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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 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.
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.
Jir. 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 systein is included in the number of viewers under the Nielsen ratings, or whatever you want to call them, could it not be argued 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 ?
Mr. 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 marketplace, 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 HIR. 2223, the copyright revision bill.
Hly 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 wish to say that OTP fully endorses the principle of copyright payment for the calle 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 prend rapidly in many sma'l 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 progrumming 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.
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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 FCO 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 between 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 cominunity, 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 & 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 a fforded 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 communications 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, incinded 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 payments 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 subjct of continuing controversy for many
years. Yumerous 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 elimipation 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 which the bill would otherwise provide.
In summary, 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 receire 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'g 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 recommend 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 myself.
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 Jr. 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 matters. My appearance and testimony today, however, is as a concerned individual and not in my official capacity as chairman of the Copyright Committee of the local bar association. At this point, I ask that my formal statement be accepted and printed in the record. And if I could, I will address myself from a rather truncated statement.
Mr. DANIELSON. Without objection, it is so ordered and I would appreciate it if you would do that. You can truncate it very well I am sure, and hit the high spots. [The prepared statement of Mr. Brylawski follows:]
STATEMENT OF E. FULTON BRYLAWSKI Mr. Chairman. My name is E. Fulton Brylawski, Chairman of the Copyright Committee of the Bar Association of D.C. and an attorney specializing in copyright and related matters. In my brief testimony here today, I hope to alert the Subcommittee to a few constitutional disabilities of the copyright revision bill. principally the bill's violation of the separation of powers doctrine underlying the U.S. Constitution. Even the present method of administration of the copyright laws by the Copyright Office seems to be a violation of this doctrine, but av doubt on this score would be eliminated by reason of the additional powers and functions to be reposed upon the Copyright Office under the copyright revision bill.
The doctrine of Separation of Powers is often mentioned but little understood. Sometimes it is discussed as part of our federal system of checks and balanrex. While our Constitution bears its imprint, it has rarely been formulated or applied with any degree of specificity, so that it remains an amorphous and somewhat illusive concept.
Recognizing the need to better understand and clarify the doctrine, the Senate established in 1966 a subcommittee on the separation of powers, headed by Senator Sam Ervin, with the general purpose of investigating the incursions by any of the three branches of government into the constitutionally mandated sphere of another. More specifically, the committee's inquiry was directed to the problem of the exercise of emergency powers by the President in the absence of legislative authorization, the need for more effective congressional oversight of the interpretation of legislation by the judiciary and executive agencies am the extent to which the executive branch may ignore mandates containe in congressional legislation. Various methods of exercising legislative oversight of executive activity were explored to remedy the supposed imbalance of power between the legislative and executive branches. Yet, the subcommittee was als) concerned with congressional encroachment upon the executive function. Re gardless of the individual stance taken either for or against the extension of executive power, it is interesting to note that no one questioned the validity or vitality of the separation of powers doctrine.
Unfortunately, as a result of its primary concern with executive encroach. ment, both Congress and the Ervin committee were guilty of a rather ironic oversight. While seeking to use the doctrine as a means of reasserting legislative power rightfully belonging to Congress, they failed to recognize that a sub. department of the legislative branch, namely the Copyright Office, had been poaching upon the executive function through its exercise of broad executive or administrative powers. This problem promises to become more critical in the near future since the Copyright Office, under the copyright revision bill now under consideration, soon hopes to assume the full trappings of a regulatory agent.
Before examining the constitutionality of the revision bill, it seems appropriate to examine the Copyright Office under the present statute to determine whether its current operation passes constitutional muster under the separation of powers doctrine. Inasmuch as the legislative department through Congress enacts the copyright laws and the same department through the Copyright Offee administers or executes them, there is no separation between the legislative power of enactment and the executive power of executing the copyright laws. As a matter of fact, under the Copyright Act of 1870, Congress directly supervised the administration of the copyright law, so that substantially the same legislative instrumentality enacted and administered the copyright laws. How this rather patent violation of the separation of powers doctrine escaped the attention of constitutional scholars is puzzling. What is perbaps clear, however,