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the intermediate lenders since the bulk of these institutions hare CATS !
units and have specific CATV loan budgets for 1975 and 1970. In the site.
the least accurate prediction comes from the banks since few hare CATI sr
ists and a number of banks make loans to the industry through on :
lending unit or division, Finally, the widest range in the prediction de
the insurance companies and this is a function of demand, credit and na'r is
erally, CATV will be competing in insurance companies with an inspire
to upgrade their placement activities to A or Baa quality and met (ATI :
rowers could not qualify for such credit ratings.

Of particular importance to the review of the 1977 deadline, virtually Day '* * surveyed felt that they were in a position to help fund a significant port ! the more than $ 100 million required capital projected by the (NOTA bring systems into compliance, Adrersely impacting on the ability or dos ! these institutions to supply such funds is the fact that most (ATV HIT 1,9 are now judged by lenders to be fully leveraged based on their current are not and cash flow levels. Accordingly, new credit extensions must be base jected increases in subscriber levels, additional revenue producing "18.. or other cash flow generating sources not for replacement of equipterit It! *** jertions of available financing in Chart 1 are for new builds or Pr!r******* existing systems, refinancing of existing systems to longer maturiin 9'' acquisition loans. The basic assumption of the lenders is that the pr* ! their loan will be used to build plant in front of potential substrike ata enough cost that the actual operating cash flow will be sufficient to all.1.2*! lonn over a fixed period at a giren interest rate.

Specific examples of lender comments might be helpful. Firat, ****pr! insurance companies who lend to one of the top 10 public CATV Moti: N; Operator companies (MSO's") hare informed the president of that JN **** in their judgment the pumpany is fully leverage and that they will

n i to lend any funds for 1977 compliance without an inersi in unter: scribers, an increase in cash tiow and or an increase in revenue p . ** mervices, Second, a mid-west bank reported that they had found that tes ! not lend as much as their borrowers reuested wln complia. * *a! ** because many of the rules did not have an economic justification- thai cient potential revenue to cover the costs. Finally, an intermediate leiderter that they were concerned about their ability to continte serug te ir ili clients b ause these clients were being foried to borror additaan ** comply with 1977 when the lender actualis pended to me three mais reduce their outstanding balance in acrordance with their note agtertje 1.

An example of the impact in incred cat on the debt cajar of a *****,1 might be the following. Assuming a system in a 10) (NX) home (43*3.11.11' '1 ' * industry standard of 100 homes per mille and an asraspent of osmomen: or $7,000 per mile, the plant cost wouid be $7,000.

O NI ANI! tip! brobitor borrowed this sum and achien 31% wnetration of tlie 1 )! A would have debt per subscriber of $233. The alility to bort all this tre bonn by the following. Asuming a 10 year loan at lo, intensa la monthis suhkriber rate with operating costs of 40, Mu't11k in mn: jute' trontliy a h flow level of $330 #7:11 anortize $*) of debt pr*"' 71*** Ninx Band Tables bas on * A) aynilable in the w 10 31r IL""T 10 interest). Bewon murripit mandards, this would mean a Ted** to thinnce as most lenders would want to have a marzin of we'y nai! the $3 difference between $ and $33. Content!), Izet 18. * * protehly not lona more than $10*rsul seriber

If for Fr( rule ampliana purj**the Irineholder is in het trat 1.d had to increase his ***** pr mile from $7.0*) IO XIX with a pr' - ! restant, the debt wrnriker would



! ** & In dat would not result in inesti 40241 18. stiker them ! ****** propio leid mit17 a 14*? mort & debe the franchembriler ofte nie te rruget thert (1:1d. For purt of this afiniinia W iri prossinn the infusion of uity a nal from the trip: 1 * as to Impoffet in part by the nod to b rew the initial oil* ***

In *0.miry, but wel m n WPB's survey of prod llicrome lettere tex ("AT! frastry, it doen «* API*Ir that the mesure will

b e fo» fundat." ** u monde is not the cautual try uirement generator te 17* ,

herefore irre that only to 1 md ) 1** * pal 1. hau , 1., n, 1 Hal it in the tal, il ell.bair at and will be I V

Y: KISTE MEILR. Our next witness this m !**!, trative Secretary of Community de * 1. Jr. Cooper, you have a statement. ) * would like to introduce your associat


Vo fix Mr. Chairman, I would like to in
" !... Tiup gentleman on my left is Mr. )
12 Southern Wisonsin Cable. The ger

Kult, the president of the Oklahoma
Sni m an on my near left is Mr. I

11for CITA.
Milanman and members of the subcon
*** (

Mit director of CATA,

Id up the Community Antenna Televisio goox oganized in 1973 that today has

liit timughout the United States. ( Hint forrige mand copyright legislation, CA

**. and ope of activities to include
:, Fir proceedings. Generally state

Totat tip roots of CATV lie within
"" 13.1:ans alatidoned in the 1960's by the
i op to pull punches or present

**to prirent real truths, nor will we p.
P o

know, I believe, however, tha


Bioritml from construction of new systems and themes attainment of a suderiler atud protse bas needed to support the growth and deieloponent of the industry. Iepuitully submitted,


lis tetorni ya



IN 19.3 AND 1976
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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 XCTA'S largest single member company, TelePrompter, have requested and received time on their own to present view's contrary to NCT 1. 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 NCTI, 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 CĂTV 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 beliere 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, arproximately 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 exist ence 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, nation. wide 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 todar. 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 encouragement 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 Jr. Hardı 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 then 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 SIStems, 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 ques. tions 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 rooms around this country, offering television service at a price. Patients rent a television set and the set supplier, the hospital, and maintenance man all profit. The rates are as high as $3 a day, nationally, according to the hospital association. This is an unmolested industry, hospital television, HOTV, possibly with gross revenues exceeding cable. Why are they not in the copyright bill? Simply because, providing the service of facilitating television viewing is their job. The Supreme Court has twice held that the same rationale applies to CATV, and these cases of the Supreme Court are exceedingly instructive. First, one must lay aside the program-supplier-sponsored misconception that the cases are irrelevant-relevant, pardon me, because they dealt only with the 1909 Copyright Act. Of course, the Supreme Court was dealing with the 1909 Copyright Act, but the decision was made "with due regard to changing technology”; that is not based on 1909 concepts. In fact, the Court held:

“Mere quantative contribution cannot be the proper test to determine copyright liability in the context of television broadcasting. If it were, many people who make large contributions to television viering might find themselves liable for copyright infringement-not only the apartment houseowner who erects a common antenna for his tenants, but the shopkeeper who sells or rents television sets, and, indeed, every television set manufacturer. Rather, resolution of the issue before us depends upon a determination of function that CATV plats in the total process of television broadcasting and reception."

The Court reasoned that television viewing was a combined activity, a combined activity of broadcasters and viewers. Broadcasters perform, viewers do not. Broadcasters are active performers, viewers passive beneficiaries. CATV "falls on the viewer's side of the line."

The Court concluded as a matter of separation of powers-not as a matter of copyright policy-that the job of accommodating “various competing considerations of copyright, communications, and antitrust” belonged to Congress. The Court did not intend that Congress, in fact, adopt CATV copyright liability.

Then came TelePrompter-CBS, where the Court was faced with microwaved, long-distance signal importation-more than 450 miles by CATV systems that also originated their own programs, also sold local advertising, and also interconnected with other systems. The Court found no copyright significance to these auxiliary activities and found that the distance the signals traveled did not "alter the function that CATV performs for its subscribers.” In fact, the Court stated:

The reception and rechanneling of these signals for simultaneous viewing is essentially a viewer function, irrespective of the distance between the broadcast. ing station and the ultimate viewer.

Mr. Chairman and members of this committee, when a television station broadcasts, the broadcast is in the public domain. The Supreme Court characterization of what CATV does is as true today as it was when the Court made its decision. What CATV does its viewer function is not altered by the words of the 1909 act, or H.R. 22:23.

Those advocating CATV liability have a high burden of persunsion because CATV does fulfill Communications act goals by making television more widely available, or often available for the first time.

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