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To allow the copyright holder to be compensated again-this time directly by the Oswego cable system-would be giving him the windfall of an undeserved second payment. This is a windfall that neither the cable television industry nor the 15 percent of the American households, which are cable television subscribers, can afford.

Thank you.

Mr. KASTEN MEIER. Thank you, Mr. Bresnan.

You make a consistent point that regular broadcasters benefit, as do advertisers, and potentially the copyright owner, by virtue of the additional audience that cable television provides. Do the broadcasters agree to that, or do they dispute that fact?

Mr. BRESNAN. I will be submitting to you the brochures from the broadcasters who claim all of these additional market areas. Those two charts are the work of the Association of Independent Television Broadcasters. Now, there may be times when they claim one thing and at times another, but when they construct the rate chart, they do claim these territories.

[The material referred to is in the files of the subcommittee.] Mr. KASTEN MEIER. I am only asking for the purpose of ascertaining whether that is a point in dispute, or whether the broadcasters agree to that, that this includes your subscribers, in terms of their sold audience.

Mr. BRESNAN. I'm not sure I understand the question clearly. There is no dispute that broadcasters claim coverage of the CATV subscribers who are provided the signals by the CATV system.

I have been advised by Miss De Costa on my left

Mr. KASTEN MEIER. Yes, I thought perhaps Miss De Costa might know more precisely, as a matter of technical expertise, whether that is correct. It is a matter of fact rate cards are built on the basis of cable audiences, as well as normal audiences. Do the broadcasters dispute that?

Miss DE COSTA. No. As a matter of fact, they look towards this audience to increase the size of their delivery.

Mr. BRESNAN. Miss De Costa has advised me, Mr. Chairman that to her knowledge every single cable television customer finds his way into a broadcaster's rate base.

Mr. KASTEN MEIER. Does the Teleprompter Corp. have a number of different types of systems? That is to say, does it have systems which retransmit only, and other systems which originate, use microwaves predominantly? What sort of systems do you have?

Mr. BRESNAN. Our company is a pretty good cross section of all types of cable systems, from coast to coast, from large to very small. We originate in some, and in others we do not. It is a good cross section of the industry.

Mr. KASTEN MEIER. Were you a party to the consensus agreement, or were you present at that time; or on the basis of litigation, did you absent yourself?

Mr. BRESNAN. I am glad you asked that because that so-called consensus agreement came up quite a bit today, and I do have some pretty strong feelings about it.

The consensus agreement come about at a time shortly after the time that the company I had been with merged into Teleprompter and Teleprompter's then management pretty much carried the ball. Although I was on the NCTA board-I believe I was vice chairman-when that came about.

I would like to state that the consensus agreement, in my opinion, was really a legend. It was pushed down the throat of the cable television industry, in my opinion, by the White House. If you like, I can expand on that.

Mr. KASTEN MEIER. I'm sorry, did you say that you were present at the time?

Mr. BRESNAN. I was present at the NCTA board meeting.
Mr. KASTENMEIER. For a different corporation?

Mr. BRESNAN. No; I was with Teleprompter. But Teleprompter's position was being determined by the then Teleprompter management. I had just joined the company shortly before then by virtue of the merger of my company into Teleprompter.

Mr. KASTENMEIER. And you said it was "shoved down the throat” of the cable people. How about the other parties, might they also have been somewhat unwilling, or unenthusiastic about the compromises they received?

Mr. BRESNAN. I doubt that they had too little to be unenthusiastic about, sir. At the time that that happened, the cable television industry had been frozen for about 511⁄2 to 6 years. And we were in a very deep freeze for about 3 years, from 1968 through 1971.

During the summer of 1971 the FCC studied proposed new rules which would lift the freeze on cable television, and things started to look pretty good for cable television after a long dry spell.

And in August of 1971 the then Chairman of the FCC sent a letter of intent to Congress, explaining the rules that the Commission proposed to adopt. Shortly thereafter, representatives of the broadcasting, copyright, and cable television industries were invited to a White House meeting. The net result of that meeting was that the cable television industry balked at these changes. They were told in no uncertain terms by Peter Flanigan that if they didn't agree to this thing they would get nothing, the White House would see to that.

That story was delivered back to the National Cable Television Association board of directors. Some of the directors voted for it reluctantly, some voted against it; but it was a pretty sad day for cable TV.

Mr. KASTEN MEIER. Do I understand the context that was used, “you would get nothing," not only to potential copyright legislation that the administration might take a position on, but particularly the FCC rules then pending?

Mr. BRESNAN. Specifically it had to do with the FCC rules. The FCC had in a letter of intent stated that it believed it should handle the regulatory aspects of cable TV, and leave up to the Congress the handling of the copyright aspects.

Mr. KASTEN MEIER. Then I assume, if I follow this correctly-and I assure you, I do not know precisely what transpired--that as a result of your fellow cable operators coming to an agreement, the Commission subsequently issued rules recognizing that compromise. In other words, reading between the lines of what you have said, the consensus agreement did produce some concessions for the cable industry, as well as the others, as a result of your coming to that agreement in terms of the consensus agreement; or at least others. Mr. BRESNAN. Well, first of all

Mr. KASTEN MEIER. In other words, was there not a quid pro quo which the consensus agreement reflects?

Well, this committee is not party to such a bargain, but I suppose we might take note of it.

Mr. BRESNAN. The rules that we were hoping to get out of the FCC we did not get. And I recall such powerful words I think they were attributed to Peter Flanigan-"There will be a blood bath for cable television."

Mr. KASTEN MEIER. Well, that has not happened either, has it?
Mr. BRESNAN. We seem to have gotten everything.

Mr. KASTENMEIER. The Chair yields to the gentleman from Illinois, Mr. Railsback.

Mr. RAILSBACK. The blood bath was earlier, wasn't it? [Laughter.] Do you think we could have a copy of your annual report that is referred to in your earlier testimony, would that be possible? Mr. BRESNAN. Yes, sir.

[The material referred to is in the files of the subcommittee.] Mr. RAILSBACK. Do you recall the reason for what appears to be an extraordinary loss to your company in 1973?

Mr. BRESNAN. Yes. Teleprompter Corp. was expanding into several of the top markets. Teleprompter, I guess, was probably attempting to do more to prosecute the intention of the FCC rules than any other company. It was not getting subscribers as fast as it was building plant. It stopped construction in a number of systems, and slowed down construction in others. It changed its whole mode of operations, if you will, from that of a construction company to that of an operating company.

There were significant operating costs and losses, and there was some write down of assets due to this change.

Mr. RAILSBACK. So, it really was, or could be characterized as an extraordinary loss, or a nonrecurring loss.

Mr. BRESNAN. Well, of part of it you could say that. However, in 1974 the industry also had a loss.

Mr. RAILSBACK. You went from $29 million down to about $7 million?

Mr. BRESNAN. Yes. And the interesting thing, Mr. Railsback, we picked up a bit of information this morning from a very well-respected cable analyst, and he tells us that of the 15 publicly held companies which represent 4.2 million of the 10 million cable subscribers; that those systems combined showed a net loss in 1974 of $31 million.

Now, we don't know how much profit or loss privately held companies would have because we don't have access to that information. But we estimate that the entire industry last year did not operate at a profit.

Mr. RAILSBACK. Let me just mention, the exhibit attached to your testimony reflects that the nine largest public CATV companies, there was a 1974 loss of $16.3 million; but 17.2 percent of that total figure was Telecommunications; and in the year 1973 there was a loss, a net income loss of $27.9. There is a figure that you had that year, and this is part of the total figure, that your company had a 29.7. Two companies have a rather severe impact on the total figure in both years. your Telecommunications and Teleprompter.

Mr. BRESNAN. No question about that, sir. However, the fact remains that in 1974, at which time Teleprompter did not have a real large loss, as we had in 1973, the top 15 publicly held companies I referred to just a moment ago, had a net result of a $31 million loss.

Mr. RAILSBACK. Which year was that?

Mr. BRESNAN. 1974.

Mr. RAILSBACK. Well, in 1974 Telecommunications had contributed toward that 17.2 percent of the 15 companies.

Mr. BRESNAN. Yes.

Mr. RAILSBACK. I think that is all I have.

Mr. KASTENMEIER. The gentleman from California, Mr. Danielson. Mr. DANIELSON. Thank you, Mr. Chairman.

After this consent agreement which I think we all have heard a lot about recently, do you know whether the cable industry had any part in drafting it, preparing it? That is the Consensus Agreement. Mr. BRESNAN. I don't know, sir.

Mr. DANIELSON. You are not saying that the cable industry did not participate in the preparation, you are saying you don't know whether they did.

Mr. BRESNAN. I am saying I don't know.

Mr. DANIELSON. Do you know of anybody who does know?

Mr. BRESNAN. We believe it was drafted by OTP. There were meetings conducted, where the participants included representatives of the NCTA and the broadcasting industry, and I believe the copyright industry. I don't know whether they were actual drafting sessions. We could find out.

Mr. DANIELSON. But your opinion is that, at least subsequent to those meetings, the agreement was drafted by, in your opinion, OTP. Mr. BRESNAN. Yes, sir.

Mr. DANIELSON. Which is Office of Telecommunications policy, I believe.

Mr. BRESNAN. That's correct.

Mr. DANIELSON. Were you present at the meeting where you were told, you get this, or you get nothing?

Mr. BRESNAN. The meeting with Mr. Flanigan?

Mr. DANIELSON. Well, you referred to a meeting

Mr. BRESNAN. I was present at a meeting of the NCTA board, where the remarks of the meeting with Mr. Flanigan were reported to the board.

Mr. DANIELSON. In other words, someone reported to you that had been said.

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Who reported that to you?

Mr. BRESNAN. The person I remember specifically who gave quite a bit of reporting at that time was Gary Christensen, who at that time. was general counsel to NCTA.

Mr. DANIELSON. And he made that report to a group of National Cable Television Association people, which included yourself; is that correct?

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Do you know whether there were any changes made in the so-called consensus agreement after that time, before it was signed?

Mr. BRESNAN. I can't recall, sir.

Mr. DANIELSON. You recall no changes, but you do not recall that there were no changes, also; is that correct?

Mr. BRESNAN. That is correct.

Mr. DANIELSON. You do not recall any changes, but you also do not know if there were no changes.

Mr. BRESNAN. That is correct.

Mr. DANIELSON. Were you an officer of Teleprompter at the time the agreement was signed?

Mr. BRESNAN. Yes, I was.

Mr. DANIELSON. Were you at a policymaking level at Teleprompter at that time?

Mr. BRESNAN. No, sir.

Mr. DANIELSON. Do you have any knowledge as to whether or not Teleprompter would have agreed to the so-called consent agreement. but for the threat that you reported, that you would get this, or you would get nothing?

Mr. BRESNAN. To my knowledge neither Teleprompter nor anyone else at NCTA would have accepted that agreement, were it not for the threat; that was the feeling I got.

Mr. DANIELSON. Were you at the meeting of the NCTA people when it was reported?

Mr. BRESNAN. Yes, I was.

Mr. DANIELSON. And can you tell me whether your feeling, which I am going to describe as a negative feeling for point of reference; can you tell me whether that was shared, as far as you can tell, by others?

Mr. BRESNAN. As far as I can tell, sir, it was. It was a very, very gloomy meeting at which we were told we would have to accept something which we all knew was bad for our industry.

Mr. DANIELSON. Directing your attention, now, to the two charts on the side wall which your colleague pointed out a while ago, I note that the upper one depicts what I am going to call New England, Pennsylvania, New Jersey, New York, and up through to Maine. Portions of the map are in a dark gray, and portions in white.

It is my understanding that in the white area, the area that is circumscribed by a heavy dark, black line, is the primary viewing area of the New York City television broadcasting stations; am I right on that?

Mr. BRESNAN. Yes, sir.

Mr. DANIELSON. And beyond that heavy line there continue to be, in irregular formation, other white areas, reaching from upper New York back all the way, I guess, to the St. Lawrence River to Canada: down through New York, one leg going out to a lake-I can't name it. Mr. PATTISON. Atlantic. [Laughter.]

Mr. DANIELSON. Another leg going down to the Pennsylvania southern end, again western boundary. Do I understand your testimony to be that those white areas are included within the potential viewing audience of the New York City television stations, in conjunction with their advertising rate schedule. Am I right, or wrong on that? Mr. BRESNAN. You are right.

Mr. DANIELSON. I would like to ask a question, and I think it's really for Miss Da Costa. I understand Miss Da Costa is a professional advertising agency person; am I correct?

Miss DA COSTA. Yes, sir.

Mr. DANIELSON. How long have you been so employed?

Miss DA COSTA. More than I care to admit, about 30 years.

Mr. DANIELSON. Well, you started as a child, then. [Laughter.]

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