When you talk about deregulation, we don't regard that as deregulation at all. At least before there was such a thing as exclusivity, the broadcaster got it in the marketplace. If he didn't get it, then the copyright owner might give it to a cable system, but it had to be fought for and obtained in the marketplace.

When you wipe out the rules from deregulation you are involving the Government more and putting the copyright tribunal in the system to a greater extent, so we claim it is kind of Orwellian to say this is deregulation.

There are more of the same problems. I gave you an example in film; the same problems would exist in the sports area, perhaps even greater, and we have given in our testimony a number of examples of how the marketplace gets skewed when you proceed in this fashion.

In the materials we have given you, we have also shown why we think it is within the FCC authority to act. I won't go into that here, although I will be glad to answer questions.

In any event, since this is a hearing before you, we think this is not a matter of FCC authority, but is a matter of what is proper policy. We couldn't agree more, that policy in this important area should be set by the Congress, not by an administrative agency. It is for that reason, therefore, that we welcome these hearings.

We think that the sound policy for cable future growth, not for its past but for its future, is either retransmission consent as part of Communciations Act policy, or full copyright liability, if it is a matter to be considered by this committee.

We believe that any other way of proceeding is not deregulation; it skews the marketplace and makes the Government become involved in decisions in which it has no business being.

That, very succinctly, is the position of NTIA. I would be glad to amplify on that or to answer your questions.

Mr. KASTENMEIER. Thank you, Mr. Geller.

Your main recommendation appears to be that we should subject all future growth of cable to full copyright liability or the equivalent thereof while grandfathering existing service?

Mr. GELLER. Yes, sir. The only qualification I put on that is if the cable system just began in a major market, such as Pittsburgh, and had very few subscribers, I would not grandfather that service. I would require a cable system beginning in a major market to come within the new policy. But with respect to existing systems-and they have largely developed outside the top 100 markets-I think it ought to be grandfathered if they added new signals. That would be a new matter.

I should point out also that what we are talking about here is non network programing. We are not talking about cable carrying local signals. There is no question there as to the copyright owner having been fully compensated. When he sells a program to a local station he expects every local viewer to get it, therefore, there is no issue as to copyright owner and cable ought to be able to carry the local signal.

The same thing is true with regard to network programing. Network programing is sold for dissemination to the entire Nation. Once again, therefore, we are not talking about payment for carriage of network signals but we are saying that when you do deal

with nonnetwork programing, which is not sold on a simultaneous basis, it is sold to particular markets, and on an exclusive basis. If the broadcaster obtains that exclusivity in the marketplace, it is there we would go to the full copyright liability or retransmission consent. They are equivalent.

Mr. KASTENMEIER. Wouldn't you really have two classes of cable systems: Those operating under a grandfather and those not grandfathered. Those not grandfathered would then have to evolve into something else, like Home Box Office. They would tend to generate their own programing and assume the characteristics of a television station, with added technological advantages in terms of scope of materials generated.

You are then looking to a different class of system which could be differentiated, technologically and otherwise, from existing cable system. Is that correct?

Mr. GELLER. That is correct. When cable moves into a major market it can't go out of distant signal. It can and has in the past, but when cable goes into Pittsburgh, or into the Washington area or the other places, there is so much-over-the air broadcasting there already that for cable to succeed it must offer new services. That is why it is offering pay cable. That is why it has 20 services. That is why you are getting a black network and why you will be getting cable news, as Ted Turner is proposing. It needs to do that. Another thing it can do, we believe, is to provide a place for advertiser-based programing and the assurances that they can get it. Some of the pay programs have advertising support. You could take the same film, but it might be a little later. However, the middleman or the broadcaster would go out and get advertisers who would pay not only for the showing in that area but for the showing in cable homes. It would be engineered to do that. We don't see why it can't be done.

But we agree with you that if it cannot be done, if the marketplace has reasons that won't work out, then we believe the answer is just what you said: Cable in major markets will turn to the new services.

Mr. KASTENMEIER. With respect to long distance retransmissions, in your view, who should bear the copyright liability; the cable system or the satellite company that makes such retransmission possible?

Mr. GELLER. I think that the copyright owner should be fully compensated. I think a consortium will work out how to do it. I believe the broadcaster will come to who ever owns the copyright, and say, "I would like to put it in Atlanta. I would also like to send it to 5 million cable homes. What will you charge me to do that?" He will then turn to advertisers to see how much money he can get for Atlanta and for those 5 million homes.

He might also turn to the cable systems and say to them, "I need help; I am not getting enough money to buy the product I want and, therefore, I want you to contribute x pennies per subscriber a month." It may be that the middleman will do this.

Just as you said, the satellite carrier, you have quotes around "carrier," but the satellite system such as Southern Satellite might be the one who works all this out and chips in money.

I repeat to you, I don't know how the market should work and we don't have any blueprint; all we know is that it works out in the pay area, that middlemen came forward and did it, and we think it will work out here. I don't know whether it will work out by cable being paid or cable having to pay so much, but we would leave that to the marketplace to figure out.

Mr. KASTENMEIER. You tend to differentiate between existing cable systems and new cable systems. Might not another basis for differentiation be to treat satellite signals differently than conventionally retransmitted signals?

Mr. GELLER. I don't believe so because it means, therefore, that in Philadelphia, which is close to New York, you can operate one way and bring in signals, but if you are further away you could not. We think it is a function of what is going on. With parabolic antennas you can pick up signals as much as 250 miles away. In Canada they do not allow microwave of signals. As a result, signals are brought in by very high, very peculiar antennas. We think that is a foolish way to proceed and that it ought not to be done. Mr. KASTENMEIER. This is, of course, a policy question. Nonetheless, in terms of trying to assess the possibility of change and given the importance of syndicated exclusivity to the broadcast industry, do you think a partial exclusion might be to mandate, by statute, a continuation of the exclusivity rules?

Mr. GELLER. Yes, and I agree fully with your characterization of it as a partial exclusion. We think that the syndicated exclusivity rules are desirable because you don't get it unless you go out and bid for it in the marketplace. The broadcaster doesn't pay enough, he doesn't get exclusivity, and that is a way of doing it.

There are a number of other possible compromises such as just divide the top 100 markets and say that within the top 100 markets, within a 35-mile zone, you must come within the new policy of retransmission of full copyright liability. Outside of it, you are instead within the compulsory license. It is messy, this two system thing that you speak about, but we think that you have to deal with the system as it is.

Justice Holmes said "The life of the law is not logic; it is experience," and here you have something that grown up people become accustomed to-getting services, that is what makes for the messiness. If you don't do anything about it, it means that we will skew the system for the future development in favor of a very large industry.

Mr. KASTENMEIER. I would recognize the gentleman from Califor

nia.

Mr. DANIELSON. I don't have any answers for the problems which are giving rise to these hearings. The problems are very complex, as I see them, and what amazes me is that it is only 3 years since we passed the copyright revision law and yet we are considering problems that at least I had never dreamed of at the time, and no one brought into focus, no one at all, which causes me to take one other step of caution and that is that perhaps what we are talking about here and now won't mean a thing 2 or 3 years from now. The fact we have got, I think you said, 20 satellite services available. Mr. GELLER. About to be available, since they are about to begin.

Mr. DANIELSON. Let's call it in being or gestation, one or the other.

Mr. GELLER. Yes sir.

Mr. DANIELSON. I don't believe there were any 3 years ago and I am pretty much of the opinion that 3 years from now the situation. is going to be entirely different.

Some person told me not too long ago that there is on the drawing boards some kind of a supersatellite system, which I called a celestial jukebox. In other words, you didn't have to wait until the program was ready, you just sort of punched the right button and you got whatever program you wanted out of something up there.

Mr. GELLER. I hope it is far off.

Mr. DANIELSON. I beg your pardon?

Mr. GELLER. I hope that is not coming tomorrow.

Mr. DANIELSON. I think it may be in your office before you get back to it.

In your statement, which I will chide you about briefly, I didn't receive it until this morning-I don't know how on earth I can be expected to have studied something I haven't seen. Maybe that is part of the new technology also.

Mr. GELLER. I apologize.

Mr. DANIELSON. You don't have to apologize. Almost all witnesses do it except in my subcommittee. I don't know how you would ever appear before a court of appeals without having filed your brief at least 10 days in advance. So I can't respond frankly to your questions and your suggestions and you will be gone when I am able to.

My thrust of what I am saying is, I don't really know where we are at the present time. I appreciate the contribution that you have made and I will read your brief, but I think we had better go rather slowly in changing anything because I am afraid by the time we get it changed our change will be obsolete, and we may be better off with what we have than to fly to others we know not of. Mr. KASTENMEIER. The gentleman from North Carolina.

Mr. GUDGER. Mr. Chairman, I appreciate the opportunity to question Secretary Geller, but I will refrain from doing so at this time in view of the time limitation, except to ask one question.

It is my understanding that the 1976 act really was implemented only about 18 months ago. There was about a 11⁄2 year delay in implementation, was there not?

Mr. GELLER. As a matter of fact, the first division of revenues under it has not yet occurred. It is now being considered by the Copyright Tribunal because there is a dispute and-

Mr. GUDGER. Royalties have been collected but not yet dispersed. They have been collected, they have not been distributed.

May we write you or communicate with you further should your brief and testimony here prompt us to have questions of you? Mr. GELLER. I would be delighted to come to your office individually or to come back for further testimony.

I would just say one thing. While normally I appreciate the need to go slowly, we have discovered it is best to be evolutionary in most fields and not try to turn things upside down. I would say that this field is moving so fast and cable penetration is moving so

fast, that the reason I argue for grandfathering is because you can't take a lollipop away once the public has it and becomes accustomed to a certain way of operating.

So what I am saying to you, if you allow it to continue along the path it is continuing, then that is a decision and that decision, I think, will be almost foreclosed some years in the future. It is a very dynamic, a very fast moving field, and not acting may be a sound decision but it is a decision

Mr. DANIELSON. I agree with you. I have one concern. You spoke of the lollipop. The people in the areas served do have this benefit and do not wish to have it taken from them.

Mr. GELLER. That is true.

Mr. DANIELSON. There are some areas which are not yet served and I am sure human nature being what it is, they also will want a lollipop and they will say why should the people in Denver, for example, have this benefit while we in Butte do not have the benefit.

Mr. GELLER. I would answer you that the people in Denver have much more service over the air now than the people in Butte. Mr. DANIELSON. Let's reverse the cities. Butte now has it and Denver doesn't?

Mr. GELLER. What I am saying, is that when you go into major markets there is a great deal of over air service. We would like all the additional service that is possible and, therefore, we favor cable development in those markets. We are only saying as cable comes, let it come within the marketplace, with all these new services paid for by standing and bidding for them, rather than getting the Government to step in and say here, you can have it and here is what you have to pay and here is how we are going to adjust for exclusivity lost in the marketplace. That is all.

We are saying that major markets are different and it would be helpful if the Government got out of the business of refereeing this and let it go to the marketplace.

Mr. GUDGER. I am going to yield back the balance of my time. with this observation. Being a Congressman representing the Appalachian Mountains district, I, of course, have some long acquaintance with cable TV because we do not pick up even close signals due to the mountain interference. As early as the fifties we had to get into it. So I am interested and I did not want the fact that I was not questioning to be interpreted as a lack of interest or

concern.

I thank you.

Mr. KASTENMEIER. I thank the gentleman.

This concludes, I think, questions for Mr. Geller. But, as has been suggested, we may want to continue further dialog with you on this question, which is an interesting one, and something the committee has to entertain prospectively in terms of being able to anticipate what the future will bring.

Thank you very much for your contribution this morning.

Mr. GELLER. I appreciate the opportunity to initiate the dialog at this time. Thank you.

Mr. KASTENMEIER. The committee will recess for approximately 15 minutes after which time we will hear from Ms. Ringer.

(A short recess was taken.]

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