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tion potential of cable for their copyright product-which will be many multiples of any amount which could possibly be secured from the present industry on any basis.
Finally and most important, cable television viewers-comprising 10,000,000 subscriber homes with over 30,000,000 viewers-have never been informed of the proposal for copyright payment for their television reception service, while pay. ment will not be required for the same reception by their next door neighbor using a conventional rooftop antenna. In this day of consumer concern and spe cial awareness for due process, the lack of fairness and reasonable treatment for cable subscribers for television reception—both off the air and for basic tele vision service is most evident, is not supportable, and certainly should not be countenanced by this Committee whose very title stands as a beacon light for the citizens of our nation for proper protection of their basic rights.
PENNSYLVANIA CABLE TELEVISION ASSOCIATION POLICY POSITION (PDATE
ON COPYRIGHT In October, 1968, the Board of Directors of Pennsylvania Cable Television Association, after careful study and consideration, formulated a position on copyright which was approved by the overwhelming vote of the members of the Association at a special meeting held in April, 1969, together with background explanation.
The background explanation for the position called attention to the distinct difference, both in fundamental concept and practical objectives, between the traditional community antenna television system which operates solely or mainly to provide television reception service in fringe areas, and the much promotedbut still largely undeveloped-cable communications system which is expected to provide broad television and communication services, particularly in metropolitan areas, including distribution of copyrighted programs purchased for showing through the wired system.
The background explanation also particularly noted :
The United States Supreme Court decision in Fortnightly Corporation v. United Artists Corporation, decided in June, 1968, in which service provided by the traditional CATV system was held to be on the "viewer's side of the line" and, therefore, not subject to copyright liability;
The action of the Federal Communications Commission in its Proposed CATV Rules and Inquiry, issued in December, 1968, which-among other things-in effect, foreclosed the industry on the copyright question so far as new system development is concerned and the expansion of system reception service in many areas;
The general precept that the community antenna television reception function of providing off the air reception for television signals should not be colored in its copyright and FCC regulatory treatment by the future potentials and possibilities for CATV, or traded as an expedient to accelerate or to promote tbe resolution of product and marketing problems which may be involved in the devel. opment of some of these capabilities.
Based on these considerations, the central concept and principle of the "Pennsylvania Position" on copyright was set forth as follows:
To the extent that a wired system of any kind anywhere is performing the television reception function of an antenna as the traditional CATV system, the reception should not be subject to restrictions or to copyright liability any more than reception by a conventional antenna and, accordingly, that there should be no copyright payment for television reception provided of signals received off the air.
Correlating principles were also set forth regarding the availability of "basic" television reception service to all and regarding the desirability of exploring the possible basis upon which microwaving of signals might provide increased programming.
In the intervening period since the adoption of this position, the following significant developments and occurrences must be taken into account as bearing upon the copyright issue:
(1) The Federal Communications Commission has demonstrated conclusively that with its rigid conditioning to the broadcasting environment of scarcity-created by the inherent limitations in frequency allocations-its primary commitment is to the existing broadcasting market order of things, with the accompanying characteristics of market monopoly and lack of program diversity. So strong is the FCC's commitment and concern in this respect that it has been
supercautious in its restraint of CATV to assure that there is no possibility that CATV will effect any change in the status quo.
This predilection was manifested most clearly in the FCC's action with regard to the consensus Agreement of November, 1971, which was notable not only because the FCC exacted the requirement of copyright payment as the condition for any relaxation of its rules, but also because of the scant quantum of relief given in exchange for this exaction. The nature and extent of the FCC's signal carriage restrictions constitute a clear declaration of the FCC determination that any development in CATV technology can occur only on the condition that there be no change in the existing television broadcasting order.
(2) The extended negotiation efforts by representatives of National Cable Television Association with representatives of the copyright owners have established that the position and attitude of the copyright owners do not allow for the usual business bargaining process, the demands of the copyright owners being consistently exorbitant and unrealistic, and without regard for the consequences either for the industry or the subscribing public.
(3) In addition to the restraints placed by the FCC rules on CATV television reception services, and in turn on caty system development and growth, the 1972 Rules as related to local franchising, taken with the related actions of state and/or municipal governments, have resulted in a multi-structured regulation of CATV which is duplicative, inconsistent, costly and most burdensome.
(4) While the bright promise of the potential and capacity of cable television has not dimmed, special difficulties have been encountered in system construc. tion and operation in large and metropolitan city areas, and the feasibility and acceptance of CATV service in such areas are yet to be established.
(5) In keeping with the earlier expressed opposition of the United States Department of Justice to the extension of copyright liability of CATV because of the harmful anticompetitive consequences and because the extension is not justified by the appropriate considerations for copyright protection, the Department of Justice in its December, 1970, filing before the FCC concluded that CATV'S not paying for retransmission of broadcast signals is not unfair competition and the FCC's attempted application of this concept in the circumstances has obscured the basic policy issues presented.
(6) The United States Supreme Court in Teleprompter Corporation v. Columbia Broadcasting System, Inc., decided in March, 1974, extended the l'nited Artinte decision in holding that : "By importing signals that could not normally be received with current technology in the community it serves, a CATV system does not, for copyright purposes, alter the function it performs for its subscribers. When a television broadcaster transmits a program, it has made public for simultaneous viewing and hearing the contents of that program. The privilege of receiving the broadcast electronic signals and of converting them into the sights and sounds of the program inheres in all members of the public who have the means of doing so. The reception and rechanneling of these signals for simultaneOu4 viewing is essentially a viewer function, irrespective of the distance between the broadcasting station and the ultimate viewer."
Against the perspective of these developments and occurrences, the soundness of the central concept and principle of the Pennsylvania position on copyright has bern confirmed. Furthermore, the application of this concept and principle muist be reinforced and supplemented in view of the broad and long-term implications of any departure from them, both in terms of the consequences to basic televi. sion reception service and to the development of cable communication services.
('oncerning the television reception function of (1T1, an overriding and fundamental public interest concern must be that basic television reception for everyone should be free and not subject to the burdens and risks involved in a commitment to copyright payment.
This concern gives strong reinforcement to the principle that television reception service for signals of the air should not be subject to copyright payment, simply because of the CATV means used to receive them. On the other hand, inasmuch as CATV and related technology can provide the means for qualizing the television reception opportunity for all viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic or minimum television reception should not be subject to copyright payment, by whatever means reception is secured.
To the extent that reception is being provided by CATV of signals received off the air or to furnish basic television reception, there is no proper basis whatever upon which there can be any complaint or objection by any broadcaster or copy. right owner, since such reception is substantially in keeping with the present marketing order.
Concerning the potential of CATV systems for increasing program choices, in part through the microwaving of distant signals, a number of policy and practical situations come into play, and all of these strongly indicate that there should be no copyright payment for such reception. In addition to the reasons in support of this conclusion in the CBS case and in the Justice Department position to which reference has been made, it is generally accepted that the copyright owners (who use the public resource of the airwaves without cost ) have no right to impose an absolute control on the distribution of the copyright property which they choose to distribute by broadcasting.
At the same time, it is also generally accepted that a method can be developed whereby copyright owners can be fully compensated for the actual exhibitions and performances of their property, without the necessity of restricting or bordening CATV systems or services which may well be the means for dramatically increasing the distribution possibilities for copyright property. Finally, there is a public interest in encouraging the investment of the huge capital commitments required for the construction of CATV systems with their greatly increased communications capacities, and also in encouraging the utilization of these capacities,
Recognizing that such microwaving may require some marketing adjustments and to respond by way of compromise to the overall objections of the broadcasters and copyright owners, a payment of two-tenths of one per cent per channel of the monthly service charge gross receipts would apply in exchange for a compulsory license for such reception.
With regard to both of these aspects of CATV, it is essential that the resoluition of the CATV copyright issue not include a confirmation of the nature and extent of regulation undertaken by the Federal Communications Commission over cable television or of its present rules governing CATV. The copyright law should include no provision regarding the regulation of CATV which must be a matter of separate congressional legislative determination.
In summary, the policy position update on copyright is as follows:
I. No copyright fees should be payable for television reception of off the air signals provided by a CATV system to subscribers, with such service to be specifically exempt from copyright.
II. No copyright fees should be payable on reception provided by a CATV SYStem to its subscribers of at least basic or minimum television reception, consisting of reception of the national networks (at this time three), of three independent television stations and of one educational television station, whether reception is secured off the air, by microwave or other means, with such service to be specifically exempt from copyright.
III. A compulsory license for reception of microwaved signals (other than required for minimum reception service as described above) should be granted, for which there should be a payment of two-tenths of one per cent per microwaved channel of the gross receipts from monthly service charges only. This rate should be statutorily fixed and payable into a copyright pool, to be distributed by an equitable formula.
IV. There should be no restriction or interference by the Federal Communications Commission with regard to any of the above services.
Finally, in any resolution of the copyright issue, there must be a recognition of the interests of the CATV subscribers, who up to this date have never been in. dependently represented in any of the hearings and discussions on the subject and who have never had an opportunity to be heard. CATV companies should undertake the responsibility of fully informing subscribers of the various aspects of the issue in the course of the legislative process, particularly if copyright pas. ment must be added to the service costs paid by the subscriber.
Mr. KASTENMEIER. The Chair would now like to call Mr. William Bresnan who is the president of the Cable Television Division of Teleprompter Corp.
Mr. Bresnan, we apologize for the delay in reaching you this morning, but we are interested in the subject. I see you have a prepared statement which is not particularly lengthy, you may proceed from it.
TESTIMONY OF WILLIAM J. BRESNAN, PRESIDENT, CABLE
TELEVISION DIVISION OF TELEPROMPTER CORP.
Mr. BreskaX. Thank you very much. Good afternoon, I am William J. Bresnan, senior vice president of Teleprompter Corp., and president of our Cable Division. Teleprompter is the Nation's largest cable television company, having approximately twice as many cable television subscribers as the second largest company.
On my right is Jay Ricks, a partner in the firm of Hogan & Hartson. On my left is Jacqueline Da Costa, director of Media Information and Analysis at Ted Bates & ('0., and to her left is Barry P. Simon, Teleprompter's vice president and general counsel.
Teleprompter's position on copyright is straightforward. We believe cable television systems should not be required to pay any copyright fee for the carriage of broadcast signals.
To understand this position, it is necessary to understand a basic fact about the broadcast industry-a fact which makes that industry unique among all other distributors of copyrighted materials. The broadcaster, unlike the movie producer or the book publisher, does not sell a Copyrighted product. What the broadcaster sells is the attention of the viewers. The purchaser is the advertiser. The more viewers the broadcaster can deliver to the advertiser, the more the advertiser will pay. And the more the advertiser pays, the more money is available for the broadcaster to pay the copyright owner.
Cable television affects this relationship only by enlarging the audience available to the broadcaster. In many cases this actually increases the advertising revenues available to pay the copyright owner. In no case does it deprive the copyright owner of anything to which he is entitled.
Thus, a cable system operator is not like a record pirate, as has been previously questioned in this hearing, rather, he is more like a network atiliate. And a network affiliate, I might add, actually receives compensation from the network for expanding the network market area.
I would like to cite two examples. First, imagine a television station located in a community part of which is in a valley where television reception is poor. Imagine also that a cable television system offers its service to the people of the community. The people who live in the valley have three choices:
One, they can install a rooftop antenna to watch the programs broadcast by the television station;
Two, they can subscribe to the cable television system and thereby get the benefit of the antenna tower erected by the cable television system; or,
Three, they can do neither and simply not watch the TV station's programs.
Is the Supreme ('ourt has twice recognized, choices 1 and 2 are functionally identical. Since no copyright liability attaches when the viewer erects his own antenna, why should there be any liability when the viewer avails himself of the antenna tower erected by the cable television station?
It is no answer to say that the cable television system makes—or at least tries to make—a profit out of providing its service, for clearly the antenna manufacturer-like the television set manufacturer and numerous other third parties in television-related businesses- also seeks to make a profit.
Before going on to the second example, let's pause for a moment to consider alternative 3, where the prospective viewer neither buys the tall antenna nor subscribes to the cable service but simply doesn't watch the programs broadcast by our hypothetical television station.
If this happens, what is the result? The station has a smaller audience and therefore its advertising spots are less attractive to potential advertisers. So, the station gets less money. And this means there is less money available to the station to pay the copyright owner. From this we can see that cable television, far from stealing from the copyright owner, by increasing the size of the broadcaster's audience actually increases the moneys paid to the copyright owner.
Now, consider a second situation. In this case, imagine a television station in New York City whose programs are imported via microwave hops-by a cable system and retransmitted over the cable to the cable television system's subscribers in Oswego, New York, who otherwise would not be able to receive the New York City station.
Is this situation really any different from our first example? Is the copyright owner somehow damaged by the action of the cable station? Is he, perhaps, deprived of the ability to exploit his creation in Oswego after it has been seen there on the cable?
The answer to all of these questions is, no. Because of the nature of broadcast economics, the copyright owner cannot be injured by the cable system's importing the New York City station into Oswego. And this is true even without consideration of the complicated FCC exclusivity rules which seek to give added protection to the copyright owner and which may require the cable system to delete programing so as to allegedly protect the copyright owner's markets.
As in the first example, by showing the imported programs in Oswego the cable system increases the audience of the New York City station. And this is not just a theoretical increase. The rating services— Nielsen and ARB-spend large sums of money to keep track of cable subscribers with the result that every single cable subscriber is accounted for in their surveys and so finds his way into some television station's rate card. Thus, by simply checking in Nielsen we find, for example, that in San Luis Obispo County, Calif., 30 percent of the television homes view the Los Angeles independent and network stations on a regular basis; in Grant County, N. Mex., 51 percent of the television homes view El Paso on a regular basis; in Chemung County, N.Y., 19.5 percent of the television homes view the New York City independent stations on a regular basis; in Lane County, Oreg., 20 percent of the television homes view the Portland independent and network stations on a regular basis; and in Sweetwater County, Wyo., 81 percent of the television homes view the Salt Lake City network stations on a regular basis.
In these cases, and in countless others, such coverage would be impossible without cable television.
This fact has not been lost on the broadcasters. For example, the literature put out by the Association of Independent Television Sta