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[The prepared statement of Rex Bradley, and suggested amendments to II.R. 22:23 follow:
STATEMENT OF REX A. BRADLEY, CHAIRMAN, NATIONAL CABLE TELEVISION
My name is Rex Bradley, I am Chairman of the Board of the National Cable Television Association and also l’resident of Telecable Corp., Norfolk, Va., owner and operator of 15 cable television systems serving 130,000 subscribers in ten states. Today I speak to you in my capacity as Chairman of VCTA.
The National cable Television Association is the major trade association reprementing the cable television industry. Our membership includes both multiple system operators and independent CATV Operators, as well as manufacturers and other suppliers of cable television equipment and services. NOTAN 1,320 member systems currently serve 5.8 million subscribers or jag of the nation's 10 million cable TV households.
NOTA has previously appeared before this subcommittee to present our views on copyright revision legislation and also on the newsman's shield issne.
We are, of course, vitally interested in matters affecting the CATV industry and its subscribers and we thank you for the opportunity to appear before you and assist you in your deliberations.
Jr. Chairman, since time is limited and there are many groups to hear from, I will not present a detailed description of cable television, the nature of its services, and the future role we believe broadband cable communications will play in meeting this nation's communications needs. I will be happy to submit this information for the record, if the committee so desires.
However, I do believe that because of the complexity of the issues now under consideration, and because of the potential impact on the public and the CATV industry of the action ultimately taken by Congress on copyright law revision, it is in order to place into perspective some aspects of the history of cable development.
I will state at the outset that we believe that copyright was conceived in the public's interest--to assure that creative minds would be encouraged by compensation to produce and distribute the fruits of that creativity. Copyright was not conceived as a mechanism to deny the public access to creative works. Later in my statement I will discuss further our view of copyright and comment wcifically on HR 2223.
(able television first developed in the late 1910's in Pennsylvania and Oregon as a simple master antenna' service in response to commercial broadeasaing's inability to adequately serve outlying areas. Indeed, by bringing programming to communities that otherwise would have received none, (ATV performed a bene. ficial role for both broadcasters and the public.
Gradually, broadcasters, perceiving that cable growth could result in additional competition among broadcasters for audience, began urging ('ongress and the FCC to contain cable's growth.
('ommencing in the mid-60's and throughout the decade the Fif' gradually extended its jurisdiction over CATV operations. As is well known now, FCC regulatory actions in 156 and 128 imposed a virtual six year freeze on expansion of cable in the nation's largest television markets where approximately Sy of the public resides,
In 1972 the Fir issued its Third Report and Order' which was designed to permit a controlled growth of cable in the larger urban markets. Then FOC Chairman Burch characterized the plan as one designed to "integrate cable television into the national communication structure."
Appended to my testimony (Appendix A) is a summary of those 1972 FC regulations which have rightfully been called among the most complex rules and regulations ever devised by the mind of man.
During the FCC's six year freeze cable growth did not halt completely. (per. ators continued to expand in areas where systems were already in operation and in those limited areas of the country outside of the freeze zone. Also, more attention was given to providing additional service for example, originating local community programining on existing systems
of mid-1975), there were approximately 3,210 cable ssstems serving nearly 7,0MM) communities in all 50 states. Nearly ten million American homes received
CATV Report and Order 36 FCC 2nd 143 (1972).
cable television service, or about 15 percent of the nation's television households. Franchises have been granted in another 2,600 communities, but are not yet operating. Applications are pending in approximately 1,000 additional communities.
Subscriber fees for CATV service range from $4 to $11 monthly and average about $5.50 nationally.
The cable industry employs an estimated 25,000 men and women in management, construction, engineering, programming, finance and marketing capacities
In that necessarily broad sketch of cable's development I have purposely omitted reference to copy right. Let me briefly retrace my steps focusing on the rule the copyright question has played in cable's development.
As cable growth continued, alarmed broadcasters charged that cable television systems were engaged in "unfair competition" when they carried programs without permission or payment. Those claims of unfair competition were judicially tested and rejected in 1964 by the U.S. Court of Appeals in the 9th Circuit.
During this same period the first copyright suit was brought against two CATV systems by United Artists Corp. Later a second suit in which the issue went beyond liability for simple reception was brought by CBS. Primarily due to adverse rulings by the lower courts in the United Artists case, NCTA publicly committed itself to work for a legislative solution to the copyright problem and also undertook negotiations with representatives of the broadcasting and motion picture industries. Words cannot really reflect the atmosphere in the cable television industry following those adverse lower court rulings. The prospect was simply one of total bankruptcy-turning the CATV industry lock, stock and barrel over to the motion picture industry,
In 1968 the Supreme Court, reversing the lower courts, held in the United Artistscase that CATV was not liable for copyright in receiving off-the-air signals. Five months later the FCC proposed and adopted as interim procedures "retransmission consent" rules which required CATV to obtain permission of broadcast stations and program owners to carry broadcast programs-the very thing which the Supreme Court had just ruled CATV did not need to do. Veedless to say, in the ensuing four years virtually no such consent was granted.
Negotiations between the cable and motion picture industries continued on the amount of copyright fees to be paid to copyright holders. Then in 1971, in an effort to break the regulatory impasse over cable, the Office of Telecommunications Policy and the FCC fashioned the so called “Consensus Agreement" under which the parties-broadcasters, copyright owners, and cableaffirmed support for copyright legislation and approved the outline for new FCC cable regulations. Of course, the Congress was not a party to this agreement.
Subsequently the Supreme Court in 1974 ruled in CBS v. TelePronopTerthat cable television systems were not liable for copyright for carriage of any broadcast signals under the meaning of the 1909 law. Following that decision the focus shifted to Congress and renewed efforts to revise the 1909 law with, among many other things, provisions for cable television.
I have reviewed these highlights in an effort to demonstrate the complexity of the cable/copyright problem, the intense pressures created for the cable industry by it, and the almost inextricable interrelationship between copyright and cable regulation.
During these hearings I am sure you will hear charges-principally from broadcasting and motion picture representatives-to the effect that the cable television industry has not lived up to its copyright responsibilities, that cable is an unfair competitor, and that the industry has attempted to delay resolution of the copyright issue.
We intend not to engage in “Who struck John” rhetoric in these hearings. I can only say that throughout this frustrating period NCTA has attempted in every way possible to live up to its fundamental commitment to work for fair copyright legislation. Legislation fair to all parties concerned, fair to a young. developing industry and fair to the present and future CATV subscribing public who most assuredly will be affected by imposition of copyright liability on cable.
As members of this subcommittee may be aware, there are divisions within the CATV industry over the issue of copyright payments. Positions range from no copyright liability at all, to no liability for signals received off-the-air, and no liability for a complement of signals that can reasonably be defined as adequate service. I believe, however, that the majority of the members of NCTA support
2 Cablevision, Inc. v. KUTV, Inc.. 335 F. 20 348 (9 Cir., 1964). 3 Fortnightly Corp. v. United Artists Television Corp., 392 U.S. 300 (1969). Columbia Broadcasting System v. TelePrompTer Corp., 476 F. 21 338 (2 Cir., 1974).
the Association's efforts to work with Congress in arriving at fair and reason. able legislation.
Before addressing myself to specific provisions in IR 2223 I would like to emphasize several key factors which I believe this subcommittee and the Congress must consider in arriving at fair copyright legislation for CATV..
The constitution provides for copyright protection to promote the progress of the arts and sciences by giving authors and inventors exclusive right to the poroduct of their creativity for a limited period of time. However, the courts have recognized that copyright protection has a two-fold purpose; to encourage creativity and to promote the dissemination of knowledge to the public. It is necessary to maintain a balance between encouraging creativity through a limited monopoly, and the paramount interest of the public in unrestricted freedom to use the works of others after authors have harvested their rewards. Conse. quently, copyright legislation is not only for the benefit of the owner of a work, but equally as imortant, for the benefit of the public.
In this context it is important to keep in mind that cable television through its Trption and distribution of television broadcast signals, promotes the dissemination of knowledge to the public. Indeed, without this service, which is wellvalued by a growing percentage of the population, significant numbers of Amer. in uns would be denied the fruits of creative labor. ('ongress whould be cognizant of this vital CATV role. Legislation which, for whatever reason, restricts or decreases the dissemination of knowledge to the CATV public would not be consonant with the primary public interest concern of copyright.
Secondly, the ('ongrpes should be aware that imposition of copyright liability will have an impact on the CATV subscribing public. As mentioned, those subkribers value bighly their CATV service. I am sure that members of this subCommittee have on occasion heard from CATV subscribers when those subscrib. ess felt that Federal regulations or law threatened them with loss of programming. To a significant extent the cost of copyright liability will be borne by cable subscribers
Let me make several further observations on the current financial state of the industry. It has taken several years, but an awareness is growing that CATV is not the pot of sold it was once thought to be. Last year, for example, nine of the top publicly held companies companies who will bear a very sizeable percentage of the copyright burden-suffered a combined net loss of nearly $17 million on total revenues of $267 million.
CATV is a capital intensive business. It is also a business whose expenses, for the most part, are fixed and subject to very little intluence of the CATV manager. Many expenses are subject to the same inflationary pressures exfwrienced generally throughout the country, with the normal competitive influences between suppliers tending to moderate the rate of increase. However, in addition, (able systems experience a number of substantial expenses, whose levels are established arbitrarily by some authority not subject to the moderation of competitive pressures. Some of these expenses are subject to change with little opportunity of the CATV operator to influence the level. Examples of these are pole rents, microwave charges, interest, franchise taxes, property taxes, and FCC fees.
Because most cable expenses are fixed, the only opportunity for cable opera. tors to obtain and maintain a favorable profit margin is through additional sub sribers, or by increasing subscriber rutes (often difficult because city council approval must be obtained).
The uncertainties related to these uncontrollable expenses make financial planning and borrowing difficult and expensive. Appendix B contains further detailed information on the financial impact of copyright liability for cable.
Let me now turn to the specific provisions of HR 2223. Chapter 8 of the bill would create for the first time a ('opyright Royalty Tribunal in the Library of ('ongress. This Tribunal would be composed of three persons and would be empowered lige statute to adjust copyright royalty rates, the revenue base, and in certain circumstances the distribution of royalty fees. The Tribunal is directed to undertake a review of royalty rates within six months of the date of enactof the law, and that review is to be completed within 18 months. Thenceforth, the Tribunal would conduct a review every tive years ad infinitum.
Mr. (hairman, we are opposed to the establishment of this Tribunal, and we further believe that Section of the bill is laced with intirmities that represent a very serious threat to the future viability of the cable television industry and
* Fox Film Corp. v. Doyal, 286 L'.S. 123, 127 (1932).
• Becurt. Well, in the case of the Supreme Court decision the 5*11! lering a decision with respect to the 1909 Copyright Law.
line, when that law was written there was no recognition of •, ! *wiern technologies, including cable. I believe in their reI' vl'li*rs of the court indicated that they were disturbed
.4?0 apply a 1909 law to the present day. Pienoir feeling that the public opinion is such, and that the ..:: Impright holders are such, in certain instances, that they
* ***ri to payment, and we are willing to pay. Although, if in its P10* ( Te* decides there should be no payment for copy* Trai be tickled to death. [Laughter.] VEVAN. Well, I would like to get some reasons why that might »s 1:' ; To'r prompter case there is a basis for that, and you say * Filiagone almost contrary to the Supreme Court opinion. 1ad veral other questions, but my colleagues here, I want
mation and comment; and I look forward to your colleagues. insi la very much.
X King KMFIER. The gentleman from New York, Mr. Badillo.
And I want to observe that Mr. Bradley is the first of six witnieku We have already been in session for about an hour.
Mr. DANIELSON. If you would give me a comment, I would invite : please.
Mr. Bradley. Well, as we both agree. it's very complicated. There are members of our association, our industry, that feel that we should pas copyright only for those imported signals, and there is certainly a in of logic to that, and we agree to the logic.
The difficulty that we encounter is trying to develop a formula for deterimining the payment on those signals; it results in copurigit par. ments by a selected few portions of our industry, and the rest of we are paying nothing.
Mr. DANIELSON. Well, I don't have any solution, but I'm serkung it wherever I can find it: I don't have any solution.
I'll make one gratuitous comment, though. I would think cable whou' look forward, without reluctance, to being classified in something of the nature of a public utility. You are really in an in-between muce here. You are allowing local governments to franchise you and me ulate your rates. The F((-avs you must carry a local signal, whether you want to, or not. You have no choice, no discretion, if the loral TV station puts out "Deep Throat," you are going to have to show it: I guess the same would be true of “The Longest Day," or whateirt that show was.
You are subject to the whims of local regulatory agencies, lo al ratesetting agencies. You have very properly stated that loval ratetti! agencies are not sophisticated enough to properly reflect your (int basis.
I think since you are handled more or less as a utility, you ought to relax and enjoy it. (laughter.)
I think that some of the problems could be resolved--that's free
Mr. KANTEN VER. The gentleman from Javachusetts, Mr. Drinan.
Mr. Bradley, I'm sorry I had to go to another subcommittee, but I did read your paper and I compliment you on it.
On page you indicate that opinion within the industri indep's divided, and I wonder if you could tell us how many people feel list no repirinht liability should attach at all to cable. Yon indicate the primations range from that, and I s-aume that's a minority. I wonder if they could justify that position on the basis of the ( BS 7ele pror jiem derimon.
Mr. BRADLEY. I don't know how many there are. We think it 18 a minority. I really don't know'.
Mr. DRINAN. Wellin that minority going to fight for their part.. ular view that copyright liability should not attach!
Mr. Bxdur. I these over
Mr. DRIYAN. But I take it from your festimony that you feel that copyright liability, riktly or wrongly, will in fact attah.
Mr. BRADLY. Yani, br.
Mr. DRINAV. Wat down the Supreme Court opinion mean on the Teleprompter der:non!
* "1"} 11.'1-we in Congress fix the amount; why can we simply 38 37 afl'ere shall be a copyright payment, and then leave it to imation Art forres to say what the payment should be?
12ur. The amount of payment is something that in the in: pow . I to both the copyright holders, and to our industry DY... to wpp fixed. We would like to avoid the possibility of ed: AU0W amount established without a real control by us "B1100d, the adverse impact on the financial community SPORT is of great concern to us.
W PAIL. But anybody in business, or in life for that matter , B ir ebrrything fixed; electricity might go up, rent might go
Piger with be fixed? What you really mean, you would lik
tnl amount at a certain level,
within the different from rent, electricity, paper clips, o "Billy, have in business? Akty. W11, in the case of the other things that you men
af ertain options which are usually available. If th *** 100g vou can move to another location, or build you
2. A) in the case of these other things, the moderatin; 'D irtplace, the competitive forces in the country tend "ning from going totally out of sight. In this case, ther no! Woud the gentleman vield?
lin't the real reason that largely you don't originat in an infringement before you have any reason t
*17,">1. Yra ir.
it at In other worils, they are carrying a signal originated
the So, then, if you agree there should be a on
Mr. BRADLEY, Well, in the case of the Supreme ('ourt decision the court was rendering a derision with respect to the 1.2009 ('opyright law.
nd, of coure, when that law was written there was no recognition of Nome of the mondern technologies, including cable. I believe in their remarks the members of the court indicated that they were disturbed alw't having to apply a 1909 law to the present day.
N), it is our feeling that the public opinion is such, and that the right of copyright holders are much, in (ertain in-tance, that they arr entitled to payment, and we are willing to pay. Although, if in its Windom the Congre decides there should be no payment for copyright, we would be uckled to death. (Laughter.]
Mr. DRIVAX. Well, I would like to get some reasons why that might tumamo). In the Tale prompter case there is a ba-18 for that, and you say here the FCC'has gone almost contrary to the Supreme Court opinion.
Well, I had veral other questions, but my colleagues here, I want them to question and comment, and I look forward to your colleagues. Thank you very much.
Mr. KA NMFIER. The gentleman from New York, Mr. Badillo.
Mr. Badiu). If you agree that there should be a copyright pay. thent, why must we in ('ongtem fix the amount; why can we simply not say that there shall be a copyright payment, and then leave it to the normal mat hit forretor what the payment should be!
Mr. BRADLY. The amount of payment in something that in the intenit of monity to both the copyright holder, and to our industry We would like to w fired. We would like to avoid the possibility of having an unknown amount putablished without a real control by ux And, a. I mentioned, the adver umut on the financial community In nenething that is of great concern to us.
Mr. Ban. But anibody in businew, or in life for that matter, down't have everything fire; electricity might go up, mint might go up, why should this be tired! What you really mean, you would line it free at a lower amount, we are not talking about, ob on-ly, you Man like a fire amount at Areitin level.
W!, !ould this bom datterent from rent, eletriitti popor clapas, or A1.thangelog pou are in ban !
Mr. Brol. Well, in the case of the other thin that you men. 1.., there are train oppon whith are u-dails available. If the m!, *up tool.h von can move to another liktion, or build your fin bulilingAnd in the case of the other things, the moderating prest of the thahet plater, the compilatie foto's in the country tend to keep the figures from going totally out of iht. In this , therr 14163 Bh prrel'po Mr.
W iss. Would the grntleman sirld! Mr. Baden Sie,
Mr. W164,!. ln't the noaren ontlunt la rly vou don't oriente praten mind their is an infuentral til for von hunne ut. Irwin to net.ate,
lir Buxor. Y pues, sir, Mr Wat* In other words, tilty air #TOUR "in originated bir fizetni ples and there is an infringillent for the ally travaitotart tonealout a fer,
We Bitti. Yew,r.
i hat pasti.t, and their luas toli v etoil, wir vonill open the