The other type of exclusivity is syndicated exclusivity, where a television station has purchased the right to a particular movie or program. That station has the right to prevent us from showing that same program when it's imported from another signal, even though he may not have shown it. Mr. PATTISON. Would you elaborate a little on that, I missed that. Mr. BRADLEY. Yes, sir. When television stations buy program rights to a particular movie, or syndicated program, they frequently have an exclusive right in that area. That exclusive right exists even though they may not have shown that program; and it conceivably even exists if they may never show that program. So, that same program being imported from a distance cannot be shown under the exclusivity rule. Mr. PATTISON. Any time ! Mr. BRADLEY. Any time during the period of the contract arrange mert. Mr. DANIELSON. Will the gentleman yield? Mr. PATTISON. Yes, Mr. DANIELSON. How would you prevent this? If it's coming in by cable, or microwave, how do you black out this program? Mr. PATTISON. I think it's done by notification. The local station has notified the local CATV and says, “We have bought Bambi-Mr. DANIELSON. Or "I Love Lucy." Mr. PATTISON, But “Bambi” is more likely. [ Laughter.] I know you wanted to buy “Deep Throat" (Laughter.] And then they can't show it, I guess I'm interested in what your proposal is, that you really eliminate the nonduplication rules, if we passed the copyright law. Mr. BRADLEY. Yes, sir. Mr. Parrison. Now, the normal argument, transmission or communications argument about that without regard to copyright would have a very serious effect on the local transmission, the fraetionalizat.on of the local market. Particularly it would effect, for instance, the news programs that are produced locally. That is just about the only thing that is produced locally by local afhliates bec sides the “Dialing for Dollars" thing they have in the morning. The whole effort of the local athliate is really in producing news, and that's about it; is that correct! Mr. BRADLEY. Yes, sir; that is essentially correct. Mr. Partison, Will, wouldn't there be a commun.cat.ons effect – never mind the copyright effect wouldn't there be a communicat,one effect if, in fact, the nonduplication rule were eliminated so you can a'ways show things while the local news program is on ? Wouldn't that bay an effect on the lo al advert set that usually sponsors local newst Mr BRADLEY. If I understand your question correctly and I hope I do there is currentiy no pron,bit.on against bring lig in programs of an enterta ument, or other nature, which compete with the local Mr BRADLEY. And certainly, I would admit that if the local news is not an attractive to the eyes of a viewer as something else, he is going to look at something ele I think there might be a beneficial effect in this type of competitor it will sharpen up the local station so that he will make the news 10?? attractive. Mr. PATTISON. Well, my point is, if you are going to show a dup cating program-not a news program, but "I Love Lucy," which is a duplicating program which will be precluded from showing during the local news time, I mean Mr. BRADLEY. I understand now, I did not understand you question. Yes. The answer I gave, I guess, would apply here. Mr. PATTISON. My point is, isn't that basically, fundamer taly, a matter of communications policy, as opposed to copyright pouy, couldn't we leave that to the FCC? In other words, we shouldn't be determining here in this committee whether local news is going to be heard and therefore, all you get s Walter Cronkite and John Chancellor, and the rest of the people. I:.at is not really our area, and shouldn't that be left with the FCC! Mr. BRADLEY. Well, I think, sir, that your question poses a theoretis cal possibility. In our efforts throughout the years to determine an instance of actual damage to a broadcaster we haven't found the first one; and we repeatedly asked for that. So, while there is some theoret ical possibility. I think it's probably not a very real one. I think, too, that we have stood in the past on the position that if there is a demonstrated harm, we would like to know about it, at i we are willing to talk about it and reason. Mr. PATTISON. I just have one other question, and that relate to the whole issue of translators, dealt with on page 19 of your stateme: t. I would just like to have you enlighten us a little bit more about that. I don't really understand the whole mechanism of that, how that works Mr. BRADLEY. A translator is a repeating device that is established in areas where there are holidays in the signals of the broad ast.2 station. Mr. PATTISON. And the translators are installed by whom! Mr. BRADLEY. Well, they are variously owned. In some insta:, e they are owned by the broadcasting station. In other instances they are owned by a group of local citizens; and in other instances by government agency. Mr. PATTISON. And how does that affect Mr. BRADLEY. Well, our point there, is that the bill does not how assess copyr ght hability to government owned translators and we suggest that they are no different from anybody else. it. Mr. PATTISON, What would the government own a translator for t Mr. BRADLEY. That would be a local government which wou d own Mr. PATTON. Oh, I see, just to improve the s gral for the losi people. Mr. BRADLEY. Yes, sit. Mr. PATTISON. OF CATV con'd own a translator, couldn't it? Mr. KASTENME. Mr. bradley. I want to thank you on behalf of the committee for your contribution this morning, the excellent prese "tation of your association. [The prepared statement of Rex Bradley, and suggested amendne tits to H.R. 2223 follow:] STATEMENT OF REX A BRADLEY, CHAIRMAN, NATIONAL CABLE TELEVISION ASSOCIATION My name is Rex Bradley, I am Chairman of the Board of the National Cable Televas, iti. Association and also President of TeleCable Corp., Norfolk, Va, owner and opera or of 15 cable television systems serving 130,000 subscribers in ten states Today I speak to you in my capacity as Chairman of NCTA. The Nantai Cabe 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 others appaers of cable television equipment and services NCTA × 1320 Hurtuber mysteris currently serve 58 million subscribers or 58%, of the nation's 10 a... . în cable TV households. NUTA has previously appeared before this subcommittee to present our views otcopyright revisjon jegislation and also on the new sman's shield issue. We are, of course, vitally interested in matters affecting the CATV industry and its subsribers and we thank you for the opportunity to appear before you at.1 assist you in your deliberations. Mr. Chairman since time is limited and there are many groups to hear from, 1 will not present a de vied description of cable televiston the nature of its servlees and the future rose we beneve 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 commultée so desires However I do believe tha? because of the complexity of the issues now under ensideration, and because of the potent ai impact on the puble 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 deve, pienf I will state at the outset that we believe that copyright was conceived in the polica interest to assure that creative minds would be encouraged by mem.petisation to produ e and distribipe the fruits of that creativity Copyright was hot colceived 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 «pes fl-ally on HR 2.3 Carle television first developed in the late 1940s in Pennsylvania and Oregon as a marijum master ante titia service in response to commercial broadcasting s inatioły to adequately serve on lying areas. Indeed by brit ging programming to con toga tjes that otherwise wot, d have received none CATV performed a bebeBoca, fose for bodh broadcasters and the public Grad an ly, broadcasters, perceiving that cable growth could result in addi fional competition among broad asters for and.chce began urging Congress and the bXX for ev t'a ta rabie » growth Coalheteilig in the mid 60s and throughout the decade the FCC gradually extended its jurisdicty to over CATV operations. As is Well known now †CC restalatory actions in 1986 and 1968 imposed a virt al six year freen on expan mit of cabe hi the hations latest tõevision markets where approximately of the prato a residen In 1972 the PCC isijed Its Third Report and Order which was designed to Iepeat a controled growth of cable in the larger urban markets. Then FCC Chairbeth, Barch characterized the play as one designed to inlegra e cable television into the national cotusti.upi.eafiotis structure Arqu=ded to thy test funny CAƒœnd x A) is a stationary of those 1972 FCC 4458 Waden lave fuffu, y reen called among the lost coli piex rules and Ng »alintis ever dov,sed by the nind of in an İriting the ÞUCK BÍy Vear froze cilic growth did not hait coupéctely Oper Forged to expred de atvas Where systems were already in operata na d I. *1. se tin, q'ed areas of the cour try antude of the freeze pote Also, there aften faen was given to prov„ding addi'i fal N TVICES for uxatuje originating is al cable television service, or about 15 percent of the nation's television housebord Franchises have been granted in another 2,600 communities, but are not yet jam ating. Applications are pending in approximately 1,000 additional comi 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 menig ment, construction, engineering, programming, finance and marketing caja In that necessarily broad sketch of cable's development I have purpose! 25 ted reference to copyright. Let me briefly retrace my steps focusing on the be the copyright question has played in cable's development. As cable growth continued, alarmed broadcasters charged that cable telesa e systems were engaged in "unfair competition" when they carried programs m. out permission or payment. Those claims of unfair competition were 1.1 a tested and rejected in 1964 by the U.S. Court of Appeals in the 9th Circa" During this same period the first copyright suit was brought against tw- CAZI systems by United Artists Corp. Later a second suit in which the iss' weg" beyond liability for simple reception was brought by CBS. Primarily de 1 adverse rulings by the lower courts in the United Artists case, NCIA PË committed itself to work for a legislative solution to the copyright profies así also undertook negotiations with representatives of the broadcasting at-l Lot 3 picture industries. Words cannot really reflect the atmosphere in the ca vision industry following those adverse lower court rulings. The prospect was simply one of total bankruptcy-turning the CATV industry lock, stk and barrel over to the motion picture industry, In 1968 the Supreme Court, reversing the lower courts, held in the Ur, ml Artists' case that CATV was not liable for copyright in receiving of the al signals. Five months later the FCC proposed and adopted as interim procedures retransmission consent" rules which required CATV to obtain peri 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. Neeses to say, in the ensuing four years virtually no such consent was granted Negotiations between the cable and motion picture industries continued of 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 Telecollida. # tions Policy and the FCC fashioned the so called "Consensus Agreement under which the parties broadcasters, copyright owners, and cable afhred × 159ff for copyright legislation and approved the outline for new FCC cable regula's má Of course, the Congress was not a party to this agreement. Subsequently the Supreme Court in 1974 ruled in CBS v. TelePrompTer* at cable television systems were not liable for copyright for carriage of any trad cast signals under the meaning of the 1909 law. Following that decision the 1 x 2 shifted to Congress and renewed efforts to revise the 1909 law with, anương maij other things, provisions for cable television I have reviewed these highlights in an effort to demonstrate the com¡sex.!! of the cable copyright problem, the intense pressures created for the ca♪ dustry by it, and the almost inextricable interrelationship between copyright and cable regulation During these hearings I am sure you will hear charges principmy fr brondensting and motion picture representatives- to the effect that be cât de television idustry has not lived up to its copyright responsibilities that ** is an unfair competitor, and that the industry has attempted to delay restat, & of the copyright issue. We intend not to engage in Who struck John" rhetoric in these bearings I can only say that throughout this frustrating period NCTA has atter,pred 8 every way possible to live up to its fundamental commitment to work for far copyright legislation Legislation fair to all parties concerted fair to a y 2'4 developing industry and fair to the present and future CATV subscribing plje who post assuredly will be affected by imposation of copyright liability ot, en' • As the tubers of this subcommittee may be aware there are divisions within the CAIV industry over the psue of copyright payments Positions range from t copy right latility at all, to no liability for sigtimis received off the st" ani mo labors for a cor,plement of signals that can reasonably be defined is adequate service. I believe, however, that the majority of the members of NCIA » the Association's efforts to work with Congress in arriving at fair and reasonable legislation. Before addressing myself to specific provisions in HR 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 product 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. Consequently, copyright legislation is not only for the benefit of the owner of a work, but equally as important, for the benefit of the public. In this context it is important to keep in mind that cable television through its reception 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 Americans would be denied the fruits of creative labor. Congress should 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 Congress should be aware that imposition of copyright liability will have an impact on the CATV subscribing public. As mentioned, those subscribers value highly their CATV service. I am sure that members of this subcommittee have on occasion heard from CATV subscribers when those subscribers 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 gold 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 influence of the CATV manager. Many expenses are subject to the same inflationary pressures experienced generally throughout the country, with the normal competitive influences between suppliers tending to moderate the rate of increase. However, in addition, cable 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 operators to obtain and maintain a favorable profit margin is through additional subscribers, or by increasing subscriber rates (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 Copyright Royalty Tribunal in the Library of Congress. This Tribunal would be composed of three persons and would be empowered by 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 five years ad infinitum. Mr. Chairman, we are opposed to the establishment of this Tribunal, and we further believe that Section 8 of the bill is laced with infirmities that represent a very serious threat to the future viability of the cable television industry and Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932). |