Now that the "unfair competition" shibboleth has been discredited," the only bases for contending that CATV should pay copyright are (1) that it makes a profit from the use of copyrighted material and (2) that it really does engage in a public performance for profit. Neither one of these positions are sound. There is no principle of copyright law which assesses liability for copyright based on profit alone and certainly none exists in the pending Bill.

As to the display or performance of copyrighted works publicly by community antennas, the complete answer is that a reception antenna does not perform. The cable operator does not convert the electronic signal into pictures and sound— he merely delivers a signal to the subscriber who furnishes his own equipment to convert the signal to pictures and sound in order to receive and view the performance. The CATV operator does not use or sell any program or the performance thereof either publicly or privately. A CATV operator sells a receiving antenna service, just as a manufacturer sells a receiving antenna from which he makes a profit, but community antennas do not perform anything. They are, factually and logically, on the side of the viewer. The only way this can be changed is by enactment of the legislative fiction that furnishing an antenna is a performance publicly.

Despite the FCC's push for copyright liability, the copyright law is not the place to bypass the Commerce Committees and embed regulatory flexibility in concrete. The Senate Commerce Committee, in its Report on S. 1361 stated that it “*** believes that in view of the potential impact of certain provisions in S. 1361 on our Nation-wide communications service, ample opportunity should have been afforded it to consider those provisions in-depth and to have held hearings on the communications issues." Certainly, CATV should be eliminated from this Bill, if for no other reason than to permit the Commerce Committees to develop a national communications policy on cable television before any copyright policy on the community antenna function is undertaken.

IV. CONCLUSION

Based on the foregoing review of the background and the provisions of this legislation, it must be concluded that the provisions of H.R. 2223 concerning CATV are philosophically unsound. An across-the-board payment, including payment by the public for two tickets to the same performance or for distant signals as limited by the Commission's rules, is, in our opinion, soaking the consumer. We believe that this Subcommittee is justified and should adopt the community antenna industry's historical position by amending this Bill to eliminate any copyright liability for the community antenna function, under Section 106 or other provisions of H.R. 2223, but not, of course, the origination function of cable television systems for which it should be liable like anyone else.

Thank you.

12 Comments of U.S. Department of Justice in FCC Docket No. 18397A (1970).

"II. THE COMMISSION'S ANALYSIS

"Two premises pervade the Commission's analysis and proposals with respect to importation of distant signals, not only in this immediate proceeding, but throughout its consideration of CATV problems: The first is that television broadcasters are being subjected to 'unfair competition' from CATV operators; and the second is that there is a public interest in preserving marginal television broadcasters from failure by various cross-subsidy devices and restrictions aimed at CATV. We submit that both of these are incorrect as a matter of policy.

"1. Unfair Competition. The Commission's theory of 'unfair competition' is relatively simple: As a result of the Supreme Court's decision in Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968). CATV operators do not have to pay copyright fees on broadcast signals. and this the Commission savs, results in 'unfair competi tion' against broadcasters who do have to pay copyright fees for programming.

"Certainly the Fortnightly decision frees the CATV operator from an expense which broadcasters must bear; but if the Commission is to employ an analysis based on equating lower costs with 'unfair competition,' then it cannot look at CATV cost savings In Isolation. [Footnote omitted.] It has, for example, turned over to broadcasters publiclyowned spectrum at no charges, and allows them to use it at nominal charges. This publiclyowned spectrum, when combined with a broadcast transmitter. constitutes a program delivery system which CATV operators cannot duplicate at anything approaching the unit cost per viewer. Under the Commission's analysis, this constitutes unfair competition' by broadcasters against all other media of communications including CATV "The Commission's basic error is misapplying the concept of 'unfair competition.' If this concept is to have any meaning it must refer to specific acts by one competitor which are intended to harm others. See generally Callman, The Law of Unfair Competition, Trademarks and Monopolies, Ch. 2. The Theory of Unfair Competition.' By treating CATV cost savings as 'unfair competition.' the Commission has obscured the basie publie policy issues with which it is confronted, and has introduced unnecessarily emotional terminology into the making of policy for both broadcasters and CATV operators."

This memorandum is in response to your request for an analysis of United Sates Senate Bill No 1361 which was passed on September 11, 1974 and is now pending in the House of Representatives In addition, this will respond to your further request, by letter of October 29, 1974, that we discuss the reasons that community antenna systems, as distinguished from other phases of cable television systems, should not be liable for copyright Finally, you ask that an appropriate revision of Section 111 of S.1361 be prepared

I - BACKGROUND

Before undertaking an analysis of the bill, it is important to understand its background A brief history of the copyright revision program will aid in appreciating the various positions of the cable industry as they have evolved during the past 10 years

The present Copyright Law of the United States was enacted in 1909 to carry out the following language of Article 1, Sec. 8 of the Constitution of the United States

"To promote the Progress of Science and useful Arts, by securing for limited
Times to Authors and inventors the exclusive Right to their respective Writ
ings and Discoveries."

The Legislative Appropriations Act of 1955 appropriated funds for a comprehensive program of research and study of Copyright Law revision by the Copyright Office of the Library of Congress A number of reports were published, including the Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law: 1965 Revision Bill (89th Cong, 1st Sess. House Committee Print), explaining the thinking behind its various sections The bill proposed by the Register of Copyrights was introduced on February 4, 1965 (HR 4347, 89th Cong, 2nd Sess)

In describing the basic approach of the bill, the Register of Copyrights stated at page 13
"The basic legislative problem is to insure that the copyright law provides the
necessary monetary incentive to write, produce, publish, and disseminate
creative works, while at the same time guarding against the danger that
these works will not be disseminated and used as fully as they should be-
cause of copyright restrictions."

When some commentators discuss copyright and the incentives to the starving writer in the cold garret, they are not talking about television. There may be starving writers in cold garrets but, if there are any such people involved in television, it is 28 companies, including the networks, that are keeping them there This copyright bill probably will not put one penny in any of their pockets

Note the testimony of Mr. Arthur B. Krim, President of the United Artists Corporation, on June 24 1965, when he appeared before Subcommittee No. 3 of the House Judiciary Committee (Hearings on H.R. 4347, p. 1332), on behalf of Allied Artists Television Corp.; Danny Thomas Enterprises, Inc, Desilu Productions, Inc.; Embassy Pictures Corp.; Independent Television Corp.; Metro-Goldwyn Mayer, inc Wolper Productions, Inc.; Screen Gems, Inc.; Seven Arts Productions, Inc.; Twentieth Century-Fcx Television, Inc.; United Artists Television, Inc.; Universal Pictures, Inc.; Walt Disney Productions, Inc.. and Warner Bros. Pictures, Inc. Mr. Krim stated:

"I think, gentlemen, that this group of companies which, as you can see.
number 14, represents in excess of 75 percent of the copyrighted material
which is going over the airwaves today. I would venture the further guess
that if we were to add to these 14 another number, certainly not more than 14,
and of course including the three networks, we would cover so close to 100
percent of the copyrighted material which is going over the airwaves and that
the exceptions would be relatively minor in nature."

The Register of Copyrights claimed in his Report that he took no position on the two pending cases against the cable industry.1/ Nevertheless, he stated (p. 22) that under Section 106(a) (4) and (5).

"A community antenna service would be performing when it retransmits the
broadcast to subscribers over wires;"

On pages 40, et seq., the Report discusses secondary uses of transmissions. It lists the arguments advanced for an outright exemption of CATV and those opposed to any exemption before summarily disposing of this issue as follows:

"On balance, however, we believe that what community antenna operators are
doing represents a performance to the public of the copyright owner's work.
We believe not only that the performance results in a profit which in fairness
the copyright owner should share, but also that, unless compensated, the
performance can have damaging effects upon the value of the copyright. For
these reasons, we have not included an exemption for commercial community
antenna systems in the bill."

Extensive hearings were held on H.R.4347, in 1965, during the 1st Session of the 89th Congress which resulted in the bill being reported on October 12, 1966 with amendments. These amendments did not alter the definitions recommended by the Register of Copyrights "To perform or display a work 'publicly' " or " 'transmit'." This language was intended to impose full liability on the transmissions by CATV as provided by Section 106 of the bill. Earlier studies of the Office of Copyright had not considered CATV. It was purely an afterthought.

The bill also was amended, however, by adding a highly complicated Section 111 which provided limitations on exclusive rights by secondary transmissions (Union Calendar No. 999, 89th Cong, 2d Sess.). Section 111 contained in H.R.4347 may be briefly summarized in the following six points.

1. In order to enjoy any exemption from the payment of copyright fees, a CATV system must not originate any programming other than "weather, time and news reports, free from editorial comment agricultural reports; religious services; and local proceedings of governmental bodies", there must be no "commercial or political" advertising or sponsorship of closed circuit presentations; and there must be no charges made for any particular program or programs. Also, not more than two channels may be devoted to originations. Finally, if the CATV operator engages in the deletion of any commercials or station identification, or in any way alters program content, he loses all exemption under the Act

2. A CATV system otherwise eligible for exemption is not liable for the payment of copyright royalties for any broadcast programs received within the "limits of the area normally encompassed by the broadcast station whose signal is received, as determined by the Register of Copyrights Furthermore, if a copyright program is broadcast by two or more TV stations which provide a Grade B signal over the CATV system, and if one of the TV stations has the exclusive license from the copyright owners to transmit the program in the area served by the CATV system, the CATV system must protect that exclusivity, provided it is given ten days' written notice of the exclusivity.

3. A CATV system which receives the program of a television station which does not "normally" serve the area in which the CATV operates must pay copyright fees for such programs, except in an area which is not "adequately" served by television stations.

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

4. If the CATV system is in an area which is not "adequately" served by television stations, it can receive, under a system of compulsory licensing, the programs of a TV station which does not normally" serve the area. The bill or report defines an area as "adequately" served when a "preponderance or more than half or substantially all" of the programs of the three major television networks are normally received Also, the exclusivity limitation discussed under paragraph 2, above, applies equally in an in adequately served area In order to qualify for compulsory licenses for the importation of non Grade B or non-local signals under the provisions discussed above, the CATV system must supply to the Register of Copyrights information as to the persons who own or control the CATV system and information as to the name and location of the stations carried on the CATV system.

5 It a CATV system receives the programs of non-local stations in an area covered by a "local" station, and duplicates the programming provided by the local station, the CATV system loses all exemption from copyright liability.

6 The parties bargain for a reasonable fee and the Court decides the issue in case they cannot agree Failure of either party to offer or accept a reasonable fee will incur up to treble fee damages for the copyright holder.

The section reflects many regulatory concepts which would be enforced by the copyright bill These regulatory concepts, it was understood, had their origin at the Commission it should be remembered that at this time (October 12, 1966) the legality of the Commission's Second Report and Order asserting general jurisdiction over CATV was still very much in doubt. The Commission's regulatory program of containment "peeks" out of the provisions of this section.

In presenting testimony on HR 4347 (89th Cong ), which became HR 2512 (90th Cong ), the then President of NCTA (Hearings before Subcommittee No. 3, Committee on the Judiciary. House of Representatives, 89th Cong, 1st Session, p. 1245, June 24, 1965), after discussing the conflict between the bill and communications policy under the jurisdiction of the Interstate and Foreign Commerce Committee stated that CATV systems should be free of copyright clearance requirements. An amendment was then offered2/ (Hearings, p. 1255) to exempt CATV from copyright with the following three qualifications: (1) The further transmission by CATV is made without altering the content. (2) no direct admission fee is charged, and (3) the reception apparatus is not coin operated. This amendment would have removed the possibility, it was stated, of a conflict between this legislation and other legislation being considered for establishment of communications policy.

When H.R. 2512 was passed, Section 111, relating to CATV, was stricken from the bill under an agreement between the Chairmen of the Judiciary Committee and the interstate and Foreign Commerce Committee. This agreement was entered into to settle a violent dispute between the Committees over regulation of CATV in the copyright bill. This dispute erupted after a speech by Congressman Arch A Moore, Jr. (R. W Va) (Cong. Record, April 6, 1967, p. H3624, et seq) following up his letter of the previous day to all members of the House

In his speech, Congressman Moore attacked the bill for attempting to use copyright for the regulatory control of CATV by: (1) an invasion of the jurisdiction of the Commerce Committee (2) effectively prohibiting CATV from originating programs, and (3) protecting pay-TV on broadcast stations and effectively precluding pay cable

As the bill passed, it left CATV fully liable for copyright NCTA agreed to the bill because of the frightening decision of the US District Court (S.D. NY.) holding CATV liable for infringement of copy. right if this decision were to be affirmed on appeal, at least half of the legislative process would be completed and speedy legislative action would be possible to protect the industry

On August 2, 1966, the then President of NCTA presented testimony to the Subcommittee on Patents, Trademarks and Copyrights of the Committee on the Judiciary of the US Senate of S 1006, an identical bill to H R. 4347. This testimony was delivered some 16 months after testimony before the House on H R 4347 and some eight months before House passage of H.R. 2512

A number of things had occurred between the House and Senate Committee hearings The District Court (S.D. N.Y) had held on May 23, 1966 that Fortnightly's CATV system had infringed United

21 "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 equipment of whatever des gn, including antennas, and related equipment wherever located, which receives and makes avalable 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 performan or exhibition of a work, Provided: The further transmission is made without altering or adding to the content of the origiran trans mission and no direct admission fee is charged for the privilege of seeing or hearing such transmission and the receiving apparatus is not coin operated

Artists' copyrights; the FCC asserted jurisdiction over all CATV systems on March 8, 1966, and the House Subcommittee no. 3 announced substantial modification in the provisions of H.R. 4347 Operating in this climate, NCTA believed, at that time, that it was compelled to make a compromise proposal In doing so, it was stated:

"These proposals in their entirety may satisfy no one certainly not our-
selves

but they are made in good faith..." (Hearing, id. p. 86).

There were six points in the proposal. In brief, they were as follows:

1. No liability for programs received off-the-air;

2. A compulsory license for distant signals in an inadequately served area;

3. Industry wide bargaining for programs from distant signals received in adequately served areas at fees fixed by statue somewhat higher than fees in adequately served areas

4. Liability of CATV for all copyrighted programs which it originates;

5. Music should be considered cleared at the source;

6. No limitation on CATV reception of non-copyrighted programs.

Despite the efforts of NCTA to propose a solution to the copyright issues, admittedly, under the pressure of the District Court holding, no action was taken on that bill. It should be noted that the Department of Justice opposed any extension of copyright liability to CATV because of the possibility of harmful anti-competitive consequences and that this extension is not justified by valid considerations of the right to copyright protection (Hearings, p. 211, et seq.).

S. 597 was introduced by Senator McClellan on January 23, 1967 and S. 543 was introduced by him on January 22, 1969. These bills, so far as CATV is concerned, were substantially the same as S 1006, however, further hearings were held on S.547 and a Committee Print of December 10, 1969 (91st Cong. 1st Session) contained a number of changes in Section 111. S.644 was introduced on February 18, 1971 containing the changes reported in Section 111 of S.547. Except for technical changes, S.1361, introduced on March 26, 1973, was the same as S.644.

In a letter dated November 1, 1968, the NCTA submitted to Senator McClellan a proposal which, under the circumstances then existing, NCTA believed was the only workable compromise, i.e. an acrossthe-board approach. This plan would (1) require a compulsory license upon an inclusive payment for all television signals carried; (2) a single place to pay; (3) a provision honoring sports "blackouts" under Public Law 87-331; and (4) no restrictions on originations or reception of uncopyrighted programs. Needless to say, this proposal was not accepted. This plan, as well as many other proposals, made to the National Association of Broadcasters and copyright owners have all been rejected.

Finally, Tom Whitehead, of OTP, and Chairman Dean Burch called a meeting of the interested parties from which came the Consensus Agreement of November 8-12, 1971. This Agreement has been termed the ransom price extracted from NCTA for the supposed relaxation of CATV rules (Cable Television Report and Order, 36 FCC 2d 3 (Feb. 3, 1972).)

The Consensus Agreement, it is understood, was adopted by a one-vote majority of the NCTA Board of Directors under great pressure from the Government. That sort of agreement is no agreement (For a current press account of the Agreement see CABLE NEWS, Dec. 17, 1971.) Moreover, all of the Consensus Agreement had to be accepted or nothing - no qualifications or reservations of any kind were permittted. The pressure for acceptance by the Government was so great that time was not allowed to consult the industry generally.

The stated purpose of copyright legislation, Mr. Burch informed Senator McClellan in his letter of January 26, 1972, was "... to bring cable into the competitive television programming market in a fair and orderly way." (Underscoring supplied.)

Cable television, when it originates like a broadcaster, is already on a completely competitive basis with television except for the anti-siphoning restrictions placed on cable by the FCC it there was any intention of being fair, no such restrictions would have been placed on one of two competitors by the Government. When CATV is acting as a master antenna on the "side of the viewer" it is not a competitor. Television stations compete with each other which is facilitated by CATV. The CATV function does not compete (fairly or unfairly) with television a concept fully supported by the Department of Justice. (See Comments of Department of Justice in FCC Docket 18397-A, Dec. 7, 1970.)

Chairman Burch also stated in his letter to Senator McClellan:

"But the nature of consensus is that it must hold together in its entirety

It is important to observe that the Commission disavowed the Consensus Agreement, in denying the public the right to comment on it, as it must. This was done by the Commission just a few short

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