Committee on the Judiciary

Hearing on “Direct Broadcast Satellite Service and Competition in the Multichannel Video Programming Distribution Market”

STATEMENT OF F. JAMES SENSENBRENNER, JR., CHAIRMAN

May 8, 2003

            The Committee on the Judiciary has exclusive congressional jurisdiction over laws pertaining to antitrust and effective competition in the national marketplace. As Chairman of this Committee, I have made it a priority to rigorously examine business practices and structural barriers that unfairly restrain competition in our nation’s free market economy.  

            Over 90 million Americans receive multichannel video services. The multichannel video industry, which comprises both cable and satellite video service distributors, has expanded entertainment options for millions of Americans and provided access to timely and important news information. Last year, cable and satellite revenues were well over $50 billion.

            The last several years have seen rapid growth in the Direct Broadcast Satellite (DBS) video distribution market. DBS technology provides Americans with expanded viewing options by transmitting satellite signals directly to their homes. Since 1994, the number of DBS subscribers has skyrocketed from zero to nearly 20 million. Satellite service has provided millions of rural Americans with access to multichannel video programming once reserved to cable subscribers in urban areas. In my state of Wisconsin, for example, 30 percent of homes have no access to cable.

            My Committee colleagues on both sides of this dais have heard complaints from constituents concerning poor cable service and cable bills that continue to increase well above the rate of inflation. DBS serves as an important competitive counterweight to cable’s traditional dominance of the multichannel video programming distribution market. Two fierce competitors, DirecTV and EchoStar, control over 90 percent of the U.S. DBS market, but only around 20 percent of the broader multichannel video distribution market.

DBS offers the potential to provide rural communities with broadband Internet service, a central feature of the 21st century infrastructure. But far more remains to be accomplished in this field.

            In 2001, Hughes Corporation announced plans to sell DirecTV to EchoStar Communications. The combined company would have created a horizontally-integrated U.S. DBS monopoly. In December of 2001, this Committee conducted an oversight hearing on competition in the multichannel video distribution market at which competitive aspects of this proposal were discussed. After a protracted period of review, the Department of Justice and a unanimous FCC rejected the merger because of its serious anticompetitive potential.

            Last month, News Corp. announced that it had acquired a controlling interest in Hughes Corporation’s DirecTV. While reaction to this announcement has not been universally enthusiastic, there is virtually unanimous agreement that the competitive implications of this merger are fundamentally different from those presented by the failed EchoStar/DirecTV merger.

            Because News Corporation does not own U.S.-based satellite distribution assets, its acquisition of DirecTV does not raise horizontal antitrust concerns. At the same time, News Corp. has significant programming assets, including 20th Century Fox, the Fox Network, National Geographic Network, and the FoxNews Channel. As a result, its acquisition of DirecTV has led some to express concern about the creation of a vertically-oriented media conglomerate that could withhold programming from distribution competitors. Vertically-oriented media organizations are not without parallel in the U.S. media market. Larger media companies, such as AOL Time Warner, control both programming and distribution resources.

            Nonetheless, in its recently-filed FCC license transfer application, News Corporation agreed to several binding commitments to address potential program access concerns. The Committee looks forward to learning more about the nature and scope of these obligations.

 It should also be emphasized that News Corporation’s acquisition of DirecTV does not require relaxing media ownership rules presently being examined by the Federal Communications Commission.

            Before we begin, I would like to stress that the purpose of today’s hearing is not to prejudice the outcome of the pending antitrust review of News Corp.’s proposed acquisition of DirecTV. We are legislators, not regulators. However, as legislators -- particularly on this Committee -- we have an obligation to continually examine the legal environment to ensure that our antitrust laws are enforced in a manner that provides American consumers access to the most affordable, highest quality products that our free market economy can produce. Today’s hearing advances this important commitment.

            I look forward to hearing from today’s distinguished panel and yield to Ranking Member Conyers for his opening remarks.