antenna; as for example, where they bring in a signal to an underserved area or where there are poor signals or possibly no service at all. But we are not talking about that kind of CATV today. We are talking about New York, Philadelphia, Baltimore, Toledo, Cleveland, Detroit, Cincinnati, Dayton, Fresno, Los Angeles, San Diego. Nobody can say that these are underserved areas. There is a plethora of television signals there.

Senator BURDICK. Apparently, it is not the television signals; it is those special isolated locations behind buildings and things of that nature, I understand.

Mr. ANELLO. Well, that is partially true. In New York, there is not any question but that reception, direct reception, is poor because of the canyons. Again, this is a true CATV system, and the city of New York limits the franchise to New York signals. I do not think they ought to pay any copyright fees.

However, sir, there is this consideration. Let us assume now that Tele Prompter-I think they have one of the franchises-or Sterling, whatever it might be, wires up 500,000 homes and apartments at $6 a month. That is $3 million a month, $36 million a year. What is to prevent them, then, from starting to originate programing and having pay television systems built up upon the strength of these free broadcast signals? That is why we believe that when a person uses free broadcast signals, he should be limited to that usage.

Senator BURDICK. I want you to elaborate a little bit more on this secondary point you touched upon. I think it applies to the wide open spaces where I come from. Would you provide some exemptions in the areas that cannot presently be reached?

Mr. ANELLO. I just cannot see the logic for exempting a CATV system from copyright liability when it imports a signal into a community where there is little or no service. If a UHF station went into that area, he would pay copyright fees. If a CATV system goes into that area and brings in a signal outside of the grade B contour, why should he not pay a copyright fee?

Senator BURDICK. I am referring to some areas up along the Canadian border, where they receive very poor or no reception even yet. There is no UHF in the country either, and this just kicks it over to those people. Do you think there should be copyright fees paid there?

Mr. ANELLO. Yes, sir. They are making money out of somebody else's property and I do not see why they should not pay for it.

Senator BURDICK. What about the public interest? If they are not there, why should not they receive service?

Mr. ANELLO. Does public interest dictate that you use somebody else's property? I do not think so.

Senator BURDICK. Should those people go without service?

Mr. ANELLO. No; they should not and will not. My point is, Mr. Chairman, that you can pay copyright fees, provide service, and still make money. That is all. I do not think that the payment of a copyright fee will preclude the establishment of any CATV system. As a matter of fact, one of their leaders, who is also a broadcaster, recently stated that he saw nothing wrong in the payment of copyright fees. Broadcasters have to pay them; so should CATV.

I think the argument that they cannot live with copyright fees presupposes an arbitrary action on the part of the copyright owner. If this takes place then that would be the time for the Government to step in either on antitrust or conspiracy, or some other ground, and seek to alleviate the situation. But to give a blanket exemption merely because somebody does not believe that he should have to pay for something, I think, is bad economic philosophy.

Senator BURDICK. If the existing broadcasting stations do not extend their coverage, and there is no UHF station in the area and the cable company would think it is not economically feasible to build cables in an area like that, we just go without service?

Mr. ANELLO. No, sir. I would hope that through one of the auxiliary devices, boosters, translators, or satellite-by satellite, I do not mean the up-in-the-sky satellite. I mean a television satellitethrough one of these means, you would have service. I think everybody in the United States is entitled to the national network programing at a very minimum. And I think the time will come when either by translator or satellite for a station in Fargo, for example, to bring all Minneapolis programs up to-what is the town north, Great Falls? Senator BURDICK. Grand Forks.

Mr. ANELLO. Grand Forks. Fine, I think the Commission is headed this way. I think the Commission could help materially if it would permit the translator or the broadcaster to feed the translator by way of microwave. If the Commission does this, I think it will alleviate conditions in almost 99 percent of these underserved areas. You can build a translator for less than $10,000 and it operates automatically. True, you need one for each channel, but the signal is free. It serves people without pay.

More important, Senator, the CATV system will find it difficult to serve the very areas that you speak of simply because it thrives where the population is fairly dense. A CATV operator cannot afford to string a mile of cable for one customer. Economics preclude it, whether he pays copyright fees or not. But by the use of translators the broadcast signal will get out to all the people, farmers as well as city dwellers. That is why I think translators are the answer to the rural problem. I do not think a translator would be any good in New York. That is where the cable system should be.

Senator BURDICK. I want to thank you for giving us some light on this very complex question.

Mr. ANELLO. I want to say, Mr. Chairman, we thank you and if we can help in any way, we are willing to sit down with anybody to try to iron this thing out. If you ever get to the point where you feel like specific legislation should be drafted; we would be more than glad to cooperate.

Senator BURDICK. Thank you for your offer, and we may use your services again.

Mr. ANELLO. Thank you.

Senator BURDICK. The next witness will be Mr. Ernest W. Jennes on behalf of the Association of Maximum Service Telecasters.

STATEMENT OF ERNEST W. JENNES, ON BEHALF OF ASSOCIATION OF MAXIMUM SERVICE TELECASTERS, INC.

Mr. JENNES. Thank you, Mr. Chairman.

I am Ernest W. Jennes, a member of the law firm of Covington & Burling, Washington, D.C., general counsel to the Association of Maximum Service Telecasters, Inc. (MST). MST's membership includes approximately 150 VHF and UHF, commercial and educational television stations, serving small, medium-sized, and large cities throughout the country.

In accordance with the letter from Chief Counsel Brennan, my testimony will deal principally with the implications of S. 1006 as it bears on the relationship between copyright and the operations of so-called community antenna televisions systems (CATV). There are, however, some matters which cannot be considered solely in relation to CATV but must be considered in the broader context of the application of copyright to television broadcastnig.

It is fair to say that the most basic and serious issues to be faced in considering the relationship between copyright and CATV operations result from recent efforts to make a drastic change in the nature of CATV and to expand this new form of CATV throughout the United States without regard to the size of the communities involved or the extent of the existing and potential-and I do want to stress potential-local and area television broadcast service that is or can be provided to those communities. The impact of these developments on the system of television broadcasting which has been supplied free to the American people can be profoundly serious and adverse.

MST participated actively in the proceedings before the Federal Communications Commission resulting in the issuance of its second report and order which, in turn, established regulations dealing with various facets of CATV within the jurisdiction of the FCC. MST also testified in support of H.R. 13286, the bill to clarify and confirm the power of the FCC to regulate CATV, which was reported favorably by the Committee on Interstate and Foreign Commerce on June 17. However, very important and basic CATV problems fall squarely within the copyright area. The FCC has expressly disclaimed jurisdiction over these problems, and H.R. 13286 does not deal with them either.

It is important to recognize at the outset that television broadcasters require and use enormous quantities of copyrightable materials. This fact becomes dramatically clear when you realize that a single television station will normally operate 6,000 or more hours a year. And with two, three, four, or more television stations operating in a particular market, the hours of programing provided the public become quite astronomical-12,000 to 25,000, and as much as 60,000 a year with 10 stations operating in the market.

For analytical purposes it may be helpful to recognize that the programs required and used by television stations fall into at least four different categories.

The first general category of television programing consists of programs which are locally created and which the station itself ownsfor example, local entertainment programs or documentaries. How

ever, there is an increasing tendency to record these programs for later distribution and sale to other television stations in other markets.

The second general category consists of locally created programs which are owned by others but which are produced by the television station under exclusive territorial licenses; a common example is a play-by-play sports program.

The third category includes recorded non-network programs for which a television station purchases broadcast rights which are almost invariably exclusive as against other television stations in the market for a specified period of time; two principal examples are moving picture feature film released for television broadcast and programs or program series which are produced initially for television and distributed either on a one-time basis or as part of a daily or weekly series that may continue for an entire year or longer.

The fourth category is that of network programs which include not only the programs of the three well-known national networks but also programs of regional networks and of specialized networks; these programs may be either live or recorded and the television station obtains geographical exclusivity both by contract and network practice.

For the present purposes it is essential to recognize that, as to each of the foregoing types of programs, our free system of television broadcasting depends upon exclusivity of television program_rights. This is commonly recognized in the case of network programs because network advertisers simply will not pay twice for the same coverage. Since the vast preponderance of national network programing is distributed on a simultaneous or same day basis, these facts of television life are readily apparent.

What I fear is not so readily apparent, although it is just as true, is that exclusivity is critical in the case of programing which is not distributed on a simultaneous or same-day basis. A television station exists by virtue of its capacity to sell advertising. There is a complete interrelationship as among the amount of revenue that can be obtained from advertisers, the size of a station's audience, the ability of the station to obtain that audience, and the programs it has to offer. Every one of these factors is directly affected by whether the station has exclusive rights to the programs it broadcasts. Every time a program is aired, a large portion of the audience potential in the particular market disappears. In this respect television differs significantly from other media such as motion pictures and the theater. It seems to us, therefore, that of critical importance among the issues the committee is exploring at this stage is the ability of the television program owner or distributor to provide and of the television station to obtain exclusive rights to expose particular television programs to the public. Without exclusivity, the value of the program and the inducement to produce a program, to distribute it, and to purchase it are lessened, the supply of programs is diminished and the capacity of free television broadcasting to serve the public is impaired. The question, therefore, is-how does CATV affect this situation? The answer to this question is affected by the fact that there is not just one kind of CATV but there are different kinds of CATV.

Numerous CATV systems perform essentially a supplementary function within the normal service areas of television stations. They may do so by improving the quality of service within the outer reaches of the normal coverage area of television stations to members of the public who normally watch those stations and thus receive better reception from the very same television stations which they would otherwise watch. Or a CATV system may be located within the principal cities or communities served by television stations and offer an alternative to individual outside antennas. Or it may place receiving antenna on a mountain and bring nearby television signals into valleys which are shielded from direct signals. Even this kind of CATV system utilizes elaborate receiving and retransmission facilities and reproduces or performs copyrighted programs for profit. But so long as CATV merely performs the supplementary function of improving the reception of the stations which would be watched in any event under normal circumstances and does not alter normal viewing and market patterns, we do not believe that the application of the copyright laws presents significant practical problems for CATV, for the program producers and distributors or for the television broadcast stations under existing copyright law. Nor should it do so in connection with any revision of the copyright laws.

There is still another type of CATV system whose operations are somewhat different but could also be said to perform essentially a supplemental function. I am referring to the type of CATV system that extends broadcast signals into small communities in remote and thinly populated areas which are beyond the range of any off-the-air broadcast signal and where it is most unlikely that regular television stations will provide service in the future. The copyright implications of this kind of transmission may be somewhat different from that of the "fill-in" type of CATV system, but these small community, remote area CATV systems are performing essentially the same kind of function which is performed by so-called television broadcast translator stations which similary retransmit signals into communities in remote areas, and there has simply been no copyright problem as a practical matter with respect to these translators even though they have been operating for many years.

There is a quite new and entirely different type of CATV which has recently come into being. The so-called CATV copyright problem, in my judgment, really revolves around these CATV systems which we call CATV Unlimited. These CATV systems want to bring multiple outside stations into cities and towns of all sizes throughout the country where reception of local and area broadcast stations is excellent and often where there is every prospect that new television stations will come into being if CATV Unlimited does not make this impossible. Many of these new and newly proposed CATV systems want to import outside stations from great distances-many hundreds of miles or even half the continent. Many other of these CATV systems want to carry relatively closer stations-Indianapolis and Chicago stations into the Fort Wayne or South Bend market, Los Angeles stations into the San Diego market, Cleveland or Chicago stations into the Detroit or Grand Rapids market. There has been an enormous increase in proposals to provide this kind of CATV service and CATV promoters have predicted that they will take over 85 percent of all