY2005 Consolidated Appropriations Act.

For a more detailed discussion of the differences in the rules for cable and satellite providers, see CRS Report

R40624, Reauthorizing the Satellite Home Viewing Provisions in the Communications Act and the Copyright Act:

Issues for Congress, by Charles B. Goldfarb, especially at Table 1, “Current Retransmission and Copyright Rules for

Satellite and Cable Operators.”

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

The statutory provisions distinguish between the retransmission of local signals—the broadcast

signals of stations located in the same local market (as defined by the 210 designated market

areas into which the United States is divided by Nielsen Media Research) as the subscriber—and

of distant signals. These provisions block or restrict the retransmission of many distant broadcast

signals in order to protect local broadcasters from competition from distant signals and to provide

them with a stronger negotiating position vis-à-vis the satellite and cable operators. The intent is

to foster local programming. But the statutory framework also recognizes that U.S. households

benefit from the receipt of certain distant broadcast signals and includes explicit retransmission

and copyright rules for these.

The statutory framework for satellite sets the parameters within which industry players must

conduct business. It provides answers to four fundamental business questions:

•

May—or must—a satellite operator retransmit some or all local broadcast

signals?13

•

May a satellite operator retransmit certain categories of distant (non-local)

broadcast signals?

•

Is retransmission of those signals contingent on a satellite operator receiving the

prior retransmission consent of—and providing compensation to—the

broadcaster? and

•

Is use of the content on those signals subject to specific copyright license terms?

Satellite operators and broadcasters also must conduct business within the constraints of

longstanding industry practice. Broadcast program suppliers—both broadcast networks and

owners of non-network, syndicated programming—contractually grant individual broadcast

television stations the exclusive broadcast rights to their programming in a geographic area and

restrict those broadcast stations from allowing other parties to retransmit the station signals

carrying that programming beyond the area of exclusivity. Thus, in some situations where the

regulatory framework allows satellite (or cable) operators to retransmit the signals of a distant

broadcast station, subject to obtaining the permission of the broadcast station, that station may

be—and, in practice, often is—contractually prohibited from granting the MVPD retransmission

consent.

Although satellite and cable operators compete directly with one another in most markets, there

are significant differences in the regulatory frameworks under which they operate. These

differences largely reflect the different origins of the cable and satellite industries—cable

beginning as a business with technology focused on serving narrow geographic areas and satellite

beginning as a business with technology serving broad geographic areas. To this day, cable

network architecture and technology can more efficiently accommodate local programming than

can satellite. Some observers have proposed that the retransmission, copyright, and other rules

under which these competing multichannel video programming distributors operate should be

rationalized to eliminate artificial competitive advantages or disadvantages. For example, the

This is formally referred to in the statute as “secondary transmission” of the broadcast signals. The initial

transmission of the signals by the broadcast station is the “primary transmission.”

Satellite Home Viewer Extension and Reauthorization Act Section 109 Report, A Report of the Register of

Copyrights, June 2008, at pp. ix-xi and 94-180.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

receipts royalty system for cable retransmission of distant broadcast signals in Section 111 of the

retransmission of distant broadcast signals in Section 119 of the Copyright Act. The Copyright

Office also has proposed15 that the provisions defining satellite subscriber eligibility for receiving

distant signals in Section 119 (the “unserved household” provisions) be replaced by the

imposition on satellite operators of the FCC’s network non-duplication16 and syndicated

exclusivity rules,17 which currently are used to limit the retransmission of distant broadcast

signals by cable operators. But in the Congressional deliberations leading to passage of STELA,

there was little discussion of a major modification of the regulatory framework.

Issues Addressed in STELA

Reauthorization

STELA extended through December 31, 2014, several statutory copyright and communications

provisions, required for satellite operators to retransmit distant signals, that would have expired

on May 31, 2010. Most significantly:

•

Section 119 of the Copyright Act18 provides satellite operators that retransmit

certain “distant” (non-local) broadcast television signals to their subscribers with

an efficient, relatively low cost way to license the copyrighted works contained in

those broadcast signals—a statutory per subscriber, per signal, per month royalty

fee. Had the law expired, it would have been very difficult (and perhaps

impossible) for satellite operators to offer the programming of broadcast

Satellite Home Viewer Extension and Reauthorization Act Section 109 Report, A Report of the Register of

Copyrights, June 2008, at pp. 167-168.

47 C.F.R. §§76.92, 76.93, 76.106, 76.120, and 76.122. Commercial television station licensees that have contracted

with a broadcast network for the exclusive distribution rights to that network’s programming within a specified

geographic area are entitled to block a local cable system from carrying any programming of a more distant television

broadcast station that duplicates that network programming. Commercial broadcast stations may assert these nonduplication rights regardless of whether or not the network programming is actually being retransmitted by the local

cable system and regardless of when, or if, the network programming is scheduled to be broadcast. This rule applies to

cable systems with more than 1,000 subscribers. Generally, the zone of protection for such programming cannot exceed

35 miles for broadcast stations licensed to a community in the FCC’s list of top 100 television markets or 55 miles for

broadcast stations licensed to communities in smaller television markets. The non-duplication rule does not apply when

the cable system community falls, in whole or in part, within the distant station’s Grade B signal contour. In addition, a

cable operator does not have to delete the network programming of any station that the FCC has previously recognized

as “significantly viewed” in the cable community. With respect to satellite operators, the network non-duplication rule

applies only to network signals transmitted by superstations, not to network signals transmitted by other distant

network affiliates.

47 C.F.R. §§76.101, 76.103, 76.106, 76.120, and 76.123. Cable systems that serve at least 1,000 subscribers may be

required, upon proper notification, to provide syndicated protection to broadcasters who have contracted with program

suppliers for exclusive exhibition rights to certain programs within specific geographic areas, whether or not the cable

system affected is carrying the station requesting this protection. However, no cable system is required to delete a

program broadcast by a station that either is significantly viewed in the cable community or places a Grade B or better

contour over the community of the cable system. With respect to satellite operators, the syndicated exclusivity rule

applies only to syndicated programming transmitted by superstations, not to syndicated programming transmitted by

other distant broadcast stations.

17 U.S.C. §119.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

networks19 to that subset of subscribers who currently cannot receive that

programming from local broadcast stations that are affiliated with those

networks.20 It also would have been difficult for satellite operators to offer their

subscribers the signals of distant stations that are not affiliated with broadcast

networks, including both “superstations”21 and other non-network stations.

•

In addition, prior to the enactment of STELA, Section 119 provided those

satellite operators that retransmit to their subscribers the signals of “significantly

viewed” stations—stations that are located outside the local market in which the

subscriber is located but have been determined to be “significantly viewed” by

those households in the local market that do not subscribe to any MVPD

provider—a royalty-free license for the copyrighted works contained in those

broadcast signals. Had Section 119 expired, it would have been very difficult

(and perhaps impossible) for satellite operators to offer their subscribers the

signals of significantly viewed stations. Under STELA, satellite retransmission of

significantly viewed stations has been moved from Section 119 to Section 122 of

the Copyright Act, under which such retransmission is subject to the royalty-free

license in Section 122.

A network is defined as an entity that offers an interconnected program service on a regular basis for 15 or more

hours per week to at least 25 affiliated television licensees in 10 or more states. (17 U.S.C. §119(d)(2)(A) and 47

U.S.C. §339(d)(2)(A)) In addition to the four major television networks—ABC, CBS, Fox, and NBC—that provide

national news and entertainment programming aimed at a general audience, there are several networks—Univision,

Telefutura, and Telemundo—that offer news and entertainment targeted to ethnic communities, as well as smaller

networks that provide entertainment or religious programming to their affiliates. Section 119(d)(2)(B) of the Copyright

Act defines “network station” to also include noncommercial broadcast stations.

This would include subscribers who are not able to receive network programming because either (1) the satellite

operator does not offer the signals of the local broadcast stations and the subscribers are located too far from the

transmitter to receive the signals of the local network-affiliated stations over-the-air or (2) there is no network-affiliated

station in the local market. The specific household eligibility requirements for receiving distant signals are very

complex and include certain grandfathered exceptions, but as a general rule households that can receive the signals of

local broadcast television stations either over-the-air or as part of local-into-local satellite service are not eligible to

receive distant network signals and would not be affected by the expiration of this provision.

Prior to enactment of STELA, the Copyright Act and the Communications Act both had language referring to

“superstations,” but that term was defined differently in the two acts, thus creating confusion. The Communications Act

identifies a class of “nationally distributed superstations” (47 U.S.C. §339(d)(2)) that is limited to six stations that were

in operation prior to May 1, 1991. These are independent broadcast television stations whose broadcast signals are

picked up and redistributed by satellite to local cable television operators and to satellite television operators all across

the United States. These nationally distributed superstations in effect function like a cable network rather than a local

broadcast television station or a broadcast television network. The nationally distributed superstations are WTBS,

Atlanta; WOR and WPIX, New York; WSBK, Boston; WGN, Chicago; KTLA, Los Angeles; and KTVT, Dallas. All

of these nationally distributed superstations carry the games of professional sports teams. It has become common in

FCC proceedings and discussions to refer to these nationally distributed superstations as simply “superstations.” In

addition to these independent nationally distributed superstations, there also are many independent television stations

that are not nationally distributed superstations. This distinction is important because under section 325(b)(2)(B) of the

Communications Act, satellite operators may retransmit the signals of “superstations” without obtaining the consent of

the stations if they abide by the FCC’s network non-duplication and syndicated exclusivity rules (see footnotes 11 and

12 above), but this exemption from the retransmission consent requirement does apply to the retransmission of the

signals of other independent stations. On the other hand, until statutory changes were made in STELA, the Copyright

Act had defined “superstation” as “a television station, other than a network station, licensed by the Federal

Communications Commission, that is secondarily transmitted by a satellite carrier.” (17 U.S.C. §119(d)(9)) Thus, under

the Copyright Act pre-STELA, all independent stations were considered superstations and the copyright provisions

applied the same way to all independent stations. Language in STELA eliminated the definitional inconsistency

between the acts by replacing the word “superstation” with “non-network station” throughout the Copyright Act.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

•

Section 325(b)(2)(C) of the Communications Act22 allows a satellite operator to

retransmit the signals of distant network stations, without first obtaining the

retransmission consent of those distant stations, to those subscribing households

that cannot receive the signals of local broadcast television network affiliates.

Had it expired, a satellite operator would have had to negotiate compensation

terms with those distant network stations whose signals it retransmitted to those

“unserved” subscribers.

•

Section 325(b)(3)(C)(ii) of the Communications Act23 prohibits a television

broadcast station that provides retransmission consent from engaging in

exclusive contracts for carriage or failing to negotiate in good faith. Section

325(b)(3)(iii)24 prohibits an MVPD from failing to negotiate in good faith for

retransmission consent. Had these provisions expired, a broadcaster or an MVPD

could have chosen to employ a “take it or leave it” strategy rather than to

negotiate retransmission consent terms in good faith, increasing the risk of an

impasse that results in subscribers losing access to the broadcast station’s

programming.

STELA included a provision making the effective date of the act February 27, 2010, in

order to protect satellite operators from potential lawsuits for copyright infringement for

the brief period of time when the old authorization had expired and Congress had not yet

enacted new authorization. At that time, Congress had encouraged the satellite operators

not to discontinue retransmission of the distant signals in order to allow satellite

subscribers to continue to receive those signals.

Revising Existing Rules That Are Based on Analog Technology

A number of statutory provisions, and many FCC and Copyright Office rules adopted to

implement statutory provisions, have been based on the transmission of analog broadcast signals,

but during 2009 the transition to digital broadcast signals was largely achieved. As a result,

statutes and rules that explicitly referred to analog technology were no longer effective in

attaining the objectives for which they were enacted. Thus, Marybeth Peters, Register of

Copyrights, proposed five modifications to Section 111 of the Copyright Act and four

modifications to Section 119 of the Copyright Act “to accommodate the conversion from analog

to digital broadcasting.”25 Analogous changes were proposed for the Communications Act.

47 U.S.C. §325(b)(2)(C).

47 U.S.C. §325(b)(3)(C)(ii).

47 U.S.C. §325(b)(3)(C)(iii).

Marybeth Peters, Register of Copyrights, written statement before the House Judiciary Committee, hearing on

“Copyright Licensing in a Digital Age: Competition, Compensation and the Need to Update the Cable and Satellite TV

Licenses,” at Appendix 1, February 25, 2009. The proposed modifications to section 111 include revising section 111,

and its terms and conditions, to expressly address the retransmission of digital broadcast signals; amending the

definition of “local service area of a primary transmitter” to include references to digital station “noise limited service

contours” for purposes of defining the local/distant status of noncommercial educational stations (and certain UHF

stations) for statutory royalty purposes; amending the statutory definition of “distant signal equivalent” (DSE) to clarify

that the royalty payment is for the retransmission of the copyrighted content without regard to the transmission format;

amending the definitions of “primary transmission” and “secondary transmission,” as well as the “station” definitions

in section 111(f) so they comport to the amended definition of DSE; and clarifying that each multicast stream of a

digital television station shall be treated as a separate DSE for section 111 royalty purposes. The proposed

modifications to section 119 include replacing the existing Grade B analog standard with the new noise-limited digital

(continued...)

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

STELA included specific changes to language in the Copyright Act and to the Communications

Act intended to make them consistent with a digital environment. It also included provisions

directing the FCC to develop a predictive model for the reception of digital signals within six

months of enactment in order to determine which households are “unserved” and therefore

eligible to receive digital network signals. On November 23, 2010, the FCC adopted rules

creating measurement standards for digital television signals and establishing a predictive

model.26 STELA also included a provision that provides guidance for the period before the new

predictive model has been implemented.

STELA modified the methodology used to determine whether a household is served to reflect the

current market and technological environment, including the transition from analog to digital

transmission. It is possible that some of the methodological changes may increase the number of

households eligible to receive distant network signals.27 For example, most households now

receive their broadcast signals from their cable or satellite service rather than over-the-air and

therefore do not use a rooftop antenna. The old definition of unserved household referred to the

inability to receive a signal of a specified intensity using a rooftop antenna; STELA changed the

definition to refer to any antenna. Since indoor antennas, such as “rabbit-ear” antennas, tend to be

less effective than rooftop antennas, this may increase the number of households that qualify as

unserved.

Fostering Digital Multicasting, Especially Multicasting to Provide

Network Programming in Those Markets That Lack a Network

Affiliate (“Short Markets”)

Although each of the four major broadcast television networks (ABC, CBS, FOX, and NBC) has

a local station affiliate in most U.S. markets, 58 of the 210 markets do not have the full

complement of four network affiliates.28 In these short markets, subscribers have been defined as

being “unserved” with respect to the missing network and satellite operators have been allowed to

retransmit to their subscribers the signals of up to two distant stations that are affiliated with that

missing network.29

(...continued)

signal intensity standard; adopting the Individual Location Longley Rice (ILLR) predictive digital methodology for

predicting whether a household can receive an acceptable digital signal from a local digital network station; mandating

that the FCC adopt digital signal testing procedures for purposes of determining whether a household is actually

unserved by a local digital signal; and deleting various references in section 119 to “analog” unless that reference is to

low power television stations that have not yet converted to digital broadcasting.

In the Matter of Measurement Standards for Digital Television Signals Pursuant to the Satellite Home Viewer

Extension and Reauthorization Act of 2004, ET Docket No. 06-94, Report and Order, adopted November 22, 2010, and

released November 23, 2010, and In the Matter of Establishment of a Model for Predicting Digital Broadcast

Television Field Strength Receive at Individual Locations, ET Docket No. 10-152, Report and Order and Further

Notice of Proposed Rulemaking, adopted November 22, 2010, and released November 23, 2010.

See, for example, Lauren Lynch Flick and Scott R. Flick, “Congress Passes Satellite Television Extension and

Localism Act of 2010,” Pillsbury Winthrop Shaw Pittman LLP Client Alert, May 14, 2010, available at

http://www.ilba.org/downloads/~mo~FCC/Congress_Passes_STELA.pdf, viewed on June 2, 2010. Pillsbury is a law

firm with many broadcaster clients.

Warren Communications, Television & Cable Factbook 2010, Station Volume 2, “Affiliations by Market for TV

Stations, as of October 1, 2009,” at pp. C-5 – C-8.

47 U.S.C. §339. This provision applies to all network stations, but in practice it primarily involves the retransmission

(continued...)

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The Satellite Television Extension and Localism Act of 2010 (STELA)

With the transition from analog to digital technology, however, broadcast stations are able to

broadcast multiple video streams. Some local television stations in short markets are affiliated

with a national network and broadcast that network’s programming on their primary video stream,

but also have reached agreements with a second national network that lacks an affiliate in the

local market to carry the network programming of that second network on a non-primary video

stream. This multicasting allows households in the local market to receive the network

programming of that second network, although it is unlikely that the local station provides any

original local programming on that secondary video stream.

Under STELA, if a local television station broadcasts a non-primary video stream that provides

the programming of a national network and was carried by a satellite operator on March 31, 2010,

and if the local station continues to carry that network’s programming on that video stream, then

as of October 1, 2010, that video stream is considered a “qualified multicast video” and

households in that local market will be considered served with respect to the broadcast network

whose programming is carried on that video stream. Thus, after October 1, 2010, a satellite

operator cannot use the statutory distant signal copyright license to retransmit to households in

that local market the signal of a distant broadcast station affiliated with that streamed network.

Presumably, the satellite operator would have to obtain retransmission consent from the local

broadcaster (which probably would entail making a payment to the broadcaster) to retransmit the

programming as part of its local-into-local service.

As of January 1, 2011, all non-primary video streams of national network programming offered

by a local television station are considered qualified multicast video and households in the local

market are considered served with respect to the broadcast network whose programming was

carried on those video streams.30 As a result of this change in treatment of network programming

broadcast over non-primary video streams, satellite operators are allowed to retransmit the

programming as part of their local-into-local service offering (if they successfully negotiated a

retransmission consent agreement with the broadcaster), but are no longer able to retransmit that

network programming using a distant broadcast signal.

STELA allowed a satellite subscriber who was lawfully receiving the distant signal of a network

station on the day before enactment of the new legislation to receive both that distant signal and

the local signal of a network station affiliated with the same network until the subscriber chooses

to no longer receive the distant signal from its satellite operator. Thus, if in a short market a local

broadcaster began to multicast on a non-primary video stream the programming of the network

for which there has been no local affiliate, and the satellite operator chose to retransmit that nonprimary video stream, a subscriber who has been receiving the distant network signal could

continue to receive that distant signal as well as the local network signal, as long as the subscriber

did not discontinue its subscription for that distant signal. A household in that short market would

not be allowed to receive a distant network signal, however, if it received from the satellite

operator the programming of that same network from the non-primary video stream of a local

(...continued)

of distant signals into short markets that do not have local broadcast stations affiliated with each of the four major

national broadcast networks.

There remains a brief transition period, October 1, 2010, to January 1, 2011, during which if a local broadcaster were

to begin multicasting another broadcast network signal, the signal would not be deemed a qualified multicast video and

a satellite carrier could import into the local market the signal of a broadcaster affiliated with the same network.

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The Satellite Television Extension and Localism Act of 2010 (STELA)

broadcaster but was not a subscriber lawfully receiving the distant signal on the day before

enactment of the new legislation.

Another provision in STELA fostered multicasting in all markets, not just short markets. It

encouraged broadcasters to offer programming over multiple digital video streams—both their

primary stream and non-primary streams—by clarifying that satellite operators must pay

well as primary video streams. Since broadcasters often hold some copyrights for the

programming they broadcast, such payments increase their incentive to multicast.

Providing an Incentive for DISH Network to Offer Local-into-Local

Service in All Designated Market Areas: Allowing DISH to Use a

Statutory License to Retransmit Distant Network Signals into Short

Markets

Satellite operators are allowed, but not required, to offer subscribers the signals of all the

broadcast stations in their local market. If a satellite operator chooses to retransmit the signal of a

local broadcast station and to take advantage of a royalty-free statutory copyright license for the

content carried on that signal, it must retransmit the primary signals of all the full power stations

in that local market, subject to obtaining local station permission. The satellite operators had

chosen not to offer this “local-into-local” service in many small markets, preferring to use their

satellite capacity to provide additional high definition and other programming to larger, more

lucrative markets than to use the capacity to serve very small numbers of customers. In some

cases, those small markets may not generate enough revenues to cover the costs of providing

local-into-local service.31 As a result, approximately 3% of all U.S. households did not have

access to any local broadcast signals if they subscribed to satellite video service, unless they

could receive those signals directly over-the-air.32

Early in the 111th Congress, Representative Stupak had introduced a bill, the Satellite Consumers’

Right to Local Channels Act, which, in effect, would have required satellite operators to offer

local-into-local service in all markets; if a satellite operator wished to use the royalty-free

statutory copyright license to rebroadcast the content on a broadcast signal in any local market, it

would have had to provide local-into-local service in every market. But during markup of the

House Energy and Commerce Committee bill, Representative Stupak agreed to withdraw his bill

Paul Gallant, an analyst with Stanford Washington Research Group, reportedly stated that mandatory provision of

local-into-local service in all markets “would impose significant new costs on Dish Network and DirecTV and generate

virtually no new revenue” because the markets in question are so small. See Todd Shields, “DirecTV, Dish May Face

Requirement for More Local TV (Update1),” Bloomberg.com, February 23, 2009, available at

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ayQ_vo3nJImo, viewed on April 27, 2009.

According to the written testimony of Charles W. Ergen, chairman, president, and chief executive officer of DISH

Network Corporation, submitted for the hearing on “Reauthorization of the Satellite Home Viewer Extension and

Reauthorization Act,” before the Subcommittee on Communications, Technology, and the Internet, Committee on

Energy and Commerce, U.S. House of Representatives, February 24, 2009, at p. 2, “DISH provides local service in 178

markets today, reaching 97 percent of households nationwide.” According to the written testimony of Bob Gabrielli,

senior vice president, broadcasting operations and distribution, DIRECTV, Inc., before the House Judiciary Committee,

February 25, 2009, at p. 10, “DIRECTV today offers local television stations by satellite in 150 of the 210 local

markets in the United States, serving 95 percent of American households. (Along with DISH Network, we offer local

service to 98 percent of American households.)”

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The Satellite Television Extension and Localism Act of 2010 (STELA)

(which he had introduced in the form of an amendment), when DISH Network indicated that it

would voluntarily provide local-into-local service in all 210 markets within two years in

exchange for statutory relief from a current court injunction prohibiting it from providing its

subscribers distant signals using the Section 119 copyright license.33 That quid pro quo was

incorporated into STELA.

As a result of repeated violations of Section 119 of the Copyright Act, DISH Network had been

subject to a permanent injunction, imposed by the U.S. Court of Appeals for the 11th Circuit,34

barring it from using the Section 119 statutory license for the copyrighted materials when

retransmitting distant signals to its subscribers; it therefore had to employ an arms-length

agreement with National Programming Service for that entity to deliver distant signals to its

subscribers. Under STELA, the injunction was partially waived if DISH Network provided localinto-local service in all 210 local markets in the United States. Specifically, DISH is allowed to

use a Section 119 license for the copyrighted materials when retransmitting to its subscribers in a

“short market” the signals of a distant network broadcast station affiliated with a network for

which no local broadcaster is providing the network programming over its primary video stream.

Because of DISH’s long history of illegally retransmitting distant signals, STELA incorporated a

number of safeguards. DISH must demonstrate that it is offering local-into-local service in all 210

local markets in the United States (referred to as designated market areas or DMAs) in order to be

deemed qualified by the court for a temporary waiver of the injunction. The Court must select a

special master who would make an initial examination and provide on-going monitoring to assure

that DISH is serving all 210 DMAs (and if not, make a determination that it is nonetheless acting

reasonably and in good faith) and is in compliance with the royalty payment and household

eligibility requirements of the license. The initial waiver of the injunction would be temporary,

but could be extended for good cause; if DISH lost recognition as a qualified carrier it could not

seek to be re-qualified. Also, the Comptroller General was instructed to monitor the degree to

which DISH is complying with the special master’s examination. DISH would have the burden of

proof that it is providing local-into-local service with a good quality satellite signal to at least

90% of the households in each DMA. It would be subject to penalties of between $250,000 and

$5 million for failure to provide service, with exceptions for nonwillful violations.

On June 3, 2010, DISH introduced local-into-local service in the 29 DMAs it had not been

serving. These markets are: Alpena, MI; Biloxi, MS; Binghamton, NY; Bluefield, WV; Bowling

Green, KY; Columbus, GA; Elmira, NY; Eureka, CA; Glendive, MT; Greenwood, MS;

Harrisonburg, VA; Hattiesburg, MS; Jackson, TN; Jonesboro, AR; Lafayette, IN; Lake Charles,

LA; Mankato, MN; North Platte, NE; Ottumwa, IA; Parkersburg, WV; Presque Isle, ME;

Salisbury, MD; Springfield, MA; St. Joseph, MO; Utica, NY; Victoria, TX; Watertown, NY;

Wheeling, WV, and Zanesville, OH. On June 30, 2010, DISH filed with the FCC an application

for certification as a qualified carrier pursuant to Section 206 of STELA. On September 1, 2010,

the FCC adopted an order granting that certification.35

See John Eggerton, “DISH: Local Into Local Within Two Years—No. 2 DBS Provider Said It Will Deliver Local TV

Stations to All 210 DMAs During that Time Frame,” Multichannel News, October 15, 2009.

CBS Broad. Inc. v. Echostar Comm. Corp., 11th Cir. Docket No. 03-13671 (May 23, 2006).

In the Matter of Application of DISH Network, LLC for Qualified Carrier Certification, MB Docket No. 10-124,

adopted on September 1, 2010, and released on September 2, 2010.

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STELA also required each satellite carrier to submit a semi-annual report to the FCC setting forth

(1) each market in which it offers local-into-local service; (2) detailed information regarding the

use of satellite capacity for the provision of local-into-local service; (3) each local market in

which it has commenced offering local-into-local service in the six-month period covered by the

report; and (4) each local market in which it has ceased to offer local-into-local service in the sixmonth period.

Reducing the Number of Short Markets by Eliminating the “Grade

B Bleed” Problem

Prior to enactment of STELA, in areas where a network-affiliated broadcast station was located

near the DMA boundary, so that its signal extended into a portion of a neighboring DMA that did

not have a local station affiliated with the same network, households in that neighboring market

who could receive that signal at a Grade B level were not considered to be “unserved” for that

network. A satellite operator could neither offer that overlapping signal to those households as

part of local-into-local service (since it was a distant signal) nor provide to those households the

signal of a distant station affiliated with the same network, because those households were not

considered unserved. The satellite operators sought to eliminate this so-called “Grade B bleed”

problem by modifying the test for a subscriber being unserved to apply only to the strength of the

signal from an in-market station or by defining unserved in terms of whether the viewer can get

local service from the satellite spot beam, rather than in terms of over-the-air reception.36

STELA eliminated the problem by defining as “unserved” those households that do not receive

the network programming from an over-the-air signal that originates in the local market, that is

the signal of their local network affiliate.

Household Eligibility to Receive Distant Signals: Grandfathered

Subscribers, Other Subscribers, and Households That Are Not

Subscribers When Legislation Is Enacted (“Future Applicability”)

The primary mechanism for limiting satellite retransmission of distant network signals has been

to restrict such retransmission to “unserved” households that cannot receive the programming of a

particular network because either (1) the satellite operator is not offering local-into-local service

in that market and the households cannot receive a signal of a threshold quality level over-the-air

from the local network affiliate, or (2) there is no local affiliate offering the programming of that

network. But both the Copyright Act and the Communications Act include certain grandfathered

exceptions to those eligibility restrictions; as a result, many households that are able to receive a

network signal from a local broadcast station are allowed to continue to receive the distant signal

of a broadcast station affiliated with the same network. STELA retained most of these

grandfathered exceptions and in some ways expands on them.

Section 339 of the Communications Act sets the rules for carriage of distant television station

signals by satellite operators. Section 339(a)(2) addresses the replacement of distant signals with

See, for example, the written testimony of Derek Chang, executive vice president, content strategy and development,

DirecTV, Inc., before the House Committee on Energy and Commerce, Subcommittee on Communication Technology,

and the Internet, June 16, 2009, at pp. 5-6.

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The Satellite Television Extension and Localism Act of 2010 (STELA)

local signals, enumerating four different sets of rules: for grandfathered subscribers to analog

distant signals, for other subscribers to analog distant signals, for households that are not

subscribers at the time the legislation is enacted (future applicability), and for subscribers to

distant digital signals. STELA:

•

Retained Section 339(a)(2)(A), the grandfathering provision that allows certain

households that historically had been receiving distant network signals illegally

(and therefore otherwise would not have qualified to receive those distant

signals) to continue to receive those signals. The language was updated only to

reflect the date of enactment of the new legislation and to eliminate reference to

analog technology. All these households continue to be grandfathered to receive

distant network signals despite being able to receive the signals of local stations

with the same network affiliation.

•

Eliminated references to analog signals from Section 339(a)(2)(B), but otherwise

the two-part provision is retained. Under the first part, if a household’s satellite

operator had made a local network station available on January 1, 2005, as part of

local-into-local service, the operator would nonetheless be allowed to provide to

that household a distant signal of a station affiliated with the same network if the

operator had submitted to the television network no later than March 1, 2005, a

list of households receiving that distant signal that included that household. This

continues the grandfathering of households that had been legally receiving a

distant network signal and were allowed to continue to receive that signal when

they also had access to the signal of a local broadcast station affiliated with the

same network. Under the second part, if the satellite operator had not made

available a local network station on January 1, 2005, as part of local-into-local

service, the operator would be allowed to offer the household the distant network

signal only if (a) the household seeks to subscribe to the distant signal before the

date on which the operator begins to offer local-into-local service, and (b) the

operator submits to each television network within 60 days of commencing such

service the households subscribing to the distant signal. Thus, a household that

had legally sought to receive a distant network signal is allowed to continue to

receive that signal after the signal of a local broadcast station affiliated with the

same network is available.

•

Allowed a subscriber who is lawfully receiving the distant signal of a network

station from a satellite operator on the day before enactment of STELA to receive

both the distant signal and the local signal of the same network until the

subscriber chooses to no longer receive the distant signal from the satellite

operator (whether or not the subscriber elects to subscribe to local-into-local

service). Thus, all the households legally receiving distant network signals under

Section 339(a)(2)(B) at the date of enactment of STELA continue to be allowed

to receive those distant signals.

•

Prohibited a satellite operator from providing a distant network signal to a person

who (1) (a) is not a subscriber legally receiving that distant signal on the date

STELA is enacted, and (b) at the time the person seeks to receive the distant

signal, resides in a local market where the satellite operator offers local-into-local

service that includes a local station affiliated to the same network and the person

can receive that local-into-local service, or (2) (a) is a subscriber legally

receiving a distant signal on or after the date STELA is enacted, and (b)

subsequent to such subscription the satellite carrier makes available to that

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The Satellite Television Extension and Localism Act of 2010 (STELA)

subscriber the signal of a local network station affiliated with the same network

as the distant signal (and the retransmission of such signal by the carrier can

reach the subscriber), unless the person subscribes to the signal of the local

network station within 60 days after the signal is made available. The latter is

intended to support local stations by requiring the subscriber to obtain local-intolocal service in order to continue to receive the distant network signal.

•

Defined a subscriber as eligible to receive a distant signal of a network station

affiliated with the same network as a local station if, with respect to a local

network station: (1) the subscriber’s household is not predicted by the model

specified in the act to receive the threshold signal intensity; (2) the household is

determined, based on a test conducted in accordance with the current model or

any successor regulation, not to be able receive the signal of the local station with

an intensity that exceeds the standard; or (3) the subscriber is in an unserved

household as determined by the definition of an unserved household in

Section119(d)(10)(A) of the Copyright Act. The third criterion appears to allow a

household that does not meet the signal intensity test for analog service for the

signal of a local network station to be grandfathered for the receipt of a distant

network signal carrying the same network, even if that household could receive

the digital signal of the local network station.

Provisions in Section 119 of the Copyright Act define “unserved households” and set the

households. STELA modified some of those provisions.

•

If a local station is multicasting and offers a second network’s programming on

one of its non-primary video streams, but a household using an antenna cannot

receive that non-primary video stream at the signal intensity specified in FCC

rules, then the household is deemed unserved with respect to the network whose

programming is being broadcast on that non-primary stream. This took effect on

October 1, 2010, for multicast streams that existed on March 31, 2010, and on

January 1, 2011, for all other multicast streams.

•

References to analog signals were eliminated, but otherwise all the rules covering

grandfathered households receiving distant signals currently in Section

119(a)(4)(A) were retained.

•

For a subscriber (other than a grandfathered household) who, on the day before

enactment of STELA, was lawfully receiving a satellite retransmission of a

distant network signal under a statutory license, the statutory license applies for

the retransmission of that distant signal. Further, the subscriber’s household

continues to be considered an unserved household with respect to that network

until the subscriber elects to stop receiving that distant signal, whether or not the

subscriber has access to the signal of a local network station affiliated with the

same network through local-into-local service and whether or not the subscriber

elects to subscribe to that local-into-local service. This, in effect, created a new

group of grandfathered households.

•

The statutory distant signal copyright license in Section 119 of the Copyright Act

does not apply to the satellite retransmission of a distant network signal to a

person who is not a subscriber lawfully receiving that distant network signal at

the date of enactment of STELA if, when that person subsequently seeks to

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The Satellite Television Extension and Localism Act of 2010 (STELA)

subscribe to a satellite carrier for that distant signal, that person can obtain that

network’s programming from a local station affiliated with the same network

through local-into-local service.

•

The statutory distant signal copyright license in Section 119 of the Copyright Act

applies to the satellite retransmission of a distant network signal to a person who

is a subscriber lawfully receiving that distant network signal on or after the date

of enactment of STELA, and the subscriber’s household continues to be

considered to be an unserved household with respect to that network, until such

time as the subscriber elects to terminate such retransmission, but only if the

person subscribes to retransmission of a local network station affiliated with the

same network (that is, subscribes to local-into-local service) within 60 days of

the satellite carrier making local-into-local service available to the subscriber.

Thus, a household can be grandfathered for the distant network service only if it

subscribes to local-into-local service within 60 days of that service becoming

available.

Modified Copyright Treatment of the Satellite Retransmission of

Low Power Television Station Signals

Low power television service was created by the FCC in the 1980s to serve small communities

(rural or urban) with low cost, limited geographic range facilities that used available spectrum

between full power stations. It is a “secondary service” that is not guaranteed protection from

interference or displacement by full service stations. Low power stations that produced at least

two hours per week of local programming, maintained a production studio within their Grade B

contour, and complied with many of the requirements placed on full service stations were given a

one-time opportunity to obtain “Class A” status that gave them primary status, that is, protected

their channel from interference or displacement.

Historically, satellite retransmission of low power television signals was covered by the statutory

distant signal copyright license in Section 119 of the Copyright Act. Satellite operators were

allowed to retransmit the signals of low power stations to subscribers within certain geographic

limitations—to subscribers within 20 miles of the station transmitter for network-affiliated

stations located in the 50 largest markets, within 35 miles of the station transmitter for networkaffiliated stations located in other markets, and within the same designated market area as nonnetwork-affiliated stations.37 Satellite operators had no copyright royalty obligation for

retransmission of the low power station content within those same mileage limits; beyond those

limits, satellite operators were subject to the statutory copyright license fees for distant signals

outlined in Section 119 of the Copyright Act.38

Under STELA, if satellite operators seek to use a statutory license for the copyrighted material on

the low power television stations whose signals they retransmit, they must use the royalty-free

statutory local signal license in Section 122, rather than the Section 119 license. STELA expands

the geographic area covered by the royalty-free statutory license to the entire DMA in which the

low power station is located.

17 U.S.C. §119(a)(15)(B).

17 U.S.C. §119(a)(15)(D).

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The Satellite Television Extension and Localism Act of 2010 (STELA)

STELA also explicitly stated that a satellite carrier that retransmits the signal of a low power

station under a statutory license is not required to make any other secondary retransmissions.

Thus retransmission of a low power station does not trigger the requirement to offer local-intolocal service or to retransmit any other low power stations. No local low power station can

demand carriage by the satellite operator serving its market area, even if that satellite operator is

providing local-into-local service.

Since low power television stations do not have a deadline for their transition from analog to

digital transmission, the old, analog-based FCC rules for determining whether a household is

eligible to receive distant signals apply with respect to low power television until the station is

licensed to broadcast a digital signal.

The statutory local signal copyright license does not apply to satellite retransmission of repeaters

or translators.

Satellite Carriage of Noncommercial Educational Television

Stations

By statute, providers of direct broadcast satellite service (DirecTV and DISH Network) must

reserve between 4% and 7% of their channel capacity exclusively for noncommercial

programming of an educational or informational nature.39 With the digital transition, broadcasters

now are able to broadcast high definition signals and multiple digital programming streams over

their licensed spectrum, and the public television stations are seeking to expand satellite carriage

of their high definition and multicast signals.

At the time STELA was enacted, the public broadcasters had reached retransmission consent

agreements with DirecTV, the cable industry (through both the National Cable and

Telecommunications Association representing large cable operators and the American Cable

Association representing small cable operators), and Verizon for the retransmission of most of

their high definition and multicast video streams. The agreement with DirecTV incorporated

“creative solutions that recognized [DirecTV’s] capacity limitations; ultimately ensuring that

subscribers have access to the myriad of content and services provided by the local stations while

accommodating their capacity concerns.”40 The public broadcasters had not yet achieved

retransmission agreement with DISH Network, but negotiations were continuing.

STELA modified Section 338(a) of the Communications Act, which addresses the carriage of

local television signals by satellite carriers, to require any satellite carrier that has not yet

negotiated a carriage contract covering at least 30 noncommercial educational television stations

by July 27, 2010, (1) to provide subscribers, by the end of 2011, the high definition signals of

qualified noncommercial educational television stations in all the local markets in which the

carrier currently offers local television broadcasts in high definition (and by the end of 2010 to

half of those markets), and (2) when initiating the provision of high definition local broadcast

television in a market, to include the high definition signals of all qualified local noncommercial

47 U.S.C. §335(b)(1).

Written Testimony of Bill Acker, Director of Broadcasting and Technology, West Virginia Public Broadcasting,

before the Senate Committee on Commerce, Science, and Transportation, Subcommittee on Communications,

Technology and the Internet, October 7, 2009, at p. 3.

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educational television stations. In July 2010, DISH filed suit in the U.S. District Court for

Nevada, seeking temporary injunctive relief from FCC enforcement of that provision, claiming

the provision infringed on its First Amendment right “to make the editorial judgment whether to

carry local PBS stations in HD” and was confiscatory of its property.41 U.S. District Judge James

Mahan declined DISH’s request for an injunction.42 DISH did not reach an agreement with

Association of Public Television Stations, which represents all public television stations, in time

to meet the July 27, 2010, deadline, but it averted the carriage mandate in STELA by reaching an

independent HD carriage agreement with 30 noncommercial stations by July 27, 2010.43

At an October 7, 2009, hearing of the Senate Subcommittee on Communications, Technology,

and the Internet, public broadcasters identified another problem for which they sought a

legislative solution. Most states have developed state public television networks intended to serve

the entire state, but in 16 states those networks do not have public stations transmitting signals in

each DMA in the state; under current law, satellite carriers are not allowed to use a royalty-free

statutory copyright license to retransmit the signals of the in-state, but out-of-market public

broadcasting stations to their subscribers in those DMAs.44 STELA modified the provisions for

the royalty-free statutory copyright license in Section 122 of the Communications Act to allow,

where there is a public educational network of three or more noncommercial educational

broadcast stations in a state, a satellite operator to use the royalty-free license to retransmit the

programming on those stations’ signals to subscribers in any county in the state whose households

are otherwise ineligible to receive retransmissions of those signals.

Satellite Carriage of State Public Affairs Networks

Cable franchise authorities are allowed, by law, to require cable operators to set aside some of

their capacity for the carriage of public, educational, and governmental (PEG) programming. This

programming is not broadcast to the public; it is sent directly to the cable system’s head-end for

retransmission. Satellite operators are not required to offer PEG programming, though they have

the obligation to allocate between 4 and 7 percent of their channel capacity exclusively to

noncommercial programming of an educational or informational nature. In order to foster PEG

programming on cable systems, a number of states have created state public affairs networks that

produce non-broadcast programming of state-wide interest. Although this programming is

available to satellite operators, those operators are not widely offering it to subscribers.

STELA included a provision intended to encourage satellite operators to carry these state public

affairs networks. Under the provision, a satellite carrier that provides the retransmission of the

state public affairs networks of at least 15 different states, under reasonable prices, terms, and

conditions, and does not delete any of the noncommercial educational or informational

programming on those networks, would only have to allocate 3.5% of its channel capacity to the

retransmission of educational or informational noncommercial programming, rather than 4%.

This provision might encourage satellite operators to offer state public affairs networks to

subscribers in orphan counties or in short markets.

Kamala Lane, “Dish Sues FCC Over ‘PBS HD Mandate,’” Satellite Week, July 12, 2010.

“Satellite TV,” Satellite Week, July 26, 2010.

John Eggerton, “Dish Averts STELA Carriage Mandate,” Multichannel News, August 2, 2010.

Ibid. at pp. 8-10.

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The Satellite Television Extension and Localism Act of 2010 (STELA)

The Retransmission of In-State, but Non-Local, Broadcast Signals

into Counties Assigned to Local Markets in Other States (“Orphan

Counties”)

The current regulatory frameworks for both satellite and cable distinguish between the

retransmission of local and distant signals and require that local markets be defined by the DMAs

constructed and published by Nielsen Media Research.45 The viewing patterns that underlie these

Nielsen markets are primarily the result of the physical locations of the various broadcast

television stations and the reach of their signals. (They also reflect the boundaries of the exclusive

broadcast territories that each of the three original television broadcast networks—ABC, CBS,

and NBC—had incorporated into their contracts with their local affiliate stations decades ago.)

DMAs do not take into account state boundaries. As a result, under current statutes and rules, a

number of counties are assigned to local markets for which the principal city (from which all or

most of the local television signals originate) is outside their state.46 Satellite subscribers (and

many cable subscribers) in these “orphan counties” may not be receiving signals from in-state

broadcast stations and as a result may not be receiving news, sports, and public affairs

programming of interest in their state.

Many residents of orphan counties have proposed that the statutory framework be modified to

remove prohibitions or impediments on satellite operators retransmitting to their subscribers in

these counties the signals of broadcast stations in in-state, but non-local, markets. (SHVERA

selectively removed these impediments through four “exceptions” that allow satellite operators to

retransmit to their subscribers in particular orphan counties in New Hampshire, Vermont, Oregon,

and Mississippi—but not in other locations—the signals of in-state but out-of-market broadcast

stations.47) Broadcasters, however, have voiced concern that allowing such retransmission could

undermine their financial viability by reducing their audience share and thus reducing their

advertising revenues. They also assert such retransmission would weaken the local broadcasters’

negotiating position with the satellite and cable operators, who could turn to the programming of

an in-state but out-of-market affiliate of a particular network if they failed to reach retransmission

consent with the local affiliate of that network. Broadcasters claim this would harm their ability to

provide quality local programming, which is expensive to produce.48

A number of bills had been introduced in the 111th Congress that directly addressed this issue

(either generically or for specific states or geographic areas) by allowing satellite operators to

retransmit to subscribers in orphan counties the signals of certain in-state, but non-local broadcast

The statutory provisions for satellite explicitly require the use of Nielsen’s DMAs. (17 U.S.C. §122(j)(2)(A) and

(C).) The statutory provisions for cable instructed the FCC to make market determinations “using, where available,

commercial publications which delineate television markets based on viewing patterns.” (47 U.S.C. §534(h)(1)(C).)

Nielsen had already delineated such television markets, assigning geographic areas to markets based on predominant

viewing patterns in order to construct ratings data for advertisers, and the FCC therefore adopted Nielsen’s market

delineations.

For a complete state-by-state list of these counties, their populations, and the full power television stations located in

the counties, see the Appendix to CRS Report R40624, Reauthorizing the Satellite Home Viewing Provisions in the

Communications Act and the Copyright Act: Issues for Congress, by Charles B. Goldfarb.

17 U.S.C. §§119(a)(2)(c)(i)-(iv) and 47 U.S.C. §341.

See, for example, John Eggerton, “Affiliate Associations Warn Legislators Against Allowing Imported Signals from

In-State, Distant Markets,” Broadcasting & Cable, March 30, 2009.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

stations.49 But STELA (reflecting each of the four bills that had been reported out of the House

Energy and Commerce, House Judiciary, Senate Commerce, Science, and Transportation, and

Senate Judiciary committees, leading to STELA) did not include any provisions that would

address this issue directly. During the markup of the Senate Judiciary Committee bill, reportedly

several Senators prepared amendments that would have narrowly addressed the orphan county

issue in their states, but then agreed to withdraw their amendments when other Senators voiced

concern that the provisions would delay passage of the legislation because of unresolved issues

among broadcasters and satellite operators. At the markup, reportedly there was discussion of

imposing a deadline on the industry to reach a negotiated solution, such as a proposal by Senator

Coburn that, if there were no industry agreement by the time the legislation reaches the Senate

floor, a trigger provision would be inserted in the bill that would impose a statutory solution for

the orphan counties issue if no negotiated compromise is reached after two years.50 But STELA

did not include a trigger provision.

STELA included a provision instructing the FCC to prepare within one year a report containing

analysis of (1) the number of households in each state that receive local broadcast signals from

stations of license located in a different state; (2) the extent to which consumers have access to instate broadcast programming; and (3) whether there are alternatives to the use of DMAs to define

local markets that would provide more consumers with in-state broadcast programming. The FCC

submitted its report to Congress on August 29, 2011.51 The report provided data, summarized the

comment of interested parties, and identified several alternatives to the use of DMAs to define

local television markets, but did not provide any conclusions or recommendations.

In addition, a savings clause in STELA—stating that nothing in the legislation, in the

Communications Act, or in any FCC regulation shall limit the ability of a satellite operator to

retransmit a performance or display of a work pursuant to an authorization granted by the

negotiate a copyright license outside the Section 119 statutory license. This clarification is not

likely to result in the satellite retransmission into orphan counties of the sports and network

programming on in-state, but out-of-market stations, but could encourage the retransmission of

those stations’ locally produced news programming.

Representative Ross had introduced the Local Television Freedom Act of 2009, which would have allowed

multichannel video programming distributors (MVPDs)—satellite operators and cable operators (including telephone

companies)—serving an orphan county to retransmit to their subscribers in that county the signals of television

broadcast stations located in an adjacent in-state market. In addition, the Four Corners Television Access Act of 2009

had been introduced in both the House (by Representatives Salazar and Coffman) and the Senate (by Senators Bennet

and Udall) to allow satellite operators to retransmit the signals of certain in-state broadcast stations to subscribers

located in two Colorado counties that are assigned to the Albuquerque, NM, local market and to allow cable operators

located in those counties to retransmit the signals of certain in-state stations without having to obtain retransmission

consent from the stations. Also, Representative Boren had introduced a bill which would have allowed satellite

operators to retransmit to any subscriber in the state of Oklahoma—not just those in orphan counties—the signals of

any broadcast station located in that state.

See Anandashankar Mazundar, “Senate Judiciary Committee Votes Out Satellite Television Reauthorization Bill,”

BNA Daily Report for Executives, September 25, 2009.

See footnote 7 above.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

Changing the Statutory Copyright License Applied to the Content

on the Signals of Significantly Viewed and “Exception” Broadcast

Stations

The statutory framework for the retransmission of broadcast television signals has been based on

a distinction between local and distant signals. The signals of significantly viewed stations and

the signals of in-state, out-of-market stations in the four states that satellite operators were

allowed to import into orphan counties under the exceptions in SHVERA, originate outside the

market into which they are imported; in that regard, they are distant signals and they have been

subject to the Section 119 distant signal statutory copyright license. But since significantly

viewed stations and the “exception” stations can be presumed to be providing programming of

local or state-wide interest to counties in particular local markets, arguably that content could be

viewed as local to the counties into which they are imported and should be treated accordingly.

STELA modified the Copyright Act to treat those signals as local, moving the relevant provisions

from Section 119 to Section 122.

STELA changed language in the heading of Section 122 from “secondary transmission by

satellite carriers within local markets” to “secondary transmission of local television

programming by satellite.” It made satellite retransmission of both significantly viewed stations

and the exception stations subject to the local signal statutory copyright license in Section 122

rather than the distant signal statutory license in Section 119, but required the satellite operator to

continue to pay the statutory copyright license fees under Section 119 for the retransmission of

the exception stations. Since significantly viewed stations already are subject to the royalty-free

license in Section 122, effectively there is no change in copyright treatment for the content on the

signals of significantly viewed stations. But the statutory change allowed DISH Network, which

currently is under a court injunction prohibiting it from using the Section 119 statutory copyright

license to retransmit the content of broadcast signals, to use the Section 122 statutory copyright

license to do so.

Although STELA changed the statutory license required for satellite retransmission of the signals

of significantly viewed and exception stations, it did not affect the retransmission consent

requirement or the exemption from the FCC’s network non-duplication and syndicated

exclusivity rules, as they currently apply to significantly viewed and exception stations. It did,

however, include a provision stating that the satellite operator would not be required to carry the

significantly viewed stations or exception stations if it offered local-into-local service.

Allowable Signal Formats for the Retransmission of Significantly

Viewed Stations

The satellite operators have complained that although both cable and satellite operators may offer

significantly viewed stations, only satellite operators have been subject to an “equivalent

bandwidth” provision that, as interpreted by the FCC, required the satellite operator to carry the

signals of a significantly viewed station that is affiliated to the same network as a local station in

the same format as that local station every moment of the day. Thus, for example, if the local

station were not transmitting its programming in high definition format, the satellite operator

would not be allowed to retransmit into the market the signals of the significantly viewed station

in high definition format. According to satellite operators, this was infeasible.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

STELA clarified that a significantly viewed signal may only be provided in high definition format

if the satellite carrier is passing through all of the high definition programming of the

corresponding local station in high definition format as well; if the local station is not providing

programming in high definition format, then the satellite operator is not restricted from providing

the significantly viewed station’s signal in high definition format.

Studying What the Impact Would Be If the Statutory Licensing

System for Satellite and Cable Retransmission of Distant Broadcast

Signals Were Eliminated

The United States Copyright Office has proposed that Congress abolish Sections 111 and 119 of

the Copyright Law, arguing that the statutory licensing systems created by these provisions result

in lower payments to copyright holders than would be made if compensation were left to market

negotiations.52 According to the Copyright Office, the cable and satellite industries no longer are

nascent entities in need of government subsidies, have substantial market power, and are able to

negotiate private agreements with copyright owners for programming carried on distant broadcast

signals.

One possible way to transition from the current licensing system would be to enact a statutory

“trigger” mechanism, by which once a broadcast station successfully demonstrated that it had

obtained the rights to negotiate for all the holders of copyrighted materials on its programming, so

that a satellite carrier did not have to negotiate with multiple copyright holders, the statutory

license for that station would sunset and the satellite operator would have to undertake private

negotiations. This is strongly opposed by satellite operators, who question how voluntary

licensing arrangements and sublicensing would work in practice.53 Other parties argue that the

current licensing systems are efficient and that the purpose of copyright law is to balance the

potentially conflicting goals of fostering the dissemination of copyrighted material and allowing

the copyright holder to be compensated by giving the copyright holder a limited monopoly over

its material; they oppose a rule that allows the copyright holder to fully exploit its monopoly

power to receive whatever the market would bear.54

STELA instructed the Copyright Office, after consultation with the FCC, to submit to the House

and Senate Judiciary Committees, within one year, a report containing proposed mechanisms,

methods, and recommendations on how to implement a phase-out of the current statutory license

requirements in Sections 111, 119, and 122 of the Copyright Act, including recommendations for

legislative or administrative actions. The Copyright Office submitted its report on August 29,

2011.55 The report included detailed recommendations “to effectuate a phase-out of the statutory

licenses.”56

Satellite Home Viewer Extension and Reauthorization Act Section 109 Report, A Report of the Register of

Copyrights, June 2008, at p. xiv.

See, for example, the Written Testimony of Robert Gabrielli, senior vice president for program operations, DirecTV,

Inc., before the Senate Committee on Commerce, Science, and Transportation, October 7, 2009, at p. 8.

See, for example, the website of Public Knowledge at http://www.publicknowledge.org/issues/copyright.

Satellite Television Extension and Localism Act §302 Report, August 29, 2011.

Ibid. at pp. 139-140.

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

STELA also instructed the Comptroller General to prepare and submit a report within 12 months

that analyzes and evaluates the changes to the cable and satellite carriage requirements in the

Communications Act and in FCC rules that would be required if Congress implemented a phaseout of the current Section 111, 119, and 122 statutory licensing requirements in the Copyright Act.

It instructed the Comptroller General to consider the impact of such a phase-out on consumer

prices and access to programming and to include recommendations for legislative or

administrative actions. GAO submitted its report in November 2011.57

The Copyright Office report, which focused on how the various industry players would respond

to the phase-out of the statutory licenses, was confident that sublicensing and other new business

models would develop to replace the statutory licenses. The GAO report, which focused more on

the impact on consumers, raised a number of problems that might arise during a phase-out, but

also “identified a number of actions to mitigate these problems.”58 The two reports provide a

starting point for a policy debate.

Providing Digital Service on a Single Dish

Under Section 338(g) of the Communications Act, satellite operators had been required to provide

to their subscribers the analog signals of all broadcast stations on a single roof-top dish. Operators

had been allowed to use a second dish for the provision of digital signals, but there was no

requirement that all digital signals be provided on the same dish. STELA modified Section 338(g)

to require a satellite operator, if it offers local-into-local service in a market, to provide to a

subscriber the digital signals of all the local broadcast stations on a single dish.

Modification of the Methodology for Setting Copyright Royalty

Rates and of Copyright Administrative Procedures and

Requirements

STELA modified the methodology for setting copyright royalty rates as well as copyright

administrative procedures and requirements. Among these changes, STELA:

•

required satellite operators whose retransmissions of distant broadcast signals are

subject to the Section 119 statutory license to pay a filing fee, to be determined

by the Register of Copyrights, to help recoup the administrative costs of

distributing royalty fees;

•

modified the Section 119 statutory royalty fee payable to copyright owners to

take into account the non-primary streams of multicasting broadcasters;

•

instructed the Register of Copyrights to issue regulations to permit interested

parties to verify and audit the statements of account and royalty fees submitted

by satellite carriers and cable operators;

Statutory Copyright Licensing: Implications of a Phaseout on Access to Television Programming and Consumer

Prices Are Unclear, GAO-12-75, November 2011.

Ibid. at unpaginated section entitled “What GAO Found.”

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

•

changed the process for adjusting royalty fees. Most significantly, STELA

created a proceeding of the Copyright Royalty Judges, which replaced the

previously used compulsory arbitration proceeding, to determine royalty rates;

•

instructed the Copyright Royalty Judges, when determining royalty rates in those

situations where the parties are not able to reach a negotiated agreement, to

establish fees that represent the fair market value of the retransmissions, basing

their decision on economic, competitive, and programming information presented

by the parties;

•

required the Copyright Royalty Judges to make an annual adjustment to the

royalty fee based on the most recent consumer price index for all consumers and

for all items;

•

increased the statutory maximum damages to be imposed on satellite operators

for violating territorial restrictions on the retransmission of distant broadcast

signals from $5 to $250 per subscriber per month during which the violation

occurred. It also increased the maximum statutory damages for regional or largescale violations (that do not trigger a permanent injunction) from $250,000 for

each six-month period to $2.5 million for each three-month period. One-half of

the statutory damages ordered are to be deposited with the Register of Copyrights

and distributed to copyright owners;

•

modified the statutory license for retransmission by cable systems in Section 111

of the Copyright Act by increasing the specified percentages of the gross

subscriber receipts that cable operators must pay;

•

updated the definition of “distant signal equivalent” used to reflect and take into

account multicast signals when calculating the cable royalty payment, and set a

schedule for when these changes go into effect based on existing contractual

agreements;

•

clarified that the royalty rates specified in Sections 256.2(c) and (d) of title 37,

Code of Federal Regulations, commonly referred to as the “3.65% rate” and the

“syndicated exclusivity surcharge,” respectively, do not apply to multicast

streams;

•

clarified that when a cable operator retransmits a distant broadcast signal to a

service area comprised of multiple communities, in which some communities are

permitted to receive that signal and other communities are prohibited to do so,

the royalty calculation does not include payment for the households that are not

allowed to receive the signal;59

•

modified the methodology for determining the maximum and minimum royalty

payments for small cable systems; and

•

created filing fees for satellite carriers and cable operators filing statements of

account for Section 111, 119, and 122 statutory copyright licenses that are

Prior to this clarification, there had been situations in which a cable operator has been required to make a copyright

payment as if it were retransmitting a distant signal to all the communities in a service area, but in fact was not allowed

to retransmit the signal to certain communities in the service area. Cable operators have referred to the signals that they

were not allowed to retransmit, but for which they had to make copyright payments, as “phantom signals.”

Congressional Research Service

The Satellite Television Extension and Localism Act of 2010 (STELA)

reasonable and that do not exceed one-half of the cost incurred by the Copyright

Office for the collection and administration of the statements of account and any

royalty fees deposited with the statements.

Severability

STELA included a “severability” provision stating that if any provision of the new law,

amendment made by the new law, or applications of such provision or amendment is held to be

unconstitutional, the remainder of the law, amendments, and applications would not be affected.

This provision was included because there has been a long history of litigation in this area and

was intended to make sure that the entire law would not be overturned if there were a successful

legal challenge to one provision.

Author Contact Information

Charles B. Goldfarb

Specialist in Telecommunications Policy

cgoldfarb@crs.loc.gov, 7-7252

Congressional Research Service

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.