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Mr. Forn. In the "Provided" part it probably does. “The further transmission is made without altering or adding to the content"-there is no specific prohibition against that. It should be tightened up.

Mr. DRINAN. Thank you.

Now, I have trouble with the words also "no direct transmission fee is charged" the words "direct admission fee." if an auditorium invited 500 people to see something that they otherwise could not see, I would assume that you would say they should pay the copyright.

Mr. Ford. I would say that is logically converting it from a reception service to a production and a performance.

Mr. DRINAN. All right. Mr. Ford. There should be a copyright paid. Mr. DRINAN. How can you say there is no direct transmission fee when they pay $5 or $6 a month?

Mr. FORD). What was that, again?

Mr. DRINAN. If they pay a direct admission fee, pay their dollar to get in to see that nice film that otherwise they couldn't see, you would say they have to give the copyright to the original transmitter.

How can you say, if they pay $6 a month for this regular subscribing service, that they are immune from that copyright liability?

Mr. Forn. They are paying for a service, an antenna service, $6 a month. They are paying an admission fee to a performance in the other case; that is the distinction that I make.

Mr. Drinix. I suppose the transmission fee in that other case just covers the cost of the cable television.

Mr. Forn. Well, the issue is whether it is a performance or isn't a performance. If it just covers the cost, it's still a performance, and it is not a payment for the reception service, or the rental of the antenna. It is the admission charge to a performance, and I would make that distinction.

Mr. Drinax. Well, while your testimony is persuasive, Commissioner, may I just conclude by asking, is this proposed amendment to section 106, is that all that you want in the law, from this testimony !

Mr. Forn. That's correct. There are some things that have to be deleted.

Mr. DRINAN. That's the essential thrust.
Mr. Forn). Yes.
Mr. DRINAN. Thank you very much.
Mr. KANTEN METER. The gentleman from California, Mr. Danielson.
Mr. DANIELSON. Thank you, Mr. Chairman.

I want to recap again with you my impression, and that impression is from your testimony. In response to Mr. Wiggins' questions, Mr. Wiggins brought out that a copyright owner on a theatrical production, for example, charges a royalty fee for a performance within a theater, with which I have no quarrel.

The fee is the same, regardless of whether a theater is sold 10 percent, or 50 percent, or standing room only; the fee is the same. lle is paying a fee for the potential audience, which would have to be 100 percent full, that is the potential. Now, that is true if it is a regular, legitimate theater, a motion picture theater, or a drive-in, the same analogy applies.

I think it is your position that where a motion picture is broadcast by television through a broadcasting channel, the royalty rate is included on the basis of the potential audience of that TV station; whether all the people listen, or part of them, that's the potential audience, potentially 100 percent of the viewing public within both the grade A and the grade B contours.

I think it's your position that cable within those areas simply enhances the possibility that you may get a 100-percent audience. On the other extreme, where cable originates a program, originates a movie, for example, you have no objection in your philosophy to the payment of a royalty.

Mr. Ford. If he becomes the producer of the program, that's right.
Mr. DANIELSON. So, you accept that concept.
Mr. FORD. That is on a bargaining basis.

Mr. DANIELSON. I understand both of those, and I have one that gives me a problem, and that is an imported signal. The imported sig. nal is broadcast, but in computing the royalty fee that the advertiser has to pay, in fact, he was computing a full house within the grade A and grade B contour, but he wasn't necessarily computing this outlying area, the area into which it's imported-or into which it's exported, I don't know which it is. I have a problem there, would you help me out on that?

Mr. FORD. Yes. The Commission requires very detailed reports on what stations are carried by what systems. There is a very definite, specific limitation on the number of distant signals that you can bring in. Any copyrighter, in selling his product to a particular station that is a distant station, for instance Arlington, knows full well that that program is going to be delivered to that community, and he will adjust his rate accordingly.

That is why I believe the Supreme Court said that the importation of a distant signal did not prevent the copyright owner from extracting the full value for his product.

Mr. DANIELSON. On this theater concept, again, with a potential full house, standing room only; if the theater is half empty, I guess the copyright owner prevents the theater owner from giving away the rest of the tickets and bringing in 500 people who might not otherwise have attended. It makes no difference on his royalty.

Mr. Ford. And in addition to that, his next attraction, he will not pay quite as much.

Mr. DANIELSON. That is a matter of bargaining.

One last thing is a comment. I'm glad that you have recognized what bothered me very much in all those hearings, that there seems to be a confusion between a communications policy and a copyright policy. Our committee is charged with the copyright policy, and I think there seems to be an effort to try to have it in the regulations for communications through the device of copyright.

Well, thank you very much.
Mr. KASTEN MEIER. The gentleman from Illinois, Mr. Railsback.

Mr. RAILSBACK. Do you think there might be a constitutional problem, by having the Copyright Office too involved in administering this, as it is a kind of quasi-legislative agency, an executive-type agency?

Mr. Ford. I really hadn't considered at any length the Copyright Office involvement except to the extent that I know they are going to ask for a lot of information, and knowing bureaucracies as I do, it will get greater, and greater, and greater. We are already regulated by the FCC, the States are now moving into it, and to have the Copyright

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

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

Mr. Forp. 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 etlect-or a question--concerning the Consensus Agreement.

Within 3 months after the consensus Agreement was issued, the ('ommission 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.

Nr. KASTEN MEIER. Mr. Ford, I just have one more question. You were talking about the Commission; do you agree with its rule on exclusivity, 76-131, 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. Forn. Well, hopefully, within a few weeks, there will be nothing to rely upon. (Laughter.]

Mr. KASTENMEIER. 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 applichint:'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. KASTENMEIER. 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. KASTENMEIER. 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 ox BEHALF OF THE Ad Hoc (OBMITTEE 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 Convright 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 Hor Committee of Concerned Cable Television Operators For a Fair Copvright Law on s. 1361. Anted Novemher 15, 1974. prplaining the reasons the industry has tried in the past to compro mise this issue. All of those efforts were unsuccessful. The 1974 Supreme Court's decision in Tele Prompter v. OB8, infra, now places a totally different complexion on the cable copyright issue as to distant signals authorized by th FCC to carried,

II. PERTINENT PROVISIONS OF 1.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 Copy. right, depositing royalty payments there, based on a sliding percentage scale of gross receipts from subscribers, and for the distribution of those funds. Subser. tion (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 (ATV for copyright fees. The Register of Copyrights, broadcasters and copy. right owners favor liability of community antennas for copyright. As I under. stand the situation, the Register of Copyrights' position is not whether but how much ('ATV 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 NOTA 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 Fe(' to cause the NCTA Board of Directors to capitulate by a one yote 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 WOTA Board then or now really have no bearing on the issue facing this Subcommittee. Those commit. ments cannot determine the public interest or, in our opinion, justify this ('ommitter in recommending that the publie pay twice to see the same show. The Ari lloc ('ommittee 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 proristons of this Bill that establisheg copsright Hanillis based on the method of the rivers' payment to wit, hotels and apartments are Fremmed, as Indirert porn, and CATV.ubscribers are included as direct pavors. It is unlikely that the court would acept such an arbitrary distinction even if the indum tries involved agrer to it *N14 Copyright. The History. Recent Board Action The Future (Der 1974. p 9).

* Tahir Telerimion Re I and Order, 30 ron 20 3 27 (1972). See same effect, First Report and order in Dordelo 1994 1,40 Fel Res 17727 119751

* The following amendment to section 106 I suggested Sotsithstanding the provin sions 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 what prop delen, including antennas, and related equipment, wherever locatel, whleh receives and makes available by means of cabir or wipes and related equipment to individual reception sets of the kind commonly used in pirivate homes of a transmission embedsing a performance or exhibition of a work Provided. The further trannminion is made without altering or adding to the content of the original transmission and no direct 000-nion fee is charged for the privilege of sering or hearing such transmission and the receiving apparatus is not coin operated."

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