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Office move into it too, it just seems to me that the industry is going to be swamped in paper.

Mr. RAILSBACK. Am I correct then, that you would favor the FCC handling it?

Mr. FORD. I think there is no question that on the technical aspects of cable television we must have a uniform system. The FCC must have jurisdiction to regulate certain aspects of cable television, there is no question about that.

Mr. RAILSBACK. Thank you.

Mr. FORD. There is one thing I would like to add, if I may. There was a statement to the effect-or a question--concerning the Consensus Agreement.

Within 3 months after the Consensus Agreement was issued, the Commission issued its statement, its Rules of 1972, and in the course of that, in my view, they abrogated the Consensus Agreement within 3 months. And not only that, but within the last few weeks they issued another report in Docket No. 19995 in which they repeated that.

As far as I am concerned, the Consensus Agreement wasn't an agreement to begin with, never has been, and shouldn't be recognized at any time by anybody.

Mr. KASTEN MEIER. Mr. Ford, I just have one more question. You were talking about the Commission; do you agree with its rule on exclusivity, 76-151, the rule referred to by Mr. Bradley?

Mr. FORD. I am probably its most ardent foe. I have presently a case pending on behalf of Mr. Barco who will be here in a few moments, before the Court of Appeals, and hopefully they will disagree with about six other circuits that have held the nonduplication rule valid. I think it is invalid, I think it is terrible, and I hope to get it knocked

out.

Mr. KASTEN MEIER. The reason I asked you, to the extent that you and anyone else rely on those as a reason for us not to legislate in the area of copyright because the FCC made these rules to protect these people, and therefore we should rely on these rules. But if in fact we can't rely on these rules either, there may not be very much to rely

upon.

Mr. FORD. Well, hopefully, within a few weeks, there will be nothing to rely upon. [Laughter.]

Mr. KASTEN MEIER. One other question, and it is just a matter of information, I don't know that it really pertains to what we are doing. The question is, do cable system managements have the right to deny membership by any applicant up or down the block in the city?

Mr. FORD. This is a very young industry, and some of the franchises issued were two paragraphs, one was just the consent to hook up wires. And as the industry matures, as new franchises are being written, as cities become more mature, then, I think, we will find a definite obligation that you cannot deny service, the same as a public utility.

Mr. KASTEN MEIER. Certainly broadcasters cannot deny service to anybody. But to the extent that cable television is different, that you do have a subscriber, you could either make the contract with such a person, or not. It may differ in terms of the potential market.

Mr. FORD. I have never heard--and I have been pretty active-but I have never heard of any difficulty at all because every cable operator I know will get every connection he can get.

Now, there are problems. For example, supposing a particular house is out in the country 8 miles, by itself, and your rate is $4 a month: it costs $4,000 a mile to run a cable out there, then you have problems. But probably the franchise is so written as not to include those outlying areas.

Mr. KASTEN MEIER. Well, I think theoretically you might have a problem there, you might have a subscriber who is an electronics expert, you might have a subscriber on the system who originates and transmits, who might transmit himself. I don't know if that would be possible, but he would transmit to his neighbors up and down the street for a lesser fee. I was just wondering what the relationship would be of the original cable operator and the subsequent operator in the field who is obviously not paying copyright, other than to retransmit such signals.

Mr. FORD. Well, this raises a bunch of questions. Most cities do not grant exclusive licenses, or exclusive franchises, at least they have not in the past. But most of them now have ordinances which prohibit the operation of a system-and they define "system"-without a certificate from the city. The Commission defines 50 customers as a cable system before you become subject to those various rules.

But basically there is no problem at all, most of the ordinances exclude apartment houses. And of course the legislation here exempts apartment houses. Now, some of these apartment houses may have two, or three thousand apartments in them and yet, they will be exempt under the bill which is pending here; whereas a cable system of a thousand customers in a little small town out here will be liable. So, to that extent it's an inaccurate bill.

Mr. KASTENMEIER. Well. I was looking, theoretically, at what problems could arise.

Mr. FORD. Yes.

Mr. KASTENMEIER. In any event, the committee thanks you again for appearing this morning.

Mr. FORD. I tell you, I hope I'm not going to be back in here in 10 years.

Mr. DANIELSON. I hope you are, we'll have a better bill.
[The prepared statement of Frederick W. Ford follows:]

STATEMENT OF FREDERICK W. FORD ON BEHALF OF THE AD HOC COMMITTEE OF
CONCERNED CABLE TELEVISION OPERATORS FOR A FAIR COPYRIGHT LAW

I. INTRODUCTION

Mr. Chairman: My name is Frederick W. Ford. I am a member of the Washington, D.C. law firm of Pittman Lovett Ford and Hennessey, with offices at 1819 H Street, N.W. I appear here today on behalf of the Ad Hoc Committee of Concerned Cable Television Operators For a Fair Copyright Law to suggest an Amendment to the Bill and to support passage of the Bill, as amended.

H.R. 2223 is almost identical with S. 1361 which was passed by the Senate at the Second Session of the 93rd Congress. Senate Report No. 93-983 from the Committee on the Judiciary and Senate Report No. 93-1035 from the Committee on Commerce to accompany S. 1361 contain the views of the Committees on that Bill. The Report of the Judiciary Committee (p. 100) contains a history of the Copyright Revision Legislation, a sectional analysis of the Bill and discussion.'

1 There is attached hereto as Annendix 1 a Memorandum to The Ad Hoc Committee of Concerned Cable Television Operators For a Fair Copyright Law on S. 1361. dated November 15, 1974, explaining the reasons the industry has tried in the past to compromise this issue. All of those efforts were unsuccessful. The 1974 Supreme Court's decision in Tele PrompTer v. CBS, infra, now places a totally different complexion on the cable copyright issue as to distant signals authorized by the FCC to be carried.

II. PERTINENT PROVISIONS OF H.R. 2223

Briefly, Section 106 gives an exclusive right to a copyright owner to "display" or "perform the copyrighted work publicly" subject to Sections 107-117. Section 111 provides an exemption for certain secondary transmissions, including hotels and apartment houses,' institutional material, certain carriers and non-profit groups. Subsection (b) provides for full liability for the retransmission of a Pay-TV work. Subsection (c) provides certain compulsory licenses for the community antenna function of cable systems. Notwithstanding the compulsory license, full copyright liability is imposed if the secondary transmission is not permissible under the FCC rules or authorizations. In short, the public will ultimately have to respond in cash for an operator's violation of FCC rules which certainly has nothing to do with copyright.

Subsection (d) provides for filing certain information with the Office of Copyright, depositing royalty payments there, based on a sliding percentage scale of gross receipts from subscribers, and for the distribution of those funds. Subsection (e) contains various definitions.

Section 801 provides for a Copyright Tribunal to adjust the royalty base as the arbitrators think, if not overruled by the House or Senate within 90 days.

III. DIVERSE POSITIONS

There are strong differences of opinion between the Register of Copyrights, broadcasters, copyright owners and most CATV operators concerning liability of CATV for copyright fees. The Register of Copyrights, broadcasters and copyright owners favor liability of community antennas for copyright. As I understand the situation, the Register of Copyrights' position is not whether but how much CATV should pay. Copyright owners would like the Congress to impose complete liability on community antenna systems. The broadcasters' interest, in whether or not community antennas pay copyright has always been obscure to me, unless the more expenses community antennas have, the higher the rate and the fewer subscribers they will have. Copyright then becomes a device to protect broadcasters--not to compensate the author.

The broadcasters were not very obscure, however, in 1971 when NCTA and the copyright owners were about to compromise their differences. The National Association of Broadcasters and the Association of Maximum Service Telecasters went to the White House Office of Telecommunications Policy and sparked enough pressure by it and the FCC to cause the NCTA Board of Directors to capitulate by a one vote majority into accepting the iniquitous "Consensus Agreement" without change. Apparently, the NCTA still feels committed in principle to pay "reasonable" copyright despite the coercion and even though the FCC repudiated the "Consensus Agreement" within three months after it was initialed as it had to do. But the commitments of the NCTA Board then or now really have no bearing on the issue facing this Subcommittee. Those commitments cannot determine the public interest or, in our opinion, justify this Committee in recommending that the public pay twice to see the same show. The Ad Hoc Committee opposes the payment of copyright on the community antenna function and suggests an amendment to the Bill to eliminate copyright liability of community antennas for carriage of television signals."

What defense can there be for the provisions of this Bill that establishes copyright lability based on the method of the viciers' payment? To wit, hotels and apartments are exempted, as indirect payors, and CATV subscribers are included as direct payors. It is unlikely that the Courts would accept such an arbitrary distinction even if the indus tries involved agree to it.

NTCA & Copyright, The History Recent Board Action, The Future (Dec. 1974. p. 9). Cable Television Report and Order, 36 FCC 2d 3, 27 (1972). See to same effect, First Report and Order in Docket No. 19995, 40 Fed. Reg. 17727 (1975).

The following amendment to section 106 is suggested: Notwithstanding the provisions of section 106, the following are not infringements of copyright:

"(5) the further transmitting to the public, by means of broadcast receiving equip ment of whatever design, including antennas, and related equipment, wherever located, which receives and makes available by means of cable or wires and related equipment to Individual reception sets of the kind commonly used in private homes, of a transmission embodying a performance or exhibition of a work; Provided: The further transmission is made without altering or adding to the content of the original transmission and no direct admission fee is charged for the privilege of seeing or hearing such transmission and the receiving apparatus is not coin operated."'

27-786 ()- 76 p. 142

IV. THE ISSUE

The Ad Hoc Committee does not view the matter of copyright payments as an issue between it and the Office of Copyrights, the copyright owners, the NAB, AMST, or NCTA, because none of them will pay copyright-only the public ultimately pays copyright on television programs. The issue here is between the copyright owners and the subscribing members of the public to community antennas. That issue is as follows: "Should the Congress, contrary to the reason and logic of the United States Supreme Court, on two occasions, create the legislative fiction that CATV is engaged in the display or performance of a copyrighted work publicly and is, therefore, liable for the payment of copyright fees which, of course, it would have to collect from the public as a part of its antenna service?"

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The proposed legislation would create this legislative fiction by defining the right to display or "perform the copyrighted work publicly." The definitions of "perform," "display," "publicly" and "transmit" in Section 101 of the Bill intend, according to the Committee Report, to mean that "A cable television system is performing when it retransmits the broadcast to its subscribers." The right of public performance in the copyright owner is not limited by any "for profit" requirement. Section 111 of the Bill proposes limited exceptions from liability of CATV and establishes communications policy-the proper function of the Commerce Committee."

V. THE PUBLIC SHOULD NOT BE REQUIRED TO PAY A SECOND COPYRIGHT FEE FOR THE SAME PROGRAM BECAUSE OF THE TYPE ANTENNA IT USES

The Office of Copyright makes its case for CATV copyright liability on the fact that CATV charges its subscribers a fee for its antenna services which makes a profit and failure to share these profits could damage the copyright. The Supreme Court disagreed with these assumptions and found otherwise in TelePrompTer Corp. v. CBS, supra n.2. If the Office of Copyrights' theory of liability is correct, which it is not, then anyone who makes a profit, directly or indirectly, from a performance of a copyrighted work should be liable. This liability would run to wire and receiver manufacturers and countless other business enterprises which enable the public to view the performance.

The fact that CATV makes a profit, by assisting the TV station to deliver its programs to the public it is obligated to serve and for which the copyright owner has been paid, has no bearing on whether the public should pay copyright fees via CATV. CATV services keeps the copyright owner honest by delivering the signal carrying his program to the public for which he has been paid.

At the present time, a sponsor who buys a program usually pays the copyright owner for one performance over one or more stations. The sponsor pays the copyright owner, directly or indirectly, for tickets to the show for everyone within the grade B contour of the stations televising it and as far beyond that contour as it can be received. This cost is passed on to the public eventually in the purchase price of the product.

It is a scientific fact, recognized in the Sixth Report and Order," however, that over average terrain only 90% of the locations in the Grade A contour receive an adequate signal 50% of the time, and within the Grade B contour only 70% of the locations receive an adequate signal 50% of the time. I will venture that most sponsors paying for a program think they are getting a potential of 100%%% of the locations 100% of the time, but that just isn't so, even though the copyright owner is probably collecting for 100% of the locations 100% of the time.

A community antenna television system within the Grade B contour merely aids the sponsor in getting his money's worth from the copyright owner and the station by assuring the sponsor that anyone who desires the signal will receive it clearly, and thus increase the potential audience. Certain copyright owners are not satisfied with this. They collect from the sponsor who recovers his cost from the public and they would like to collect again from the CATV operator who must also pass his cost on to the public. Some way or other it does not seem right for the public to have to pay for "two tickets to the same performance." No one has

• Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968); TelePrompTer, Inc. v. CBS, 415 U.S. 394 (1974).

7 Sections 102, 106, HR. 2223, 94th Cong., 1st Sess.

* Senate Report No. 93-983, 93rd Cong. on S. 1361, p. 113.

See Senate Report No. 93-1035, 93rd Cong., 2d Sess. on S. 1361, p. 66.

10 41 FCC 148.

attempted successfully, to my knowledge, to refute this argument. They merely ignore it and talk about something else.

The copyright owners by virtue of their access to the air, with no charges by the Government to transport their product to the public compared to CATV companies which pay up to $10,000 a mile for their channels of communication to subscribers, should certainly be required to forgo a second fee from a reception service for the public.

This is particularly true here when a handful of companies seek this double payment from the American people across the country for what Congressional policy and judicial rulings now dictate is in the public domain."

Cable television or its advertisers will pay for any copyrighted programs it originates, whereas the public would receive nothing for the cash the broadcasters would have the copyright owner siphon from the publi› via CATV which otherwise could be used for copyright fees for more diverse programming.

There is a basic conflict between communications policy and any copyright law in which a cable antenna system is required to pay copyright on any signal it is authorized to receive and distribute on its system by the Federal Communications Commission.

The Supreme Court has construed the Communications Act to empower the Commission to regulate CATV. In exercising this power, the Commission requires, as a condition of receiving and carriage of television broadcast signals, that CATV systems carry all local signals. The definition of local signal varies according to the size market where the system is located. Neverthelss, the Commission exercises its power to require carriage of certain signals and permits the carriage of others. Such regulations now constitute CATV a supplemental service to make the Commission's allocations of frequencies more effective. Until set aside, revised or revoked, CATV systems must comply with those carriage rules,

The proposed legislation would compel CATV to pay copyright owners for distributing signals carrying their copyrighted works. The broadcaster has the right to pick and choose the copyrighted works he will buy and broadcast, Congress should set the record straight. If the Commission is confirmed by Congress in the power to require carriage of particular signals by CATV, then CATV will remain a supplemental reception service, perform nothing, and owe nothing. If it is desired to require copyright payment by CATV for its supplemental role, then CATV should be entitled to carry whatever programs it desires, delete the advertising and substitute its own. This is strictly a communications policy question. The broadcaster should not be permitted to have it both ways collect additional revenue from sponsors for the added carriage of CATV and require CATV to pay copyright fees. In short, the broadcaster is arguing for the morality of unjust enrichment to copyright owners at the expense of the public CATV serves as a means of using copyright to restrict the growth of CATV. It is the public who will unjustly enrich the broadcaster and/or the copyright owner- not the CATV operators. These anti-consumer provisions should not be enacted into law.

We urge the Congress not to compromise the fundamental legal principles established by the United States Supreme Court on two occasions-decisions that are on the side of the viewer. The broadcaster whatever his motives are is wrong in trying to saddle its viewers with extra copyright payments to view its "free" programs through use of a more efficient rented antenna.

Imposing copyright fees on the community antenna function and, in effect, making the American public pay tribute twice to the 28 corporations in New York and Holly wood that own substantially all of the copyrighted material on TV, to watch "free TV" is wrong. If the copyright owners or merchandisers exercise forbearance on the short term profit of double payment and permit cable television to flourish, they will be amply rewarded with even greater profits from the insatiable requirements of cable television for material to fill its many origination channels in the years to come. The Commission's power to limit the number of distant signals imported by microwave has been confirmed. No further power is needed to protect the copyright owner and the public interest.

11 Section 605 of the Communications Act of 1934, as amended, prohibits unauthorized disclosure of interstate wire or radio communications except "This section shall not apply to the receiving, developing, publishing, or utilizing the contents of any radio communiention which is broadcast or transmitted by amateurs or others for use of the general public...." (Italic supplied.)

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