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diverted from construction of new systems and the attairment of a subscriber and revenue base needed to support the growth and development of the industry. Respectfully submitted,

WARBURG PARIHAS BECKER, INC.
By Jons D. MATTHEWS

JOHN I. DAVIS

Its AttorneyR,

SUMMARY OF PROJECTED AVAILABLE DEBT FUNDS FOR THE CABLE TELEVISION INDUSTRY

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Mr. KASI SMEDER. Our next witness this morning is Mr. Robert Cooper, Executive Secretary of Co:munity Antenna Television Association, Mr. Cooper, you have a statement. You may proceed, and perhaps you would like to introduce your asso intes,

TESTIMONY OF ROBERT COOPER, EXECUTIVE SECRETARY OF COMMUNITY ANTENNA TELEVISION ASSOCIATION

Mr. Coor. Mr. Chairman, I would like to introduce the gentlemen here with me. The gentleman on ny left is Mr. Peter Athanis, general manager of Southern W. ons.n Cable. I e gentleman on my right as Mr. Kyle Moore, the president of the O'shop a Cry CATV Associa tion. The gentleman on my near left is Mr. Richard L. Brown, the general counsel for CALA.

Mr. Chunian and members of the Cooper. executive d.res tor of CALA.

committee, I am Robert

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CALA, or the Community Antenna Telev von A pe ation organ.zed in 1973 ↑) at today has as pet hers sotte foo CALV systems throughout the United States Orgely organized to focus on proposed copyright legisht on, CAIA as broadened its member-up and scope of activities to and', le hmatters as par to pating in FCC proceedings, Generally state), CAIA's philosophy recognizes that the roots of CATV de wat an the cut maraty hence Our falde, & fame abandoned in the 10%TY DONCIA.

We are not here to pull pun-les or priser! dim'on stle truths, we are here to present real truths, nor will we play a lengthy numbers gate. You should know, I believe, however, that there are by our cont

some 25 state and regional associations that have voted against the NCTA position that was previously testified to. I think you can count by the fingers of one hand the remaining State and regional associations that still give unqualified support to the NCTA position.

Furthermore, the Pennsylvania State Association and the NCTA's largest single member company, TelePrompter, have requested and received time on their own to present views contrary to NCTA. TelePrompter and the Pennsylvania systems, it might be noted, serve some 2 million homes between them, which is approximately 20 percent of the entire cable industry. Now, these statistics reveal only conclusions, not reasons; and that is perhaps what we will address in our testimony,

too.

We submit that the only reason CATV copyright presently has any support is not because the copyright-supporting splinter of the industry believes that CATV should pay, but because, as you can determine from testimony before you, it is politically expedient to do so and because of something called the Consensus Agreement, The NCTA, NAB, and MPAA can try to explain the agreement to you. For our part, we will concentrate on the merits as we see them, of the copyright issue.

CATA is here today because its membership does not believe that the motion picture industry is entitled to place its hands in the pockets of CATV operators or CATV subscribers. We reject the joint copyright position of NCTA, NAB, MPAA, that CATV owes something called "reasonable copyright."

The imposition of copyright on CATV is, in part, a tax-if you will allow the word-on the viewing public. We also believe it to be a deception to an American television-viewing public which has been told time and time again of the benevolence of broadcasters and broadcasters who delivered "free television."

As we all know, it is not a free system-it is an advertiser-supported system which means we all pay once for the programs we watch by paying higher prices for television-advertised products. Additionally, approximately 10 million households must also pay a second time by subscribing to CATV. Now, through copyright legislation, 10 millionplus cable homes will be asked to pay yet a third time.

Remember that probably CATV would have never come into existence if the FCC had fastidiously followed the Congressional mandate of Section One of the Communications Act "to make available, so far as possible, to all the people of the United States, a rapid, efficient, nationwide and world-wide wire and radiocommunications service."

Yet, in our view, some 25 years after the FCC commenced fumbling with television allocations, 2 million households, or 3 percent of all homes, receive absolutely no over-the-air television signals today. In fact, it is estimated that over 3 million homes, or some 15 percent of the total population, still do not receive the three national network signals off the air. It is CATV, however, that over the last 25 years has filled gaps in the FCC's allocation voids and, incidentally, lent a boost to your congressionally passed all channel receiver law.

It is antithetical, then, to your Communications Act purposes to saddle CATV, and through it the American television-viewing public with a tax for the privilege of watching.

Now, copyright is a creation of the legislature under a constitutionally delegated power. Also under the Constitution, you have spe

cifically been delegated power to make laws affecting interstate commerce and have done so vis-a-vis broadcasting by passage of the Communications Act. Today, the Communications Act and Copyright Act are in a state of apparent tension. I say "apparent because the program suppliers would have you believe that the main purpose of copyright is to give authors money so that they will have incentive to write. This is simply not true. Copyright is not to reward authors, but to insure that creative works find their way to the public. The Supreme Court has pointed that out in economic terms, pointing out that copyright grants are made in "the connection. that encourageinent of individual effort by personal gain is the best way to advance public welfare."

Thus, the tension dissolves when it is realized that Congress has also established a Communications act and created the FCC to fulfill similar, if not identical, purposes. Those purposes being to secure the general benefits of radio and television programing to all the people of the United States and to encourage their larger and more effective use in the public interest.

In these stated purposes it is inconceivable that the FCC's own general counsel could testify before you that CATV should pay just because the argument has been around for a long time. The FCC's Mr. Hardy desires to see resolution of this issue merely for the sake of resolution. His desire can be accommodated just as well by deleting CATV from this bill.

There are other voices in and out of the CATV industry who say that "the copyright issue must be solved-it must be put behind us because until it is laid to rest, the investment community will not advance the capital required by cable to expand and grow."

We have no quarrel whatsoever with this line of reasoning, except when it is expanded to the illogical conclusion that the industry should simply pay copyright merely to expedite the removal of this uncertainty. Clearly, CATV's future is better served by the removal of CATV from copyright legislation.

And then there are voices in our industry who say, "We can afford to pay" with remarks like "What is one or two, or two and-a-half percent of our gross?" Well, let me tell you what it is.

In December 1973, CATA, at the specific request of Senator John McClellan prepared an economic study of more than 250 CATV systems, ranging upward in size to 5.800 subscribers. In that study, which we will submit for the record, CATA found, for example, that for 1 percent of gross proceeds to copyright a system of 1,000 to 1,500 subscribers we would experience a reduction of net revenues of 13.8 percent. This happens to be the equivalent, then, of 1 percent of gross. 13.801 is the number.

Frankly, the industry cannot afford to pay that, and that is the truth. Now, lest this be considered solely as a flat dollar exemption, such as the $100,000, which has been kicked around prior to my testimony, it is not. Copyright will also adversely affect larger systems, including multiple-owned systems.

We also regard as fundamental considerations the following questions which should be asked of every proponent of copyright liability for CATV:

1. Why should this industry pay?

2. Who will really pay? And,

3. Who will receive the payments?

Consider this, there are hundreds of thousands of hospital ba around this country, offering television service at a price. P rent a television set and the set supplier, the hospital, and matters" man all profit. The rates are as high as $3 a day, nationally, ac to the hospital association. This is an unmolested industry, lost a television, HOTV, possibly with gross revenues exceeding cable. W. are they not in the copyright bill? Simply because, providing te service of facilitating television viewing is their job. The E Court has twice held that the same rationale applies to CATV, & these cases of the Supreme Court are exceedingly instructive. Fr. must lay aside the program-supplier-sponsored misconception that "'cases are irrelevant-relevant, pardon me, because they dealt o'y the 1909 Copyright Act. Of course, the Supreme Court was dea ́ ́, with the 1909 Copyright Act, but the decision was made "w regard to changing technology"; that is not based on 1909 con ape In fact, the Court held:

"Mere quantative contribution cannot be the proper test to det mine copyright liability in the context of television" broadcast. ; If it were, many people who make large contributions to television, v. ing might find themselves liable for copyright infringement-notes | the apartment houseowner who erects a common antenna for his te ants, but the shopkeeper who sells or rents television sets, and, in 19 every television set manufacturer. Rather, resolution of the fore us depends upon a determination of function that CATV 4 in the total process of television broadcasting and reception.."

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The Court reasoned that television viewing was a combined a tivity, a combined activity of broadcasters and viewers. Broad a perform, viewers do not. Broadcasters are active performers, ver passive beneficiaries. CATV "falls on the viewer's side of the ... The Court concluded as a matter of separation of powers-a matter of copyright policy-that the job of accommodating "varne competing considerations of copyright, communications, and ant trust" belonged to Congress. The Court did not intend that Co in fact, adopt CATV copyright liability.

Then came TelePrompter-CBS, where the Court was faced w microwaved, long-distance signal importation-more than 450 me by CATV systems that also originated their own programs, also local advertising, and also interconnected with other systems. Tie Court found no copyright significance to these auxiliary activities ar i found that the distance the signals traveled did not "alfer the fit. tot that CATV performs for its subscribers." In fact, the Court statel

The reception and rechanneling of these signals for simultaneous view:"2" essentially a viewer function, irrespective of the distance between the broadenst ing station and the ultimate viewer.

Mr. Chairman and members of this committee, when a television sta tion broadcasts, the broadcast is in the public domain. The Supret) Court characterization of what CATV does is as true today as t was when the Court made its decision. What CATV does its verer function-is not altered by the words of the 1909 act, or H.R. 2--Those advocating CATV liability have a high burden of pers‚asion because CATV does fulfill Communications net goals by mas television more widely available, or often available for the first time.

It is a viewer-oriented medium, as are translators, master antennae, rooftop antennae, and television sets themselves. None of these enti ties are prospectively liable for copyright under your bill, and none should be, for they are all part of the process of nationwide dissemination of programing that you have legislated in the Communica

tions Act.

In fact, in TelePrompter-CBS, the copyright holders argued that CATV prerelease of programs would dilute the profitability of reruns and other syndicated properties, thus removing incentive to produce television programs. The court rejected this argument. It recognized that the appropriate nexus was missing, that is, copyright holders do not receive money from the ultimate user-the television viewer the money comes from the advertisers.

In fact, the Court recognized that the distant signal carriage does not interfere with the "copyright holders' means of extracting recompense for their creativity and labor"; and that, in fact, CATV provides a larger viewing market to the benefit of both the advertiser and the Copyright holder.

We submit that CATV should not pay because CATV does not owe. This leads to the question of who would really pay, were this bill to become law. Well, there is no doubt that your imposition of copyright on CATV would be, at least in part, a consumer tax on television viewing. Must the cable viewer himself pay it? It could stop at the cable company, as it was pointed out, but it will not because there are no free lunches in this world.

Is it a large amount? At the national average, $6 per home. You have all the figures before you. The copyright bite works out to $1.50 per home per year for the 2.5-percent rate, which is irrespective of the number of signals carried.

In the seven congressional districts of this committee, there are approximately 73,000 cable homes. Under this bill, these 73,000 homes could pay to copyright holders up to $131,400 this year.

So, do the television viewers care? CATA has already received more than 200 community resolutions oppo-ing this viewing tax, from cities as diverse as Eau Claire, Wis, and Granville Village, N. Y.

The e resolutions from municipalities will be supplied for the record. Further, the US. Conference of Mayors and the League of Cities has also adopted a joint resolution in 1974, unanimously opposing the incluson of CATV in the copyright bill. The message, I believe, is that the constituents are concerned about higher CATV charges that will result from copyright legislation.

The third question concerns to whom copyright panents would be made Mr. Jack Valenti, president of the MPAA, told Senator M-Clellan's committee on the Judiciary on August 1, 1973, that he also represents something eslled the Corm ttee of Copyright Owners, composed of eight independent suppliers of copyrightë i television programs, which are listed in my text. Mr. Valenti testified:

The programe suppled by members of CC0 to stations, and thereby to enble avatars, constitute by far the largest part of all copyright prograins carried by television and emble,

In a CATA study of prograns broadcast in New York City daring a recent week in the month of March we found that 16 port of all coj vr-gå t on file evening programs on CBS are in fact owned by those

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