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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.»
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 Rulex.-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 should 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 ('ongress.
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.
THIE COXSENSUS 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 sup. port 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 XCTA 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. Ilowever, 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. Jarkets 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.
(4) For other programing, commencing with purchase and until day after first run, but no longer than one year.
Provided, however, that no exclusivity protection would be afforded against a program imported by a cable system during prime time unless the local station is running or will run that program during prime time.
Existing contracts will be presumed to be exclusive. No preclearance in these markets. C. Smaller Markets.
No change in the FCC proposals.
Erclusivity for network programing. The same-day exclusivity now provided for network programing would be reduced to simultaneous exclusivity (with special relief for time-zone problems) to be provided in all markets.
Leapfrogging.—(A) For each of the first two signals imported, no restriction on point of origin, except that if it is taken from the top-25 markets it must be from one of the two closest such markets. Whenever a CATV system must black out programing from a distant top-25 market station whose signals it normally carries, it may substitute any distant signals without restriction.
(B) For the third signal, the UHF priority, as set forth in the FCC's letter of August 5, 1971, p. 16.
Copyright legislation.—(A) All parties would agree to support separate CATV copyright legislation as described below, and to seek its early passage.
(B) Liability to copyright, including the obligation to respect valid exclusivity agreements, will be established for all CATV carriage of all radio and television broadcast signals except carriage by independently owned systems now in existence with fewer than 3500 subscribers. As against distant signals importable under the FCC's initial package, no greater exclusivity may be contracted for than the Commission may allow.
(C) Compulsory licenses would be granted for all local signals as defined by the FCC, and additionally for those distant signals defined and authorized under the FCC's initial package and those signals grandfathered when the initial package goes into effect. The FCC would retain the power to authorize additional distant signals for CATV carriage : there would, however, be no compulsory license granted with respect to such signals, nor would the FCC be able to limit the scope of exclusivity agreements as applied to such signals beyond the limits applicable to over-the-air showings.
(D) Unless 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.
(E) Broadcasters, as well as copyright owners, would have the right to en. force exclusivity rules through court actions for injunction and monetary relief.
Radio carriage.—When a CATV system carries a signal from an AM or FM radio station licensed to a community beyond a 35-mile radius of the system, it must, on request, carry the signals of all local AM or FM stations, respectively.
Grandfathering.—The new requirements as to signals which may be carried are applicable only to new systems. Existing CATV systems are "grandfathered.” They can thus freely expand currently offered service throughout their presently franchised areas with one exception: In the top 100 markets, if the system expands beyond discrete areas specified in FOC order (e.g., the San Diego situation), operations in the new portions must comply with the new requirements.
Grandfathering exempts from future obligations to respect copyright exclusivity agreements, but does not exempt from future liability for copyright payments.
EXCHANGE OF CORRESPONDENCE BETWEEN FCC CHAIRMAN BURCH AND
Washington, D.C., January 26, 1972.
Washington, D.C. DEAR MR. CHAIRMAN: This letter is directed to an important policy aspect of our present deliberations on a new regulatory program to facilitate the evolution of cable television. That is the matter of copyright legislation, to bring cable into the competitive television programming market in a fair and orderly way-a matter with which you as Chairman of the Subcommittee on Patents, Trademarks and Copyrights have been so deeply concerned in this and the last Congress.
You will recall that we informed the Congress, in a letter of March 11, 1970 to Chairman Magnuson, of our view that a revised copyright law should establish the pertinent broad framework and leave detailed regulation of cable television signal carriage to this administrative forum. In line with that guiding principle and a statement in our August 5, 1971 Letter of Intent that we would consider altering existing rules to afford effective non-network program protection, we are now shaping a detailed program dealing with such matters as distant signal carriage, the definition of local signals, leapfrogging, and exclusivity (both network and non-network. That program is now approaching final action.
As of course you know, representatives of the three principal industries involved-cable, broadcasters, and copyright owners—have reached a consensus agreement that deals with most of the matters mentioned above. On the basis of experience and a massive record accumulated over the past several years, we regard the provisions of the agreement to be reasonable, although we doubtless would not, in its absence, opt in its precise terms for the changes it contemplates in our August 5 proposals. But the nature of consensus is that it must hold together in its entirety or not at all-and, in my own view, this agreement on balance strongly serves the public interest because of the promise it holds for resolving the basic issue at controversy.
This brings me directly to a key policy consideration where your counsel would be most valuable. That is the effect of the consensus agreement, if incorporated in our rules, on the passage of cable copyright legislation.
The Commission has long believed that the key to cable's future is the resolution of its status vis-a-vis the television programming distribution market. It has held to this view from the time of the First Report (1965) to the present. We remain convinced that cable will not be able to bring its full benefits to the American people unless and until this fundamental issue is fairly laid to rest. An industry with cable's potential simply cannot be built on so critical an area of uncertainty.
It has also been the Commissi n's view, particularly in light of legislative history, that the enactment of cable copyright legislation requires the consensus of the interested parties. I note that you have often stressed this very point and called for good faith bargaining to achieve such consensus.
Thus, a primary factor in our judgment as to the course of action that would best serve the public interest is the probability that Commission implementation of the consensus agreement will, in fact, facilitate the passage of cable copyright legislation. The parties themselves pledge to work for this result,
Your advice on this issue, Mr. Chairman, would be invaluable to us as we near the end of our deliberations. With warm personal regards. Sincerely,
DEAN BURCH, Chairman.
Washington, D.C., January 31, 1972. Hon, DEAN BURCH, Chairman, Federal Communications Commission, Washington, D.C.
DEAR MR. CHAIRMAN: I have your letter of January 26, 1972, requesting my advice on the effect of the consensus agreement reached by the principal parties involved in the cable television controversy on the passage of legislation for general revision of the copyright law.
I concur in the judgment set forth in your letter that implementation of the agreement will markedly facilitate passage of such legislation. As I have stated in several reports to the Senate in recent years, the CATV question is the only significant obstacle to final action by the Congress on a copyright bill. I urged the parties to negotiate in good faith to determine if they could reach agreement on both the communications and copyright aspects of the CATV question. I commend the parties for the efforts they have made, and believe that the agreement that