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of the case of Mr. Nicholas Allen and Mr. Perry Patterson, we want to greet you back to a hearing before this committee after an absence of many years. And I would express gratitude of the committee to the rest of you who as officers of the organizations and who have otherwise appeared before us this morning. Thank you.

Mr. COLLINS. Thank you, Mr. Chairman.

Mr. KASTENMEIER. This concludes this morning's hearing on one aspect of copyright, section 116 on the impact on jukeboxes in America. On next Thursday morning, June the 5th in this room at 10 o'clock, the committee shall hear from Mr. Ashton Hardy, General Counsel of the Federal Communications Commission; Mr. Thomas Keller, the Acting General Counsel of the Office of Telecommunications Policy; Mr. Fulton Brylawski, professor; Mr. Rondo Cameron and Mr. Donald Merry of Sicom Electronics Corp. So until that time the subcommittee stands adjourned.

Mr. ALLEN. I am sorry, I forgot to request permission. We are not going to be present, I think, at the later hearings having to do with mechanical fee and the royalty for the recording arts, and we would like to have permission to file whatever reply we think might be appropriate


Mr. ALLEN [continuing]. To the statements that will be made.

Mr. KASTEN MEIER. Without objection, not only will the prepared statements that you have made today be accepted for the record in full, in addition to your oral statements, but any statement the Music Operators of America or Mr. Patterson may have in connection with the question of mechanical royalty will be accepted for the record. Until Thursday next, 10 o'clock in this room, the subcommittee stands adjourned.

[Whereupon, at 12:35 p.m. the subcommittee recessed to reconvene on Thursday, June 5, 1975, at 10 a.m.]




Washington, D.C.

The subcommittee met, pursuant to call, at 10:15 a.m., in room 2226, Rayburn House Office Building, the Honorable Robert W. Kastenmeier [chairman of the subcommittee] presiding.

Present: Representatives Kastenmeier, Danielson, Drinan, Pattison, and Railsback.

Also present: Herbert Fuchs, counsel, and Thomas E. Mooney, associate counsel.

Mr. KASTENMEIER. The committee will come to order.

The committee is meeting this morning for the purpose of continuing hearings on the copyright revision bill, H.R. 2223, and other bills relating to the subject. This morning we have a series of witnesses, the first two representing the Federal Government.

I would first like to call Mr. Ashton Hardy, the General Counsel, Federal Communications Commission. Mr. Hardy.

Mr. HARDY. Thank you, sir.

Mr. KASTENMEIER. You are most welcome. We would appreciate it if you would proceed.


Mr. HARDY. Thank you, Mr. Chairman.

Mr. Chairman, I am pleased to have the opportunity to present the views of the Federal Communications Commission with respect to H.R. 2223, a bill for the general revision of the copyright law.

The committee is to be commended for addressing the very serious need for comprehensive reform of our Federal copyright laws. As you know, the statute governing this subject was enacted in 1909 and was drafted in terms of the problems of that era. Motion pictures and sound recordings as we now know them were not envisioned at that time, nor were radio and television.

Mr. Chairman, I realize that the scope of this legislation is broad and that your subcommittee is concerned with such diverse subjects as library photocopying, bootlegging of film and sound recordings, and the ownership of presidential documents. The Commission has no jurisdiction over matters such as these and consequently I will not comment on them. However, the Commission has asserted juris

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diction and promulgated comprehensive rules governing the cable television industry, the subject of section 111 (c) and (d) of the proposed legislation, and thus my testimony addresses some of the background of the cable copyright problem.

Cable television is among those forms of communication which were not foreseen or provided for in the 1909 act. For this reason a complex controversy arose over the copyright liability of cable systems. I would like to trace briefly the evolution of this controversy and the Commission's involvement in it.

When the first cable systems began to operate, most merely extended local television service to rural areas where it had not been previously available. They did not import distant signals into markets where television service already existed, nor did they originate programing or serve major metropolitan areas. For these reasons, broadcast licensees did not anticipate that the new industry would pose the copyright problems that now exist. Similarly, copyright proprietors were generally unconcerned about the growth of cable because they continued to receive royalties from conventional broadcasters and did not anticipate that CATV would affect this revenue. Initially the FCC expressed reluctance to assert jurisdiction over cable in the absence of specific legislative authorization. In 1959, 26 FCC 402, the Commission ruled that cable systems could retransmit programs without the express authority of the originating station. We reasoned that cable was merely a means of extending television service and did not pose an economic threat to the broadcast industry. Pursuant to this ruling, cable operators were free to distribute programing without paying copyright royalties.

However, the attitude of the various parties changed abruptly when cable systems began to import distant signals, originate programing, and provide service in metropolitan markets which posed clear competitive threats to broadcasters. Copyright questions then came into focus and broadcasters and copyright proprietors sought protection from the FCC and the courts.

The Commission responded by abandoning its former laissez-faire posture on cable and in 1962 denied a cable system permission to import additional distant signals by microwave. I refer, of course, to the Commission's ruling in the Carter Mountain Transmission Corp. case, which was first affirmed by the District of Columbia Cirenit Court of Appeals and certiorari was denied by the Supreme Court. [32 FCC 459, aff'd 321 F. 2d 359 (D.C. Cir.), cert. denied, 375 U.S. 951 (1963).] The Commission was influenced in its decision by the fact that the proposed importation would pose an economic threat to a television licensee which could deprive the public of his service.

In 1965 the Commission further asserted its jurisdiction over cable. in its first report and order on cable television-38 FCC 683-which contained the so-called nonduplication rule. This rule manifested the Commission's desire to protect the public interest in existing television service, and to encourage the development of local broadcast stations. It prevented duplication of the originating station's signal on a cable system for a certain period before and after carriage by that station. Under the rule, a copyright proprietor could limit the time and area in which a program was shown and a broadcaster could present

programing previously shown on a network on a delayed basis without running the risk of losing his exclusivity to a cablecaster.

The Commission's second report and order, 2 FCC 2d 725, adopted in 1966, required that all new cable systems in the top 100 television markets, which parenthetically serve 90 percent of all television. viewers, obtain FCC approval before importing new distant signals. Approval was conditioned upon a finding that the new service would be consistent with the establishment and healthy maintenance of television broadcast service in the area. The effect of the rule made it virtually impossible for cable systems to establish new service in urban markets.

Subsequently, a San Diego cable operator challenged the Commission's authority to bar expansion of its system under the majormarket-distant signal rule. However, the Supreme Court upheld the Commission's action as reasonably ancillary to its duty to regulate television broadcasting. I refer, of course, to the Southwestern Cable case decided by the Supreme Court [392 U.S. 157, (1968)].

Because FCC regulation had not addressed many of the copyright questions posed by the advent of cable, broadcasters and cable proprietors sought relief in the courts. They argued for an expansive interpretation of the Copyright Act which would include a cable. broadcast as a public performance and thus subject cable operators to copyright liability.

The Supreme Court confronted this issue in the now famous Fortnightly Corp. v. United Artists Television, Inc. case, 392 U.S. 290— 1968-where United Artists sought to recover royalties from Fortnightly, a West Virginia cable system which imported into its market signals which could not be received through ordinary over-the-air means. Fortnightly argued that it provided merely a reception service, did not "perform", and therefore escaped liability.

In finding for the cable system, the Court employed a functional test under which it held that the cable system was a "viewer", not a "performer." Since "viewing" fell short of infringement, no liability was incurred. Implicit in the Court's opinion was the view that Congress is better equipped than the judiciary to strike an appropriate balance among the various competing interests.

The Commission then issued proposed general rules for cable operation [15 FCC 2d 417 (1968)]. This proceeding served as a catalyst for serious discussions concerning the manner in which the industry should be regulated. As this lengthy proceeding neared its close, the Commission forwarded a letter of intent on August 5, 1971, to Congress which outlined its plans for the near-term regulation of cable. In our letter, we acknowledged the argument raised by several parties that we should defer promulgating rules governing cable until new copyright legislation was enacted. In response we expressed the view that cable regulation and copyright could be separately considered. Accordingly, we urged the Congress to promptly enact a copyright statute and stated our intent to proceed with rulemaking. Among the rules outlined in our letter was a solution to the distant signal problem which would permit limited importation of such signals based upon a formula geared to market size, and a provision allowing program exclusivity in the top 100 markets.

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