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Now it is proposed, in Section 111 of this bill, that "CATV systems with fewer than 3,500 subscribers, now in existence, and independently owned, be exempted from the copyright" payment schedule that this bill provides for.

I would like to draw your attention to the enclosed issue of TECH TALK. On pages one through three of this issue is a synopsis of a Technical Report issued by the Office of the Chief Engineer of the Federal Communications Commission (Report Number T-7301). This report shows that based upon an FCC study of the CATV industry, that approximately 91% of all operating CATV systems have fewer than 3,500 subscribers. And in fact, that the smallest 50% of all CATV systems (i.e. half of the actual systems) average 345 subscribers each.

This bill, then, would exempt 91% of all existing cable system from the payment of copyright liabilities. The key word is existing.

Please refer to page 19 of the same enclosed issue of TECH TALK. This article (“Isn't It About Time--Again?") relates to the very distinct difference within the CATV industry between "cable television” and “Community Antenna Television." Briefly, cable television is any system with more than 3,500 subscribers; Community Antenna Television is any system with fewer than 3,500 subscribers.

And yet, both “Community Antenna" and "Cable” are being regulated, by the FCC, and through this proposed Copyright Bill, as if they were of the same.

They are not. “Community Antenna" television service is a simple service that allows people in distant communities to receive better broadcast television. "Cable" television is much more than that. "Cable" television is pay-for-a-movie television (via the cable); it is reading electric meters via the cable; it is subscriber-response polling via the cable, and much more.

The point that I would like to try to make is simply this:

(1) The National Cable Television Association has represented to this Committee that they represent "the industry.” The truth is that they represent the "cable television” industry; not the “Community Antenna" industry.

(A) The President of the NCTA, Mr. David Foster, is scheduled to appear before this Committee to “speak for the industry. Our contention is that he may speak for 9% of the CATV systems in the industry, and that these 9% of the systems may represent a large number of cable subscribers; but they do not represent a large number of systems—certainly not Community Antenna systems. (2) There are spokesmen within the "Community Antenna" industry who could and should be allowed to present the views of the other 91% of the CATV industry. I would like to urge that some way be made to allow such a presentation before this Committee.

We are dealing with small communities, and normal, un-sophisticated community antenna reception. And we are dealing with a proposal which would allow the existing small systems to operate without copyright liability, while any new small “Community Antenna" systems will (under the terms of this bill) be required to pay copyright fees. We believe this is wrong.

Please give our proposal some consideration. The 91% of the CATV communities we speak on behalf of total nearly 5,000 in all, I believe they have a right to be heard ... and David Foster of the NCTA does not speak for them. Sincerely,

ROBERT B, COOPER, Jr.,

President.

COLUMBIA BROADCASTING SYSTEM, INC.,

New York, N.Y., August 7, 1973. Hon. JOHN L. McCLELLAN, Chairman, Subcommittee on Patents, Trademarks and Copyrights, Committee on

the Judiciary, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: On July 31 and August 1 the Subcommittee on Patents, Trademarks and Copyrights held Ilearings on several Copyright Revision Bill subjects, including cable television, but that subject was specifically limited to the royalty schedule contained in § 111 of S. 1361 for the compulsory licensing of cable television systems.

CBS was not invited to appear at the Ilearings nor did we desire to do so in view of the fact that the cable television part of the Hearings was limited to the specific subject of the royalty schedule. Our concern is more general-the proper place of cable television in the copyright context. Therefore, we take this opportunity to set forth the CBS position on that. We respectfully request that this letter be made a part of the record of the Hearings.

Preliminarily, it is useful to note what are the functions that a cable television system performs when it retransmits broadcast signals to its subscribers. Only one week before its decision in Fortnightly v. United Artists, 392 U.S. 390 (1968), the United States Supreme Court in United States v. Southwestern Cable Co., 392 U.S. 157 (1968) said that:

"CATV systems perform either or both of two functions. First, they may supplement broadcasting by facilitating satisfactory reception of local stations in adjacent areas in which such reception would not otherwise be possible; and second, they may transmit to subscribers the signals of distant stations entirely beyond the range of local antennae." 392 U.S. at 163.

When the Court decided Fortnightly a week later the function of distant sig. nal importation was not before it; the function of the use of advanced antenna technology and equipment to overcome adverse topographical conditions to permit subscribers to receive signals already in the community, and that function only, was.

The United States Court of Appeals for the Second Circuit decided CBS v. Teleprompter,-F. 2d—177, USPQ 225, on March 8, 1973. In its decision it held that:

“When a CATV system is performing this second function of distributing sig. nals that are beyond the range of local antennas, we believe that, to this extent, it is functionally equivalent to a broadcaster and thus should be deemed to 'perform' the programming distributed to subscribers on these imported signals. . The system's function in this regard is no longer merely to enhance the subscriber's ability to receive signals that are in the area ; it is now acting to bring signals into the community antenna, erected in that area." 177 USPQ at 231.

Consequently, the Court of Appeals went on:

"We hold that when a CATV system imports distant signals, it is no longer within the ambit of the Fortnightly doctrine, and there is then no reason to treat it differently from any other person who, without license, displays a copyrighted work to an audience who would not otherwise receive it. For this reason, we conclude that the CATV system is a 'performer of whatever programs from these distant signals that it distributes to its subscribers." 177 USPQ at 231.

CBS believes that the Court of Appeals is right in concluding that there is no reason to treat a cable television system, which brings a copyrighted work to a distant audience who would not otherwise receive it, differently from any other person who performs the same function. Moreover, we see no reason for the law to be changed so as to grant cable systems discriminatorily preferential treatment. Treating them in the same way as other users of copyrighted works are treated would only require that cable television systems secure licenses from copyright proprietors just as do the broadcasters with whom they compete.

Not treating the cable systems to complusory licensing, as S. 1361 proposes to do, would eliminate the necessity of:

The recording by capable systems of notices in the Copyright Office and the prescription of regulations for them by the Register of Copyrights ($ 111(d) (1)).

The deposit by cable systems with the Register of Copyrights of statements of account every three months and the prescription of regulations by the Register of Copyrights for the deposit (8 111 (d) (2) (A)).

The deposit by cable systems with the Register of Copyrights of the prescribed graduated royalty fees and the prescription of regulations for the deposit by the Register of Copyrights (8 111(d) (2) (B)).

The annual filing of claims by persons (who have a sufficient financial stake as well as the means and energy to do so) entitled to fees with the Register of Copyrights and the prescription of regulations for such filing by the Register of Copyrights ($ 111(d) (3) (A)).

The annual determination by the Register of Copyrights about whether a controversy exists concerning the distribution of royalty fees (f 111(d) (3) (B)).

The determination and deduction of his administrative costs by the Register of Copyrights, the distribution of royalty fees to those entitled to them, and, if the Register has found a controversy to exist, a certification to that effect and the constituting of a panel of the Copyright Royalty Tribunal ($ 111(d) (3) (B)).

The maintenance of 15% of the royalty fees collected in a special fund and their distribution according to regulations prescribed by the Register of Copyrights to the copyright owners of musical works (8 111 (d) (3) (C)).

The withholding from distribution by the Register of Copyrights or the Copyright Royalty Tribunal of an amount either one deems sufficient

to satisfy all claims with respect to which a controversy exists (8 111

(d) (3) (D)). Vor would the Copyright Royalty Tribunal created by Chapter 8 of the Bill be required to exercise the functions of making determinations concerning the adjustment of the copyright royalty rates or the distribution of the royalty fees provided for in the cable television compulsory license.

Nor would the Houses of Congress have the burden of deciding whether to exercise a right of veto against a time deadline, reflecting their judgments about royalty adjustments recommended by the Copyright Royalty Tribunal, as provided for in $ 807 of the Revision Bill.

Nor would be courts be burdened by the necessity of reviewing determinations of the Tribunal concerning the distribution of cable television royalty fees, as provided for by $ 809 of the Revision Bill.

CBS believes that it is not possible for any official or any Copyright Royalty Tribunal, or any other such body, to set royalty rates that are “reasonable". By what criteria of reasonableness could the determination be made? Moreover, by what criteria would the Register of Copyrights be guided in distributing the royalty fees to copyright proprietors who file claims for them? What weight, if any, would be given to the quality of the copyrighted works? How would the Register of Copyrights attempt to measure quality when no guidelines are provided by the Revision Bill? Nor does the Revision Bill provide guidelines for the Copyright Royalty Tribunal to make judgments about the distribution of the royalty fees in the controversies certified to it by the Register of Copyrights.

The fact is that there is no adequate substitute for the operations of a normal marketplace in which prices are determined by supply and demand. If such a marketplace were permitted to function, consistently with other marketplaces in our free enterprise economic system, the problems which are insolvable by officials and tribunals would be solved by bargaining in the marketplace. The expenses of the operation would be borne by those who deal in the marketplace as contrasted with the expenses of the labyrinthical, top-heavy, governmental structure contemplated by S. 1361, part of the expenses for which would be taken out of the royalty fee fund and part of which would be taken out of the American taxpayer.

A normal marketplace does not now exist for cable television, but copyright proprietors would certainly find a way of selling their rights if cable were paying for them. All other copyright users have managed to find a way of dealing with copyright proprietors. The present lack of a market is due to the uncertainty, which is only now being resolved in the courts, over whether cable television systems are liable to the normal application of copyright law and the consequent unwillingness of cable television systems to bargain and pay for what they retransmit.

As noted above, on March 8 of this year the Court of Appeals for the Second Circuit unanimously held in CBS v. Teleprompter that cable television systems are liable under the present law for the carriage of copyrighted programs contained in distant signals which they import. Petitions for review by the United States Supreme Court were filed in early June; we expect the Court to act on the petitions in the fall of this year; thus, it is probable that the Court's decision will finally determine the copyright question in the near future.

This being so, CBS suggests the wisdom of awaiting the outcome of the copyright test case rather than acting on Section 111 of S. 1361, which the Congress may find unnecessary in light of whatever action is taken by our highest court. After all, we are not without a Copyright Law; the only questions are what it means and whether that is unjust. We shall have the answers presently. Only if it is unjust should it be changed.

We believe you are aware of the fact that CBS has consistently taken the position that cable television systems should have a copyright exemption for retransmission of television broadcasts to their subscribers who are within the normal coverage area of the station originating such broadcasts, subject to certain conditions to assure fairness. We reaffirm that position because we believe that such an exemption is justified by the need for simplicity and by the expectation of the broadcaster, and those who license his use of their program material, that the broadcast station's signal will reach the entire public in its normal broadcast area. The Circuit Court's decision, review of which is now sought, accomplishes that result.

There is one incongruity in Section 111 of S. 1361 we should like to call to your attention. Section 111 makes it a copyright infringement for a cable television system to carry a professional sporting event into the local service area of one or more television stations—when none of the stations has been authorized to broad. cast the event. Apparently it is felt that even with the payment of the statutory royalty for the compulsory license which the Revision Bill would provide, it is unfair-to the sports promoter, to the league, to the broadcaster, or to all three for a cable television system by its unilateral action to frustrate the consensual agreement of the marketplace. Yet the Revision Bill shows no similar concern in the identical situation for the copyright owner of any other kind of copyrighted work, no matter what its importance, even though he had deliberately chosen to license the work to no local station. It seems to us that logic would require that the copyright proprietors of news and entertainment programs be treated no less favorably than the promoters of professional sporting events. Respectfully,

ROBERT V. EVANS.

STATEMENT OF THE COMMUNITY ANTENNA TV ASSOCIATION (CATA)

AUGUST 10, 1973 CATA is a national association of small CATV systems whose problems and interests materially differ at times from those confronting large scale cable television operations and established cable systems in major television markets.

CATA was formed in late July 1973 at Dallas, Texas to serve as spokesman for small CATV operators. Although CATA is still in its formative stages as an organization, its membership already includes more than 100 CATV systemsmost of which are family owned and operated-serving in excess of 90,000 subscribers throughout the United States.

CATA was not in a position to present its views concerning Section 111 of S. 1361 to the Subcommittee at its August 1, 1973 hearings. CATA representatives did, however, attend the hearings and are familiar with positions taken by interested parties who testified. CATA welcomes this opportunity to present its views on a single critical issue: whether small CATV systems should be subject to copyright liability.

Small CATV systems perform valuable services to the public by assuring adequate, dependable, television reception in communities and areas beyond major television markets. Costs of system operation, particularly expenses of upgrading plant necessitated by FCC enactment in March 1972 of technical standards, and other construction expenses, have been increasing at a very rapid rate. As the Subcommittee knows, the ability of small system operators to raise capital has been quite limited. Also, their ability to increase subscriber rates is often restricted, if not by the terms of their franchises, certainly by economic realities in the markets served. Moreover, most cannot and do not desire to initiate ancillary broadband services in order to gain additional revenues. Clearly, these small systems merit the kind of "breathing space” assured by a copyright exemption based upon size.

CATA recognizes that jurisdiction over copyright matters resides exclusively in the legislative branch. CATA cannot, however, ignore the fact that the Federal Communications Commission and the President's Office of Telecommunications Policy called various interested parties together in 1971 to hammer out a compromise among the several industry groups regarding the emergence of the cable television industry. Despite the fact that these FCC-OTP sanctioned negotiations had no legislative power and no jurisdictional control over the copyright question, compromises were reached on a wide range of issues affecting the cable industry, including certain agreements dealing with copyright. The entire package of agreements has become known as the “Whitehead Consensus Agreement". The Whitehead agreement, while not binding upon Congress, did contain a provision calling for the exemption from copyright liability of certain CATV systems—those with fewer than 3,500 subscribers. We raise this point not to say that the Whitehead agreement in any way controls the Subcommittee's thinking regarding the copyright issue, but rather so that the Subcommittee will understand that numerous small CATV operators acquiesced in the many unfavorable aspects of the Whitehead agreement because they believed that the broadcasters and copyright owners would cffer their support for copyright legislation containing an exemption for small CATV systems. Hence, if denied the copyright exemption, the small cable systems will lose the single most important reason for accepting the various provisions of the Whitehead agreement, many of which have been carried over to the present Copyright Bill, as well as the FCC's CATV regulations enacted in March 1972.

Thus it was unexpected that Section 111 of the legislation approved by the Subcommittee lacked a small system exemption : CATA respectfully urges that S. 1361 include an exemption from copyright liability for CATV systems having fewer than 3,500 subscribers. We understand there is no significant objection to the inclusion of such an exemption and will discuss why we believe it would serve the public interest.

As noted earlier, CATV systems in the below 3,500 subscriber category for the most part provide their subscribers with a basic service for improving television reception. Most of these systems operate solely as a means of delivering television signals to communities where normal television reception is poor or nonexistent: communities beyond the primary service areas of television broadcast stations ; communities in which other secondary transmission facilities such as translators are either lacking or inadequate; communities near large cities but situated in pockets of poor reception produced by terrain barriers.

Some small systems also engage in limited local originations, generally of an automated nature (time and weather scan). Few if any such systems carry advertising, engage in pay television operations or operate their own microwave relay systems. They are, in short, the traditional community antenna television systems—locally owned and operated—which had their genesis in the mountainous regions of Pennsylvania and Oregon in the late 1940s, and which continue to depend upon subscriber revenues for economic support.

Although overlooked by the Federal Communications Commission when it revised its program exclusivity rules in 1972, small systems were taken into account when the agency enacted its mandatory origination requirement (47 C.F.R. $ 76.201 (a)) in 1969. 20 FCC2d 201. Section 76.201 (a) exempts systems with fewer than 3,500 subscribers from origination cablecasting, principally for economic reasons.

In its regulation of the broadcasting and common carrier industries, the Commission has evidenced a similar concern for the development of small communications companies. Exemptions from and exceptions to generally applicable, but often burdensome regulatory requirements, are not uncommon and have been construed to serve the larger public interest.

In the common carrier field, for example, small communications carriers were recently exempted from having to submit comprehensive economic data and information to support tariff revisions. See 47 C.F.R. $ 61.38(f). The FCC noted that carriers with “small revenues”, limited service areas and “few customers" should not have to undertake the costly and elaborate reporting procedures required of larger carriers. Final Report and Order (Docket No. 18703, 25 FCC 2d 957, 965-66 (1970).

With reference to broadcasting, the FCC recently embarked upon a comprehensive program of “re-regulation.” Many of its rule revisions grant relief to small market broadcasters from certain burdensome regulatory requirements. Similiarly, in rule making proceedings involving the renewal of broadcast licenses and the ascertainment of community problems by broadcasters, the FCC has recognized that factors such as market and station size may well warrant the application of different and less stringent standards to certain classes of licensees. Indeed, in an Interim Report and Order relating to broadcast license renewals, the FCC has exempted radio stations from newly-enacted annual reporting requirements applicable to television licensees and has promised to re-evaluate in a year whether it is desirable to require radio broadcasters to continue to adhere to additional local public file requirements imposed upon all broadcasters.

Finally, in the television broadcasting field, numerous rules and policies have been designed to favor UHF development and in some cases to exempt UHF licensees, which often are small businesses when compared to their VHF counterparts, from requirements applicable to VHF licensees. For example, 47 C.F.R. $ 73.636, NOTE 8, provides for possible ad hoc exemptions to UHFs from duopoly restrictions consistently applied to VHF licensees. In addition, the FCC has a long-standing policy of fostering UHF development. This policy has been reflected in rules governing the agency's regulation of CATV systems. See e.9., 47 C.F.R. $ 76,61 (b) (2).

The United States Congress has also gone on record many times in support of efforts to assist in the development of UHF television stations. One can also look to various statements by members of the Senate and House expressing concern for similar legislation to assist in the growth of FM radio stations. See e.g., S. 585. The list goes on when one looks to the Congressional hearings regarding the need for more frequency space to be allocated to the land-mobile spectrum. Even in this 93rd Congress concern for small businesses is evidenced by hearings held by Senator Thomas McIntyre regarding how broadcasters and

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