issued by the FCC but also to copyright legislation and that these two aspects of implementing the Compromise are inextricably tied together.

In this connection, I would like to stress the need for immediate meetings between our respective lawyers to agree on the text of a revised Section 111 of the Copyright Bill which would reflect the provisions of the Compromise and which the parties would recommend jointly to the Congress. In my absence, Gerald Phillips telephoned you earlier this week to request that NCTA's lawyers be made available for this purpose at dates earlier than they have stated they could meet in view of their other NCTA commitments. I sincerely hope that you will be able to arrange for such a meeting within the next several days.

As to the fee schedule under the compulsory license, the members of your and our negotiating committees agreed at our last meeting that a fee schedule could not be worked out between the parties. It was recognized that this was inevitable as long as NCTA feels that any agreement must provide for a single fee to embrace all types of program material. Obviously, since our Committe represents producers and distributors of filmed and taped television programs, we could not negotiate for fees payable to the music performing societies, the networks or other possible claimants. This is a point which we had made at the outset of our negotiations, and it was for that reason that we suggested to your Committee at our meeting in December of last year that NCTA should enter into negotiations with these other groups.

In any event, it has been quite clear to both parties that any further efforts at negotiation of fees would not only be fruitless, but would delay prompt introduction and enactment of a copyright bill, which is essential to implementation of the consensus agreement.

At the last meeting of the two industry committees, the NCTA representatives stated that despite this inability to agree upon fees, the NCTA would nonetheless support inclusion in the statute of a fee schedule not agreed to by the parties. In a subsequent conversation, Alfred Stern confirmed to me that this was the official position of the NCTA, adopted at a board meeting of the Association. In our view, this violates the clause of the Compromise which states expressly that "[u]nless a schedule of fees covering the compulsory licenses or some other payment mechanism can be agreed upon between the copyright owners and the CATV owners in time for inclusion in the new copyright statute, the legislation would simply provide for compulsory arbitration failing private agreement on copyright fees." In view of the past history of open and fair dealing between our groups, the indicated failure of the NCTA to support the cited provision of the Compromise has caused grave concern among the members of our Committee. In the meanwhile, I have received conflicting reports on the official attitude taken by the NCTA regarding its support for the above provision of the Compromise. I believe, therefore, that it would be most helpful if you could advise me by letter of the NCTA's unequivocal position that it supports all of the provisions of the Compromise including that dealing with arbitration. Such assurance would be most helpful in bringing about a full and speedy implementation of the Compromise—a goal to which our industry is completely committed. With best personal regards.

Sincerely yours,

COPYRIGHT REVISION BILL

PROPOSED TEXT OF CABLE TELEVISION SUBMITTED BY COMMITTEE OF COPYRIGHT

OWNERS

SEC. 111. Limitation on exclusive rights: Scondary transmissions

(a) CERTAIN SECONDARY TRANSMISSION EXEMPTED.-The secondary transmission of a primary transmission embodying a performance or display of a work is not an infringement of copyright if :

(1) the secondary transmission is not made by a cable system, and consists entirely of the relaying, by the management of a hotel, apartment house, or similar establishment, of signals transmitted by a broadcast station licensed by the Federal Communications Commission, within the local service area of such station, to the private lodgings of guests or residents of such establishment, and no direct charge is made to see or hear the secondary transmission; or

(2) the secondary transmission is made solely for the purpose and under the conditions specified by clause (2) of section 110; or

(3) the secondary transmission is made by a common, contract, or special carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others; Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmission; or

(4) the secondary transmission is not made by a cable system and is made by a governmental body, or other non-profit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.

(b) SECONDARY TRANSMISSION OF PRIMARY TRANSMISSION TO CONTROLLED GROUP.-Notwithstanding the provisions of subsections (a) and (c), the secondary transmission to the public of a primary transmission embodying a performance or display of a work is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, if the primary transmission is not made for reception by the public at large but is controlled and limited to reception by particular members of the public.

(c) SECONDARY TRANSMISSIONS BY CABLE SYSTEMS

(1) Subject to the provisions of clause (2) of this subsection (c), secondary transmissions to the public by a cable system of a primary transmission made by a broadcast station licensed by the Federal Communications Commission and embodying a performance or display of a work shall be subject to compulsory licensing upon compliance with the requirements of subsection (d) in the following cases:

(A) Where the signals comprising the primary transmission are exclusively aural and the secondary transmission is permissible under the rules and regulations of the Federal Communications Commissior; or

(B) Where the community of the cable system is in whole or in part within the local service area of the primary transmitter; or

(C) Where the signals comprising the secondary transmission are contemplated by and consistent with section 76.5(a), (f), (g), (h), (i), and (0) through (u) and Subparts D and F of the rules and regulations of the Federal Communications Commission as published in Volume 37, Federal Register, page 3252 et seq., on February 12, 1972.

(2) notwithstanding the provisions of clause (1) of this subsection (c), the secondary transmission to the public by a cable system of a primary transmission made by a broadcast station licensed by the Federal Communications Commission and embodying a performance or display of a work is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, in the following cases:

(A) Where the signals comprising the secondary transmission, whether or not authorized by the Federal Communications Commission, are inconsistent with, or in excess of those contemplated by, the rules and regulations of the

Federal Communications Commission referred to in subclause (C) of clause (1) of this subsection (c); or

(B) Where the community of the cable system is in whole or in part within the local service area of one or more television broadcasting stations licensed by the Federal Communications Commission and

(i) the content of the particular transmission program consists primarily of an organized professional team sporting event occurring simultaneously with the initial fixation and primary transmission of the program; and

(ii) the secondary transmission is made for reception wholly or partly outside the local service area of the primary transmitter; and

(iii) the secondary transmission is made for reception wholly or partly within the local service area of one or more television broadcasting stations licensed by the Federal Communications Commission, none of which has received authorization to transmit said program within such area.

(d) COMPULSORY LICENSE FOR SECONDARY TRANSMISSIONS BY CABLE SYSTEMS.—

(1) For any secondary transmission to be subject to compulsory licensing under subsection (c), the cable system shall at least one month before the date of secondary transmission or within 30 days after the enactment of this Act, whichever date is later, record in the Copyright Office, a notice including a statement of the identity and address of the person who owns or operates the seeondary transmission service or has power to exercise primary control over it together with the name and location of the primary transmitter, or primary transmitters, and thereafter from time to time, such further information as he Register of Copyrights shall prescribe by regulation to carry out the purposes of this clause (1).

(2) A cable system whose secondary transmissions have been subject to compulsory licensing under subsection (c) shall during the months of January, April, and July and October, deposit with the Register of Copyrights, in accordance with requirements that the Register shall prescribe by regulation and furnish such further information as the Register of Copyrights may require to carry out the purposes of this clause (2)

(A) A statement of account, covering the three months next preceding, specifying the number of channels on which the cable system made secondary transmissions to its subscribers, the names and locations of all primary transmitters whose transmissions were further transmitted by the cable system and the gross amounts irrespective of source received by the cable system.

(B) A total royalty fee for the period based upon a schedule or schedules to be determined as follows:

(i) Within sixty days after the enactment of this Act, the Register of Copyrights shall constitute a panel of the Copyright Royalty Tribunal in accordance with Section 803 for the purpose of fixing a schedule or schedules of just and reasonable compulsory license fees.

(ii) The schedule or schedules of compulsory license fees shall be determined by the Tribunal in a like manner as if the Tribunal were convened to make a determination concerning an adjustment of copyright royalty rates, provided, however, that Sections 806 and 807 shall not apply and that the determination of the Tribunal shall be effective at the end of the twelfth month after the enactment of this Act or on the date the Tribunal renders its decision, whichever occurs sooner.

(iii) The Tribunal, immediately upon making a determination, shall transmit its decision, together with the reasons therefor, to the Register of Copyrights who shall give notice of such decision by publication in the Federal Register within fifteen days from receipt thereof. Thereafter, the determination of the Tribunal may be subject to the judicial review in a like manner as provided in Section 809 but no other official or court of the United States shall have power or jurisdiction to otherwise review the Tribunal's determination.

(iv) Notwithstanding any of the provisions of the antitrust laws (as designated in § 1 of the Act of October 15, 1914, p. 323, 38 Stat. 730, Tit. 15 U.S.C. § 12; and any amendment of any such laws) owners of copyrights in different works and owners of cable systems may among themselves or jointly with each other agree on, or submit to the Copyright Tribunal for its consideration, one or more proposed schedules of compulsory license royalty fees, and proposed categories of secondary transmissions and cable systems for inclusion in any of the schedules to be established or adjusted by the Tribunal pursuant to this subsection and Section 802.

(C) The preceding subclause (B) of clause (2) of this subsection (d), shall not apply to cable systems that before March 31, 1972, were operating in accordance with the rules and regulations of the Federal Communications Commission, served less than 3,500 subscribers, and were not, directly or indirectly, by stock ownership or otherwise, under common ownership or control with any other cable systems serving in the aggregate more than 3,500 subscribers, provided that this exemption shall continue to apply as long as the cable system continues to serve not more than 3,500 subscribers and is not directly or indirectly, by stock ownership or otherwise, under common ownership or control with any other cable systems serving in the aggergate more than 3,500 subscribers, and provided further, that such cable system files annually at the Copyright Office in accordance with requirements that the Register of Copyrights shall prescribe by regulation, a statement setting forth the names and addresses of other cable systems directly or indirectly in control of, controlled by, or under common control with the cable system filing the statement, the number of subscribers served by each of such other cable systems; and the names and addresses of any person or persons who directly or indirectly own or control the cable system filing the statement and directly or indirectly own or control any other cable system or systems, and the names and addresses of the cable systems so owned or controlled. For the purposes of this subclause (C) of clause (2) of subsection (d), "subscriber" shall mean a household or business establishment, or, if a hotel, apartment house or similar establishment, it shall mean a lodging or dwelling unit within such establishment containing a television receiving set.

(3) The royalty fees deposited under clause (2) shall be subject to the following procedures:

(A) During the month of July in each year, every person claiming to be entitled to compulsory license fees for secondary transmissions made during the preceding twelve-month period shall file a claim with the Register of Copyrights, in accordance with requirements that the Register shall prescribe by regulation. Notwithstanding any provisions of the antitrust laws (as designated in § 1 of the act of October 15, 1914, 38 Stat. 730, Tit. 15 U.S.C. § 12, and any amendments of any such laws), for purposes of this clause any claimants may agree among themselves as to the proportionate division of compulsory licensing fees among them, may lump their claims together and file them jointly or as a single claim, or many designate a common agent to receive payment on their behalf.

(B) After the first day of August of each year, the Register of Copyrights shall determine whether there exists a controversy concerning the statement of account or the distribution of royalty fees deposited under clause (2). If he determines that no such controversy exists, he shall, after deducting his reasonable administrative costs under this section, distribute such fees to the copyright owners entitled, or to their designated agents. If he finds the existence of a controversy he shall certify to that fact and proceed to constitute a panel of the Copyright Royalty Tribunal in accordance with section 803. In such cases the reasonable administrative costs of the Register under this section shall be deducted prior to distribution of the royalty fee by the tribunal.

(C) During the pendency of any proceeding under this subsection, the Register of Copyrights or the Copyright Royalty Tribunal shall withhold from distribution an amount sufficient to satisfy all claims with respect to which a controversy exists, but shall have discretion to proceed to distribute any amounts that are not in controversy.

(e) Relation to other laws and regulations.-Nothing in this section shall be construed as limiting or preempting the authority of the Federal Communications Commission to regulate the operations of broadcast stations or cable systems pursuant to any other Act of Congress; Provided that, the Federal Communications Commission shall not limit the area, duration or other scope of the exclusivity a television broadcast station may acquire respecting secondary transmissions by cable systems that are not subject to the compulsory license provided for in subsection (c) of this Section 111 beyond any limits that may be applicable to the area, duration or other scope of the exclusivity a television broadcast station may acquire respecting other television broadcast stations. (f) Definitions. As used in this section, the following terms and their variant forms mean the following:

(1) A "primary transmission" is a transmission made to the public by the transmitting facility whose signals are being received and further transmitted by the secondary transmission service, regardless of where or when the performance or display was first transmitted.

(2) A "secondary transmission" is the further transmitting of a primary transmission simultaneously with the primary transmission without change in program or other message content.

(3) A "cable system" is a facility that in whole or in part receives signals transmitted by one or more television broadcast stations licensed by the Federal Communications Commission and makes secondary transmissions of such signals by wires, cables, or other communications channels to subscribing members of the public who pay for such service. For purposes of determining the royalty fee under Subsection (d) (2) (B), two or more cable systems in contiguous communities (including_different political divisions or subdivisions) under common ownership or control or operating from one headend shall be considered as one system.

(4) The "local service area of a primary transmitter" as used in this section comprises the area in which a television broadcast station is entitled to insist upon its signal being retransmitted by a cable system pursuant to the rules and regulations of the Federal Communications Commission as published in Volume 37, Federal Register, page 3252, et seq., on February 12, 1972, or such similar rules as the Federal Communications Commission may from time to time lawfully adopt in the future in light of changed circumstances,

(5) The terms "full network station," "partial network station," "independent commercial station," and "non-commercial educational station" as used in subpart D of the rules and regulations of the Federal Communications Commission as published in Volume 37, Federal Register, page 3252, et seq., on February 12, 1972, shall be defined in accordance with the rules and regulations of the Commission of the same date with such additional elaboration as the Commission may from time to time provide consistent with the intent of this Act. (g) This section shall be effective upon the enactment of this Act, [Add the following to section 501]

(c) For any secondary transmission by a cable system that embodies a performance or a display of a work which is actionable as an act of infringement under subsection (c) of section 111, a television broadcast station holding a copyright or other license to transmit or perform the same version of that work shall, for purposes of subsection (b) of this section 501 be treated as a legal or beneficial owner if such secondary transmission occurs within the local service area of that television broadcast station.

Amend Section 801 (b) by deleting the words "continue to be reasonable" and by substituting the words "are just and reasonable."

THE PROFITABILITY OF CABLE TELEVISION SYSTEMS AND EFFECTS OF COPYRIGHT (Robert W. Crandall, Associate Professor, M.I.T. and Lionel L. Fray, Senior Executive Consultant, T.B.S.)

FEE PAYMENTS

SUMMARY

Following the implementation of new FCC regulatory policy for cable television in early 1972, representatives of the cable television and program production industries have been attempting to determine a mutually acceptable schedule of fee payments by the cable industry for the commercial use of copyrighted programming. Agreement on a schedule would facilitate the passage of legislation and permit the cable television industry more rapidly to fulfill its potential for serving the public, an objective supported by the FCC, OTP, and probably a majority of the Congress and the public-as well as by the copyright owners. Unfortunately, agreement has not been possible chiefly because the representatives of the cable television industry argue that many cable systems are not sufficiently profitable to cover their capital costs, and that copyright fee payments in any significant amounts would reduce cable system profits to a level so low that the industry would be unable to attract new capital to permit future growth. The major evidence advanced to support their views is an economic study undertaken for the industry by Mitchell.1

We have independently attempted to assess the profitability of cable television systems, and the likely effects of copyright fees upon their ability to attract sufficient amounts of capital to sustain future growth. The analysis incorporates not only much of Mitchell's evidence, but also additional data developed subsequent to the publication of his paper.

1 Bridger M. Mitchell in association with Robert H. Smiley. Cable Television Under the 1972 FCC Rules and the Impact of Alternative Copyright Fee Proposals, An Economic Analysis, Sept. 30, 1972.

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