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Mr. DANIELSON. I think I understand your position, thank you, very much.
Mr. KASTENMEIER. The gentleman from Illinois, Mr. Railsback. Mr. RAILSBACK. No questions, thank you.
Mr. KASTENMEIER. The gentleman from New York, Mr. Pattison. Mr. PATTISON. No questions.
Mr. KASTEN MEIER. The gentleman from California, Mr. Wiggins?
Mr. WIGGINS. I mean to a specific customer?
Mr. BARCO. Yes, the customer in this case being the CATV system. Mr. WIGGINS. It's not from the air, that is.
Mr. BARCO. Oh, no, you have to have a special pickup.
Mr. WIGGINS. In those systems in Pennsylvania that have some experience in cable casting, which is a word describing the origination, I think
Mr. BARCO. Local origination..
Mr. WIGGINS. Has there been difficulty in obtaining financing for those stations by reason of the fact that they are, or should be liable for copyright payments?
Mr. BARCO. No. You see, those systems, of course, have two types of programs, the cable casting, No. 1, a locally originated program; and then they have these other programs that they buy. They go on the marketplace and negotiate the price as broadcasters do. We have had no problems in that respect at all.
Mr. WIGGINS. That's all.
Mr. KASTEN MEIER. Thank you very much, Mr. Barco, for your testimony here today. I am sorry we kept you so long.
[The prepared statement of George J. Barco, and the Pennsylvania Cable Television Association Policy Position follow:]
STATEMENT OF GEORGE J. BARCO, GENERAL COUNSEL, PENNSYLVANIA CABLE TELEVISION ASSOCIATION
Mr. Chairman, members of the subcommittee, I am George J. Barco of Meadville, Pa. For the past 23 years, I have endeavored to participate actively and positively in the deliberations of the cable television industry leadership on the various issues affecting it nationwide.' During this time I have been a part owner and president of several cable television companies, including the one serving the community in which I live. Also, I have served as General Counsel for the past 20 years of Pennsylvania Cable Television Association, the state association of the cable television industry in Pennsylvania where the CATV industry was born as a commercial enterprise some 27 years ago and where more communities and a greater percentage of the television viewing public secure reception by CATV service than in any other state.
During this period, I have been personally and directly acquainted with the nature and development of the industry itself and have observed the changing views and concepts of others toward the industry. I have been concerned, again and again, particularly during the last 10 years, that these views and concepts, and, in turn, many aspects of government treatment accorded to the industry have been influenced to a great extent by a pervasive preoccupation, inside and outside of the industry, with the technical and theoretical capabilities of cable television to provide broad television and communications services. This preoccupation has been obsessive to such an extent that the financial, technological and practical requirements for such an evolution have not been fully analyzed
1 National Chairman [then known as President]. National Cable Television Association, 1957: Member. Board of Directors of NCTA. 15 years ending in 1972: Member. NCTA Copyright Negotiating Committee, 1972-1975; Member, NCTA Music Copyright Negotiating Committee, 1972-1975.
or recognized, on the one hand, and, at the same time, the significance of the television reception function being provided by CATV have been discounted and the real nature of the service today confused and distorted.
Time and again it has been acknowledged by the Federal Communications Commission, the broadcasters and the copyright owners themselves that the master or community antenna television reception function which the CATV industry was established to perform, does not interfere with or encroach upon the respective interests of broadcasters and copyright owners, because the service is supplementary to, and supportive of, broadcasting and corrective of some of the technical limitations of the technology. Regardless of all of the talked about hopes, dreams and promises for cable, it is a central fact that cable as it exists today represents only a concept of the ultimate cable communications technology, and the implementation of that concept requires tremendous expenditures of time and money with very considerable risks, uncertainties and unknowns.
The Pennsylvania Position on copyright places the television reception function of cable television in clear focus and places that function in proper perspective, both with relation to the subscribers it presently serves, and with relation to the capabilities for cable to improve and equalize television reception opportunities for the public generally. The Pennsylvania Position also recognizes the desirability of realizing the potential of cable television for providing increased program choices in part through microwaving of additional signals, acknowledging that this function is distinct from the television reception function, and that providing such service may be subject to reasonable copyright payment.
I must emphasize that the Pennsylvania Position represents not merely an expedient response to the various pressures for the resolution of the copyright issue for the industry, nor does it represent an effort to limit or reduce the extent or amount of copyright payment motivated by business self-interest. It is presented rather as the right, logical and equitable resolution of the issue in view of the true nature of the functions concerned and the over-all public interest in them.
The Pennsylvania Position was originally developed by the Pennsylvania Cable Television Association in 1969 and reviewed and refined by it in March of 1975 [with much time and consideration being given to the issue by a broad base of Association membership in both instances]. However, its adherents are not limited to Pennsylvania, for it has wide acceptance across the nation.
It is no secret that there is a fundamental and serious division in the industry on the issue of copyright payment. The Pennsylvania Position in essence represents the views of a substantial segment of the industry that is opposed in principle to the concept of "across the board" copyright liability, and particularly, copyright liability for television reception of signals received off the air.
The other substantial segment of the industry has been willing and even eager, to agree to payment of copyright fees "across the board" in response to an assortment of influences, including the appeal of an expedient response to the pressure for copyright payment; the desperate hope that such a commitment will evoke some response from the Federal Communications Commission in the direction of relaxing its very restrictive regulations of CATV; and the expectation that such payment from the existing industry will be the means of securing the availability of microwaved signals thought to be a prerequisite for the economic viability of cable television for the large cities and the cable communications industry of the future.
Although NCTA still officially adheres to the views of this segment, its policy in this respect has been seriously questioned and reviewed again and again, even as late as May 23, 1975. In this regard, it must be taken into account that many members of NCTA have interests in television broadcasting and copyright holdings which are to some extent clearly in conflict with CATV interests as such. It is my opinion that the position of NCTA on copyright has been definitely weighted and influenced by these interests and still is today.
One measure of the extent of the division is that some 18 state and regional associations have either drafted a resolution for action, or have taken action, in opposition to the NCTA position of copyright payment "across the board." I believe that a clear plurality if not majority of cable operators throughout the country are opposed to copyright payment for signals received off the air and are convinced that payment for these signals is not reasonable.
The basic principle of the Pennsylvania Position that off the air television reception should not be subject to the burdens and risks involved in a commitment to copyright payment is founded on the pertinent facts and circumstances.
The broadcasters and copyright owners make use of the public resource of the airwaves without payment. In addition, the policy of the 1934 Communications Act favors the widest possible distribution of broadcast services for the general benefit and welfare of all citizens. As a consequence, there must accrue a fundamental right in the public to utilize on an equal basis all signals receivable off the air, whether by conventional rooftop antenna or by cable television.
Again, since the copyright owners choose to distribute their property by broadcasting, there is no reasonable basis for any expectation by them that they should control or limit the distribution as if they were providing for a performance in a theater, arena or hall.
From the point of view of the subscriber, it is incomprehensible that liability to copyright fees should depend on the accident of topography-or in the real life situation of the television viewer-whether he is living in a high area where a conventional antenna provides adequate reception or whether he lives behind the hills or along the river where CATV service is required or desirable to provide satisfactory television reception. These reception conditions can change from street to street in a given community.
A correlating basic principle of the Pennsylvania Position is that inasmuch as CATV can provide the means for equalizing the television reception opportunity for all the viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic television reception should not be subject to copyright, by whatever means reception is secured.
I am unable in the time allotted to me to further detail the philosophical and factual basis for the Pennsylvania Position, and I have, therefore, attached the Position in full to this statement for the record.
In summary, the Pennsylvania Position so far as payment of copyright fees is as follows:
(1) No copyright fees should be payable for television reception of off the air signals, regardless of the total number involved.
(2) No copyright fees should be payable for basic television reception, whether secured off the air or by microwave. While we have stated that basic television reception should include the national networks, three independent television stations and one educational television station, we recognize that there is room for differences of opinion as to what basic television reception should include.
(3) Copyright fees would be payable on the reception of microwaved signals (other than required for basic television reception in (2) above) at the rate of two-tenths of one percent per microwaved channel of the gross receipts from monthly service charges only.
While not included in the Pennsylvania Position, I should mention that a number of individuals favoring the Pennsylvania Position have suggested that as an alternative, fees could be based on the fee schedule in H.R. 2223, prorated against the number of distant signals microwaved as the numerator over the total signals carried as the denominator. Thus, if a system carried a total of ten signals, three of which were microwaved and subject to copyright payment, the system would pay three-tenths of the fee schedule.
Another fundamental concern emphasized in the Pennsylvania Position is that the copyright bill not effect a confirmation of the present FCC regulatory treatment of the industry. For example, the FCC definition of so-called "distant" and "local" signals has little relation to actual reception conditions for signals received off the air; and the application of these artificial and arbitrary definitions results in unreasonable, unfair and discriminatory treatment for television viewers.
To those who are concerned that the Pennsylvania Position may not provide “enough" initial extra payment for copyright owners, I submit that the reasonableness of the resolution of the copyright issue is not determined by the size of any additional copyright payment but by whether or not there is a proper basis for payment. Furthermore, the copyright owners themselves over the years have stated that their primary concern is not with the existing industry or in the off the air television reception, but in the future of the industry in the 89 of the 100 top markets not yet developed.
The prevailing opinion is, and NCTA statistics establish, that these markets can develop only by bringing in additional television signals by microwave and by the purchase of much copyrighted programs for local origination. These markets also have the highest promise for the pay cable market, programs for which will be purchased from copyright owners. In short, the copyright owners themselves will be the beneficiaries of tremendous gain from the increased distribu
tion potential of cable for their copyright product-which will be many multiples of any amount which could possibly be secured from the present industry on any basis.
Finally and most important, cable television viewers-comprising 10,000,000 subscriber homes with over 30,000,000 viewers-have never been informed of the proposal for copyright payment for their television reception service, while payment will not be required for the same reception by their next door neighbor using a conventional rooftop antenna. In this day of consumer concern and special awareness for due process, the lack of fairness and reasonable treatment for cable subscribers for television reception-both off the air and for basic television service is most evident, is not supportable, and certainly should not be countenanced by this Committee whose very title stands as a beacon light for the citizens of our nation for proper protection of their basic rights.
CABLE TELEVISION ASSOCIATION
POLICY POSITION UPDATE
In October, 1968, the Board of Directors of Pennsylvania Cable Television Association, after careful study and consideration, formulated a position on copyright which was approved by the overwhelming vote of the members of the Association at a special meeting held in April, 1969, together with background explanation.
The background explanation for the position called attention to the distinct difference, both in fundamental concept and practical objectives, between the traditional community antenna television system which operates solely or mainly to provide television reception service in fringe areas, and the much promotedbut still largely undeveloped-cable communications system which is expected to provide broad television and communication services, particularly in metropolitan areas, including distribution of copyrighted programs purchased for showing through the wired system.
The background explanation also particularly noted:
The United States Supreme Court decision in Fortnightly Corporation v. United Artists Corporation, decided in June, 1968, in which service provided by the traditional CATV system was held to be on the "viewer's side of the line" and, therefore, not subject to copyright liability;
The action of the Federal Communications Commission in its Proposed CATV Rules and Inquiry, issued in December, 1968, which-among other things—in effect, foreclosed the industry on the copyright question so far as new system development is concerned and the expansion of system reception service in many areas;
The general precept that the community antenna television reception function of providing off the air reception for television signals should not be colored in its copyright and FCC regulatory treatment by the future potentials and possibilities for CATV, or traded as an expedient to accelerate or to promote the resolution of product and marketing problems which may be involved in the development of some of these capabilities.
Based on these considerations, the central concept and principle of the "Pennsylvania Position" on copyright was set forth as follows:
To the extent that a wired system of any kind anywhere is performing the television reception function of an antenna as the traditional CATV system, the reception should not be subject to restrictions or to copyright liability any more than reception by a conventional antenna and, accordingly, that there should be no copyright payment for television reception provided of signals received off the air.
Correlating principles were also set forth regarding the availability of “basic" television reception service to all and regarding the desirability of exploring the possible basis upon which microwaving of signals might provide increased programming.
In the intervening period since the adoption of this position, the following significant developments and occurrences must be taken into account as bearing upon the copyright issue:
(1) The Federal Communications Commission has demonstrated conclusively that with its rigid conditioning to the broadcasting environment of scarcitycreated by the inherent limitations in frequency allocations-its primary commitment is to the existing broadcasting market order of things, with the accompanying characteristics of market monopoly and lack of program diversity. So strong is the FCC's commitment and concern in this respect that it has been
supercautious in its restraint of CATV to assure that there is no possibility that CATV will effect any change in the status quo.
This predilection was manifested most clearly in the FCC's action with regard to the Consensus Agreement of November, 1971, which was notable not only because the FCC exacted the requirement of copyright payment as the condition for any relaxation of its rules, but also because of the scant quantum of relief given in exchange for this exaction. The nature and extent of the FCC's signal carriage restrictions constitute a clear declaration of the FCC determination that any development in CATV technology can occur only on the condition that there be no change in the existing television broadcasting order.
(2) The extended negotiation efforts by representatives of National Cable Television Association with representatives of the copyright owners have established that the position and attitude of the copyright owners do not allow for the usual business bargaining process, the demands of the copyright owners being consistently exorbitant and unrealistic, and without regard for the consequences either for the industry or the subscribing public.
(3) In addition to the restraints placed by the FCC rules on CATV television reception services, and in turn on catv system development and growth, the 1972 Rules as related to local franchising, taken with the related actions of state and/or municipal governments, have resulted in a multi-structured regulation of CATV which is duplicative, inconsistent, costly and most burdensome.
(4) While the bright promise of the potential and capacity of cable television has not dimmed, special difficulties have been encountered in system construction and operation in large and metropolitan city areas, and the feasibility and acceptance of CATV service in such areas are yet to be established.
(5) In keeping with the earlier expressed opposition of the United States Department of Justice to the extension of copyright liability of CATV because of the harmful anticompetitive consequences and because the extension is not justified by the appropriate considerations for copyright protection, the Department of Justice in its December, 1970, filing before the FCC concluded that CATV's not paying for retransmission of broadcast signals is not unfair competition and the FCC's attempted application of this concept in the circumstances has obscured the basic policy issues presented.
(6) The United States Supreme Court in Teleprompter Corporation v. Columbia Broadcasting System, Inc., decided in March, 1974, extended the United Artists decision in holding that: "By importing signals that could not normally be received with current technology in the community it serves, a CATV system does not, for copyright purposes, alter the function it performs for its subscribers. 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."
Against the perspective of these developments and occurrences, the soundness of the central concept and principle of the Pennsylvania position on copyright has been confirmed. Furthermore, the application of this concept and principle must be reinforced and supplemented in view of the broad and long-term implications of any departure from them, both in terms of the consequences to basic television reception service and to the development of cable communication services.
Concerning the television reception function of CATV, an overriding and fundamental public interest concern must be that basic television reception for everyone should be free and not subject to the burdens and risks involved in a commitment to copyright payment.
This concern gives strong reinforcement to the principle that television reception service for signals off the air should not be subject to copyright payment, simply because of the CATV means used to receive them. On the other hand, inasmuch as CATV and related technology can provide the means for equalizing the television reception opportunity for all viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic or minimum television reception should not be subject to copyright payment, by whatever means reception is secured.
To the extent that reception is being provided by CATV of signals received off the air or to furnish basic television reception, there is no proper basis whatever upon which there can be any complaint or objection by any broadcaster or copy