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Mr. Drixax. No. No. I approve of no discussion.

Mr. Hardy. We exchange documents, as I am sure you are aware, and comment on the documents submitted by both oflices. We do not always come down on the same side, and I am sure frequently do not, particularly in the field of cable. I think there are, as you are well a ware, many differences of opinion between the FCC and the OTP.

Mr. DrinAX. You would not care to take another minute or two to spell those differences out, would you?

Mr. HARDY. I am sure that they are so complex that it would take a great deal more than a minute.

Mr. Drinax. Thank you, sir.
Mr. KASTENMEIER. Mr. Pattison.

Mr. Pattison. I also see potential conflicts in your jurisdiction between the copyright law and the FCC's jurisdiction in the area of nonduplication of signals and exclusivity and also in the area of the use of translators, which we have not talked about. And I wonder if you would just comment a little bit more about the problems. I realize that the Southwestern case was decided and said that you have jurisdiction, but that was in the absence of copyright law. Now, suppose we pass a copyright law here that relates and governs (able, is that not going to cause some jurisdictional problems bet ween the FCC and the copyright law!

Mr. Hardy, I am not sure that we will have any problems with our jurisdiction. If we were to feel that there were jurisdictional problems, I am sure that we could submit to ('ongress proposed legislation to clarify the jurisdiction of the Commission.

Insofar as this bill is concerned as it relates to the areas that you just mentioned, that being the use of translators, the nse of microwave facilities, we do not believe that there is anything that you will be carving into statutory stone which would affect our jurisdiction. Were the courts to so construe your statute, then we would, of course, have to come to Congress for some clarifying legislation.

Mr. PaTTisox. My point is once the cable system is paying a copyright fee, as they are not now, then questions arise of how they can use their license. It seems to me that our legislation is sort of in the situation, that if then your legislation changes, in other words, your rules change, then our legislation, to the extent that it was based upon your legislation at that time becomes somewhat impractical.

Mr. ILARDy. I can only say to you I know of no present rulemakings which would affect it.

Jr. Parrisox. Well, for instance, you establish a fee, for instance, for cable operators based upon the fact that they do have the nonduplication rules. Assume that. And I do not suppose that it is going to happen, but just for the purpose of argument, just as an example. assume that you do away with your nonduplication rules. Then, of course, the fee would have to perhaps be different.

Mr. ILARDy. Well, I know of nothing presently pending before the ('ommission which would indicate the (Commission anticipates remoring exclusivity protection or nonduplication protection.

Mr. PATTISOX. That is not my point. The point is that it is obvious a change in your rules will reflect upon the statute that we ultimately pass, based upon the rules as they exist right now.

Mr. Hardy. I can only respond by saving, I suppose, ('ongress has to adopt legislation based upon a situation as it exists, leaving as much

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flexibility as possible for future change. I really do not know how to respond to your question, Mr. Pattison, and I am not trying to evade it.

Mr. PATTISON. No. I understand.

Mr. Hardy. But I really do not know how to answer that. I can only say to you that all that Congress can do is adopt legislation based upon the present statute, and I know of no plans, I know of no pending rulemakings which would change the statute from the Commission standpoint, from its regulatory standpoint, so I don't know how to respond to that, how you can leave that flexibility.

Mr. PATTISON. I guess the problem is we are dealing in an area that is so rapidly changing, the technology is so rapidly changing that we cannot really foresee what kind of changes in technology will occur and, therefore, what rules you are going to adopt in response to that technology.

Mr. Hardy. I suspect that we have that same problem at the Commission.

Mr. PATTISON. So it would seem to me, knowing that there are probably going to be changes, that maybe we ought to think in terms of building in some sort of a mechanism so that those changes can be coordinated. I do not know how you do that.

Mr. Hardy, I am afraid that I cannot offer you any help because I do not know how you would do it either, sir. Mr. PATTISON. Well, we will both think about it. Mr. HARDY. All right. Mr. PATTISON. I have no further questions.

Mr. KASTENMEIER. The gentleman from Illinois has another question.

Mr. RailsBACK. Mr. Hardy, I wonder if you could make available to us the Commission's previous rules and orders concerning cable television? Could you do that for the record ?

Mr. Hardy. The rules they have presently? Mr. RAILSBACK. Yes. Mr. HARDY. Certainly. I am sure we can do that. Mr. RAILSBACK. I think that some have probably been superseded or preempted. Have there not been a whole series of orders and rules? Mr. HARDY. Yes.

Mr. RAILSBACK. I think that it would be helpful to me personally to see all of them and the sequence.

Let me ask you this Mr. Hardy. We will make those available to the committee, sir. [The material referred to is in the files of the subcommittee.] Mr. RAILSBACK. Thank you. Was there ever an embargo of sports transmissions that involved minor league franchise areas, or can you give us a little bit of the background of that?

Mr. Hardy. I am afraid I do not know. Are you referring to sports blackouts? Mr. RAILSBACK. Yes.

JIr. Hardy. That is presently pending before the Commission. It is considering sports blackout rules at the present. The Commission is attempting to make those rules consistent with the intent spelled out by Congress in the sports blackout legislation. We are trying to be consistent with those, or at least that is what the Commission is discussing at present. As to the outcome of those blackout rules, I do not know what those will be. They are presently being studied by the

Commission, and I understand they will come before the Commission for discussion late this month or in early July.

Mr. RAILSBACK. At one time I was led to believe that you were considering, the FCC was considering blacking out transmissions from a distance where there was a minor league franchise. Is that correct? Or do you recall?

Mr. Hardy. Yes, it could have applied to minor leagues.
Mr. RAILSBACK. Is that still under active consideration or what?

Mr. IIARDY. The overall policy of sports blackout rules is under consideration and being discussed, yes.

Mr. RailsBACK. IIave there been any orders or rules as yet promul

gated ?

Mr. Hardy. Those are being studied, and the rules will be adopted hopefully this year.

Mr. RAILSBACK, Are you saying that you are looking for direction from the Congress as to what a blackout policy should be, how much it could encompass and whether it should a trect minor league cities as well as major league areas or what?

Jr. ILARDY. I am sure that the Commission would welcome any direction that Congress may wish to offer on that. We, at present, are operating off the statute that was adopted by Congress. We report annually on the effects in professional sports. But of course, we do not know what the effects, we have no data which we could study on the effect on minor league sports.

Mr. RAILSBACK. Let me ask you one other question. I think maybe you referred to the people that are involved, but I am not sure, I am not sure that that is going to be very helpful to us, and maybe your testimony might be more helpful. Do you personally believe, based on your experience or the Commission's experience, that this should be a different fee schedule depending upon, or that there should be some flexibility in a fee schedule taking into account the different distances and the different problems that may be involved in cable television.

Jr. IIarny. I am not sure that the Commission has taken a distinct position on that. We support the present bill which applies the same fee schedule regardless of the distance from which the signal is imported, be it a local signal or a distant signal which is imported. The Commission supports at the present time the present bill that was presented to us in its general form.

Mr. RAILSBACK. Thank you.
Mr. Hardy. And would apply it equally.
Mr. KASTEN MEIER. Mr. Ilariv, on behalf of the committee
Mr. DANIELSON. Mr. Chairman, I have two questions if I may.
Mr. KASTENMEIER. The gentleman from California, Mr. Danielson.

Mr. DanielSox. I am interested in the theory under which your Commission asserts jurisdiction for the regulation of cable. As I understand it, you feel that you have that right in order to protect television licensees from the economic threat of competition which might impair their ability to render their public service under their license; and conversely, in order to protect, to promote the develop. ment and health, economic health of local television stations. I side from that, what basis of jurisdiction (loes FCC feel that it has regarding cable?

Mr. Hardy. The basis for the jurisdiction, as you stated, and as found by the Supreme Court, is based upon the responsibility that the Commission has to insure that this Nation has an efficient and widespread radio and television system.

Mr. DANIELSON. Well, on cable—we are not really worried about radio really, are we, particularly?

Mr. Hardy. Well, when I say radio, radio as defined includes television, because the Commission is a

Mr. DANIELSON. But I am only speaking about television here, and can we agree on that? Now, proceed.

Mr. HARDY. Now, I was trying to answer your question insofar as it relates to the theory upon which the Commission asserted jurisdiction, and that was the theory as you stated, and that was approved by the Supreme Court. The theory is that if you lose the local service from a television broadcaster, then you have undermined the congressional intent to insure a nationwide, efficient, widespread radio system. And I use radio again in the sense that it includes television. And that was the theory approved by the Supreme Court.

Mr. DANIELSON. And of which I can understand the rationale and the logic, and I have no problem. Do you have any other basis?

Mr. HARDY. And I think the words used were “reasonably ancillary." Mr. DANIELSON. Do you have any other basis? Mr. HARDY. Any other basis for your legislation? Mr. DANIELSON. For asserting jurisdiction to regulate cable? Mr. HARDY. That is the extent. That is the extent of the rationale supporting our assertion of jurisdiction.

Mr. DANIELSON. Then I guess your answer is no, you have no other basis?

Mr. Hardy. That is correct.

Mr. DANIELSON. What does copyright have to do with either protecting existing television from an economic competitive threat, or the promotion of local television broadcasting? Mr. HARDY. I am not sure that I know the answer to that.

Mr. DANIELSON. I did not think you did. Thank you very much That is all of my questions.

Mr. KASTENMEIER. Thank you, Mr. Hardy, for your appearance this morning. And we appreciate the help you have given us.

[The prepared statement of Ashton R. Hardy follows:]

STATEMENT OF ASHton R. HARDY, GENERAL COUNSEL, FEDERAL COMMUNICATIONS

COMMISSION

Mr. Chairman, I am pleased to have the opportunity to present the views of the Federal Communications Commission with respect to H.R. 2223, a bill for the general revision of the copyright law.

The Committee is to be commended for addressing the very serious need for comprehensive reform of our federal copyright laws. As you know, the statute governing this subject was enacted in 1909 and was drafted in terms of the problems of that era. Motion pictures and sound recordings as we now know them were not envisioned at that time, nor were radio and television.

Mr. Chairman, I realize that the scope of this legislation is broad and that your Subcommittee is concerned with such diverse subjects as library photocopying, bootlegging of film and sound recordings, and the ownership of presi. dential documents. The Commission has no jurisdiction over matters such as these and consequently I will not comment on them. However, the Commission has asserted jurisdiction and promulgated comprehensive rules governing the cable television industry, the subject of Section 111(c) and (d) of the proposed

legislation, and thus my testimony addresses some of the background of the talle (opy right problem.

( able television is among those forms of communication which were not forempen or provided for in the 1909 Act. For this reason a complex controversy arose over the copyright liability of cable systems. I would like to trace briefly the evolution of this controversy and the Commission's involvement in it.

When the first cubie systems began to operate, most merely extended local television service to rural areas where it had not been previously available. They did not import distant signals into markets where television service already eristed, nor did they originate programiming or serve ma jor metropolitan areas. For these reasons, broadcast licensees did not anticipate that the new industry wonid pose the copyright problems that now exist. Similarly, copyright proprietors were generally unconcerned about the growth of cable because they (ntinued to receive royalties from conventional broadcasters and did not anticipate that ('ATV would affect this revenue.

Initially the FC expressed reluctance to assert jurisdiction over cable in the absence of specific legislative authorization. In 1959 (26 FOC 402), the Commission ruled that cable systems could retransmit programs without the erpress authority of the originating station. We reasoned that cable was merely a means of extending television service and did not pose an economic threat to the broadcast industry. Pursuant to this ruling cable operators were free to distribute programming without pa ring copyright royalties.

However, the attitude of the various parties changed abruptly when cable erstems began to import distant signals, originate programming, and provide service in metropolitan markets which posed clear competitive threats to broadCusters. ('opyright questions then came into focus and broadcasters and copyright proprietors sought protection from the FCC' and the courts.

The ('ommission responded by abandoning its former laissez-faire posture on (able and in 1962 denied a cable system permission to import additional distaunt signals by microwave. I Carter Mountain Transmission ('orp., 32 FC 459. a fl'd. 321 F. 2d 339 (D.C. Cir.), cert. denied, 375 U.S. 951 (123)). The ('ommission was influenced in its decision by the fact that the proposed importation wand pose an economic threat to a television licensee which could deprive the public of his service.

In 1965, the Commission further asserted its jurisdiction over cable in its Firxt Report and Order on (able Television (38 FCC 083) which contained the

called Non-Duplication Rule. This rule manifested the Commission's desire to protect the public interest in existing television service, and to encourage the developinent of local broadcast stations. It prevented duplication of the originating station's signal on a cable system for a certain period before and after curringe by that station. Under the rule, a copyright proprietor could limit the time and area in which a program was shown and a broadcaster could present programming previously shown on a network on a delayed basis without running the risk of losing his exclusivity to a cablecaster.

The Commission's Second Report & Order 12 FCC 725 (1966)). reqnired that all new cable systems in the top 100 television markets (serving 90% of all television viewers) obtain For approval before importing new distant signals, Approval was conditioned upon a finding that the new service would be consistent with the establishment and healthy maintenance of television broadcast Service in the area. The effect of the rule made it virtually impossible for cable systems to establish new service in urban markets.

Subsequently, a San Diego cable operator challenged the (Commission's authorits to har expansion of its system under the major-inarket-distant signal rule. However, the Supreme Court upheld the ('ommission's action as reasonably ancillary to its duty to regulate television broadcasting. [1.8. v. South restern ('able Co., 392 V.S. 167 (1968)

Because FCC regulation had not addressed many of the copyright questions prsel by the advent of cable, broadcasters and cable proprietors sought relief in thie courts. Ther argued for an expansive interpretation of the Copyright Act which would include a inble brondonut as a publie performance" and thus sihject cuble operators to copyright liability. The Supreme Court confronted this issue in Fortnighily Corp. v. United Artist, Television, Inc., 392 V.S. 290 (106), where I'nited Artists sought to recover royalties from Fortnightly, a West Vir. ginia puble system which imported into its market signals which could not be received through ordinary over-the-air means. Fortnightly argued that it provided merely a reception service, did not "perform" and therefore escaped lia

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