as possible, to all the people of the United States, a rapid, efficient, nation-wide, and world-wide wire and radiocommunications service." Yet, twenty-five years after the FCC commenced fumbling with television allocations, two million households or 3 percent of all homes, receive absolutely no over-the-air television signals. It is estimated that over ten million homes, or 15 percent of the population, do not receive the three national network signals.off the air. It is CATV, however, that over the last 25 years has filled gaps in the FCC's allocations voids and lent a boost to UHF television in tandem with your all channel receiver law. It is antithetical, then, to your Communications Act purposes to saddle CATV, and through it, the American television-viewing public with a tax for the privilege of watching.

Copyright is a creation of the legislature under a constitutionally delegated power: "To promote the progress of science and useful acts by securing for limited times to authors and inventers the exclusive rights to their respective writings and discoveries."

Also under the Constitution, you have specifically been delegated power to make laws affecting interstate commerce and have done so vis-a-vis broadcasting by passage of the Communications Act. Today, the Communications Act and Copyright Act are in a state of apparent tension. I say apparent because the program suppliers would have you believe that the main purpose of copyright is to give authors money so that they will have incentive to write. Not true. The main purpose is not to reward authors, but to insure that creative works find their way to the public. The Supreme Court has pointed out that in economic terms, copyright grants are made in "the connection that encouragement of individual effort by personal gain is the best way to advance public welfare. ***” Thus, the tension dissolves when it is realized that Congress has also established a Communications Act and created the FCC to fulfill similar, if not identical, purposes: those being to secure the general benefits of radio and television programming to all the people of the United States and to encourage their larger and more effective use in the public interest. In these stated purposes, it is inconceivable that the FCC's own general counsel could testify before you that CATV should pay just because the argument has been around for a long time. We submit that if the FCC testifies in support of copyright, it ought to relate that testimony to some area of concern within its jurisdiction. If Mr. Hardy desires to see resolution of the issue merely for the sake of resolution, his. desire can be accommodated just as well by deleting CATV from this bill.

There are other voices in and out of the CATV industry who say that "the copyright issue must be solved-it must be put behind us, because until it is laid to rest, the investment community will not advance the capital required by cable to expand and grow."

We have no quarrel with this line of reasoning, except when it is expanded to the illogical conclusion that the industry should simply pay copyright merely to expedite the removal of this uncertainty when CATV's future is better served by the removal of CATV from copyright legislation.

And then, there are voices in our industry who say "We can afford to pay" with remarks like "What is one or two or 21⁄2 percent of our gross?" Let me tell you what it is.

In December, 1973, CATA turned into Senator John McClellan an economic study of more than 250 CATV systems, ranging in size from 40 subscribers to 5,800 subscribers. In that study, which we will submit for the record, CATA found that in the singular "rate" level of one percent of gross proceeds to copyright that, among other breakdowns by system size, systems of 1,001-1,500 subscribers would experience reduction of net revenues of 13.8 percent.

Frankly, the industry cannot afford to pay and that is the truth. Lest this be considered solely a pitch for a small system exemption, that is, a flat dollar exemption, such as $100,000, it is not. For copyright will adversely affect larger systems, including multiply owned systems.

We also regard as fundamental considerations the following questions which should be asked of every proponent of copyright liability for CATV:

1. Why should this industry pay?

2. Who will really pay?

3. Who will receive the payments?

CATV should not pay copyright because there is no debt owing. There are hundreds of thousands of hospital rooms in this country offering television service at a price. Patients rent a television set and the set supplier, the hospital,

and maintenance man profit. Rates are as high as $3 a day. There is an unmolested industry-hospital television-possibly with gross revenues exceeding CATV. Why are they not in the copyright bill? Because they are providing the service of facilitating television viewing. The Supreme Court has twice held that the same rationale applies to CATV. These cases are instructive. First, one must lay aside the program-supplier sponsored line that the cases are irrelevant because they dealt with the 1909 Copyright Act. Of course, the Supreme Court was dealing with a 1909 Copyright Act. But they said, in Fortnightly that the decision was made "with due regard to changing technology. ***", i.e., not based on 1909 concepts. The Court held: "*** mere quantitative contribution cannot be the proper test to determine copyright liability in the context of television broadcasting. If it were, many people who make large contributions to television viewing might find themselves liable for copyright infringement-not only the apartment house owner who erects a common antenna for his tenants, but the shopkeeper who sells or rents television sets, and, indeed, every television set manufacturer. Rather, resolution of the issue before us depends upon a determination of the function that CATV plays in the total process of television broadcasting and reception."

The Court reasoned television viewing was a combined activity of broadcasters and viewers; that broadcasters perform and viewers do not; broadcasters are active performers and viewers passive beneficiaries and CATV "falls on the viewer's side of the line."

The Court concluded as a matter of separation of powers—not as a matter of copyright policy-that the job of accommodating "various competing considerations of copyright, communications, and antitrust" belonged to Congress. The Court did not intend that Congress, in fact, adopt CATV copyright liability.

Then came TelePrompTer-CBS, where the Court was faced with microwaved, long-distance signal importation-more than 450 miles-by CATV systems that also originated their own programs, also sold local advertising and interconnected with other systems. It was contended that this entire package moved CATV to the broadcaster side of the line. The Court found no copyright significance to the other CATV activities and found that the distance that signals travelled did not "alter the function [CATV] performs for its subscribers." The Court stated: "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 simultaneous viewing is essentially a viewer function, irrespective of the distance between the broadcasting station and the ultimate viewer." (Emphasis added.) Mr. Chairman, members of this committee, two points: (1) When a television station broadcasts, the broadcast is in the public domain; (2) The Supreme Court's characterization of what CATV does is as true today as it was when the Court made its decision. What CATV does-its viewer function-is not altered by the words of the 1909 Act or H.R. 2223.

Those advocating CATV liability have a high burden of persuasion because CATV fulfills Communications Act goals by making television more widely available or available for the first time. It is a viewer-oriented medium, as are translators, master antennae, rooftop antennae, and television sets themselves. None of these entities are prospectively liable for copyright under your bill. None should be, for they are all part of the process of nationwide dissemination of programming that you have legislated in the Communications Act.

In TelePrompTer-CBS, the copyright holders argued that CATV prerelease of programs (which would not apply to network television) would dilute the profitability of reruns and other syndicated properties, thus removing incentives to produce television programs. The Court rejected this argument. It recognized that the appropriate nexus was missing, that is, copyright holders do not receive money from the ultimate user-the television viewer-but from the advertisers "who use the drawing power of the copyrighted material to promote their goods and services."

The Court recognized: that distant signal carriage does not interfere with the "copyright holders' means of extracting recompense for their creativity and labor"; and that, in fact, CATV provides a larger viewer market (to the benefit of both the advertiser and copyright holder).

We submit that CATV should not pay because it does not owe. Copyright holders are paid by advertisers, not currently, and hopefully, not in the future, by viewers or by those that help the viewing process-CATV systems.

This leads to the second question—who will really pay. There is no doubt that your imposition of copyright on CATV would be, at least in part, a consumer tax on television viewing. Some have difficulty with the word "tax". But it is a form of territorial taxation, that is, a special television viewing charge to be paid only by cable viewers. Must the viewer himself pay it? It could stop at the cable company. But it will not because there are no free lunches. Is it a large amount? At the national average cable charge of $6 per month per home, the copyright bite is $1.80 per year-for the 2.5 percent rate, irrespective of number of signals carried.

In the seven Congressional districts of this Committee, there are approximately 73,000 cable homes. Under this bill, these 73,000 homes could pay to copyright holders up to $131,400 per year.

What about the television viewers? They care, too. We have already received more than 200 community resolutions opposing this viewing tax from cities as diverse as Eau Claire, Wisconsin, and Granville Village, New York.

These resolutions from municipalities will be supplied for the record. Further, the United States Conference of Mayors and the League of Cities also adopted a joint resolution opposing the inclusion of CATV in the copyright bill. Your constituents are concerned about higher CATV charges that will result from copyright legislation.

The third question concerns to whom copyright payment would be made. Jack Valenti, president of the MPAA, told Senator McClellan's Committee on the Judiciary on August 1, 1973, that he represents the Committee of Copyright Owners, composed of eight independent suppliers of copyrighted television programs: (1) Columbia Pictures Industries, Inc.; (2) Metro-Goldwyn-Mayer, Inc.; (3) Metromedia Producers Corporation; (4) Paramount Pictures Corporation; (5) Twentieth Century Fox Film Corporation; (6) United Artists Corporation; (7) MCA, Inc.; and (8) Warner Brothers, Inc. Mr. Valenti said: "*** the programs supplied by members of CCO to stations, and thereby to cable systems, constitute by far the largest part of all copyright programs carried by television and cable. ***" CATA has completed a tabulation of copyright registrations for television programs broadcast in New York City during a recent week.

Of all program hours telecast by the three networks in New York City, between 5:00 p.m. and 11:30 p.m., in the sample week:

46.15 percent of all copyright-on-file program time on CBS was owned on record by one of these eight CCO firms; similarly, 31.58 percent for NBC; and 16.67 percent for ABC.

Finally, movie copyrights on file for that week reflected that 51 of 68 movies (60 percent) were owned by one of these eight firms. Clearly, Mr. Valenti is correct in his analysis of who owns copyright. But to make the analysis and our point more clear, please consider that the largest copyright owner of the big eight-MCA-had gross revenues in 1974 of $641 million-a third more than not the largest cable company, but all cable companies-the whole cable industry. Given the state of economic affairs in the cable industry, we are indeed saddened that we were not first in thinking of a relief act for our industry-a royalty from program suppliers to CATV for aiding viewers to see their programs. They can clearly afford to pay.

Mr. KASTENMEIER. Our next witness is Mr. Frederick W. Ford, counsel for the Ad Hoc Committee of Concerned Cable Television Operators for a Fair Copyright Law. Mr. Ford, would you like to introduce your colleagues?

TESTIMONY OF FREDERICK W. FORD, COUNSEL, AD HOC COMMITTEE OF CONCERNED CABLE TELEVISION OPERATORS FOR A FAIR COPYRIGHT LAW

Mr. FORD. Mr. Chairman and members of the committee, I am Frederick W. Ford, a member of the Washington law firm of Pittman Lovett Ford & Hennessey, with offices at 1819 H Street NW. I appear here today on behalf of the Ad Hoc Committee of Concerned Cable Television Operators for a Fair Copyright Law to suggest an amendment to the bill and to support passage of the bill, as amended.

Accompanying me are Ben V. Willie of Iowa; C. Warren Fribley of New York; Lawrence Flinn of Connecticut, and George Gardner of Pennsylvania.

I have conceded 5 minutes of the time alloted to me to Teleprompter Corp., which is the largest owner of cable television in the country. I have, therefore, cut my statement rather drastically. I would like to have the entire statement incorporated in the record, because I will eliminate large parts of it in order to confine myself to the allotted time.

Mr. KASTEN MEIER. The chairman appreciates that, Mr. Ford, and without objection the 17-page statement and the appendixes will be received for the record.

Mr. FORD. The ad hoc committee opposes the payment of copyright on the community antenna function, and suggests an amendment to the bill to eliminate copyright liability of community antennas for carriage of television signals. That suggested amendment is contained in footnote 5.

The ad hoc committee does not view the matter of copyright payments as an issue between it and the Office of Copyrights, the copyright owners, the NAB, AMST, or NCTA, because none of them will pay copyright, only the public ultimately pays copyright on television programs. The issue here is between the copyright owners and the subscribing members of the public to community antennas.

The issue is as follows: Should the Congress, contrary to the reason and logic of the U.S. Supreme Court, on two occasions, create the legislative fiction that CATV is engaged in the display or performance of a copyrighted work publicly and is, therefore, liable for the payment of copyright fees which, of course, it would have to collect from the public as a part of its antenna service?

The public should not be required to pay a second copyright fee for the same program because of the type of antenna it uses.

The Office of Copyrights makes its case for CATV copyright liability on the fact that CATV charges its subscribers a fee for its antenna services which makes a profit and failure to share these profits could damage the copyright. The Supreme Court disagreed with these assumptions and found otherwise in TelePrompTer Corporation v. CBS, 415 U.S. 394 (1974). If the Office of Copyright's theory of liability is correct-which it is not-then anyone who makes a profit, directly or indirectly, from a performance of a copyrighted work should be liable. This liability would run to wire and receiver manufacturers and countless other business enterprises which enable the public to view the performance.

CATV services keeps the copyright owner honest by delivering the signal carrying his program to the public for which he has been paid.

At the present time, a sponsor who buys a program usually pays the copyright owner for one performance over one or more stations. The sponsor pays the copyright owner, directly or indirectly, for tickets to the show for everyone within the grade B contour of the stations televising it and as far beyond that contour as it can be received. This cost is passed on to the public eventually in the purchase price of the product.

It is a scientific fact, recognized in the Sixth Report and Order, however, that over average terrain only 90 percent of the locations in the grade A contour receive an adequate signal 50 percent of the time, and within the grade B contour only 70 percent of the locations receive an adequate signal 50 percent of the time. I will venture that most sponsors paying for a program think they are getting a potential of 100 percent of the locations 100 percent of the time, but that just isn't so, even though the copyright owner is probably collecting for 100 percent of the locations 100 percent of the time.

A community antenna television system within the grade B contour merely aids the sponsor in getting his money's worth from the copyright owner and the station by assuring the sponsor that anyone who desires the signal will receive it clearly, and thus increase the potential audience. Certain copyright owners are not satisfied with this. They collect from the sponsor who recovers his cost from the public and they would like to collect again from the CATV operator who must also pass his cost on to the public. Some way or other it does not seem right for the public to have to pay for "two tickets to the same performance." No one has attempted successfully, to my knowledge, to refute this argument. They merely ignore it and talk about something else.

Cable television or its advertisers will pay for any copyrighted program it originates, whereas the public would receive nothing for the cash the broadcasters would have the copyright owner siphon from the public via CATV which otherwise could be used for copyright. fees for more diverse programing.

There is a basic conflict between communications policy and any copyright law in which a cable antenna system is required to pay copyright on any signal it is authorized to receive and distribute on its system by the Federal Communications Commission.

The proposed legislation would compel CATV to pay copyright owners for distributing signals carrying their copyrighted works. The broadcaster has the right to pick and choose the copyrighted works he will buy and broadcast.

Congress should set the record straight. If the Commission is confirmed by Congress in the power to require carriage of particular signals by CATV, then CATV will remain a supplemental reception service, perform nothing, and owe nothing.

If it is desired to require copyright payment by CATV for its supplemental role, then CATV should be entitled to carry whatever programs it desires, delete the advertising, and substitute its own. This is strictly a communications policy question. The broadcaster should not be permitted to have it both ways collect additional revenue from sponsors for the added carriage of CATV and require CATV to pay copyright fees.

In short, the broadcaster is arguing for the morality of unjust enrichment to copyright owners at the expense of the public CATV serves, as a means of using copyright to restrict the growth of CATV. It is the public who will unjustly enrich the broadcaster and/or the copyright owner, not the CATV operators. These anti-consumer provisions should not be enacted into law.

We urge the Congress not to compromise the fundamental legal principles established by the U.S. Supreme Court on two occasions.