Gill Industries, operator of a cable television system in San Jose, Campbell and portions of Santa Clara County, California, submits the following comments in connection with the Subcommittee's pending inquiry into the copyright laws as they relate to cable television. - Gill Industries wishes to bring to the Subcommittee's attention the Copyright Office's practice of insisting that cable systems pay an entire six-month license fee for stations which are carried by the cable system for only part indeed, for only a few days -- of the copyright period. Gill Industries became aware of this practice in the wake of its Copyright Statement of Account for the period January 1 to June 30, 1978. In its computation of so-called "distant signal equivalents," on which the compulsory fee is based,1/ Gill noted that it had carried the signal of KNUV-TV, Sacramento, California, only for some 37 days of the 181-day copyright license period, i.e., from January 1, 1978 through February 6, 1978. Accordingly, Gill computed a pro rata DSE based on the relatively short time which Gill carried the signal of KNUV-TV. The Copyright Office subsequently informed Gill the pro rata computation was improper under the Office's interpretation of the Copyright Act. The Office said that there "are no provisions for adjusting the DSE of a station carried less than full time other than those as described in Section 111 (f) of the copyright law allowing adjustments for specific substitute and part-time carriage." Accordingly, Gill was obliged to pay a license fee for KNUV-TV for the entire six-month license period even 1/ See 17 U.S.C. $111. though the station was carried on the system for only the first 37 days of the period. The difference in cost to Gill was approximately $11,318.00. Gill Industries urges that this interpretation is not required by the Copyright Act and works an unwarranted and costly hardship on those cable television systems which, for a variety of business reasons, may carry particular distant television signals for only part of a given copyright license period. It is true, as the Copyright Office noted, that the Act provides for partial DSE treatment in cases involving the late-night or specialty programming rules of the Federal Communications Commission or in cases of part-time carriage where full-time carriage is impossible because of lack of available channel space. However, this fact hardly compels the Office's interpretation. Indeed, it seems that the Act is simply silent on the question of partial carriage during the copyright license term, and Gill can find no mention of this particular problem in the legislative history of the Act. However, Gill submits that given the nature and purpose of the compulsory license fee, as stated on the face of the legislation and in the Act's legislative history, it is entirely proper for cable systems to pay pro rata license fees for partial carriage of television signals. Initially, the legislative history of the Act indicates that the fee paid is intended to be based on actual retransmission, or, use, of particular signals rather than the mere potential or possible carriage of broadcast signals. Thus, for example, the House Report on the bill which was eventually enacted noted that the House Committee intended to maintain the "basic principle" of the Senate version to establish a "compulsory copyright license for the retransmission of those over-the-air broadcast signals that a cable system is authorized to carry, House Rep't 94-1476 (95th Cong., September 3, 1976) (emphasis added).- Numerous other references link the fee to the "retransmission" of broadcast signals, and the House Report clearly concluded that the copyright liability of cable systems "should be limited to the retransmission of distant non-network programming." Commerce Clearing House 15.850. A cable system can hardly be said to be "retransmitting" a signal in whole or in part once it has dropped carriage altogether. 2/ Because Gill had overpaid the fee by several thousand dollars, this amount was deducted from the Copyright Office's refund. 3/ This report is reprinted in the Commerce Clearing House Copyright Law Reporter at ¶¶15.785-16.009. Subsequent references to the report will be made to the Reporter paragraph number. The House Report on the Act stated " it is the "retransmission" of "distant non-network programming" by cable systems which "causes damage to the copyright owner by distributing the program in an area beyond which it has been licensed" by limiting "the ability of the copyright owner to exploit the work in the distant market. Commerce Clearing House 15.850. Moreover, such exploitation directly benefits the cable system retransmitting the signal "by enhancing its ability to attract subscribers and increase revenues. Commerce Clearing House ¶15.850. Thus, the Committee concluded, the copyright liability should be limited to the "retransmission of distant non-network programming." Clearly, once a cable system has halted retransmission of the signal of a particular signal, the retransmission no longer adversely affects the station nor does the cable system derive the direct benefit of enhancing its ability to attract subscribers and increase revenues through the "use" of the station's signal. Nor does the "compulsory" nature of the license support the Copyright Office's interpretation of the Act. Indeed, the license was made compulsory without any intention that cable systems would be made to pay for signals which are no longer retransmitted. Rather, a compulsory license was enacted because, the House Report stated, "it would be impractical and unduly burdensome to require every cable system to negotiate with every copyright owner whose work was retransmitted by a cable system." Commerce Clearing House ¶15.849. Thus, the interpretation imposed on the Act by the Copyright Office is both unfair and improper. It deliberately exacts from cable systems copyright license fees for stations which are no longer being retransmitted. Indeed, even if a cable system retransmitted a broadcast signal on only one day during the license term, the cable system, under the Copyright Office's interpretation, would nonetheless be compelled to pay the complete license fee as if the station had been retransmitted throughout the six-month license term. If this places an unwarranted premium on cable systems for merely deleting a signal, the burden is even more pronounced for a system which, during a given license term, seeks to switch the distant signals transmitted. The cabel system which switches the carriage of one station for another would, under the Copyright Office's interpretation of the Act, be liable for two license fees even though, at any given time during the license period, the system carried only one of the distant stations. The Copyright Office's interpretation of the statute obviously operates to discourage experimentation with the diversity of distant signals available by satellite. As a practical matter, cable systems will be able to switch signal carriage, in response to competitive or public demands, only at two times during the year, the times of the ending of one copyright license period and the beginning of another period. Finally, it is difficult to see how the payment of pro rata fees would unduly burden the Copyright Office. The computation of pro rata fees is simple, and, as the Copyright Office has indicated, the Act already provides for a kind of pro rata fee for part-time carriage. - In conclusion, Gill Industries submits that the copyright license fees imposed by the Act should be and, in fact, were intended to be based on actual retransmission. The Copyright Office's interpretation to the contrary flies in the face of the Act's legislative history, and severely restricts independent business judgments by individual cable systems. APPENDIX 1.H. THE NEW YORK TIMES, MONDAY, NOVEMBER 12, 1979 Canadian Cable TV Enters U.S. Franchises Are Secured By ANDREW H. MALCOLM Special to The New York Times TORONTO, Nov. 11 Canadian cable TV companies, which got their head start pulling in American television signals for viewers to the north, are now homing in on a totally new market-the United States. Lured by the mushrooming American cable TV industry and armed with almost three decades of experience, the Canadian concerns have made significant penetrations in recent months in diverse cable areas from California to New Jersey. Last month Canadian Cablesystem's scored a coup by winning the cable franchise for the city of Minneapolis against American competition from Time Inc., Storer Broadcasting and Warner Cable. Now Canadian-American competition is heating up in southern California and Portland, Ore., which has just requested franchise bids. 'A Huge Growth Market' "The United States is attractive to Canadian cable companies for the same reason it's attractive to American companies," Barry Gage, president of Maclean-Hunter Cable TV Ltd., said. "There's a huge growth market down there." With Canada's major markets virtually saturated with cable Coverage, the logical place for growth is to the south, a theme developing in many Canadian industries. But while foreign companies are free to own cable TV systems in the United States, the same is not true in Canada, a fact that has prompted some Americans to cry foul. In Canada, a cable TV company must have 80 percent Canadian ownership and all of its directors must be Canadian. The provisions are intended to combat what Canadians see as America's pervasive cultural and media influences. Canadian cable executives point out that cable markets here are already highly developed. Attracted by cable's -quality reception of the American networks, 74 percent of Canada's 7.2 million TV households have access to cable TV. More than 50 percent subscribe, compared with 20 percent in the United States. This has created a Canadian cable TV Industry with more than 5,200 employees in 400 companies with gross operating revenues last year of $271.5 million and after-tax profits of $27.9 million. Source: Cable Communications Magazine While Canadian cable TV jumped off to an early lead in technology and expertise, Government regulation in recent years has been slow to open new vistas. For instance, pay TV, which brings live sports events or first-run movies free of commercials into the home for a special monthly charge, is still prohibited here. Government officials say they hope to license some operators within a year. "This Government hesitancy and ti midity is so utterly frustrating." Phil Continued on Page D2 |