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-All cable systems would receive a compulsory copyright license for signals and programs carried in compliance with the regulatory provisions of the Consensus, which were adopted in the form of the FCC's 1972 cable regulations, including those relating to such matters as number of signals, mileage zones, and leapfrogging. Bus cable systems would have to bargain like everyone else for copyright licenses to programs taken from any additional or nonconforming signals which the FCC migiht subsequently permit them to carry. And the fees to be paid under the compulsory license would be determined by arbitration in the absence of agreement among the parties.

-Broadcasters would enjoy exclusively rights for non-network programming only in the major television markets, and their rights would be limited even there in markets below the top 50.2 For network programs, broadcasters would receive a narrow nonduplication right. The copyright law would provide broadcasters with machinery to enforce their exclusivity rights in the courts.

THE PROPOSED REVISIONS IN S. 1361

The Revised Text of the cable provisions of S. 1361 attached as Appendix C faithfully adheres to the terms of the 1971 Consensus, including those that are unfavorable to broadcasters and copyright owners. The principal changes from the present text of S. 1361 are summarized below.

1. Compulsory License.-Section 111 (c) (1) (C) of the Revised Text confers a compulsory copyright license on cable systems wherever the signals carried are contemplated by and consistent with the FCC Rules of February 12, 1972, implementing the Consensus. These Rules authorize a cable system to carry all local signals and all signals that are "significantly viewed" locally; a full complement of the television networks; a quota of distant independent station signals depending on the size of the television market in which the system is located, provided that under the so-called "leapfrogging" provisions signals imported from any of the top 25 markets must come from one of the two closest such markets; and all "grandfathered signals"-i.e., all signals not otherwise authorized which were lawfully carried by the system prior to March 31, 1972. The Rules also establish exclusively rights whereby local television stations may protect themselves against simultaneous carriage of their network programs on imported distant signals (with special relief for time-zone problems), and in some markets against repetition of their non-network programs on distant signals imported by cable within periods of time that vary according to the size of the television market. Under the Revised Text, the compulsory license would cover all signals authorized by the 1972 Rules if carried in compliance with the exclusively provisions. 2. Limitations on Scope of Compulsory License.-Conversely, Section 111(e) (2) (A) of the Revised Text provides that cable retransmissions are subject to full normal copyright liability whenever they are inconsistent with or in excess of those contemplated by the 1972 Rules. This provision ensures that the compulsory license conferred on cable systems does not delegate to the FCC the power in effect to revise the copyright law whenever a majority of the Commission concludes that its rules concerning CATV should be altered. The limitations thus imposed on the scope of the compulsory license are not regulatory in nature. They do not affect the Commission's freedom to regulate. To the contrary, they ensure that the exercise of the Commission's unfettered regulatory power will not have the incidental legislative effect of modifying the copyright treatment prescribed by Congress.

Thus, future FCC regulations might permit cable systems to carry station signals or programs as to which carriage is not permitted under the 1972 Cable Rules. In that event, cable systems would be free to carry the additional or different signals or programs, but they would have to obtain a copyright license like any other user. Whatever justification there may be for a compulsory license for the bulk of a system's programs in terms of the alleged burden of multiple negotiations, it is clear that negotiating copyright licenses for a signal or programs in addition to those now authorized would not impose a burden requiring the special privilege of a compulsory license. NCTA recognized as much when it accepted the Consensus limitations on the scope of the compulsory license. Authorization for carriage of additional signals or programs could result from changes in a variety of different Commission Rules, including (a) those which

2 NAB and MST offered to reduce the scope of the exclusivity rights in the largest markets in exchange for some protection, or less restricted protection, in smaller markets, but the cable interests refused.

specify what signals may be carried by stations in various categories of television markets, and those which locate and categorize specific television markets (Subpart D of the 1972 Rules); (b) those defining the programs as to which broadvarious definitions of terms employed in the above-mentioned Rules (Section cast television stations may claim exclusivity rights (Subpart E); and (c) various definitions of terms employed in the above-mentioned Rules (Section 76.5 (a), (f), (g), (h), (i), and (o) through (u)). For example, the Commission might directly authorize the carriage of an additional distant signal by stations in a particular market category. Or it might authorize an additional signal by changing the category of a particular market or the definition of a market category, by expanding the 35 mile zone which determines what signals are subject to carriage as local signals, or by changing the definition of the signals that must be carried as "significantly viewed." Or the Commission might change its "leapfrogging" rules so as to permit carriage of signals from markets not now authorized. Similarly, by changes in the CATV exclusivity rules or the definitions on which they depend, cable systems might be authorized to carry individual programs as to which a valid exclusivity claim might otherwise have been asserted. For all such signals or programs not authorized under the present rules, Section 111 (c) (2) (A) simply provides that the compulsory copyright license will not apply.

3. Arbitration of Fee Disputes.-As contemplated by the Consensus, Section 111(d) (2) (B) of the Revised Text establishes a mechanism for the arbitration of disputes over the amount of fees to be paid pursuant to a compulsory license if the parties cannot agree. We believe that this provision would result in fee levels lower than those that would prevail under free market conditions, where the copyright owner has the option of simply refusing to sell at an unsatisfactory price. Nonetheless, it would mitigate the bargaining disadvantage imposed by the compulsory owners by enabling him to seek fees which a neutral expert body would regard as just and reasonable.

The arbitration provision replaces the schedule of fees between 1% and 5% of gross receipts that would be imposed by statute for the first three years under S. 1361 as written. As the NCTA representatives who testified before this Subcommittee on August 1 expressly recognized, this fee schedule is necessarily arbitrary, since no Congressional hearings or studies have been conducted on the appropriate fee levels for cable systems and since the questions involved are both novel and complex.

NCTA asserts that it prefers an arbitrary statutory solution because too much time will be required for an arbitral tribunal to acquire and analyze the data necessary to a reasoned conclusion. The Revised Text meets this objection by simply relieving cable systems of fee obligations for as much as another year after enactment of the legislation, if it takes that long for the tribunal to render its decision, and by providing that, if the tribunal takes longer than a year, its decision will be applied retroactively beginning 12 months after the date of enactment. NCTA's lame contention that such a delay in determining the amount of the copyright liability would prevent cable systems from obtaining needed bank financing flies in the face of both common sense and cable experience. The experience is that a number of cable systems have received substantial bank commitments in the short time since the TelePrompTer decision specifically established their liability under present copyright law; indeed, TelePrompTer itself has obtained a credit of $150 million from a group of banks headed by First National Bank of Boston. (Cable News, May 28, 1973.) The common sense is that, if banks would withhold funds because of uncertainties as to the amount of copyright liability, the problem will not be solved by fixing a schedule for only the first three years of copyright liability, since cable systems need and seek loans for much longer terms than three years and since cable representatives insist that the amount of the fees initially fixed by statute would not be taken as relevant in determining what fees are just and reasonable thereafter.

It is not surprising that cable interests prefer the extremely low fee levels proposed in S. 1361 to just and reasonable fees determined in the most objective possible way, but they agreed to forego this exceptionally favorable treatment in favor of arbitration. The appropriateness of arbitration in the event of the parties' failure to agree is hardly diminished, as the NCTA witnesses before this Subcommittee curiously implied, by the fact that the parties have indeed failed to agree on fee amounts.

4. Exemption for Small CATV Systems.-Section 111(d) (2) (C) provides an exemption from fee liability under the compulsory license for cable systems serv

ing less than 3500 subscribers which were in lawful operation prior to March 31, 1972, provided that they are not under common ownership or control with other cable systems serving in the aggregate more than 3500 subscribers. This provision honors the commitment of broadcasters and copyright owners to support such an exemption. It affords full protection for the dwindling number of socalled "mom and pop" cable systems which are not controlled by large multiple system operators, whose needs are regularly invoked by NCTA representatives to substantiate hardship pleas for the cable industry as a whole.3

In this connection it should be noted that the prepared testimony of Mr. George Barco on behalf of cable interests submitted to this Subcommittee as of August 1, which appears to spurn the benefit of this exemption, in fact claims the exemption in a different form. Barco proposes that, in lieu of the exemption for systems with fewer than 3500 subcribers, there should be an exemption for all systems for the first $200,000 of annual gross receipts. Note that a system with 3500 subscribers charging a fee of $5 per month would have annual gross receipts of just over $200,000. There are two significant differences between the Barco proposal and the Consensus exemption. The first is that the Barco proposal would provide a wholly unjustified windfall exemption to every cable system in the country with more than 3500 subscribers. The second is that an exemption defined in Mr. Barco's way enables him to avoid relying expressly on the Consensus as the basis for claiming the exemption.

5. Exclusivity vis-a-vis Signals and Programs Not Authorized Under Present Rules.—As indicated above, the Commission's Rules limit the exclusivity rights which broadcasters can negotiate with copyright owners and then asssert against cable retransmissions covered by the compulsory license. Section 111(e) of the Revised Text provides that, if the FCC shou'd authorize carriage of signals or programs not subject to compulsory copyright license, it will not restrict the broadcasters' exclusivity rights vis-a-vis such cable retransmissions to any greater extent than it restricts their exclusivity rights vis-a-vis other television broadcast stations. This provision implements an express term of the Consensus and preserves the basic principle of the Consensus that privileged treatment for cable systems in matters that are essentially of a copyright nature should not extend to signals or programs not authorized under the 1972 Rules. Section 111 (e) makes clear that this assurance as to treatment under the copyright law in no way limits or preempts the FCC's statutory authority to regulate the operations of broadcast stations or cable systems pursuant to any other Act of Congress.

6. Right of Enforcement.-The Revised Text also adds a new subsection to Section 501 of S. 1361 to provide that television broadcasters will have the same rights of judicial enforcement as copyright owners with respect to actionable infringements of copyright resulting from a cable retransmission within the broadcaster's local service area. This provision also implements an express term of the Consensus. Its effect is simply to ensure that broadcasters, like copyright owners, will have effective judicial remedies to enforce such copyright protections vis-a-vis cable systems as remain to them under the Consensus. This provision is of particular importance in the enforcement of exclusivity terms of copyright licenses, as to which it is the broadcaster rather than the copyright owner which has the primary interest in enforcement or the practical ability to enforce.

THE CONSENSUS SHOULD BE IMPLEMENTED

In their testimony before this Subcommittee on August 1, NCTA officials appeared to be trying to back away from their commitment to support copyright legislation implementing the Consensus Agreement. They pressed for enactment of the statutory fee schedule contained in S. 1361 rather than the arbitration provisions they had agreed to support in its place. They did not affirmatively support a modification of Section 111 to establish the limitations on the scope of the compulsory license which were the heart of the Consensus Agreement. And they proposed revisions of their own in S. 1361 which are inconsistent with the Consensus. (NCTA's proposed revisions are discussed in Appendix D.)

Cable interests have already obtained the benefit of the regulatory provisions of the Consensus in the form of the FCC Rules ending the freeze on CATV and

3 The Consensus further protects the "mom and pop" systems through the "grandfather" provision which exempts all cable systems lawfully operating on Mar. 31, 1972, from the obligation to respect exclusivity rights. Most of the "mom and pop" systems established or likely to be established were in operation before 1972,

authorizing cable systems to import new distant signals. At last count a total of 1,104 cable systems have been granted certificates of compliance with the 1972 Rules, including 400 new systems. (Cable News, July 30, 1973.) The FCC accorded cable interests these early benefits, with the support of broadcasters and copyright owners, in reliance on NCTA's promise that it would support implementation of the rest of the Consensus. The time has come for NCTA to make good on that pledge.

We find it difficult to believe that a responsible organization would renege on such a pledge under these circumstances. Indeed, in their testimony before this Subcommittee its officers offered scarcely a figleaf of justification for their apparent retreat from the Consensus. When NCTA President Foster was asked about the Consensus by the Chairman, he said NCTA's position was that the Consensus had been useful to get the parties off dead center, but now that its purpose had been served, the parties had "moved beyond the Consensus." This response sounded very much as if he were simply saying that NCTA had already gotten what it wanted from the Consensus, and so had no reason to honor it. NCTA's difficulties in finding a tenable rationalization for a retreat from the Consensus is also apparent in the testimony of NCTA National Chairman Hostetter. He acknowledged that the question concerning the Consensus had not been adequately dealt with in President Foster's testimony. But his explanation was that NCTA.had never liked the Consensus and had accepted it only under extreme pressure. In fact, as with most compromises, none of the parties was pleased with the Consensus: but once they reluctantly agreed to it, the other parties kept their word. Cable interests have not hesitated to invoke the Consensus when it has served their purposes. They invoked it aggressively in connection with the FCC proceedings leading to the adoption of the 1972 Rules. Indeed they invoked it only a few weeks ago, in a Statement of Position on S. 1361 circulated to their members, in support of their claim to an exemption for cable systems with fewer than 3500 subscribers.

The justifications for attempting to back away from the Consensus suggested half-heartedly in President Foster's prepared testimony on August 1 only underline the flimsiness of the available pretexts. Mr. Foster says that "major broadcast interests" such as CBS and a television station in Las Vegas did not abide by the Consensus, without mentioning that those "interests" were not parties to the Consensus (or that their opposition was in fact unavailing). He says that "to the best of our knowledge" the FCC's position is still the pre-Consensus position stated in a letter from Chairman Burch to Senator Pastore of March 11, 1970, without mentioning either the letter of Chairman Burch to Senator McClellan of January 26, 1972, endorsing the Consensus, or the Commission's own explicit endorsement of the Consensus in adopting the 1972 cable regulations. And he says, contrary to the fact, that the FCC "did not adopt rules which comported in all respects" with the Consensus. His sole illustration of this unsupportable proposition is a provision in the network exclusivity rules for special relief to broadcasters in the smaller markets of the Rocky Mountain time zone, where the Commission concluded that the simultaneous exclusivity rule is uniquely ineffective to protect a station's network programming, because prime time viewing hours do not coincide with any network feed of prime time programs and many stations therefore broadcast these programs on a delayed basis or out of sequence. Far from being inconsistent with the Consensus, this provision implements an express term of the Consensus calling for "special relief for time-zone problems" from the rule of simultaneous-only exclusivity for network programming.

COPYRIGHT LIABILITY FOR IMPORTED SPORTS PROGRAMS

In testimony before this Subcommittee, NCTA argued strenuously for deletion of Section 111 (c) (4) (B) of S. 1361, a provision which is not treated one way or the other by the Consensus. That provision subjects to normal copyright liability a cable retransmission of a professional athletic contest carried on a distant signal into the local service area of television broadcast stations none of which has received permission to broadcast the contest. NAB and MST support retention of this provision as written, and have accordingly included it in the Revised Text as Section 111 (c) (2) (B).

Contrary to the repeated assertions of NCTA witnesses, the sports provision does not impose a "black-out" of sports contests. It simply requires cable systems to negotiate for copyright licenses to retransmit a professional athletic event if the local television broadcast stations with which they compete have not been

authorized to broadcast the event. There can be no argument that cable systems need a compulsory license for such individual sporting events because of any burden of identifying or negotiating with the copyright owners. Any different treatment of cable systems from the treatment accorded broadcast stations in this respect would be grossly discriminatory against television broadcast stations. Moreover, it would effectively destroy the ability of athletic teams to assure the continued availability to the viewing public of games of special local or regional interest over free television broadcast stations. This result is not in the public interest.

Professional sports are now televised in great variety throughout the United States. This variety is made possible by the broadcast of different games in different areas of the country. In sports such as football, baseball, basketball, and hockey, each area of the country receives one or two games at a particular broadcast time, but the total number of games broadcast throughout the country at that time may be quite large. If CATV retransmits all these games into a particular local market at once, the resulting fragmentation of the local audience would destroy the market for broadcast of the local team's games unless the team or a particular contest happened to have great attraction for a national audience. The foreseeable result of granting cable systems a compulsory license to import broadcast signals of distant games which are not sold to local broadcasters, would be to reduce the number of games broadcast in the various regions of the country in favor of a few selected national games. The revenues of local teams would suffer as a result, and local audiences would be deprived of the opportunity to see games of teams with particular local or regional appeal. Even if Congress should conclude that this is a desirable result, it would be inappropriate to implement such a policy by granting special copyright privileges to cable systems and permitting them to subvert limits on the transmission of distant games still imposed on broadcasters.

Indeed, there is much to be said for the proposition that cable systems should be prohibited from carrying any football, baseball, basketball, or hockey game that has not been offered to a free television broadcasting station in the same market. However, this is a question of regulatory policy, not a copyright question, and accordingly we do not contend that it should be reflected in S. 1361. But since there is no conceivable justification for granting cable systems a compulsory license to carry such games, the copyright bill should include a provision denying cable systems such preferential copyright treatment.

[APPENDIX A] CONSENSUS AGREEMENT

FULL TEXT OF THE CONSENSUS AGREEMENT ACCEPTED BY REPRESENTATIVES OF BROADCASTERS, COPYRIGHT OWNERS, AND CABLE SYSTEMS IN NOVEMBER 1971

Local signals.-Local signals defined as proposed by the FCC, except that the significant viewing standard to be applied to "out-of-market" independent stations in overlapping market situations would be a viewing hour share of at least 2% and a net weekly circulation of at least 5%.

Distant signals.-No change from what the FCC has proposed.

Exclusivity for nonnetwork programing (against distant signals only).—A series shall be treated as a unit for all exclusivity purposes.

The burden will be upon the copyright owner or upon the broadcaster to notify cable systems of the right to protection in these circumstances.

A. Markets 1-50.

A 12-month pre-sale period running from the date when a program in syndication is first sold any place in the U.S., plus run-of-contract exclusivity where exclusivity is written into the contract between the station and the program supplier (existing contracts will be presumed to be exclusive).

B. Markets 51-100.

For syndicated programing which has had no previous non-network broadcast showing in the market, the following contractual exclusivity will be allowed: (1) For off-network series, commencing with first showing until first run completed, but no longer than one year.

(2) For first-run syndicated series, commencing with first showing and for two years thereafter.

(3) For feature films and first-run, non-series syndicated programs, commencing with availability date and for two years thereafter.

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