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. DRINAN. 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?

Mr. 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, January 1974. that you would have developed some specifics that would help us with this tough 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?

Mr. 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 may 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? How long of a report is that?

Mr. KELLER. I am not sure. It may go 50 or 100 pages.

Mr. RAILSBACK. I wonder if you could make that available to us?
Mr. KELLER. Certainly.

Mr. RAILSBACK. 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 define 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. RAILSBACK. 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. DANIELSON. Have you concluded?

Mr. RAILSBACK. Yes, I have. Thank you, Mr. Chairman.

Mr. DANIELSON. I have only a couple of questions. In response, in effect, to the question of the gentleman from Illinois, 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 distributed thereafter by cable within the island. You take cities like Bishop, Calif., Chester, Calif., Chadron, Nebr., and you have the same situation. Within some of our larger cities there are areas which are in the shadow of large buildings, 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 President 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. DANIELSON. 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

next several months, that it has to do with structuring the areas to be served by cable and the manner in which it is to be served, the numbers of channels, et cetera, as opposed to in harmony I should say, those functions performed by our regularly licensed broadcasting systems?

Mr. KELLER. Well, the bill itself would not set forth the precise standards and specifications. Principally what the bill would do would be to make certain jurisdictional distinctions between nonFederal and Federal regulation of cable.

At the present time, the FCC, State cable agencies as well as local municipalities, all three regulate cable to one extent or another, and there is a lot of overlap and duplication. The bill would attempt to solve that problem and clearly delineate these jurisdictional boundaries.

Mr. DANIELSON. I see. I recognize we are talking about copyright in this committee.

Mr. KELLER. Right.

Mr. DANIELSON. And copyright basically is the relationship between the owner of the property, the copyrighted item, music, literature, or whatever it may be, and the person who uses it. It is the use of a person's property in programing. In the purest sense, it really has nothing to do with the jurisdictional relationship between television and cable, for example, although obviously it would have some impact because if a cable system could use copyrighted programs without compensation to the copyright owner, they would be in an economically advantageous competitive position with the TV station which does have to pay a fee, and that is what we are going to have to try to work out in this committee. But beyond that, I question that your organization, with its mission, has anything at all to do with copyright, even in the broadest interpretation of your so-called charter. Copyright is a proprietary thing, who is paying whom for use of whose property. And I think that is true of FCC also. Do you have any comments on that?

Mr. KELLER. I agree wholeheartedly, Mr. Danielson. And as I tried to indicate in my statement, OTP's involvement in the copyright question was really ancillary to our involvement in the broader question of cable development, and we addressed the copyright problem only by way of saying that it has to be solved if this issue of the competitive relationship between cable and broadcasting is ever going to be ironed out.

Mr. DANIELSON. I think it is essential that we resolve it, and that is what we are working on. I am just trying to put my mind in proper perspective. Just frankly what is the impact of the recommendations that you have made and are making, and those also by Mr. Hardy! I just sort of would like to know what is the point of interest and how much weight should we give to the testimony and so forth.

I do have one other little comment. I understood from your statement that you think that there probably ought to be two standards, your recommendation would be two standards of copyright payments, one for the original transmission area, and probably a different one for primary transmissions generated by the cable system?

Mr. KELLER. Yes. And we assumed that those primary transmissions or program originations, if you will, would be performances within the meaning of the general copyright law, and that section 111 only addresses the retransmission of programing on broadcast stations.

Mr. DANIELSON. Again, your interest would only lie to the extent that the origination, or the rebroadcast of or the importation of a distant signal was in a broadcast area of licensed stations so that you would have a competitive situation?

Mr. KELLER. I am not sure I understand that.

Mr. DANIELSON. As long as the cable is in new territory where it is not in competition with the traditional broadcasting system, would there be any competition?

Mr. KELLER. No; which is not to say, however, there would be no need for copyright payments.

Mr. DANIELSON. Of course. That is not any concern of yours within your charter, right?

Mr. KELLER. As to the matter of payment to the copyright owner for distribution of a program into an area that is unserved by broadcasting, this is not within our communications purview.

Mr. DANIELSON. Thank you very much. You have been very helpful.
Are there any further questions of this gentleman?

Mr. RAILSBACK. Mr. Chairman, let me just ask one more.
Mr. DANIELSON. Yes.

Mr. RAILSBACK. On page 5 of your statement you mention that the Cabinet Committee thought that I think program retailers should also negotiate and pay a fee. Now, that is something different than we have heard before if, in fact, you mean that they are paying a separate fee from the cable television systems or companies, is that right? Is that a different suggestion?

Mr. KELLER. Yes; it is, Mr. Railsback. Let me try to explain. Basically cable can perform three functions by way of delivery of programing to a subscriber. First, it can take a broadcast signal off the air and retransmit it. We are saying for that service there should be a compulsory license to compensate the copyright owner.

The cable system can also originate programs at its head-ends; that is, it can go out and buy the rights to distribute a motion picture on its cable system, and in that case it would be acting just like a broadcaster or network. It would go right to the copyright owner or motion picture producer and buy the rights. And that is covered under the general provisions of the copyright law.

Now, third, it could lease channel capacity to what you might call a program retailer or a middleman. You or I might go to the motion picture producer and buy the rights to the film, and then in turn go to the cable operator and say, "I would like to lease one channel on Thursday night for distribution of this movie," and pay the lease rate charged by the cable operator.

Mr. RAILSBACK. So you are not talking about retransmissions?
Mr. KELLER. That is right.

Mr. RAILSBACK. Thank you.

Mr. DANIELSON. You are really only talking about retransmission in the one instance, the first instance?

Mr. KELLER. Correct.