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is incorporated in the bill, we recognize that Congress is writing on a clean slate here, without the benefit of prior experience with cablecopyright payments, and that it may be necessary to adjust the fee schedule in the future on the basis of additional experience and data. We do feel, however, that the provision in the present bill which allows the Copyright Tribunal to commence adjustment of the license fees as early as 18 months after enactment could undermine the certainty and stability which the bill would otherwise provide.
In summary, Mr. Chairman, OTP believes that the question of cable's liability for copyright has occupied and diverted the attention of major industries and all branches of Government for too many years. It is essential for copyright legislation to be enacted soon; first, because television program producers will thereby receive fair compensation for cable's profitable use of their product; and, second, because it is time to put the question to rest so that cable may grow and develop in response to the needs and demands of the public. In short, we believe that copyright legislation is a necessary prerequisite to full realization of cable's promise of additional channels, expanded services, and a multiplicity of outlets available for the people of this Nation.
That concludes my prepared statement, Mr. Chairman. I would be pleased to answer any questions that you or other members of the subcommittee may have at this time.
Mr. KASTENMEIER. Thank you very much, Mr. Keller.
Is there anything which the preceding witness, Mr. Hardy, said in behalf of the Federal Communications Commission, which representing the Office of Telecommunications Policy, you would not endorse?
Mr. KELLER. As to the position of the Commission on the bill before the committee today, I believe that the OTP and the FCC positions coincide perfectly. Basically, we feel, as does the Commission, that we do not have the expertise to address the specifics of the various pmvisions of section 111, but we do endorse the general principle of cable's payment of copyright.
Mr. KASTEN MEIER. Your statement is somewhat more enthusiastic than that of the FCC in terms of endorsing cable television's future. I do not know whether that describes any real difference in policy or attitude.
Mr. KELLER. I think that the reason for that, Mr. Chairman, is principally the result of our having provided staff support for the Cabinet Committee on Cable Communications. As I indicated, we became intimately involved with the cable issue, not in terms of the service pres. ently being provided by cable, but in terms of cable's long-range potential and, indeed, this is one of the charters of the Office of Telecommunications Policy, to look further down the road. And we see cable as something far more than a mere retransmission system. We see it as a vehicle for providing an abundance of channels for all kinds of communications uses.
Mr. KASTENMEIER. Just for my own benefit, about 20 years ago there was a discussion of the prospect of what was then called pay TV. But what we were really confronted with, I think, in 1965 was a different system called community antenna television which did not have origination for the most part, and was a retransmission system. But, presently cable, with the potential you allude to, suggests it is more like
the pay TV of 1953. Would you not agree? What difference is there between a cable television of 1975 and the pay TV proposals of 1955?
Mr. KELLER. I do not see much difference in terms of economics and viewer choice between the two, except that the pay TV experience of 1955 was an over-the-air broadcast subscription television technology, which, like conventional broadcast technology, was limited as to the number of channels that could be made available. With over-the-air subscription TV you might have one such outlet in a given community. Cable can provide any number of channels that might be made available for originated programing or programning that is provided by a program retailer who merely leases the channel from the cable operaior, to be made available to subscribers either on a pay-as-you-go basis or an advertiser-supported basis or a combination of the two.
Mr. KASTEN MEIER. Returning to the bill itself, while you generally support the bill, you indicate that it is not a perfect bill. And referring to imperfections, you do mention one area, and that is that you feel that the Tribunal's consideration of the fee schedule comes too early if it comes 18 months after enactment.
Mr. KELLER. Right. As I read it-I believe it is section 801 or 802Vr. RAILSBACK. 802.
Mr. KELLER [continuing). The Tribunal would be empowered to reconsider the fee schedule every 5 years, except for the initial such reconsideration, which could commence, as early as 18 months after enactment. Our view is that the copyright question has inhibited cable development and has clouded the whole question of the appropriate regulatory approach to cable for so long that there should be a period of stability before controversies arise again in terms of how a new fee schedule ought to be structured.
Mr. KASTENMEIER. And that is said without respect to whatever the Tribunal might do; that is, raise fees or lower fees?
Mr. KELLER. Whether it might raise, lower, or whatever; right.
Mr. KASTENMEIER. Is there any other area that could be perfected in the bill other than that point ?
Mr. KELLER. That was really the only point about which we felt strongly enough to address. When I say that it is not a perfect solution, obviously the various industries would like to see changes. But in terms of our overall attitude toward section 111, we do not have any major problems.
Nr. KASTEN MEIER. Thank you.
Mr. DRINAN. Yes. Thank you very much, sir, for your statement. And you indicate that your organization is, in fact, preparing legislation. When will that be ready!
Mr. KELLER. That legislation has been in the preparation stage for about a year now, Father Drinan.
Mr. DRINAN. A year and a half, since January 1974.
Mr. Drinan. We hope to act upon this in the next several days.
Mr. KELLER. I would say this, that the cable legislation being prepared by our office to implement the recommendations of the Cabinet Committee can be considered wholly separate and apart from the copyright question, which is being considered by this subcommittee. Mr. ÜRINAN. Then it would not help us at all?
Mr. KELLER. It does not address the question of copyright payments. In fact, it presumes that copyright liability by cable systems would be handled by the copyright revision bill.
Mr. DRINAN. You say OTP is preparing cable legislation which will establish a national plan and regulatory framework for cable communications based on recommendations of the Cabinet Committee. And you can do all of that without referring to copyright?
Mr. KELLER. One of the recommendations of the Cabinet Committee was that the cable be subject to copyright payment. We presumed that that recommendation would be implemented by passage of section 111 of this bill or something like it. We do not contemplate addressing the copyright question in the cable bill we are drafting, which basically is a bill to establish the regulatory and jurisdictional framework.
Mr. DRINAN. So it is not relevant to what we are talking about at all?
Mr. KELLER. That is correct.
Mr. Drinan. So why did you put it in? You had to say that OTP is doing something?
Mr. KELLER. Not at all, Father Drinan. The reason we put it in is because we see the growth of cable as an important factor in the development of the communications capability of this country in terms of service to the public.
Mr. Drinan. I think just everybody, you know, sees that. But do you have anything to help us with? I mean, you do not disagree at all with the FCC, and I assume that you did not talk to FCC before coming here either, and you come here, two different agencies, one independent which is supposed to have jurisdiction by statute over this matter, and then you come and you do not tell us anything different. So, what are we supposed to learn from your presentation?
Vr. KELLER. Well, I suppose you could learn that here are two agencies of Government that endorse the general principle of copyright payment by cable and endorse the bill as it is before you now.
Mr. DRINAN. Well, that does not help much unless you give some specifics. I did not mean to be too critical, but I just had hoped that you people, after that report a year and a half ago, you know, Januarv 1974. that you would have developed some specifics that would heln us with this touch problem. I thank you.
Mr. DANIELSON (presiding). The gentleman from Illinois, Mr. Railsback.
Mr. RAILSBACK. Thank you. Are there areas that are still inaccessible to television transmission like West Virginia or some of the rural mountainous areas, do you know?
Vr. KELLER. There are some isolated communities that may well have no access to a television signal at all.
As a matter of fact, if I mar expand on that, OTP commissioned a study by Denver Research Institute to study the extent to which television signals were available in rural communities across the country, and the study revealed that there were certain areas that had very little, if any, television service.
Mr. RAILSBACK. How long a report is that? Ilow long of a report is that?
Mr. KELLER. I am not sure. It may go 50 or 100 pages.
Mr. RALLSBACK. Let me ask you this: In your judgment, is there any value to be derived from differentiating in fees for distant transmissions as compared to local, and also perhaps the third case of areas that are being serviced that do not really have access to the networks, or you know, the television transmissions? Do you think we should provide some degree of flexibility in your fee schedules?
Mr. KELLER. As you know, that proposal has been around for a while. Various agencies, industry groups, and, indeed, this subcommittee have attempted to somehow detine what is a local signal versus a distant signal. It is a very, very difficult question and you get into the problem of overlapping markets, into the
Mr. RAILSBACK. Formulas, yes.
Mr. KELLER. Formulas, the whole thing. And the position OTP has taken, insofar as the principal industries here--the copyright people and the cable people have agreed on the general idea of a compulsory license to cover all signals, is that for ease of administration, and to avoid definitional problems and disputes, this certainly seems to be the best way to go. I must say personally, in terms of logic and the economics of television program distribution, it would seem that possibly local signals ought not to be covered since the copyright owner has sold the program for distribution to a particular community.
Mr. RAILSRACK. Markets, right, local markets.
Mr. KELLER. Right; and the cable system merely enhances the reception capability of the local viewer. Now, that can be differentiated from the importation of a distant signal where the program owner did not contemplate distribution in that market. As I say, once you attempt to write that distinction into a law you get into all kinds of jurisdictional and definitional problems, and for purposes of administration it seems that a compulsory license covering local and distant signals is the best solution.
Mr. RAILSBACK. Thank you. That is all.
Mr. DANIELSOX. I have only a couple of questions. In response, in effect, to the question of the gentleman from Winois, I know there are some areas where an ordinary television service is not available. Take the island of Guam, for example, I think everything brought into Guam has to be canned and is ili-tributed thereafter by cable within the island. You take cities like Bishop, (alif., Chester, Calif., Chad. ron, Nebr., and you have the same situation. Within some of our larger cities there are a reas which are in the shadow of large buildinora, or mountains or hills, and there is just no reception unless you have cable. They have what is called Cold Water Canyon in Los Angeles, so there is definitely a role to be played by cable, even within the existing metropolitan area as well as in outlying areas.
I would like to have you tell me what is the primary role of the Office of Telecommunications Policy? What is the function or the purpose for which it was set up?
Mr. KELLER. Well, Mr. Danielson, it was set up in 1970 principally in response to recommendations of subcommittees of the House and Senate, a study by the General Accounting Office
Mr. DANIELSON. But what is it supposed to do?
Mr. KELLER. Well, the issue of the telecommunications role of the executive branch had been around for several years, and during the fifties and the sixties it had been studied by the Congress, the GAO, and the Budget Bureau.
Mr. DANIELSON. I am aware of that. But I would like to know what is OTP's role, what is OTP supposed to do, and what is its mission in life?
Mr. KELLER. What these various study groups recommended was there be an executive branch capability that would have the resources and the authority to do several things. Number one, to manage and coordinate the Federal Government's use of communications; the budget for which amounts to about $10 billion annually. There was a need for some central coordinating group within the executive branch to coordinate for the purpose of promoting sharing of systems and eliminating duplication.
Mr. DANIELSON. OK. Now, what is the next point?
Mr. KELLER. The second function was to manage and assign that portion of the radio frequency spectrum which is used by Government agencies.
Mr. DANIELSON. Does FCC have nothing to do with that?
Mr. KELLER. The FCC has nothing to do with that, that is correct. The FCC allocates and assigns the frequencies that are available for the private sector.
Mr. DANIELSON. But those portions of the spectrum which go to the Government are within the OTP, and they recommend to the Presi. dent that they be assigned to a given agency, is that correct?
Mr. KELLER. That is correct. And then the third function is to formulate and develop long-range policy recommendations for the use and development of telecommunications in this country. And this applies to domestic as well as international communications, whether they involve satellites, radio, television, telephone, telegraph, common carrier, cable, or microwave.
Mr. DANIELSOX. And you make those recommendations to whom?
Mr. KELLER. Basically the recommendations go in three directions. First to the President, if the President wants advice on any given issue.
Mr. DANIELSON. On anything, yes.
Mr. KELLER. Involving telecommunications. Second, to the Congress by way of recommended legislation, or by way of views and recommendations on legislation that has been introduced by someone else. And third, to the FCC by way of advice and recommendations, if you will, on some of the longer range policymaking and rulemaking issues which the Commission is considering.
Mr. DANIELSON. All right. Now, in response to the questions by Mr. Drinan, you mentioned that the proposed legislation which you are working on, and which will be recommended, I presume, in the