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Mr. Barco. I will be glad to come back after lunch.
Mr. KASTENMEIER. The subcommittee will be in recess for 15 minutes, until 1:45.
(Whereupon, at 1:30 p.m. a recess was taken until 1:55 p.m.]
Mr. KASTENMEIER. The subcommittee will come to order for the resumption of our testimony today. When we recessed we were hearing from Mr. George Barco, who had submitted his testimony, and was in the position of anticipating a question of mine, to the position of the Pennsylvania Cable Television Association, No. 3, that copyright fees would be payable on the reception of microwaved signals.
What are microwave signals, in common parlance, so that we might understand what that refers to ?
Mr. Barco. There are two types of signals in cable television systems received and transmitted to their subscribers. One, what we receive normally over the air, and the other where we have to use microwave operations, where you bring a signal by long distance with a series of retransmitting of signals, reaching the ultimate destination. Now, may I explain that?
Mr. KASTEN METER. Yes.
Mr. BARCO. I said we take three positions, as Your Honor will remember. First, anything “off the air” should pay no copyright because it is a basic right of the American citizen to receive these broadcast television signals. Number two, we said there is also a right to basic television reception, regardless of how it is received, by the public.
Now, even though in Pennsylvania there is no need to have anything except what we receive off the air-in any part of Pennsylvania--there are some signals brought in by microwave from New York City, for instance. But they are not needed for basic television reception excepting in those instances where we want it.
Now, we think there are some communities in the Midwest and Far West where they cannot get the signals any way except by microwave, but it is a very small number of communities. We think that those people should be entitled to receive television reception, regard. less of whether it's off the air, or by microwave, without the payment of copyright because of the fact that it is important to the welfare of our Nation to have everybody receive television reception. And we say they should be able to receive the three networks, three independents, and one educational station.
You might ask, why do we cite that number--this is the reception provided to people in the large cities. Why should there be second-class citizens in the smaller communities. Television reception in the small communities, gentlemen, is more important than television reception in the big cities because this is the most important thing they have outside eating and sleeping.
Mr. KASTENMEIER. In terms of the networks, the independent and educational television stations, there is an FCC determination of what constitutes a complete service within a market in terms of some con. figuration as to what type of network stations constitute
Mr. Barco. A market.
Mr. KASTENVEIER. A fully served arra. I guess this is somewhat Hifferent.
Mr. Barco. Mr. Chairman, that definition is an artificial one, established by the FCC. The amazing thing to us in the industry is that they will give a license to a broadcaster to put a signal out in the air. They can't restrict that licensed signal, where it goes. And then they come and say to us, "Well, you can't carry it" even though we pick it out of the air. They say, “You can receive this one, but you can't receive that one.” Frankly, we can't understand it at all.
And the other thing we have to keep in mind, Mr. Chairman, is that, if in the same community, if you use a rooftop antenna, you can receive anything that is receivable off the air, like you do with the CATV system. But the FCC comes and says to us, “If you have to buy television reception service from a cable company, you can't bring in but so many stations,” but they make no such restriction on rooftop antennas, regardless of the number of signals received.
Mr. KASTENMEIER. Mr. Barco, do the members of your associationand it is a very old one in Pennsylvania-differ in terms of their characteristics, or types of programs, the type of transmitting they are involved in, than the members of the national association that testified before?
Mr. Barco. No, generally not. I would say to you that from our personal knowledge, we have about 60 systems which do cable casting, which is local origination. Our system has been doing that for 8 years, and we know a number of other systems who do the same thing.
Mr. KASTENMEIER. Thank you. The gentleman from California, Mr. Danielson. Mr. DANIELSOn. Thank you, Mr. Chairman.
Thank you, Mr. Barco. On cable casting for origination of programs you do not question that copyright fees should be paid on that type of program.
Mr. BARCO. Absolutely not. And we do pay on those we buy.
Mr. DANIELSON. I just wondered whether you had any question on that.
Mr. Barco. No, no question. Mr. DANIELSON. Under the formula that you come up with here, your three points, can you give me an estimate of how many CATV systems would be paying copyright, and how many would not ?
Mr. BARCO. My recollection is that that was checked by the NCTA Office, and they estimated about 750 systems would be paying copyright, that is if they brought it in by microwave beyond, off the air.
Mr. DANIELSON. I understand. Well, 750—how many systems are there?
Mr. BARCO. Altogether around 3,000.
Mr. Barco. But you must keep in mind, Congressman, that 89 percent of the top 100 market, or 89 markets rather, have not been developed for CATV, and this is where the play is going to come in because they think that they are going to develop those markets by bringing in the distant signals by microwave. And when they get beyond the basic television reception, then they will have to pay.
And of course, that is all based on the proposition that when you bring in a signal by microwave, there has not been any compensation to the copyright owner. If he is being compensated because he knows about it, then of course we don't think there should be double pay. ment. But if he hasn't been paid, it's only right that he should be paid.
Mr. DANIELSON. I think I understand your position, thank you, very much.
Mr. KASTENMEIER. The gentleman from Illinois, Mr. Railsback. Mr. RAILSBACK. No questions, thank you. Mr. KASTEN MEIER. The gentleman from New York, Mr. Pattison. Mr. Pattison. No questions. Mr. KASTENMELER. The gentleman from California, Mr. Wiggins? Mr. WIGGINS. Are the microwave signals beamed to a receiver? Mr. Baroo. To a receiving antenna. Mr. WIGGINS. I mean to a specific customer? Mr. Barco. Yes, the customer in this case being the CATV system. Mr. Wiggins. It's not from the air, that is. Mr. BARCO. Oh, no, you have to have a special pickup. Mr. Wiggins. In those systems in Pennsylvania that have some experience in cable casting, which is a word describing the origination, I think Mr. Barco. Local origination.
Mr. Wiggins. Has there been difficulty in obtaining financing for those stations by reason of the fact that they are, or should be liable for copyright payments ?
Mr. Barco. No. You see, those systems, of course, have two types of programs, the cable casting, No. 1, a locally originated program; and then they have these other programs that they buy. They go on the marketplace and negotiate the price as broadcasters do. We have had no problems in that respect at all.
Mr. Wiggins. That's all.
Mr. KASTENMEIER. Thank you very much, Mr. Barco, for your testimony here today. I am sorry we kept you so long.
[The prepared statement of George J. Barco, and the Pennsylvania Cable Television Association Policy Position follow:]
STATEMENT OF GEORGE J. BARCO, GENERAL COUNSEL, PENNSYLVANIA CABLE
TELEVISION ASSOCIATION Mr. Chairman, members of the subcommittee, I am George J. Barco of Meadville, Pa. For the past 23 years, I have endeavored to participate actively and positively in the deliberations of the cable television industry leadership on the varions issues affecting it nationwide. During this time I have been a part owner and president of several cable television companies, including the one serving the community in which I live. Also, I have served as General Counsel for the past 20 years of Pennsylvania (able Television Association, the state association of the cable television industry in Pennsylvania where the CATV industry was born as a commercial enterprise some 27 years ago and where more communities and a greater percentage of the television viewing public secure reception by CATV service than in any other state.
During this period, I have been personally and directly acquainted with the nature and development of the industry itself and have observed the changing views and concepts of others toward the industry. I have been concerned, again and again, particularly during the last 10 years, that these views and concepts, and, in turn, many aspects of government treatment accorded to the industry have been influenced to a great extent by a pervasive preoccupation, inside and outside of the industry, with the technical and theoretical capabilities of cable television to provide broad television and communications services. This preOccupation has been obsessire to such an extent that the financial, technological and practical requirements for such an evolution have not been fully analyzed
i National Chairman then known as Presidenti. National Cable Television ARROCIA Hon. 1957 : Member, Borrd of Directors of NCTA. 15 venr ending in 1972 : Member. NOTA Corricht Negotiating Committee. 1972-1975: Member. NCTA Music Copyright Negotiating Committee, 1972-1973.
or recognized, on the one hand, and, at the same time, the significance of the television reception function being provided by CATV have been discounted and the real nature of the service today confused and distorted.
Time and again it has been acknowledged by the Federal Communications Commission, the broadcasters and the copyright owners themselves that the master or community antenna television reception function which the CATV industry was established to perform, does not interfere with or encroach upon the respective interests of broadcasters and copyright owners, because the serie is supplementary to, and supportive of, broadcasting and corrective of some of the technical limitations of the technology. Regardless of all of the talked about hopes, dreams and promises for cable, it is a central fact that cable as it exist today represents only a concept of the ultimate cable communications technology, and the implementation of that concept requires tremendous expenditures of time and money with very considerable risks, uncertainties and unknowns.
The Pennsylvania Position on copyright places the television reception function of cable television in clear focus and places that function in proper perpective, both with relation to the subscribers it presently serves, and with relation to the capabilities for cable to improve and equalize television reception opportunities for the public generally. The Pennsylvania Position also recognizes the desirability of realizing the potential of cable television for providing increased program choices in part through microwaving of additional signals, acknowledging that this function is distinct from the television reception function, and that providing such service may be subject to reasonable copyright payment.
I must emphasize that the Pennsylvania Position represents not merely an expedient response to the various pressures for the resolution of the copyright issue for the industry, nor does it represent an effort to limit or reduce the extent or amount of copyright payment motivated by business self-interest. It is presented rather as the right, logical and equitable resolution of the issue in view of the true nature of the functions concerned and the over-all public interest in them.
The Pennsylvania Position was originally developed by the Pennsylvania Cable Television Association in 1969 and reviewed and refined by it in larih of 1975 (with much time and consideration being given to the issue by a broad base of Association membership in both instances). However, its adherents are not limited to Pennsylvania, for it has wide acceptance across the nation.
It is no secret that there is a fundamental and serious division in the industry on the issue of copyright payment. The Pennsylvania Position in essence represents the views of a substantial segment of the industry that is opposed in principle to the concept of "across the board" copyright liability, and particularly, copyright liability for television reception of signals received off the air.
The other substantial segment of the industry has been willing and even eager, to agree to payment of copyright fees "across the board" in response to an assortment of influences, including the appeal of an expedient response to the pressure for copyright payment; the desperate hope that such a commitment will evoke some response from the Federal Communications Cominission in the direction of relaxing its very restrictive regulations of CATV; and the expecttion that such payment from the existing industry will be the means of securing the availability of microwaved signals thought to be a prerequisite for the economic viability of cable television for the large cities and the cable communications industry of the future.
Although NCTA still officially adheres to the views of this segment, its polics in this respect has been seriously questioned and reviewed again and again, even as late as May 23, 1975. In this regard, it must be taken into account that many members of NCTA have interests in television broadcasting and copyright hold. ings which are to some extent clearly in conflict with CATV interests as such. It is my opinion that the position of NCTA on copyright has been definitely weighted and influenced by these interests and still is today.
One measure of the extent of the division is that some 18 state and regional associations have either drafted a resolution for action, or have taken action, in opposition to the NCTA position of copyright payment "across the board." I believe that a clear plurality if not majority of cable operatory throughout the country are opposed to copyright payment for signals received off the air and are convinced that payment for these signals is not reasonable.
The basic principle of the Pennsylvania Position that off the air television reception should not be subject to the burdens and risks involved in a commitment to copyright payment is founded on the pertinent facts and circumstances.
The broadcasters and copyright owners make use of the public resource of the airwaves without payment. In addition, the policy of the 1934 Communications Act favors the widest possible distribution of broadcast services for the general benefit and welfare of all citizens. As a consequence, there must accrue a fun. damental right in the public to utilize on an equal basis all signals receivable of the air, whether by conventional rooftop antenna or by cable television.
Again, since the copyright owners choose to distribute their property by broad. casting, there is no reasonable basis for any expectation by them that they should control or limit the distribution as if they were providing for a performance in a theater, arena or hall.
From the point of view of the subscriber, it is incomprehensible that liability to copyright fees should depend on the accident of topography- or in the real life situation of the television viewer--whether he is living in a high area where a conventional antenna provides adequate reception or whether he lives behind the hills or along the river where (ATV service is required or desirable to provide antisfactory television reception. These reception conditions can change from street to street in a given community.
A correlating basic principle of the Pennsylvania Position is that inasmuch ag CATV can provide the means for equalizing the television reception opportunity for all the viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic television reception should not be subject to copyright, by whatever means reception is secured.
I am unable in the time allotted to me to further detail the philosophical and factual basis for the Pennsylvania Position, and I have, therefore, attached the Position in full to this statement for the record.
In summary, the Pennsylvania Position so far as payment of copy right fees is as follows:
(1) No copyright fees should be payable for television reception of off the air signals, rerardless of the total number involved.
(2) No copyright fees should be payable for basic television reception, whether secured off the air or by microwave. While we have stated that basic television reception should include the national networks, three independent television sta. tions and one educational television station, we recognize that there is room for differences of opinion as to what basie television reception should include.
(3) Copyright fees would be payable on the reception of microwaved signals (other than required for basic television reception in (2) above) at the rate of two-tenths of one percent per microwaved channel of the gross receipts from monthly service charges only.
While not included in the Pennsylvania Position, I should mention that a number of individuals favoring the Pennsylvania Position have suggested that as an alternative, fees could be based on the fee schedule in H.R. 2223, prorated against the number of distant signals microwaved as the numerator over the total signals carried as the denominator. Thus, if a system carried a total of ten siguals, three of which were microwaved and subject to copyright payment, the kystein would pay three-tenths of the fee schedule.
Another fundamental concern emphasized in the Pennsylvania Position is that the copyright bill not effect a confirmation of the present FCC regulatory treatment of the industry. For example, the Hill definition of si-called "distant" and *local" signals has little relation to actual reception conditions for signals received off the air; and the application of these artificial and arbitrary definitiens results in unreasonable, unfair and discrir viewers.
To those who are concerned that the Pennsylvania Position may not provide *enough" initial extra payment for copyright owners, I submit that the reasonableness of the resolution of the copyright issue is not determined by the size of any additional copyright payment but by whether or not there is a proper basis for payment. Furthermore, the copyright owners themselves over the years have stated that their primary concern is not with the existing industry or in the off the air television reception, but in the future of the industry in the of the 100 top markets not yet developed.
The prevailing opinion is, and NOTA statistics establish, that these markets can develop only by bringing in additional television signals by microwave and by the purchase of much copyrighted programs for local origination These mar. kets also have the highest promise for the pay cable market, programs for which will be purchased from copyright owners. In short, the copyright owners themselves will be the beneficiaries of tremendous gain from the increased distribu