right owner, since such reception is substantially in keeping with the present marketing order.

Concerning the potential of CATV systems for increasing program choices, in part through the microwaving of distant signals, a number of policy and practical situations come into play, and all of these strongly indicate that there should be no copyright payment for such reception. In addition to the reasons in support of this conclusion in the CBS case and in the Justice Department position to which reference has been made, it is generally accepted that the copyright owners (who use the public resource of the airwaves without cost) have no right to impose an absolute control on the distribution of the copyright property which they choose to distribute by broadcasting.

At the same time, it is also generally accepted that a method can be developed whereby copyright owners can be fully compensated for the actual exhibitions and performances of their property, without the necessity of restricting or burdening CATV systems or services-which may well be the means for dramatically increasing the distribution possibilities for copyright property. Finally, there is a public interest in encouraging the investment of the huge capital commitments required for the construction of CATV systems with their greatly increased communications capacities, and also in encouraging the utilization of these capacities.

Recognizing that such microwaving may require some marketing adjustments and to respond by way of compromise to the overall objections of the broadcasters and copyright owners, a payment of two-tenths of one per cent per channel of the monthly service charge gross receipts would apply in exchange for a compulsory license for such reception.

With regard to both of these aspects of CATV, it is essential that the resolution of the CATV copyright issue not include a confirmation of the nature and extent of regulation undertaken by the Federal Communications Commission over cable television or of its present rules governing CATV. The copyright law should include no provision regarding the regulation of CATV which must be a matter of separate congressional legislative determination.

In summary, the policy position update on copyright is as follows:

I. No copyright fees should be payable for television reception of off the air signals provided by a CATV system to subscribers, with such service to be specifically exempt from copyright.

II. No copyright fees should be payable on reception provided by a CATV system to its subscribers of at least basic or minimum television reception, consisting of reception of the national networks (at this time three), of three independent television stations and of one educational television station, whether reception is secured off the air, by microwave or other means, with such service to be specifically exempt from copyright.

III. A compulsory license for reception of microwaved signals (other than required for minimum reception service as described above) should be granted, for which there should be a payment of two-tenths of one per cent per microwaved channel of the gross receipts from monthly service charges only. This rate should be statutorily fixed and payable into a copyright pool, to be distributed by an equitable formula.

IV. There should be no restriction or interference by the Federal Communications Commission with regard to any of the above services.

Finally, in any resolution of the copyright issue, there must be a recognition of the interests of the CATV subscribers, who up to this date have never been independently represented in any of the hearings and discussions on the subject and who have never had an opportunity to be heard. CATV companies should undertake the responsibility of fully informing subscribers of the various aspects of the issue in the course of the legislative process, particularly if copyright payment must be added to the service costs paid by the subscriber.

Mr. KASTEN MEIER. The Chair would now like to call Mr. William Bresnan who is the president of the Cable Television Division of Teleprompter Corp.

Mr. Bresnan, we apologize for the delay in reaching you this morning, but we are interested in the subject. I see you have a prepared statement which is not particularly lengthy, you may proceed from it.

TESTIMONY OF WILLIAM J. BRESNAN, PRESIDENT, CABLE

TELEVISION DIVISION OF TELEPROMPTER CORP.

Mr. BRESNAN. Thank you very much.

Good afternoon, I am William J. Bresnan, senior vice president of Teleprompter Corp., and president of our Cable Division. Teleprompter is the Nation's largest cable television company, having approximately twice as many cable television subscribers as the second largest company.

On my right is Jay Ricks, a partner in the firm of Hogan & Hartson. On my left is Jacqueline Da Costa, director of Media Information and Analysis at Ted Bates & Co., and to her left is Barry P. Simon, Teleprompter's vice president and general counsel.

Teleprompter's position on copyright is straight forward. We believe cable television systems should not be required to pay any copyright fee for the carriage of broadcast signals.

To understand this position, it is necessary to understand a basic fact about the broadcast industry-a fact which makes that industry unique among all other distributors of copyrighted materials. The broadcaster, unlike the movie producer or the book publisher, does not sell a copyrighted product. What the broadcaster sells is the attention of the viewers. The purchaser is the advertiser. The more viewers the broadcaster can deliver to the advertiser, the more the advertiser will pay. And the more the advertiser pays, the more money is available for the broadcaster to pay the copyright owner.

Cable television affects this relationship only by enlarging the audience available to the broadcaster. In many cases this actually increases the advertising revenues available to pay the copyright owner. In no case does it deprive the copyright owner of anything to which he is entitled.

Thus, a cable system operator is not like a record pirate, as has been previously questioned in this hearing, rather, he is more like a network affiliate. And a network affiliate, I might add, actually receives compensation from the network for expanding the network market area.

I would like to cite two examples. First, imagine a television station located in a community part of which is in a valley where television reception is poor. Imagine also that a cable television system offers its service to the people of the community. The people who live in the valley have three choices:

One, they can install a rooftop antenna to watch the programs broadcast by the television station;

Two, they can subscribe to the cable television system and thereby get the benefit of the antenna tower erected by the cable television system; or,

Three, they can do neither and simply not watch the TV station's programs.

As the Supreme Court has twice recognized, choices 1 and 2 are functionally identical. Since no copyright liability attaches when the viewer erects his own antenna, why should there be any liability when the viewer avails himself of the antenna tower erected by the cable television station?

It is no answer to say that the cable television system makes or at least tries to make-a profit out of providing its service, for clearly the antenna manufacturer-like the television set manufacturer and numerous other third parties in television-related businesses-also seeks to make a profit.

Before going on to the second example, let's pause for a moment to consider alternative 3, where the prospective viewer neither buys the tall antenna nor subscribes to the cable service but simply doesn't watch the programs broadcast by our hypothetical television station. If this happens, what is the result? The station has a smaller audience and therefore its advertising spots are less attractive to potential advertisers. So, the station gets less money. And this means there is less money available to the station to pay the copyright owner. From this we can see that cable television, far from stealing from the copyright owner, by increasing the size of the broadcaster's audience actually increases the moneys paid to the copyright owner.

Now, consider a second situation. In this case, imagine a television station in New York City whose programs are imported via microwave hops by a cable system and retransmitted over the cable to the cable television system's subscribers in Oswego, New York, who otherwise would not be able to receive the New York City station.

Is this situation really any different from our first example? Is the copyright owner somehow damaged by the action of the cable station? Is he, perhaps, deprived of the ability to exploit his creation in Oswego after it has been seen there on the cable?

The answer to all of these questions is, no. Because of the nature of broadcast economics, the copyright owner cannot be injured by the cable system's importing the New York City station into Oswego. And this is true even without consideration of the complicated FCC exclusivity rules which seek to give added protection to the copyright owner and which may require the cable system to delete programing so as to allegedly protect the copyright owner's markets.

As in the first example, by showing the imported programs in Oswego the cable system increases the audience of the New York City station. And this is not just a theoretical increase. The rating servicesNielsen and ARB-spend large sums of money to keep track of cable subscribers with the result that every single cable subscriber is accounted for in their surveys and so finds his way into some television station's rate card. Thus, by simply checking in Nielsen we find, for example, that in San Luis Obispo County, Calif., 30 percent of the television homes view the Los Angeles independent and network stations on a regular basis; in Grant County, Ñ. Mex., 51 percent of the television homes view El Paso on a regular basis; in Chemung County, N.Y., 19.5 percent of the television homes view the New York City independent stations on a regular basis; in Lane County, Oreg., 20 percent of the television homes view the Portland independent and network stations on a regular basis; and in Sweetwater County, Wyo., 81 percent of the television homes view the Salt Lake City network stations on a regular basis.

In these cases, and in countless others, such coverage would be impossible without cable television.

This fact has not been lost on the broadcasters. For example, the literature put out by the Association of Independent Television Sta

tions, in text accompanying these illustrations in which the white areas—excuse me, Barry, would you point out, please

Mr. SIMON. In New York, for example, it's right here.

Mr. DANIELSON. Would the witness go on the other side, please? Mr. SIMON. I'm sorry. In New York the black line goes like this. Mr. BRESNAN. The black line represents the perimeter of the local television market as defined by the Association of Independent Broadcasters. I would like to quote from the text that accompanies those drawings.

"The accompanying illustrations show how cable television can dramatically increase the physical coverage area of independent stations, expanding their influence far beyond the perimeters of the local television market.

"Advertisers on cable-connected independent stations share in this expanded TV coverage reaching a bonus audience of consumers as valuable to the national/regional advertiser as those situated within the defined local market area."

As a further illustration of this point I have here a stack of brochures; these are promotional brochures put out by the television stations. Each one takes pains to point out that its audience includes cable subscribers in distant markets. So we find that:

KTLA, an independent station in Los Angeles, claims a greater potential audience than any other Los Angeles station, network, or independent. The station credits its "significant penetration by way of CATV stations."

WGN, an independent station in Chicago claims substantial viewing far beyond the reach of its signal by virtue of CATV systems.

The rate card of KSL, a network affiliate in Salt Lake City, shows coverage by KSL of "Mountain America"-even extending, thanks to cable television, as far as northern Wyoming.

The list could go on and on. But rather than belabor the point, I will simply submit these brochures themselves to the committee.

What do these extra viewers that cable adds to the audience of these stations mean to the relationship between station and advertiser? It means that the station time is more valuable and so the advertiser pays more. Now listen to what Miss Da Costa, who is in charge of all media-related research at Ted Bates, the Nation's fifth largest advertising agency, says:

Viewing occurring on CATV systems has been included in surveys for quite some time in the total audience reported for individual stations. The industry has generally used these total audience figures to establish rates and corresponding cost efficiencies. This practice compensates stations for all viewing including that which takes place within CATV houses—both inside and outside the range of the station's off-air reception area.

To go back to our example, we see that the copyright owner whose creation is broadcast by the New York City station and imported, by cable, to viewers in Oswego has not been deprived of the chance to earn money by showing his production in Oswego. For the advertising revenues to be derived from showing the program to the cable subscribers in Oswego have already been derived by the New York City station. And, as a result, the New York City station will pay the copyright owner more than if the station were unable to reach the Oswego audience.

57-786 76 pt. 1 44

To allow the copyright holder to be compensated again-this time directly by the Oswego cable system-would be giving him the windfall of an undeserved second payment. This is a windfall that neither the cable television industry nor the 15 percent of the American households, which are cable television subscribers, can afford.

Thank you.

Mr. KASTEN MEIER. Thank you, Mr. Bresnan.

You make a consistent point that regular broadcasters benefit, as do advertisers, and potentially the copyright owner, by virtue of the additional audience that cable television provides. Do the broadcasters agree to that, or do they dispute that fact?

Mr. BRESNAN. I will be submitting to you the brochures from the broadcasters who claim all of these additional market areas. Those two charts are the work of the Association of Independent Television Broadcasters. Now, there may be times when they claim one thing and at times another, but when they construct the rate chart, they do claim these territories.

[The material referred to is in the files of the subcommittee.] Mr. KASTEN MEIER. I am only asking for the purpose of ascertaining whether that is a point in dispute, or whether the broadcasters agree to that, that this includes your subscribers, in terms of their sold audience.

Mr. BRESNAN. I'm not sure I understand the question clearly. There is no dispute that broadcasters claim coverage of the CATV subscribers who are provided the signals by the CATV system.

I have been advised by Miss De Costa on my left

Mr. KASTEN MEIER. Yes, I thought perhaps Miss De Costa might know more precisely, as a matter of technical expertise, whether that is correct. It is a matter of fact rate cards are built on the basis of cable audiences, as well as normal audiences. Do the broadcasters dispute that?

Miss DE COSTA. No. As a matter of fact, they look towards this audience to increase the size of their delivery.

Mr. BRESNAN. Miss De Costa has advised me, Mr. Chairman that to her knowledge every single cable television customer finds his way into a broadcaster's rate base.

Mr. KASTEN MEIER. Does the Teleprompter Corp. have a number of different types of systems? That is to say, does it have systems which retransmit only, and other systems which originate, use microwaves predominantly? What sort of systems do you have?

Mr. BRESNAN. Our company is a pretty good cross section of all types of cable systems, from coast to coast, from large to very small. We originate in some, and in others we do not. It is a good cross section of the industry.

Mr. KASTENMEIER. Were you a party to the consensus agreement, or were you present at that time; or on the basis of litigation, did you absent yourself?

Mr. BRESNAN. I am glad you asked that because that so-called consensus agreement came up quite a bit today, and I do have some pretty strong feelings about it.

The consensus agreement come about at a time shortly after the time that the company I had been with merged into Teleprompter and Teleprompter's then management pretty much carried the ball. Although I was on the NCTA board-I believe I was vice chairman-when that came about.