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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 pavments, 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.
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 of 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 pics ture 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. DANIELSON. You are really only talking about retransmission in the one instance, the first instance?
Mr. KELLER. Correct.
Mr. DANIELSON. The other two, if the cable operator buys a movie, or buys the movie rights, whatever they may be, whatever compensation is involved is a part of a contract between the parties?
Mr. KELLER. Correct.
Mr. DANIELSON. And on the lease situation, the leasing of the line he is really acting as a common carrier, a public utility simply providing a vehicle through which the lessor utilizes the channel for whatever purpose, legitimate purpose we hope that he might have?
Mr. KELLER. Yes.
Jr. KELLER. That is right. It is only with respect to the retransmission.
Mr. DANIELSON. And on retransmission we all know I think that television stations earn their incomes from commercials, from selling advertising. And one of the factors in determining the advertising rate is the number of viewers. If the number of viewers on the cable system is included in the number of viewers under the Nielsen ratingrs, or whatever you want to call them, could it not be arguer that perhaps the copyright owner is being compensated at that point if you add another 5,000 viewers by cable, and those 3,000 are included in the, shall I say, guaranteed circulation of the TV station? Do you not have a copyright payment?
Jir. KELLER. I certainly can be argued that you do, but you get into all sorts of difficulties there with respect to which audience the advertising is directed toward or intended for, local and regional advertising and so forth.
Mr. DANIELSON. I realize, but again the market place, seller and buyer of the program, can sit down and fight it out over the table and decide what kind of a fee to pay?
Mr. KELLER. Yes; they could.
Mr. DANIELSON. Fine. Thank you very much. You have been most helpful.
[The prepared statement of Thomas J. Keller follows:] STATEMENT OF THOMAS J. KELLER, ACTING GENERAL COUNSEL, OFFICE OF TELE
COMMUNICATIONS POLICY, EXECUTIVE OFFICE OF THE PRESIDENT Mr, Chairman, members of the Subcommittee, I am pleased to respond to your Invitation to discuss the views of the Office of Telecommunications Policy on II. R. 2223, the copyright revision bill.
My remarks today are limited to those sections of the bill which address the question of copyright payments by cable television systems. At the outset, I wi-h to say that OTP fully endorses the principle of copyright payment for the cable retransmission of broadcast originated programming. Before discussing the rationale behind this position, it may be helpful to place the cable-copyright question in an historical context.
The cable television industry began in the late 1910's as a means of bringing improved television reception to isolated communities in the mountainous regions of Pennsylvania and Oregon. Although this service spread rapidly in many small towns throughout the Nation, cable's telecommunications capacity was quite limited in its early days.
With the development of new technology increasing the potential capacity of cable system to 20 television channels or more, cable enjoyed increased growth during the 1960's. Many new systems provided not only improved reception of nearby broadcast stations, but also began to originate television programming and to import additional broadcast signals by means of microwave links from distant cities. Today, there are over 3,000 cable systems serving approximately 10 million cable subscribers.
As cable's capacity to increase signal availability in local markets became apparent, the broadcast industry, fearing shifts in established viewing patterns, began to sit up and take notice. Similarly, the program production industry became concerned that cable's importation of programs from distant markets could diminish the value of those programs when they were subsequently offered for sale to broadcast outlets in the market served by a cable system.
By 1966, the Federal Communications Commission had asserted jurisdiction over cable systems, primarily with respect to the retransmission of broadcast signals. Unable to resolve the issues of potential competition between cable and broadcasting, the FCC imposed a virtual freeze on cable expansion in the top 100 markets. In so doing, the Commission noted that cable's use of broadcast signals without reimbursement to program owners had a direct bearing on the cable-broadcast controversy. Thus, the copyright question became intertwined with communications policy issues regarding the competitive relationship be tween cable and broadcasting.
During this same period, the program production industry instituted law sults against cable operators for copyright infringement. Although the Supreme Court ultimately ruled that cable was not liable for copyright payments under a narrow reading of the Copyright Act of 1909, the Court also stated that Congress should take a fresh look at conforming the copyright law to new technological develop ments that were not envisioned 60 years ago. In fact, this issue had already become a subject for Congressional consideration as part of the overall copyright revision that had been underway for several years.
The Office of Telecommunications Policy first confronted the cable-copyright issue soon after its creation in 1970. In June 1971, the President appointed a special committee to develop proposals for a comprehensive national policy on cable communications. The Committee, chaired by the Director of OTP, recog. nized at the outset that cable technology offered a major solution to the problem of channel scarcity that is inherent in our present system of television broadcasting.
Unlike over-the-air broadcast technology which, because of spectrum limitations, permits only a limited number of channels in a given community, cable technology permits an abundance of channels. The Cabinet Committee viewed cable as something far more than a mere vehicle for retransmitting broadcast signals; rather it saw cable as a technology with the potential to evolve into a medium of communication in its own right, offering new opportunities for access by the public to the electronic media, and new outlets of expression for program producers, advertisers, and virtually anyone who wished to convey a message. In essence, cable's traditional retransmission service was seen as an adjunct to the provision of a multiplicity of channels that could be leased for a broad range of uses. It was apparent, however, that the public would receive the full benefits of cable's potentital only if the medium were afforded a fair opportunity to develop and compete with existing media, free of unwarranted governmental restrictions. To this end, OTP is preparing cable legislation which will establish a national plan and regulatory framework for cable communica. tions based on the recommendations of the Cabinet Committee.
Similarly, it was evident that the unresolved copyright question had inhibited the growth and development of cable, and had made the integration of cable into the television program distribution market most difficult. Accordingly, the Report of the Cabinet Committee, published in January 1974, included a recommendation that cable be subject to copyright liability. The Committee felt that program retailers leasing cable channels should negotiate and pay for the right to use programs and other copyrighted information just as entrepreneurs in other media are required to do. The Committee also recommended that cable system operators which retransmit broadcast signals should be subject to copyright parments in the form of a statutory compulsory license.
These recommendations were grounded on principles of equity, as well as copyright and communications policy rationale. The purpose of copyright protection, under the Constitution, is to ensure that authors receive the encouragement they need to create, as well as the remuneration which they fairly deserve for their creations. Cable systems, in their retransmission of broadcast signals, make profitable use of copyrighted works and should therefore be subject to some form of payment. Moreover, only when cable is obligated to the payment of copy. right can the argument of cable's "unfair competition" with broadcasters be put finally to rest.
As you know, Mr. Chairman, the question of the form that cable's copyright payment ought to take has been a subjet of continuing controversy for many
years. Numerous proposals have been put forward attempting to distinguish among various types of signals. But these previous proposals have failed for lack of agreement between the principal industries, and it now appears that a blanket compulsory license has gained the widest acceptance among the parties.
In 1971, faced with the cable "freeze" and the fact that the cable-copyright issue was an integral part of the competitive disputes between the cable and broad. cast media. OTP encouraged representatives of the principal industries (cable, program producers and broadcasters) to reach some form of agreement on copyright payment. The resulting "Consensus Agreement," providing for elimluation of the freeze and the promulgation of the FCC's present cable rules had, as a central provision, the agreement of all parties to support copyright legislation in the form of a compulsory license for cable's carriage of local and distant signals. The bill before you today incorporates such a provision and, although not a perfect answer to all aspects of the issue, we believe it provides a reasonable and workable solution to the problem.
Beyond our belief that payinent of copyright fees by cable systems is in accord with traditional copyright principles of incentive and fairness, OTP also looks to copyright legislation to afford stability and certainty where previously there has been nope. In this regard, we are concerned that the affected industries not be forced to revisit the uncertainties and disputes which now preoccupy them. While OTP takes no position on the particular fee schedule that is incorporated in the bill, we recognize that Congress is writing on a clean slate here, without the benefit of prior experience with cable-copyright payments and that it may be necessary to adjust the fee schedule in 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 Copy. right Tribunal to commence adjustment of the license fees as early as eighteen months after enactment could undermine the certainty and stability wbich the bill would otherwise provide.
In summary, OTP believes that the question of cable's liability for copy right 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 therehy 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. DANIELSON. We have to move along. I find that we are overscheduled in the first place, and as is traditional with this committee we are overquestioning in the second place. It is my fault, and I assume responsibility. I am going to recomniend that the next three witnesses try to confine themselves with all of the self-discipline they can so that we can at least give everyone a chance to appear, and I will try to discipline meelf.
Our next witness is Mr. E. Fulton Brylawski, chairman of the Copyright Committee of the Bar Association for the District of Columbia
Won't you please come forward and sit down, and pull up the microphone and give us the benefit of all of your statement as quickly as you can! Thank you.
TESTIMONY OF E. FULTON BRYLAWSKI, CHAIRMAN. COPYRIGHT
COMMITTEE, BAR ASSOCIATION, DISTRICT OF COLUMBIA Mr. BRYLAWSKI. Mr. Chairman, I am E. Fulton Brylawski, chairman of the Copyright Committee of the Bar Association of the District of Columbia and an attorney specializing in copyright and related