oversight

DISH Network Complied with the Court-Appointed Special Master's Examination of Its Compliance with the Section 119 Statutory License

Published by the Government Accountability Office on 2012-12-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States Government Accountability Office
Washington, DC 20548



           December 12, 2012


           Congressional Committees


           Subject: DISH Network Complied with the Court-Appointed Special Master’s Examination of
           Its Compliance with the Section 119 Statutory License


           This report responds to the requirement, enacted in the Satellite Television Extension and
           Localism Act of 2010 (STELA), 1 mandating that the Comptroller General monitor and
           periodically report on the degree to which DISH Network (DISH) 2 was complying with the
           Special Master’s 3 examination of its compliance with the royalty payment and household
           eligibility requirements of the Section 119 statutory license. 4 On March 23, 2012, we issued
           our first report on this subject; 5 at the time, we found that DISH was complying with the
           Special Master’s examination. In this report, our second and final report on this subject, we
           address DISH’s compliance through the completion of the Special Master’s examination.


           To respond to this mandate, we interviewed the Special Master and analyzed documents he
           provided. We conducted this performance audit from June 2012 to December 2012 in
           accordance with generally accepted government auditing standards. Those standards
           require that we plan and perform the audit to obtain sufficient, appropriate evidence to
           provide a reasonable basis for our findings and conclusions based on our audit objectives.
           We believe that the evidence obtained provides a reasonable basis for our findings and
           conclusions based on our audit objectives.


           Summary


           We found that DISH complied with the Special Master’s examination. DISH provided the
           Special Master with information on its subscribers and royalty payments, and cooperated on
           a survey of all major network-affiliated broadcast stations nationwide. Since our March 23,
           2012, report, the Special Master issued a report noting that there was no substantial
           evidence of improprieties by DISH regarding the Section 119 statutory license.

           1
             Pub. L. No. 111-175, § 105, 124 Stat. 1218, (2010) amending title 17, U.S.C. by adding § 119(g)(4)(B)(vii).
           2
             From 1996 through 2008, DISH Network was the media and entertainment arm of EchoStar Communications
           Corporation. In 2008, EchoStar divested DISH Network. In this report, we refer to DISH Network and its
           predecessor as DISH.
           3
             A Special Master is appointed by a judge to carry out the duties set out in the order appointing him.
           4
             The Special Master’s examination and reporting requirements are set out at 17 U.S.C. § 119(g)(4)(B).
           5
             GAO, To Date, DISH Network Is Cooperating with the Court-Appointed Special Master’s Examination of Its
           Compliance with the Section 119 Statutory License, GAO-12-496R (Washington, D.C.: Mar. 23, 2012).

           Page 1                                                              GAO-13-169R DISH Network Compliance
Background


The four major broadcast networks—ABC, CBS, Fox, and NBC—own or have affiliate
television broadcast stations in most local television markets, known as designated market
areas (DMA), 6 throughout the nation. However, some local television markets lack access
to one or more of the four major broadcast networks; these markets are referred to as short
markets. Further, some households are unable to receive an adequate over-the-air signal
from one or more of the local stations owned by or affiliated with the four major broadcast
networks, typically because these households reside a significant distance from the
television station’s broadcast antenna; these households are also unserved households. 7

More than 30 million U.S. households have access to broadcast programming through
subscriptions to direct broadcast satellite (DBS) service. 8 When a DBS operator provides its
subscribers access to broadcast programming, it is providing secondary transmission of the
programming. Because the broadcast programming is copyright protected, a license is
required for the secondary transmission of these works. 9 Section 119 of title 17 of the
United States Code allows DBS operators, such as DISH, to provide distant, out-of-market
television broadcast signals to subscribers in short markets and to other unserved
households; 10 this is referred to as distant-into-local service. In addition, a separate license
found at Section 122 of title 17 allows DBS operators to provide local television broadcast
signals to subscribers in the same local area; this is referred to as local-into-local service.
To take advantage of the Section 119 license, DBS operators must deposit with the U.S.
Copyright Office a government-set royalty, which is later distributed to copyright owners. 11


In 1998, a few years after DISH started providing satellite transmission of broadcast
programming to its subscribers, the four major broadcast networks and others filed suit
alleging that DISH provided distant, out-of-market television broadcast signals to served
households, which were ineligible for such service. In 2006, following a decision by the
Eleventh Circuit Court of Appeals, DISH was found to have engaged in a pattern or practice
in violation of Section 119 by improperly transmitting distant network signals to ineligible
households and was permanently enjoined from providing distant-into-local transmission of
all programming originating on stations affiliated with the four major broadcast networks. 12


In 2010, Congress, through STELA, amended 17 U.S.C. § 119 to provide a remedy
permitting DISH to seek relief from the injunction issued under Section 119. By providing
local-into-local service in all 210 DMAs, DISH became eligible for recognition as a “qualified

6
  Nielsen Media Research defines the DMAs. According to Nielsen, a DMA identifies an exclusive geographic
area of counties in which the home market television stations hold a dominance of total hours viewed. There are
210 DMAs in the United States.
7
  The Federal Communications Commission categorizes television broadcast signals by grades of signal
strength, with Grade A being the strongest. An unserved household is unable to receive a signal of Grade B
strength or better. Unserved households include homes of all types, including recreational vehicles and
commercial trucks.
8
  In addition to DBS service, over 55 million households have access to broadcast programming through
subscriptions to cable service.
9
  This is the right to show the copyright-protected work in public. 17 U.S.C. § 106(4).
10
   With a statutory license, the DBS operator does not need to obtain the copyright holder’s permission for the
secondary transmission as long as it follows the regulations and pays the Copyright Office the required royalty.
11
   The statutory licenses permit the public performance of the copyright-protected works in exchange for payment
of royalties established using processes defined by statute.
12
   CBS Broadcasting, Inc. v. EchoStar Communications Corp., 450 F.3d 505 (11th Cir. 2006).


Page 2                                                              GAO-13-169R DISH Network Compliance
carrier” and to then request that the court waive its injunction. On June 30, 2010, DISH filed
an Application for Certification with the Federal Communications Commission (FCC)
requesting qualified carrier status under Section 119, which FCC granted on September 1,
2010. However, as a further condition for approval, STELA directed the court to appoint a
Special Master to conduct a compliance examination of DISH. On November 24, 2010, in
accord with 17 U.S.C. § 119(g)(4)(B), the District Court for the Southern District of Florida
appointed a Special Master under rule 53 of the Federal Rules of Civil Procedure to perform
the required examination and report his findings to the court. The Special Master was
required to examine and file a report on DISH’s compliance with the household eligibility
requirements associated with the Section 119 license and the royalty payments to the
Copyright Office. If the qualified carrier (DISH) was found to have willfully made a
secondary transmission in violation of the statute, the waiver would be lifted and the
permanent injunction would be reinstated.


DISH Complied with the Special Master’s Examination


We found that DISH complied with the Special Master’s examination, which consisted of
examining DISH’s compliance with the royalty payment and household eligibility
requirements of the license under Section 119. During his examination, the Special Master
held regular meetings with DISH and representatives of the four major networks and their
affiliates. The Special Master reported that DISH provided monthly reports of its distant, out-
of-market signals; its Copyright Office submissions; and its auditor’s report. DISH also
provided GAO with the same information, as we requested. As we discussed in our March
23, 2012, report, DISH and representatives of the four major networks and their affiliates
collaborated on a survey of all major network-affiliated broadcast stations nationwide; the
purpose of the survey was to determine whether any problem existed with DISH’s services
to eligible subscribers. The Special Master told us that DISH fully responded to the 20
instances where a survey respondent raised a question about the importation of distant
signals, which were found to be without merit. The Special Master told us that he was
impressed with how well the parties of both sides—DISH and representatives of the four
major networks and their affiliates—worked together on the effort and that they provided all
the documents that he requested to conduct his examination.


In his July 23, 2012, report, the Special Master found that the documentation and
information provided by DISH, the networks, the associations, and the major content
providers showed (1) no substantial evidence of delivery by DISH of distant signals to any
persons other than eligible subscribers and (2) no improprieties in the calculation and
payment of royalties under DISH’s statutory license. The Special Master concluded that
there was no substantial evidence that a copyright holder could bring a successful action,
under the provisions of 17 U.S.C. § 119, against DISH for infringement. The court directed
that the Clerk of the District Court for the Southern District of Florida transmit the Special
Master’s report to Congress in accordance with 17 U.S.C. § 119. According to the Clerk’s
office, this matter is considered to be closed.




Page 3                                                    GAO-13-169R DISH Network Compliance
Agency and Third-Party Comments


We provided a draft of this report to DISH Network, the Federal Communications
Commission, and the Special Master for review and comment. The Special Master noted
that the draft report appeared to represent correctly the underlying facts and the conclusions
set forth in his analysis and report, and that it appeared to accurately summarize his July 23,
2012, report. The Federal Communications Commission and DISH Network did not provide
comments.

                                       ------------



We are sending copies of this report to DISH Network; the Chairman, Federal
Communications Commission; and the Special Master. In addition, the report is available at
no charge on the GAO website at http://www.gao.gov.

If you or your staffs have questions about this report, please contact me at (202) 512-2834
or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this report. Key contributors to this report
were Mike Clements (Assistant Director), Martha Chow, and Bert Japikse.




Mark Goldstein
Director
Physical Infrastructure Issues




Page 4                                                   GAO-13-169R DISH Network Compliance
List of Addresses


The Honorable Patrick J. Leahy
Chairman
The Honorable Chuck Grassley
Ranking Member
Committee on the Judiciary
U.S. Senate

The Honorable John D. Rockefeller
Chairman
The Honorable Kay Bailey Hutchison
Ranking Member
Committee on Commerce, Science, and Transportation
U.S. Senate

The Honorable Lamar Smith
Chairman
The Honorable John Conyers, Jr.
Ranking Member
Committee on the Judiciary
House of Representatives

The Honorable Fred Upton
Chairman
The Honorable Henry Waxman
Ranking Member
Committee on Energy and Commerce
House of Representatives




(543304)




Page 5                                               GAO-13-169R DISH Network Compliance
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