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 manage ment, construction, engineering, programming, finance and marketing capacities. In that necessarily broad sketch of cable's development I have purposely omitted reference to copyright. Let me briefly retrace my steps focusing on the role 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 Artists case 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. Needless 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 cable-affirmed 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. TelePrompTer that 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. 2d 348 (9 Cir., 1964). 3 Fortnightly Corp. v. United Artists Television Corp., 392 U.S. 390 (1968). Columbia Broadcasting System v. TelePrompTer Corp., 476 F. 2d 338 (2 Clr., 1974). the Association's efforts to work with Congress in arriving at fair and reasonancorgisiation. Before addressing myself to specific provisions in HR 2223 I would like to #t;"as,že 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 prolact of their creativity for a limited period of time. However, the courts have reglazed that copyright protection has a two-fold purpose; to encourage creativity and to promote the dissemination of knowledge to the public. It is tessary to maintain a balance between encouraging creativity through a liml'esi zot, poly, and the paramount interest of the public in unrestricted freedom to use the works of others after authors have harvested their rewards." Conseqanty copyright legislation is not only for the benefit of the owner of a work, but og tily as important, for the benefit of the public. In this context it is important to keep in mind that cable television through its freeption and distribution of television broadcast signals, promotes the disseminatron of knowledge to the public. Indeed, without this service, which is wellta and by a growing percentage of the population, significant numbers of Amerjests would be demed the fruits of creative labor Congress should be cognizant of Man Vital CATV role Legislation which, for whatever reason, restricts or decreases the dissemination of knowledge to the CATV public would not be constart with the primary public interest concern of copyright. Secondly, the Congress should be aware that imposition of copyright liability have an impact on the CATV subscribing public. As mentioned, those subset, jets value highly their CATV service I am sure that members of this subcomaffee have on occasion heard from CATV subscribers when those subscribers felt that Federal regulations or law threatened them with loss of programBằng Tɔ a significant extent the cost of copyright hability will be borne by cable 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 1 of the pot of goid it was once thought to be last year, for example, nine of the top pubiicly held companies companies who will bear a very sizeable percentage of the copyright burden suffered a combined net loss of nearly $17 million on fofa, revenities of $267 million CALV is a capital intensive business. It is also a business whose expetises, for the most part, are fixed and subject to very little influence of the CALV nabager – Many expenses are subject to the same inflationary pressures ex perienced generally throughout the country, with the normal competitive inflatters between suppliers tending to moderate the rate of increase. However, in adda in cable systems experience a number of substantivi expenses, Whose levels Are estatuished arbitrarily by some authority not subject to the moderation of cob-petitive pryseures. Notue of these expertises are subject to chalige with little opportunity of the CATV operator to infl jence the level Examples of these are juca relis, microwave charges, interest, franchise taxes property taxes, and FCC fers Because most cable expetises are fixed the only opportunity for cable opera fork to of fain and maintain a favoraise profit margin is through ad ufional subWITHIN of by ih tvaring subscriber rates coften dithcult because city councti mirovai mast be obtained i The unwrtainties related to these uncontrollate exjet ses filike financial | Mr litig and borrowing diffent, and expensive Appe,dix ik contains furthet def need information on the financial impact of copyra ́t haluty for cab,e lopter n of the ball let me now turn to the specific provisions of HR 2005 ok create for the first like a Copyt mit Rivady in abacal, the Library of Tuis Tribunal wond be cot spise of thlitev je tuolis atud wond in ein vind by statute to adlast copy fight rauty raten the Tuvenije base, and in 1 Tracanal is directed certain city latentatio em the slasty bigfisk of rainy feen toman ler'ike a review of royalty faten wit. farther mueve that meet nta&a『{ཟོ་ a very het, is threat to the future viamuly of the case Corp ▼ Deval 2×6 1 8 12.12 195 Tribunal and we action alal represent ten vanon andiamtry and And I want to observe that Mr. Bradley is the first of six witnesses We have already been in session for about an hour. Mr. DANIELSON. If you would give me a comment, I would invite :t, 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 pay copyright only for those imported signals, and there is certainly a lot of logic to that, and we agree to the logic. The difficulty that we encounter is trying to develop a formula for determining the payment on those signals; it results in copyright payments by a selected few portions of our industry, and the rest of us are paying nothing. Mr. DANIELSON. Well, I don't have any solution, but I'm seeking it wherever I can find it; I don't have any solution. I'll make one gratuitous comment, though. I would think cable shou' look forward, without reluctance, to being classified in something of the nature of a public utility. You are really in an in-between zone here. You are allowing local governments to franchise you and reg ulate your rates. The FCC says you must carry a local signal, whether you want to, or not. You have no choice, no discretion, if the local 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 whatever that show was. You are subject to the whims of local regulatory agencies, local ratesetting agencies. You have very properly stated that local ratesetting agencies are not sophisticated enough to properly reflect your at 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. Thank you. Mr. KASTEN METER. The gentleman from Massachusetts, Mr. Drinan. Mr. DRINAN. Thank you, Mr. Chairman. 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 60 you indicate that opinion within the industry is deep'y divided, and I wonder if you could tell us how many people feel that no copyright liability should attach at all to cable. You indicate the positions range from that, and I assume that's a minority. I wonder if they could justify that position on the basis of the CBS Tele pror per decision. Mr. BRADLEY. I don't know how many there are. We think it is a minority. I really don't know. Mr. DRINAN. Well, is that nunority going to fight for their part... ular view that copyright hability should not attach! Mr. BRADLEY. I believe so, yes. Mr. DRINAN. They will justify it! Mr. BRADLEY. Yes, sir; they will attempt to just fy it. I'm sure. Mr. DRINAN. But I take it from your testimony that you feel that copyright hability, rightly or wrongly, will in fact attach. Mr. BRADLEY. Yes, sir. Mr. DRINAN, What does the Supreme Court opinion mean on the Teleprompter decision! Mr. BRADLEY. Well, in the case of the Supreme Court decision the court was rendering a decision with respect to the 1909 Copyright Law. And, of course, when that law was written there was no recognition of Some of the modern technologies, including cable. I believe in their remarks the members of the court indicated that they were disturbed about having to apply a 1909 law to the present day. So, it is our feeling that the public opinion is such, and that the rights of copyright holders are such, in certain instances, that they are entitled to payment, and we are willing to pay. Although, if in its w.dom the Congress decides there should be no payment for copyright, we would be tickled to death. [Laughter.] Mr. DRINAN. Well, I would like to get some reasons why that might be so. In the Teleprompter case there is a basis for that, and you say here the FCC has gone almost contrary to the Supreme Court opinion. Well, I had several 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. KASTEN MEIER. The gentleman from New York, Mr. Badillo. Mr. BADILLO. If you agree that there should be a copyright payment, why must we in Congress fix the amount; why can we simply not say that there shall be a copyright payment, and then leave it to the normal market forces to say what the payment should be! Mr. BRADLEY. The amount of payment is something that in the interest of equity to both the copyright holders, and to our industry we would like to see fixed. We would like to avoid the possibility of having an unknown amount established without a real control by us. And, as I mentioned, the adverse impact on the financial community Is something that is of great concern to us, Mr BADILLA, But anybody in business, or in life for that matter, doesn't have everything fixed; electricity might go up, rent might go up, why should this be fixed? What you really mean, you would like it taxed at a lower amount, we are not talking about, obviously, you would like a fixed amount at a certain level. Why should this be different from rent, electricity, paper clips, or anything else you have in business! Mr. BRADLEY, Well, in the case of the other things that you mentoned, there are certain options which are usually available. If the rent goes up too high you can move to another location, or build your own building. And in the case of these other things, the moderating effect of the marketplace, the competitive forces in the country tend to keep the figures from going totally out of sight. In this case, there rosh pressure, Mr. WiGors, Would the gentleman yield! Mr. BADILLO, Sure, Mr. WIGGINS. I»n't the real reason that largely you don't originate grams and there is an infringement before you have any reason to Mr. Wiss In other words, they are carrying a signal originated by somebody else, and there is an infringement before there is any reason to start tabung about a fee. Mr. Babio So, then, if you agree there should be a copyright payment, and there has to be regulation, why should Cot grys be the one to fix that amount. Isn't it better at all times to have the deter mination made by a tribunal who can listen to the arguments or hot2 sides, a tribunal who can conduct an investigation of the financial -ar cumstances of the parties involved, and make a reasonable dec based upon the circumstances as they come up from time to time! Mr. BRADLEY. In a setting of rate by a tribunal, in addition to the uncertainty that worries us, there would be some pretty signifi-and pressures brought to bear by some of our opponents in this world Mr. BADILLO. There are no pressures brought on Congress, I gather But, there are more of you, and we have great confidence in your ability to set the rate. Mr. BADILLO. I have no further questions. Mr. KASTEN MEIER. The gentleman from New York, Mr. Patt. Mr. PATTISON. Relative to this exemption, this $100,000 gross come exemption, isn't it true that that exemption, if enacted, wo, 1 cover most of the rural stations which pick something out of the a.f. don't import very much by microwave and other means, and are pr marily the people you can make the best argument about that stø, d not pay copyright fees, as opposed to the local person who p.ca the CATV who picks local signals off the air, and where you get a rea sonably good signal anyway! Mr. BRADLEY. Yes. This $100,000 figure would-in round numbers. exempt systems that have 1,500 subscribers or less, small systems that have 2,000, or so. But, at least that takes care of the very small one. the one that is rendering a master antenna system type of service ili the pure sense. Mr. PATTISON. How would you handle the problem where s $100,000 exemption would provide an incentive to small systetus--ef big systems, for that matter-to become a series of small systems! In other words, you take a situation where you have a variety of systems in the suburbs that are all served by one head end an. 1 are owned by the same company, but could be owned by different companies! Mr. BRADLEY. I believe the bill now has a definition of "system" ir it, that would prevent that. That definition includes all the area servei by one head-end of a cable system. Mr. PATTISON. But there could be a breakpoint where a system could say, "Well, it's better to install a couple of other head-ends ati get the exemption." Mr. BRADLEY. I believe that the cost of installing head-ends wo... i prevent that, because it's substantial. Mr. PATTISON. OK. Now, another subject. You talk about the bis à out of the nonduplication rule. When you black out a distant signalte cause a local system has that particular program on, can you later broadcast that particular program? What is the practice! Mr. BRADLEY. No. We cannot rebroadcast it. When a program is being blacked out, in all but one area of the country it's blacked out simultaneously with the broadcast winch the viewer will see. Now, this has to do with the network exclusivity. There are two types of black-outs, One I just mentioned is network, when an imported net work signal is showing the same program as the local station, you black out the imported one and show the local one, |